What Is Payroll?

At its core, payroll refers to the process of calculating and managing employee compensation, including salaries, wages, bonuses, and deductions. It’s a critical function for any organization, ensuring that employees receive accurate and timely payments for their work1.

Here are some key aspects of payroll services:

  1. Gross Pay Calculation:

    • On payday, the payroll service calculates the gross amount an employee is owed based on factors like hours worked and pay rate.
    • This calculation considers regular hours, overtime, and any other relevant components.

  2. Deductions and Withholdings:

    • Payroll services deduct taxes (such as income tax), Social Security contributions, and other withholdings from employees’ earnings.
    • These deductions ensure compliance with legal requirements.

  3. Payslips and Payments:

    • After calculating the net pay (gross pay minus deductions), the service generates payslips for employees.
    • Employees receive their salaries through direct bank transfers.

  4. Statutory Compliance:

    • Payroll services handle statutory compliance, including PF (Provident Fund), ESI (Employee State Insurance), PT (Professional Tax), and IT (Income Tax).
    • They also generate tax reports and Form 16 for employees.

  5. Employee Self-Service:

    • Modern payroll systems encourage employee self-service, allowing staff to access their payslips, tax information, and other relevant details online.
    • This reduces the burden on HR and payroll staff.