They say the first step towards change is awareness. Last week, we took you through some of the generic frustrations that the payroll life is home to. Here are some more scenarios that irk the payroll professional... process-specific ones this time around.
… continued from The Payroll Life Part 1: No easy joke
Meeting strict statutory requirements accurately can prove to be frustrating. E.g. Mid-period salary revisions (ESIC periods are April to September and October to March) that cross the threshold value for ESIC contributions (ESI is to be paid only up to a gross salary of Rs.21000) can lead to confusion. This is as there exists a condition that such employees have to continue paying their ESIC until the end of the ESI period.
This condition has to be factored in for the right employees. The payroll executive must identify such cases and apply the condition without fail.
All legal deductions, such as provident fund, professional tax, etc., need to be checked manually, owing to the serious repercussions that missing out on one can have for the company as well as the payroll executive.
A payroll executive is often unable to cope with the challenge that PF poses. The output needs to thoroughly checked each time. Also, if an employee wants to withdraw the amount in his PF before 5 years of service is complete, the reversal of the tax exemption has to be done without fail. Here, the payroll executive has to bifurcate new joinees, employees, and resignees.
Also, the ECR file, with 21 columns, no less, needs to be accurate. Else, repercussions can be serious for the company.
The Indian compliance landscape is a constantly evolving one. Add to this the fact that, often, when legalities change, they are to be put into effect from a past date i.e changes which are notified in 2016 may require to be effective from April 2015. The above scenario presents financial implications for the company, i.e. the company finds it difficult to bear the burden of an entire year’s backlog as the payout may be required to be paid in a single shot. In such cases, creative solutions such as converting incentives to the arrear amount to be paid may be called for.
There is a need to approach several departments before full and final (F&F) settlements can be rolled out. Dependencies on HR team and the department to which the employee belongs are present. Keeping track of notice periods, if being served, is nothing sort of a pain in the neck. The employee may not be regular at work. Even if he is, his hours may not match the requirement.
In such cases, if the attendance is systematized using a software, no problems arise. Else, it is difficult to keep track of the employee’s presence and absence. Also, IT declarations need to be collected. The payroll executive is responsible for these endless exit formalities! Use a cloud software to organize these and roll out F&F’s with no confusion whatsoever.
Arrears by their nature are difficult to deal with. Any policy changes during the period where arrears apply imply recalculations. When done manually, errors abound. With a software, however, these calculations are easily handled on the back end and cause no ruffles whatsoever.
The collection of Proof of Investment begins as early as December/January so as to soften the blow on the employee and also as time is required to process these. Here, employees may sometime sneak in the previous year’s proofs. Additionally, for employees that joined mid-year, only proofs from date of joining are valid, and calculations to be prorated. Hence, checks are to be done manually. If the check fails, the payroll executive is to take responsibility for these - a quarter-long task.
At the time of filing of Form 24Q, the PAN numbers of certain employees may not be available and the employees get skipped. Also, only taxable income is to be considered here. Inaccuracies in this respect result in the gross salary as per Part A and Part B of Form 16 being mismatched.
Both these conditions lead to a need to refile Form 24Q, which results in several queries to be addressed. Moreover, the wrong filing of Form 24Q results in mistakes worth of a whole year coming up at the time of Form 16 generation. Frustration is a mild word for the emotions that rise like bile in the throat at the time of Form 16 generation!
Loans and perquisites may be rolled out to employees under different conditions and plans. The calculations are difficult and can be frustrating. For example, if an interest-free personal loan is issued to an employee from the company, then the interest cost “saved” by the employee, calculated as the difference between the interest charged by SBI (say 15%) and the company (0%), is deemed to be a perquisite which is taxable for the employee. The payroll executive needs to then calculate the interest saving (difference between 15% and 0%) and add the total interest saving for the year to the taxable salary of the employee. And when interest rates are revised by the RBI, recalculation from the effective date is to be done.
With a payroll solution, these calculations are easily handled on the back end, with the HR/payroll professional only having to indicate the appropriate plan under which loans/perquisites have been issued.
Even writing down the steps gives us a minor headache. The collection of bills, their manual verification, and the appropriate payouts makes it a hectic process. Tracking reimbursements also presents difficulties in case of carry forwards.
Now that you know the suffering that a payroll professional working without a payroll software endures, what are you going to do about it?!
Know the top 7 benefits of using a payroll software here.
Note: All gifs sourced from Giphy