What is Payroll Software ?

What is Payroll Software?

In a company, payroll is the sum of all financial records of salaries for an employee, wages, bonuses and deductions. In accounting, payroll refers to the amount paid to employees for services they provided during a certain period of time. Payroll plays a major role in a company for several reasons. From an accounting perspective, payroll is crucial because payroll and payroll taxes considerably affect the net income of most companies and they are subject to laws and regulations. From an ethics in business viewpoint payroll is a critical department as employees are responsive to payroll errors and irregularities: good employee morale requires payroll to be paid timely and accurately. The primary mission of the payroll department is to ensure that all employees are paid accurately and timely with the correct withholdings and deductions, and to ensure the withholdings and deductions are remitted in a timely manner. This includes salary payments, tax withholdings, and deductions from Salary.

What is salary and why salary?

It is a matter of fact that one of the main intention of working is motivation

In today's world there are many factors that an employee will be looking into for the work they do. Out of which three are identified as basic requirement that today's employee would be looking into.



Monitory benefits

Monitory benefits, Salary is one way of motivating the employee. This is generally paid once in a month depending on the organizational structure. There are also cases where in salary is paid weekly/bimonthly and also on daily wages.There are various laws affecting salary payment to the employees, the labour welfare act, Payment of Salaries and Wages act, the Minimum Wages act etc.Business policy says, Give and take, Give to take. Any employer for the work taken from the employee has to pay some money in return to the employee. There are some rules affecting the payment of salary as told.

If we look into few of them Employee is to be given few components of salary that are Basic, DA, and HRA which comes under the minimum wages act. There are some rules affecting the same and to certain class of people the above components may vary. Classes are basically divided under the minimum wages act as skilled workers/Unskilled Workers and Semi Skilled Workers. Minimum wages rate may vary from location to location. E.g. Minimum wages to be paid in a metro city is something more than that of a rural area. Factors influencing Payroll

Salary calculation methods and structures

Calculation methods:

Calculation methods can be monthly/Fortnightly/weekly and daily. Generally now a days people follow payments once a month to reduce statutory compliance. Whereas a few class of employees are paid either weekly or daily wages.


Salary calculation varies from company to company. Few companies may opt to give a component that another company doesn't wish to give. Eg. A company may be giving a component called Washing allowance where as few companies doesn't give washing allowance at all.

Deriving at the salary is a big process. An example are given below :

Take a case of a company that gives the following components to its employees.




Special allowance

Entertainment allowance

Washing Allowance

Magazine allowance

KIT allowance, etc.,

All the above components can be based on a gross earning or individual can be derived based on another component.

Eg. DA can be 20% of Basic and HRA can be 40% of Basic and DA and there can also be a case where in an allowance like Entertainment allowance is given based on the total salary on a Slab basis. And so on. There are various methods of deriving at the figures.

The components can be different for a class of people. For eg. People in the administration may be getting an allowance that is not given to the production dept. employees and so on.

Salary components can also be based on the physical presence of the employee eg. A component like Ex Head quarters allowance/Petrol allowance is given to the employee only when he is present

Above all these there can be deductions like quarters rent, canteen deduction etc.

Attendance and Leave

Attendance: It is the availability of an employee for the accomplishment of assignment or work given by the employer.

Attendance details are maintained in various forms. From traditional hand written ledgers to punch card system to drop card system to swipe card systems and biometrics readers.

Different attendance monitoring systems of different companies gives different outputs. There are many companies giving these systems.

Leave: It is an extension given by the employer to the employee for being available for employee for the accomplishment of assignment.

A company's leave structure is dependent on the management decision. But in general there are three to four types of leave eligibility that a company will give to its employees.

They are

CL – Casual Leave

SL – Sick Leave

EL/PL – Earned Leave/Paid Leave

ML – Maternity leave etc