Indian pay roll process is done according to the provisions under the 7th Pay commission first let’s understand what is pay roll and its components
Payroll is defined as a method of managing the salaries of employees in organizations. The process involves calculating employee salaries and tax deductions, administering pension benefits and disbursing salaries to employees. It can be called as an account activity that carries out the administration of the salaries of the employees of the organization.
Payroll is the salary processing system.
Payroll is divided into two parts-Monthly and Annual
Monthly payroll includes the following:
Pay roll in India adminstering acts
Indian Factories Act 1948
Shops and Commercial Establishments Act 1961
Beedi and Cigar Workers (Condition of Employment) Act 1966.
Plantation Labor Act 1951
Mortar Transport Workers Act 1961
Building & Other Construction
Workers (Regulation of Employment and Conditions of Service) Act 1996
Inter-State-Migrant Workers (Regulation of Employment & Conditions of Service) Act 1979
Contract Labor (A & R) Act
EPF & MP Act
In India Payroll generation depends totally on number of days in month. Say Feb (28 days). Total salary package will be paid accordingly, but while deducting a LWP it would be calculated on basis of 28 days.
Thus it’s irrespective of any number of holidays etc.
The Industrial Employment (Standing Orders) Act, 1946 (Ref. model Standing Order) the salary should be calculated on 30days for Monthly rated employee and 26days for daily rated employee, to maintain the constant PF deductions & LOP of an employee
As per government norms 26 days are calculated for salary in every month, there is no partiality to the workers like skilled or semi skilled or clerical job the role applicable to all, but some of the private concerns follow 30 or 31 days for their own benefit. 26 days are consider salary calculation period. It is 30 days irrespective of the Sundays and holidays for monthly wages and 26 days for daily wages.
Ideal components for calculation of pay roll
Basic Pay: base component of salary
House Rent Allowance (HRA): supports housing expenses
Conveyance Allowance: supports daily transportation expenses
Child Education Allowance: supports school expenses for childrennbsp;
Special Allowance: covers miscellaneous expenses related to office duties (academic research, tours, uniform, etc.)
Payroll is calculated by adding allowances and excluding deduction
Gross Salary = (CTC) - (EPF) - Gratuity.
Taxable Income = Gross Salary - EPF) - HRA - LTA - Medical Insurance – Tax- transport allowances- other allowances
From above formulas
Take Home Salary = Gross Salary - Income Tax - Employee's PF Contribution (PF) - Professional Tax.
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