Know the Purpose of Payroll Management System

Know the Purpose of Payroll Management System

Understanding the Purpose of Payroll Management System

When you first started your business, you had this great idea in mind, or you just had the will to have something of your own. Hence, you picked the best industry you know in and started.

The first and second month was great. You got a few clients, and you were happy to cater to their needs through freelancers. However, eventually, your work grew, you started getting more and more work, so much so that your freelancing team was not enough.

Just like that, all of a sudden, you had to face the responsibility of hiring employees, managing them, offering them hike, providing them incentives, etc.

This seemed like an easy task at first, but with time, it started getting more and more complicated. You were trapped in between multiple responsibilities – dispatching salaries on time and taking business decisions. At the end of every month, you had to stay in the office till 10 or 11 PM to complete payroll.

Can you relate?

If you can, it is time to understand a few factors about the payroll management system in India. Below we have explained what payroll management in India is, what are the stages, and how you can manage everything with ease. 

So, without further do, let’s dive in and check what the payroll management system is.  

The objective of the Payroll System

The payroll management system is a set of processes that helps you streamline salaries, bonuses, deductions, taxes, and other necessary aspects of the net pay of all the employees in your organization.

There are two primary objectives of the payroll management system in India. One is the macro objective, which is related to sales, strategy, revenue, etc. Another is micro, which is associated with the daily tasks of the business.

The aim behind having a payroll management system is to automate and streamline micro tasks such that the HR team has time to focus on the macro tasks.

You don’t have to worry about handling, managing, and creating payslips, salaries, and deductions of the employees. The tax deductions are also automated or handled by the outsourcing team. You only have to focus on major tasks such as the efficiency of sales, revenue, strategy, etc.

Here are the benefits that are delivered by a payroll management system to the HR department and the organization:

You can improve employee morale because when payroll activities are streamlined, your employees get a proper payroll structure. This helps in developing trust in the employer because it improves the financial integrity of the employer. Don’t you think? If you transfer salaries on time, deduct the right tax, submit it, and offer regular bonuses or incentives on time, your employees are happier.

Every employer has to take care of several payroll compliance structures. For example, TDS, PF, ESI, and other requirements of the tax and labor laws of India. If the employer is not updated with the latest news, it is likely for them to miss some aspects of this compliance. This means that the employer may have to incur penalties on these laws, which can hamper the brand image. A payroll management system can help you reduce the chances of this happening.

Every new business can face issues in managing and securing employees’ data because there is too much to handle. When you use an outsourced payroll management system in India, it is likely for you to gain help in securing and managing this data.

Lastly, it is cost-effective and time-effective. You don’t have to hire a full team in-house to handle these requirements. You don’t even have to spend a huge amount of time on the payroll at the end of every month. This saves your money as well as time, which you can utilize in other important business decisions. 

Stages of Payroll India

Gather Information

To process payroll India of the employees of the organization, collect data. You need to know the time every employee has worked for, including full-day, half-day, paid leaves, short-leaves, etc. You can also capture this data directly from the biometric payroll management system.

If you are not using an automated system for payroll, you may have to spend some time collecting this data from manual sheets. 

If the data is manually captured, it is necessary to thoroughly verify the data to understand if everything is up to the mark. For example, you may have accidentally placed the leave of an employee in someone else’s column in the Excel sheet. So, you are required to cross-verify every entry with the leave applications, etc.

This is a hassle, which is why outsourced payroll management in India can be utilized. 


Now, this task also depends on the help you have. If you are using an automated payroll calculation system, then you can feed the above data to the system. But, if you have to calculate payroll manually, you need to spend some (Read: A lot) of time on the calculations.

You have to count the hours of the normal work cycle of the employee as per their attendance. These hours are charged as per the normal pay scale of each employee.

Then, you need to bifurcate the hours of overtime because those are usually paid separately with hiked pay. Most of the organizations pay double salary for the overtime. However, it depends on the position as well. If the employee is in a managerial position, then they may not receive overtime for a certain amount of hours. So, you have to consider that as well in the calculations.

Overtime is usually calculated with the gross pay of the employee rather than net pay. Hence, you need to calculate that further to move forward.

Lastly, remove deductions from this pay such as PF, ESI, TDS, etc. This step is essential because it is linked to several compliance regulations. If you don’t submit the PF but deduct it, you can not only suffer fines but also lose your reputation in front of employees. 


The final step of the payroll India process is to pay the employee. Send the payment electronically, schedule it, or visit the bank and transfer it before the salary day. Don’t leave this task for the end day as various circumstances can cause a delay in the payments of employees. 

Post Payroll Management India

Once you have dispatched the payroll to all the employees, you need to complete several other activities such as salary slip generation, taxes, PF, reports, etc.

