Payroll is the list of employees who works for the company either in their own office or in someone else's office. But they get paid by the company, for example. Paul is on the payroll of Apple, but if Facebook needs few IT Experts, Apple can send their employee to Facebook's office to work for a contract period. Payroll is the total of money the employer pays to the employees. As a business function, it involves:
- Developing organization pay policy including flexible benefits, leave encashment policy, etc.
- Defining payslip components like basic, variable pay, HRA, and LTA
- Gathering other payroll inputs (e.g., the organization's food vendor may supply information about the amount to be recovered from the employees for meals consumed)
- The actual calculation of gross salary, statutory as well as non-statutory deductions, and arriving at the net pay
- Releasing employee salary
- Depositing dues like TDS, PF, ESI etc. with appropriate authorities and filing returns
In short, we can say that the payroll process involves arriving at what is due to the employees, also called 'net pay', after deducting taxes.
Net pay = Income- Deduction,
Income = All regular income + allowances