Minimum Wages
The land law prohibits employers from paying less than the minimum wages for a particular type of job. In India, now almost all kinds of employment are governed by the Minimum Wages Act, and minimum wage is declared at the Central & State level depending on the industry type. While we process salaries, all HR professionals should ensure that employees are paid the minimum wages. In many places, there is some ambiguity on where to find the minimum wages. First of all, one needs to consider if a particular industry falls under Central or State government. If it's under the governance of the Central government, it should pay the central minimum wages; otherwise, the state government minimum wages are applicable.
Minimum Employee Welfare Deductions
Employee welfare deductions are an essential part of any salary deductions. These deductions involve Employees State Insurance Contributions, Employee Provident Fund Contributions, Contributions towards Workers Welfare Fund, Contributions towards Labour welfare fund etc. These contributions should be deducted based on some percentages. There are some cases; the gifts are fixed to some amount.
When we calculate these contributions, we need to understand that salary is different in each case. In many places, there is some upper limit in the salary calculations and contributions. For example, ESI cannot be calculated if the employee's salary is above INR. 21,000 per month.
Taxes
There are different types of taxes to be considered in the salary processing. We need to deduct TDS (Income tax )from the employee's salaries based on the Income Tax Slab for a particular financial year for every employee. Remember, not all employees come under the ambit of income tax (TDS) deductions. The HR professional need to collect the investment declarations from the employees before going ahead and deducting the tax from the employee's salary
Another tax which one needs to consider is the Professional tax for the local self-government. It is different from state to state, and one needs to have various slabs for each state. It's been paid on a half-yearly basis, and the income for an employee for the upcoming six months is to be calculated in advance to deduct the professional tax.
The HR/Payroll manager should be prudent. At the same time, the full and final of an employee would be some differences in the projected salaries and actual salaries of a person when he leaves.
Salary disbursement process
The salary disbursement process gets predominance where the salary disbursement is restricted through some mode by the government or situations. For example, In Kerala, there is one government application called Wage Protection System, and all employers need to disburse salaries through this automated system. All the organisations need to register in this system with the bank details and keep the same bank account funded while releasing the wages.
Also, there are cases where we need to release salaries in currency notes. It's a headache to keep the proof of salary disbursement with a signature on the voucher or wage sheet.
The HR professional should have a clear understanding of the process of salary disbursement to make sure that all the proofs are secured for future reference and to avoid further claims of salaries.
Records
All records of the salary processing, deductions, investment proof, vouchers should be kept ready for any future reference by any government authority or auditors. There can be cases where we will have to pay the same amount again if the HR/Payroll department does not keep the proper records within the formats. The employer/organisation needs to keep all the documents intact for any surprise inspections by authorities.
Salary processing & disbursement is an easy job as long as we know the basics and are updated with the latest changes in deduction percentages, minimum wages etc. An HR professional needs to dedicate time for the research of all these items daily. They can also seek support from external experts and consultants to make sure all are intact. This level of engagement will also ensure the organisation's business continuity with suitable systems and processes in place.