But, first things first, so prepare salary slips of the employees electronically through your payroll management system and send it to employees. This should be correctly sent with the company watermark and seal.

Then recalibrate taxes, PF, and other requirements if it is the end of the quarter. Submit the taxes and deductions to relevant departments.

Every once in a while, the company also needs to submit returns on these submissions. Prepare for these submissions, generate forms, check it, and oversee the calculations with the accountant carefully.

Then, when you have finally completed all these tasks, prepare reports for macro analysis. For example, payroll reports, financial budget reports, PF and taxes report employee performance report, etc. All these reports can help you manage your payroll and macro sales and marketing goals with ease.

Difference Between Manual and Automated Payroll Management

Working on the payroll management process is a difficult task manually. However, it has benefits, bringing out more accurate and detailed results. On the other hand, automated payroll management can be completed quickly. Apart from these basic differences, some other prominent ones can be listed as follows:

  • Minimal Requirement of Resources –
    The requirement for resources is undoubtedly minimal when it comes to the automated process of the payroll management system. In automated processes, paper waste is ultimately canceled out, employee requirement is minimal, the recurring cost of machinery or other items is reduced, and the total cost of production is very little compared to manual work.
  • Data Accuracy –
    As we all know, collecting and organizing data for any project is very difficult and equally important. When people get into sorting and researching data, they put everything into it or become lethargic, spoiling the work. But, giving the work to the right person can solve this problem quickly. On the other hand, sorting data on automated processes becomes very difficult because organizing the data takes more time than manually. Data researching and sorting should be preferred in manual processes instead of automated ones.
  • Dependability –
    If the dependability factor is considered Between the payroll management system types, then the manual process is much more preferred. When it comes to automated processes, the transparency of the work is limited, and the results may be compromised. That is why the preference for the manual method is more regarding the dependability of the data and the outcome of the work or project.
  • Environment-Friendliness –
    Manual work unnecessarily wastes a lot of paper, which is undoubtedly not worth it in today’s generation. Compared to manual work, using automated processes can help save a lot of paper and, ultimately, the environment. Also, using paper continuously is not at all cost-efficient. For the same reason, more preference is given to automated processes in the context of environment-friendliness and being up-to-date with work.
  • Customer Satisfaction –
    In a manual employee payroll management system, customer satisfaction is much more because of the personal touch to the work. Sometimes, automated work doesn’t have the specifications that clients need to have in their work. A human can only understand these specifications, not machines or software. This may create a sense of disappointment in them, which is not even close to perfection. That is why, in this area, the automated system takes the upper hand compared to most companies’ manual payroll management systems.

Considering the differences between automated and manual payroll systems, the answer to what a payroll management system is and which one to prefer becomes much more precise. If you need clarification about which type you should choose, then the best way to get effective results is to use a mediator version of both of them.

How to Effectively Combine Automated and Manual Payroll Management Systems?


If your mind is continuously tossing about which type to choose among automated and manual employee payroll management systems, then a mixture of both these can be used. Doing this is a straightforward process that only requires little time and effort. The first thing you need to do is understand both systems’ strong and weak points and then sort out your work in both of them accordingly.

For example, if data efficiency is the strong point of manual process and less requirement of resources is the strong point of automated work, then focus on keeping all the research and data organizing work on employees or manual resources. Staging all the steps and then distributing them in the manual and automated process will make your work easier and save much of your time. Also, your efforts will be reduced without compromising the productivity and quality of the result.

This is also one of the primary reasons many companies and businesses adopt this mixture method to research, analyze, sort, and work on their project and get appropriate results. Successful companies have such organized plans for payroll management systems, so the connection between the employees and the company is vital. The employees and company authorities are happy with their system, which keeps growing daily.

Drawbacks of the Payroll Management System

Just like the various benefits of a payroll management system and the numerous expectations people have, some noted drawbacks exist. These may seem small and easily solvable initially, but moving further (if ignored), they can cause significant troubles. So, solving and finishing them as soon as they are tracked down is better.

Some of the prominent drawbacks of the payroll management system are:

  • Technical Glitches and Incompatibility –
    Nothing in this world is perfect, neither a natural nor a man-made thing. This law also applies to the payroll system because, eventually, it is developed by a human itself. Some technical glitches may sometimes trouble and imbalance people’s work and cause problems. If any technical glitches occur in your system in the primary stage, immediately paying attention to it and repairing it is essential to avoid further and much more extreme damage.


