Payroll can be time-consuming. But when you have a system in place to help you process payroll, it’s a lot easier to manage. Setting up a simple, effective payroll system is pretty easy, too.
Step 1: Apply for a TAN at your nearest Tax Information Network Facilitation Center or online through India’s Income Tax Department website. You should expect to pay a processing fee of ?65 (?55 application charge, plus 18% GST) when you submit your application. If you pay using a debit or credit card, you’re charged an additional 2% to cover banking fees. If you decide to pay through a Net Banking facility, you’re charged an additional ?4 plus GST. You can also pay via demand draft or cheque, both of which are free.
Step 2: Choose a payroll system that has the features your business needs such as the ability to calculate payroll taxes and social security and create annual salary slips for your employees.
As an employer, you’re required to collect withholding tax and social security from your employees’ pay. Social security is deducted at a rate of 12% of an employee’s annual salary, which you’re required to match. But withholding tax varies between states and income levels. Also, before you collect payroll deductions, your employees should fill out their withholding allowance certificate. You should keep this form on file. At the end of the year, you should supply each employee with Form 16, which details their salary and payroll deduction information. This form should be given to employees within two months after the end of the year.
Some other considerations include:
- Does the system work with your preferred employee compensation terms, including health plan premiums and retirement contributions?
- Is the system flexible enough to grow with your business?
- Does the system integrate with cloud-based accounting software, such as QuickBooks Online, so it’s easy to run payroll tax reports?
Step 3: Follow the instructions included with your payroll software to set up your system. Some of the main steps to complete include:
- Enter basic information such as employees’ names and addresses
- Enter wage information
- Enter regular work hours for each employee
- Connect the system to your accounting software
Setting up your payroll system properly helps streamline your payroll process. And connecting it to cloud-hosted accounting software makes maintaining your books simple.