How Payroll Systems Work

To provide the salary to employees needs the system and this system is payroll system. In this system, boss pays the salaries of employees on the time with correct amount. He also deduct all TDS and deposit it in the Govt. account. In big company, a separate team is appointed for handling all salaries, bonus and employees' fund.

Following are the main steps of payroll systems work :

1. Record the Payroll Information

Today all the basic accounting software have the option of recording the payroll separately. For example in tally software, we first add the payroll information. In this, we make the groups of employees. Employees may be of sales, purchase or accounts department or any other department.  Then, we record the name of employees with his full data and keep him under specific employees group. Now, we record the basis of his salary, it may be on attendance basis or on production basis.

After this, we record his pay head. In this, we can make the head as basic pay, bonus, home rent allowance,  overtime salary, and canteen deduction. All will be under indirect expenses. EPF Fund deduction and salary payable will be under liability because, it has to pay but still did not pay.

2. Edit Payroll Information

If any employee leave or any new employee joins or there is any changing regarding the transfer of employee from one department to other, we can edit payroll information at any time. This will help to correct record of payroll. For this, we can use alter or edit option.

3. Approve and Pay Payroll and Record Payroll Vouchers

When employees are paid by employer, it is approved by authorized person. After paying, payroll vouchers are completed. Basic accounting principle will apply for recording payroll.

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Accounting Education: How Payroll Systems Work
How Payroll Systems Work
Accounting Education
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