Payroll is one of the significant elements of whether you will join a company or not. But while negotiating your salary, we focus on increasing that CTC.
While CTC is important for your salary structure, you also pay attention to how much your take-home salary increases.
To know your salary in and out, read on. We will get you started on your journey to understanding your payroll management and the factors that affect it.
You need to ensure that you are up to date with the changes in the salary structure as per your company’s policy and the state taxation laws.
During any new batch of employees, you will have to educate them on these taxes. Still, before you do that, you need to make sure that your salary structure benefits both non-taxable and the taxable bracket of employees.
Generally, CTC has four sides; basic, allowance, prerequisites, and retirement benefits/contributions. In addition, some perquisites can be exempted, helping you save money in taxes.
5 Payroll Methods to Improve Your Payroll Management Process
- Basic salary and its components
Remember, it is always a better trade-off between a higher in-hand salary and a higher taxable salary.
People with lower pay should opt for a higher basic salary like home rent allowance, conveyance, medical reimbursement, etc.
These salary elements may get taxed to a certain extent. But they make a higher portion of the entire salary. Employees higher up in the hierarchy get higher packages, so their taxable elements are more. However, due to this, they get more tax benefits.
2. Importance of Allowance
Specific individuals get fixed allowance from the income tax department, helping them bring down their taxations to a great extent.
Although tax benefits are reasonable, you need to remember that a lower in-hand salary is better without tax deduction.
3. Facilities and Advantages
Additional facilities and amenities provided by the employer to the employee aren’t included in the salary. If the Income Tax Department had this prerequisite as a part of the salary structure, they would be taxed. That’s the reason you need to pay close attention to the number of prerequisites your employer is providing you.
4. Benefits of Retirement
This is the fourth and the essential factor in your pay structure. These savings aren’t short-term; these are long-term savings that help an individual live a dignified life post-retirement.
While these deductions are necessary, they cut down the take-home salary to some extent. So, it is essential to pay attention to such elements while structuring your salary.
5. Long Term & Short Term Goals
While an employee doesn’t have complete control over their salary structure, they still can opt for a personalized one. However, you need to be sure about your long-term and short-term financial goals before you go ahead and change your tax structure.
Here are the key things to keep in mind to streamline the payroll management system:
- Complete your payroll management records
Keep the basics clear. Centralize and store your employees’ details, official deductions, bonuses, benefits and overtime in a single sheet. You can even use payroll automation software where everything is stored against proper names.
If your employees expect any changes in those details, let them know that they will have to report in advance. After all, if the records are right, then only will the payroll move smoothly.
- Use an electronic payroll system
Are you still recording the time your employees put in, manually? That way you are not only using up more time but also rendering human errors that may just increase TAT. Adopt an electronic system that stores everything at one place, as well as send you automatic alerts, warnings, and notifications when something doesn’t add up.
You could also customize the software as per the policies of your company.
- Open a separate payroll account
Opening a separate payroll account helps you manage your operating cash and your taxes & payroll cash differentiated, helping you manage both with ease. Your bank can become invaluable in this case. The representative will guide you on managing your expenses and operating cash, helping you manage cash on hand whenever it comes to payroll management.
- Create an integrated network
If your employees are punching in on time, if certain updates are given or not, all of this can be tracked to one centralized system. Going electronic not just for the payrolls, but also to manage other systems of records is integral in defining a smooth-running system. An integrated system allows manual efforts to be drastically reduced, and human errors are largely eliminated.
- Consider an outsourcing agency
At the start, any business has a minimum number of partners and a small staff size. As the company grows, so does everything associated with it. Payroll management requires multiple changes and redefinitions. Consider outsourcing your payroll management services.
A professional team helps your company’s system align with that of the state rules & regulations. With a whole team dedicated to looking after your payroll tasks & milestones, your company will have a smooth humming system.
To summarise quickly, use an integrated network to eliminate human errors, open separate payroll accounts and keep your systems up to date with the current trends in the industry. Encourage your employees to be proactive in updating their details.
Last but not the least, having a dedicated payroll management services agency, can be a boon for today, and years to come.
Benefits of payroll management software
- Payroll management software is useful for compliance purposes- staying up to date with employee records on attendance, work performance, income, and deductions, etc.
- Automation of payroll helps speed up payroll processing and makes it easy to generate reports e.g. for tax filing purposes.
- When you outsource payroll to third-party providers, the privacy of employee and company financial data will be maintained.
- Payroll software can offer employees access to their payroll data and for self-service processing
While tax benefits are essential to your employees, as an employer, you need to be transparent and let them know your company’s salary structure. After that, your employees can take a call whether they want to opt for the tax benefits or not.
After all, transparency is the key to a long-term relationship between the company and employees. It would be recommended to take advice from an expert payroll management services provider to implement it more efficiently.