Payroll Processing in India – Basic Components That You Should Know

Employee compensation management, which is usually referred to as payroll management, is a comprehensive process. It includes salary calculation, disbursal, payslip generation, deduction taxes, record keeping, etc.

For small and mid-sized business owners, framing the salary components is often a challenge especially if they are less proficient in administering the payroll process. However, it is an inevitable task that needs to be performed periodically, and an error in the process may lead to critical legal implications. With the advent of efficient payroll software solutions, payroll processing is an easier task now.

If you are looking forward to enriching your knowledge of payroll processing in India, there are some things you need to know. Listed below are the basic components that every business owner should be familiar with:

  • Gross Salary: Gross compensation is an easy-to-understand concept. It is the total sum of employee’s salary without any deductions. It is also called as cost-to-company (CTC) when calculated on an annual basis.
  • Net Salary: This is the take-home salary of an employee after statutory deductions from the gross compensation.
  • Government Deductions: The employer is entitled to withhold payroll taxes from the employee’s gross salary and pay it to the tax authority. The deductions paid to the government may include Employee Provident Fund (EPF), Professional Tax, Employee State Insurance (ESI), Income Tax, etc.
  • Employee Benefits: It includes the privileges given to the employees other than the regular income like home loan, travel allowance, leave concession, medical facilities, house rent allowance, and so on.

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