The Payroll Life Part III: Payroll challenges faced by CA firms

By Pavan Sharma
4 minute read ● September 25, 2017
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The Payroll Life Part III: Payroll challenges faced by CA firms

There has been a surge in the number of professionals (Chartered Accountants and others), handling payroll processing and labour compliances, especially in the last decade or so. The said area of practice has great potential to grow, and specialisation, unheard of earlier, almost seems the norm now.

The payroll function is extremely critical to any organisation. Outsourcing the payroll function, likely during the initial 5 - 7 years from an entity’s birth, only goes to show the amount of faith that entrepreneurs have on professionals. As cliched it may sound, with great faith comes great responsibility. Professionals have to give their best to ensure that payroll is managed on time and, most of all, is accurate. That said, professionals face challenges of their own while servicing payroll assignments. This article sheds light on some of the common challenges and what one can do to overcome them.

Gathering payroll data

The accuracy of the payroll run depends on the completeness and quality of employee data at hand. Any information, no matter how infinitesimally small, matters and it is important that this information is gathered properly. Every piece of information, be it with respect to attendance, leaves, salary revisions, last working day, variable or bonus pay is important and contributes to the final salary payable to the employee. No entrepreneur, especially a startup, wishes to delay salary payments to its employees. Least of all, they do not want any confusion with respect to the numbers arrived at. There cannot be any back and forth communication, given that we usually face a strict deadline with respect to the release of salaries. Per the Payment of Wages Act, 1936, the wage cycle for employees is to be no longer than 30 days and payouts are to be made within 7 days of the end of the wage cycle for establishments employing less than 1000 employees and within 10 days for others. Thus, it is important that all information is collected in a timely manner.

Planning the payroll run

Planning payroll assignments is far more difficult than planning accounting assignments. As discussed above, there cannot be any delay in release of salaries to employees and thus, we have to plan each month in advance. We can have situations where the date of salary release falls on a Sunday or a bank holiday and salaries may not be processed by the bank on that date. Salary payment instructions could get lost in the mire of paperwork that some banks insist on. It is also likely that the person managing HR at the client’s end may be on vacation and there may be questions that remain unanswered. Every month is new and requires proper coordination between the payroll team at the client’s end and at the CA’s end. Small delays could lead to larger problems, especially when salary payout deadlines are missed.

Availability of quality resources

Unlike accountancy, payroll is not taught as a subject and wherever taught, it is not done so in the desired manner. This has resulted in a massive void for quality payroll resources in the industry that can only be filled in over time. For now, accountants with 3+ years of experience double up as payroll managers and given that payroll is so closely linked with accounting & compliance, it sometimes helps to have a resource with an accounting background managing the same. Nonetheless, we have often felt the deep need to have dedicated payroll resources managing client engagements. The capability that a payroll resource brings in is not limited to running payroll but extends to managing labor compliances as well.

Payroll is not just about the salary run!

As has been said above, payroll assignments are not just about running salary each month. They extend to labor compliances as well. There are multiple registers to be maintained under each labour law, multiple forms to be filled and declarations/disclosures to be made. The scenario has changed dramatically over the last year or so as there is so much happening on the compliance front. There have been many amendments in the law and notifications being issued by various labor departments on a monthly basis. It’s challenging to stay on top of all these amendments.

The professional should also ensure that the client’s interests are well protected and that, as a team, they are in a good position to defend any queries by labor inspectors. It is also important to educate the relevant stakeholders at the client’s end about these compliances. Inspections are unannounced and often, for reasons well known, a time of great distress to the client. It is during this moment that the need for a professional is truly felt and the CA so engaged must rise up to the occasion.

Finding the right software support

While many people try, payroll can no longer be managed on spreadsheets. Businesses have evolved and have become more complex. Even start-ups have unique pay structures and, in some cases, HR policies that have to be adhered to. A simple spreadsheet may not be able to cater to these complexities. Running payroll on a spreadsheet is prone to errors and the reliance on human resources is great. The need now is to move to a payroll system that works. There can be no software which comes with all solutions built in. Every software caters to the requirement of the ‘masses’ and there will be times where you will have to modify the extant rules to serve your client better. It is thus important to partner with the right payroll software to provide quality and timely services.

The more number of years that you spend in the payroll function, the more you learn - both from mistakes, unknowingly committed (of course not at the cost of the client) and from the experience that the client brings in himself/herself. Every month is an opportunity to learn and challenges can be overcome from experience. Have faith in yourself; only then will you be able to keep up the faith that the client has in you!

Wishing all the professionals handling payroll assignments the very best!

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