Contribution of digitization in payroll management

Payroll is defined as the disbursal of salary by the employer to the employees for work completed by them. Every employer or business organization needs to have an effective payroll management system established. The payroll management system refers to the use of a software programme to perform the various tasks related to payment to employees and filing of taxes.

What are the payroll functions performed by the HR?

The HR under payroll management performs the following functions:

• It formulates and implements the organization’s pay policy which includes leave encashment, bonus, incentives and other financial aspects.
• It defines the significant components of the salary such as Leave Travel Allowance (LTA), House Rent Allowance (HRA), and the basic and flexible components of the salary.
• It calculates the gross salary of the employees of the organization to arrive at the net pay.
• It is responsible for depositing the deductions done under TDS, EPF to the appropriate authorities within the stipulated period to avoid levy of penalties and fines.
• Finally, release of salary to the employees of the organization.

Why is Digitization of payroll management required?

It is to be noted that when the HR performs its payroll functions manually, it is bound to consume time. Indeed, you can say that this manual method is cost-effective; but the HR personnel need to keep themselves updated with the constantly changing labour laws and tax related rules and regulations.

Flaws and errors can be minimized if the company decides to digitize its payroll management process. Digitization implies that the company decides to use a payroll software. The use of this payroll software will ensure a number of benefits to the organization. Primarily, it will become easy for the HR personnel to collect data coming from various sources in a seamless manner. It will provide complete automation of the payroll system by directly providing payslips to the employees. In addition, the software will also facilitate easy management of the attendance (leaves and balances) of the employees of the organization. Most significantly, the software will reduce the time consumed and the chances of making errors in the calculation and disbursal of the salaries of the employees of the organization.

As a result, the Human Resource Management System (HRMS), or Human Resource Information System (HRIS) is increasingly being adopted by both large businesses and small and medium enterprises (SMEs).

Let us now assess the contribution made by digitization in the field of payroll management.

Ensures easy observance of the laws of the land: It is vital to comprehend that manually doing entry of the deductions, gross pay, bonus, incentives and other financial details of the employees can be time consuming and erroneous. Moreover, as per the Union Budget, which comes out every year in India, the tax deduction rules are susceptible to change. All these hassles can be easily handled by utilizing the services of a payroll software. Such softwares are also capable of sending reminders to employees to enter the details as per the given deadlines and generate reports.

Ensures adaptability: Another significant contribution of digitization of the payroll management is that it adapts itself well at the time of expansion of the organization. The payroll software should be capable of handling vast employee data in terms of leave balance, attendance, income tax computation and other vital financial information.

Gives the option of self-service to employees: The payroll software should provide the option to employee to enter their essential details in the payroll management software itself. This will ensure accurate data entry. It will also reduce the hassle of contacting the HR personnel in the case of making a correction which can now otherwise be done automatically.

Ensures timely pay-out to the employees: Digitization of the payroll management system ensures timely disbursal of salary to the employees. This helps in boosting the morale of the employees and gives them assurance of job security.

Provides automatic alerts with reference to discrepancies: Digitization of payroll management will help in sending alerts at the time of incorrect data entry or tax deduction. In this manner, errors can be easily spotted and rectified.

Therefore, to conclude, the transition from manual to digital payroll system helps to save a lot of time. It also facilitates quick processing of salary, helps to maintain records effortlessly, eliminates errors, and reduces stress on the part of the employers.