Payroll Processing
As a business with employees, you have certain important responsibilities. Having an understanding of these responsibilities will help you in making certain that you comply with the law. All employers must:
• Withhold appropriate taxes from employees. These taxes include the federal, state, and local taxes the employees must pay, and the employee's portion of Social Security and Medicare taxes. You withhold the income taxes as the employee has designated.
• Set aside funds for these payroll taxes, including both employer and employee portions of Social Security / Medicare, and employer liabilities for unemployment compensation and worker's compensation.
• Remit (pay) both the employee taxes and employer taxes to appropriate agencies. For example, you will pay both the federal income tax withholding and Social Security/Medicare amounts to the IRS.
• Report tax liabilities to appropriate agencies and to employees, as specified by law.
• Provide other reports to federal, state, and local agencies as required. For example, you must report the employee status of all new employees.
Payroll Structure
There are few fundamental that you have to keep in mind:-
Basic should not be less than 35%
HRA:- generally half of Basic
Conveyance :- Any amount but up to 800p m is tax free
Medical now is it allowance or reimbursement?
Allowance is taxable and reimbursement up to 1250pm tax free
Deductions:-
PF:- Pf is 12% of Basic .(employee construction)
there is also employers contribution of the same amount:-12%.some company’s include this in the CTC and some just include employee contribution. So you need to check what is the amount offered to the employee at the time of joining.
PF is deducted only if Basic is less than equal to 6500p.m
ESI:-If the total gross salary of an employee is less than and equal to 1000 per month then ESI is deducted @ 1.75@ of gross salary(employee share) and 4.75%(employer share, again you need to check whether it is included in the CTC or not)
Taxes:- as per the law
Click here for detail
As a business with employees, you have certain important responsibilities. Having an understanding of these responsibilities will help you in making certain that you comply with the law. All employers must:
• Set aside funds for these payroll taxes, including both employer and employee portions of Social Security / Medicare, and employer liabilities for unemployment compensation and worker's compensation.
• Remit (pay) both the employee taxes and employer taxes to appropriate agencies. For example, you will pay both the federal income tax withholding and Social Security/Medicare amounts to the IRS.
• Report tax liabilities to appropriate agencies and to employees, as specified by law.
• Provide other reports to federal, state, and local agencies as required. For example, you must report the employee status of all new employees.
Payroll Structure
There are few fundamental that you have to keep in mind:-
Basic should not be less than 35%
HRA:- generally half of Basic
Conveyance :- Any amount but up to 800p m is tax free
Medical now is it allowance or reimbursement?
Allowance is taxable and reimbursement up to 1250pm tax free
Deductions:-
PF:- Pf is 12% of Basic .(employee construction)
there is also employers contribution of the same amount:-12%.some company’s include this in the CTC and some just include employee contribution. So you need to check what is the amount offered to the employee at the time of joining.
PF is deducted only if Basic is less than equal to 6500p.m
ESI:-If the total gross salary of an employee is less than and equal to 1000 per month then ESI is deducted @ 1.75@ of gross salary(employee share) and 4.75%(employer share, again you need to check whether it is included in the CTC or not)
Taxes:- as per the law
Click here for detail
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