Payroll Procedure

Salaries and wages are prepared in payroll department, which is normally a section of accounts department. All permanent records of an employee is maintained in the payroll department starting from his letter of appointment and report of resumption of duty by the departmental foreman concerned. Periodical change in wage rate arising out of normal increment or promotion is intimated by the personnel department. Thus, all permanent details such as name, token no., department, wage-rate, provident fund membership No., E.S.I.C. No. etc. are recorded on the wages sheet in advance i.e. before the details of actual work during the wage-period are prepared by Personnel department, and sent to payroll. When wages are paid on the basis of time, Time-Cards are sent to payroll department after tallying the hours present with hours worked and idle and rest time. Similarly, piecework cards are authorised by the department concerned certifying accepted units of production and such cards form the basis for wage payment under Piece-rate. For monthly paid staff, a copy of the attendance register is sent to payroll department for the preparation of wages sheet.  A third set of information is sent to payroll department for various deductions to be made from the wages. It is important to note that deductions from wages are required to be authorised.  Some of the deductions are statutory viz. income-tax, professional tax, E.S.l.C. contribution, provident fund contribution, etc. Other allowable deductions are house rent, cooperative society dues, advance taken by workers, etc.  Payroll is prepared with the aforesaid information either serially by token numbers or department wise. It is advisable to prepare department wise payroll due to the following advantages:–

• Payroll preparation work can be divided.
• Departmental labour rate can be developed.
• Reconciliation can be easier.
• Wage payment can be made in respective departments with the payroll.
• Assist in the preparation of budget and control of departmental labour cost.

In the payroll, the employee’s name, ticket No., hours worked - normal and overtime, Wage rate and dearness allowance rates shall be mentioned. His gross earnings shall be computed with each component such as basic wages, dearness allowance, overtime wages, overtime premium, house-rent allowance, shift allowance, attendance bonus, incentive bonus, etc.  Similarly, details of all deductions and net wages payable are indicated.

Computerised Payroll

With the increased use of computer, large organisations as well as small concerns have computerised payroll. In big organisations, a database is created with all permanent. details of each worker, and thereafter, information is continuously fed in the computer starting from timekeeping and time-booking till preparation and accounting of payroll.