Payroll processing is the step-by-step method of calculating employee salaries, deductions, taxes, and compliance contributions (like PF, ESIC, TDS, PT, etc.), and then paying employees correctly and on time.

 Steps in Payroll Processing

1. Pre-Payroll Setup

2. Collect employee data (attendance, leaves, overtime, bonuses, etc.)
3. Define salary structures (basic, HRA, allowances, deductions)

• Verify statutory compliance requirements (PF, ESIC, TDS, Professional Tax, Gratuity, etc.)

  Payroll Calculation

• Gross Salary = Basic + Allowances + Incentives
• Deductions = PF + ESIC + TDS + PT + Loan/Advance recovery
• Net Salary (Take-Home) = Gross Salary – Deductions

• Compliance Management

• PF & ESIC contributions deposit before the 15th of every month
• TDS deduction and deposit to Income Tax Dept.
• Professional Tax deposit (as per state rules)
• Filing monthly/quarterly/annual returns

• Salary Disbursement

• Generate bank transfer statements
• Issue salary slips to employees
• Update payroll registers

• Post-Payroll Activities

• Filing returns (PF, ESIC, TDS, PT)
• Generating reports (cost to company, department-wise salary reports, etc.)

Maintaining payroll records for audits

Tools/Technologies Used in Payroll Processing

Excel/Spreadsheets (for small businesses)
Payroll Software (Zoho Payroll, GreytHR, RazorpayX Payroll, QuickBooks, Tally)

Customized ERP/HRMS (SAP, Oracle, PeopleSoft)

• Benefits of Proper Payroll Processing

Accuracy in employee salary payments
Timely statutory compliance (PF, ESIC, TDS, PT)
Reduced risk of penalties
Transparent salary slips for employees
Saves time with automation