CHAPTER-1INTRODUCTION 1.1 INTRODUCTION Payrollmanagement system encompasses all the tasks involved in paying ano r g a n i z a t i o n s e m p l o y e e s .

. I t t y p i c a l l y i n v o l v e s k e e p i n g t r a c k o f h o u r s w o r k e d a n d ensuring that employees receive the appropriate amount of pay. It also includes calculatingt a x es a n d social security,a s w e l l a s e n s u r i n g t h a t t h e y a r e p r o p e r l y w i t h h e l d a n d processed. Depending on the company in question, a full range of other deductions may becalculated, withheld, and processed as part of payroll administration. Additionally, theprocessing of contractor payments may fall under the umbrella of payroll administration.The specific tasks involved in payroll administration tend to vary according to the needsof each unique company or organization. For example, some companies have workers thatreceive commissions in addition to salaries. In these companies, including commissions inemployee salaries is a part of payroll administration. For some companies, it also involvesa s s i g n i n g ex e m p t o r n o n - e x e m p t s t a t u s t o w o r k er s , a d d i n g b o n u s es i n t o p a y c h e c k s , calculating overtime payments, and adhering to applicable employment laws.H a n d l i n g p a y r o l l - r e l a t e d p r o b l e m s a r e p a r t o f p a y r o l l a d m i n i s t r a t i o n a s w e l l . I f a n employee is paid an incorrect amount or a direct depositfails to go through, both thingsare payr oll administration issues. Likewise tax filing and deduction errors are payrolladministration matters as well.Payroll administration can be very simple, involving the payment of just a handful of e m p l o y e e s , o r v er y c o m p l i c a t e d , i n v o l v i n g p a y r o l l f o r t h o u s a n d s o f e m p l o y e e s a n d contractors. In some, very small companies, payroll may be handled by the owner of the 1

company or an employee. However, other companies may have many employees to payand keep track of necessitating a well planned, efficient payroll administration system.S o m e c o m p a n i es c h o o s e t o h a n d l e p a y r o l l a d m i n i s t r a t i o n i n - h o u s e , o f t e n c r ea t i n g a separate department just for the handling of payroll. Often, such organizations purchasesoftware to streamline payroll-related tasks. Some companies even have special softwaredesigned for them, creating a payroll system that is tailored to their unique requirements.Many companies decide tooutsourcepayroll administration to other companies. Payrolladministration companies handle most, if not all, payroll-related tasks for the companiesthey serve. Some payroll administration companies also provide management and humanresource assistance as well. Many payroll administration companiestailor their services tomeet the needs of organizations of all sizes and types. Some even offer onsite help andpayroll consultations as well.Payroll is defined as a method of administrating employees salaries in the organizations.T h e p r o c e s s c o n s i s t s o f c a l c u l a t i o n o f s a l a r i es a n d t a x d e d u c t i o n s o f t h e e m p l o y e e s , administrating the retir ement benefits and disbursements of salaries to employees. It cana l s o b e c a l l e d a s a n a c c o u n t s a c t i v i t y w h i c h under ta kes t he sa la r y a dministr a tion of e m p l o y e e s i n t h e o r g a n i z a t i o n . A d m i n i s t r a t i n g t h e e m p l o y e e s s a l a r i e s i s n o t a n e a s y task, the HR and accounts department work together to calculate and disburse the salary tot h e employees. T hus, pa yr oll ma na gement ca n be further subdivided into t w o s u b processes, i.e. Payroll accounting and payroll administration.Payroll refers to theadministration of employees' salaries, wages, bonuses, net pay, and deductions. It consist of the employee ID, employee name, date of joining, daily attendance record, basic

salary,allowances, overtime pay, bonus, commissions, incentives, pay for holidays, vacations andsickness, value of meals and lodging etc. There are some deductions such as PF, taxes, loaninstallments or advances taken by employee.

PAYROLL IS ADMINISTERED ON MONTHLY BASIS AND ANNUALBASIS. While administrating the monthly payroll basic salary, HRA, conveyance, and other specialallowances such mobile, etc are considered. There are some deductions. Allowances, incentives, bonuses and reimbursements are based on organizational policies.Some organizations provided the allowances on a fixed rate say 10% or 12% of the basicsalary. Some organizations go for performance based incentives. PAYROLL MANAGEMENT PROCESSES Calculation of gross salaries and deductible amounts is a tedious task which involves risk.Some of the organizations use the traditional manual method of payr oll processing andsome go for the advanced payroll processing software. An organization opts for any of thefollowing payroll processing methods available:a) Manual System : - M a n u a l p a y r o l l s y s t e m i s t h e t r a d i t i o n a l p a y r o l l s y s t e m w h i c h involves pen and ink, adding machine, spreadsheet, etc instead of computers, software