  • Adapting to the System is a little Time-Consuming –
    Even if the system takes very little time to work and present results, the employees who are using the system need time to adjust. They may require more time to get adopted to the automated system instead of just a normal one. In such a situation, starting their training from the manual process and then making them aware of the automatic process will be helpful. This way, employees will be clear about entering an entirely new zone and can adopt the system quickly and rapidly.
  • The cost of Initial Investment is more –
    While discussing the HR payroll management system, the initial investment cost for all the designs must be addressed. Anyone can start manual payroll work with little funds in their hands. However, when it comes to automated payroll systems, the initial investment cost is enormous. So, developing a computerized payroll management system can only be possible with enough investment to buy all the necessary systems and machinery.
  • Continuous Updation of the System is Important –
    Keeping the system continuously updated is another task to crack. Installing the system and taking lifelong benefits from it is impossible. Technology keeps changing and moving ahead with each passing day. Keeping all the systems updated from time to time is a difficult task.
  • Unprotected Data is always in Danger –
    Due to some technical issues in the system, all the personal data given by the clients remain unprotected. This is prone to the risk of hacking and misuse of the personal data of those clients. Taking strict and immediate actions is much more important after recognizing such errors.
  • Technological Dependency is Incomparable –
    The automated system depends entirely on technical structure, and if any electrical error occurs, all the data and information fall in danger.
  • Recurring Maintenance Costs cannot be avoided –
    The maintenance cost of an automated system is recurring because the machinery keeps getting faulty at some point. This recurring maintenance should also be protected because otherwise, the quality of the work or result will be compromised.
  • May Require Manual Work sometimes –
    Even the automated system may require manual work when it defaults. This manual work maybe even more than the actual work, so much so that working a manual ultimately may seem simpler.
    Looking at the above drawbacks of the payroll management system, it is evident that even this system has a lot of flaws. However, once these drawbacks are resolved properly, effectively, cost-efficient and long-lasting benefits can be received.

Overcoming the Drawbacks of Payroll Management System

It may sound easier, but overcoming the drawbacks of a payroll management system is not at all a child’s play. Just like having a plan while making a system, you must have a strategy to overcome drawbacks. Finding a solution for any drawbacks is possible if you properly understand the problem and plan to solve it systematically.

The steps that can be followed to overcome the drawbacks of the payroll management system are:

  • Understanding the exact problem with the system.
  • Getting to the root cause of the creation of that problem.
  • Listing down the whole pattern properly.
  • Drawing a systematic chart for the required steps to solve the problem.
  • Following all the steps correctly and getting help from the experts in case of any trouble during execution.

If these steps are followed sequentially, then half of the problem gets solved then and there. So, these steps should be addressed and instead kept a proper check on to gain effective results from the same.


The payroll management system of any organization impacts several other aspects such as employee satisfaction, employee trust in the organization, salary calculations, compliance, taxes, sales, revenue, and other such activities. If you fail to streamline your payroll services in India, it is highly likely for you to face reputation damage in front of employees and company stakeholders,

Hence, the importance of the payroll management system in India and outsource your tasks. This can help you reduce costs and efforts spent on the management of these tasks. You can pay for the services you have acquired and leave the management and handling of employees on the outsource payroll management in India.

Paysquare is a payroll outsourcing organization in India. With our skilled employees and industry experience, we can help you streamline your payroll management in India. Reach out to us anytime, and our team will get back to you to hear your requirements. With us, you can leave your payroll-related worries behind and focus on the important decisions of your business.

Frequently Asked Questions

How can one explain the payroll management process in short?

Explaining the payroll management process in short may involve 3 practical steps. The first among them is gathering all the information related to the system. The next step will be to calculate and analyze all the collected information and estimate the total amount. Lastly, paying the employees according to the calculated structure. Combining these three steps systematically and appropriately will bring you an impactful payroll analysis conclusion.

What is the main agenda behind strategizing a payroll management system?

The main agenda or purpose of the payroll management system is to discipline the income and expenditure of a business. It regulates employee payment strategies and makes a monthly or yearly analysis of a business’s total income and spending. This way, you can guess the profit or loss margin quickly. Also, this is a consistent process and doesn’t need to be prepared repeatedly. Once the payroll management system is set up and executed correctly, the only thing to look after is its working process and response.

What are the fantastic benefits of using a payroll management system?

There exist various incredible benefits of using a payroll management system for your business. Among these, the topmost ones are: proper organization of all the work, outcome, and total salary level of every employee, saves a lot of time and effort of people, doesn’t need to be prepared repeatedly, significant enhancement in data security, keeping both the authorities and the employees happy becomes easier, and so on. These prime benefits (as mentioned in the article above) are essential in every company or business nowadays because of their accuracy and complete security.

Are there any unsolvable drawbacks of the payroll management system?

No, any drawback regarding employee payroll management systems is not unsolvable because of the various developments that have taken place in the IT industry. You can easily track down any trouble in your system that is prone to happen in the future.

Then, effective solutions can be drawn with expert analysis of the trouble. Also, these solutions are brought into practice so that exact results can be noticed and confirmations according to the same can be made. To conclude, there is no unsolved problem regarding payroll management systems.