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5 Simple Steps to Set up Payroll

Managing employee compensation has always been important. However, the growing need for efficiency and the intricate legal landscape are making it even more crucial.

Governments continue to evolve employee legislation to provide social and economic justice to employees. Similarly, employees’ demand for speedy and error-free payments makes efficient payroll management indispensable. So, implementing a proper payroll setup is critical for any organization.

This is a step-by-step guide on how to set up payroll. After reading it, HR personnel will be able to set up payroll without any implementation challenges easily.

What are the 5 Easy Steps to Set up the Payroll?

Registering any business, gathering employee information, and choosing the right payroll system are key steps in setting up payroll.

Step 1. Prepare Prerequisites and Register Your Business

HR personnel should collect relevant information before registering the business in any region. In India, individuals would need a digital signature certificate, a Permanent Account Number (PAN), and a Tax Account Number (TAN), among other documents. Similarly, in the USA, HR teams would require an Employer Identification Number for tax purposes. Different countries require different documents, but they all contain similar information. Go through the official government site of any country/state before registering the business.

Step 2: Collect and Organize Employee Information

You need to collect necessary employee information such as their contact details and identity proofs like an Aadhar card. Tax related information like PAN card and PF details are also important.

However, the information varies based on different regions. For example, in India, details like PF and ESIC details among other details are necessary. But in the USA, information like social security number is collected for payroll setup.

Step 3. Payroll Setup and Configure Settings

After registering your firm and gathering employee information, configure and set up your payroll with payroll software. Here is a brief overview of the entire process:

• Outline the payroll policy. Define leave year and set criteria for working hours and times off. Additionally, customize salary components according to an employee’s designation.
• Input employee information into a payroll management software. Rely on employee masters with a self-onboarding feature, as it allows employees to upload information independently.
• Specify criteria related to tax deductions, leave entitlements, and minimum wages. Rely on solutions offering real-time updates to streamline the compliance management process.
• Integrate payroll module with other modules: You should connect modules related to leave, attendance, payroll, performance and travel. Such integrations would help you in entering data and would also reduce errors.

Step 4. Process and Run Payroll

You need to calculate different salary heads related to tax deductions and arrears. You also need to settle travel-related and other claims. This process, if done manually would take a lot of your time.

You can rely on HR software to speed up payroll calculations, as it can automatically calculate all relevant processes according to the specified criteria.

Step 5. Disburse Salaries and Maintain Records

This is the final step in setting up payroll. You should rely on direct bank transfers for disbursing salary. You should also generate downloadable payslips, as most employees prefer to view their payroll-related information in PDF format.

You should also remember to keep digital records related to tax and other compliance measures, as they would be helpful in compliance-related audits.

Conclusion

HR managers should implement payroll processes by following a five-step process for payroll setup, which includes gathering well-prepared prerequisites, gathering relevant employee information, and configuring payroll policies.

It bears repeating that effective payroll management can benefit organizations in many ways. Compliance-related challenges can easily be addressed by maintaining digital records and sharing them with employees. In fact, according to a PwC survey, 59% of respondents cited greater confidence in compliance decision-making due to better coordination in compliance management. Properly implementing payroll can also help improve employee satisfaction.

There are several solutions that offer cutting-edge features.

factoHR, a cloud-based, state-of-the-art solution, offers revolutionary features. Some of the features include –

• Rule engine for configuring policies.
• Customizable salary heads for multiple employees and departments.
• An AI-powered chatbot for resolving employee queries related to payroll.
• Real-time updates for tracking changes in tax regulations.

Evaluate the available options and select the right payroll software for your business to set up your payroll.

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