Payroll calculations are defined as the various numbers and processes that are performed by an employer with a payroll calculator/system, the sum of which equals an employee’s pay. An employer calculates payroll by calculating gross wages and payroll deductions, to arrive at an employee’s net pay.
What is the Payroll Calculator?
A set of systems that are used by an organization or business to calculate an employee’s net pay.
In any organization, “payroll represents the sum of entire compensation records of employees”. This includes fixed wages, variables, bonuses, social security deductions, taxes, etc.
In financial accounting, “payroll denotes the amount paid to employees for services they provided for a defined period”. Normally, the wage period or payroll cycle would be one month. However, for contract labor and daily waged workers, based on the nature of the business, there could be appropriate periods as defined by the organizations.
How does payroll calculation work?
Payroll is all about, what a payroll company does? Let’s, take a small example where there is a small company with an employee of 15 people. The company is giving some monthly or annual CTC to its employees.
So, in the CTC there may be some addition as well as some deduction according to the country as well as the company. So, the company is of only 15 people so they can easily calculate 15 people deduction in addition to everything tax and all and will give the gross salary.
This is easy stuff as there are only 15 people in the company. So these are called as in-house payroll. Now we will talk about the big companies, such as TCS, L&T, Wipro, and Accenture. These are the company having more than 20000 employees. As well as these companies are having offices in many different countries.
So, these MNC’s can calculate their payroll, at these moments they need an outsourcing company that can calculate every employee’s salary according to their location as well as their company.
So what do these outsourcing companies do, first of all, they look up for the client or the client look for the outsourcing company for doing their company payroll?
Now after getting the client, it’s the time for the document processing in which the company head of both the companies will exchange some agreement (in which there is an agreement which tells about the payment and all the data which has to be transferred between both the companies, such as SOP, etc).
Now the transition team, as well as the operation team, comes in the scenario, which looks after all the operations of the specific payroll for the given duration.
There are transition consultants who talk with the other company representative and tell them what are the basic details of each employee which has to be shared with Payroll Company. The payroll calendar is to be made for both the client and the vendor company.
There will be some specific date in which the data is transferred from the client to the vendor. After getting the data the operation team comes in a scenario that starts and processes the detailed payroll. The payroll is processed in many ways, one of the examples is vendor company of client also give their payroll process to another vendor.
In these, the payroll process is checked two times by both the companies. After processing the payroll the vendor company checks all the data and stats and makes the salary slip after the salary slip is made it has been checked once again and if there are some faults than it has to be processed again.
Than after rectifying the mistakes than these salary slips are ready to give to the client for the processing.
After handling all the details for the specific month these all operations have to be performed according to the agreement.
Calculations of payroll are the hectic work it includes a lot of concentration as well as focus and very well updated news of specific country as well as the country, which tells about the changes in the law of the government (concerning salary pay and all).
The detailed knowledge of ms excel, ms PowerPoint and ms word is necessary, problem-solving capacity as well math’s should be good.
Payroll calculations usually constitute 4 main components – Basic pay, Allowances, Deductions, and IT Declarations. State Income Tax is calculated from the Gross – Deductions.
Gross Pay
Gross Pay is the total of Basic pay + Dearness Allowance + House Rent Allowance + Other Allowance.
Net Pay
Net Pay is the difference between Gross Pay – (Deductions + Total TDS). Total TDS is the sum total of TDS + Education Cess.
Basic Pay
Basic Pay is 50% of Gross salary (Gross * 0.5).
HRA
The amount received as the HRA from the employer. Actual rent paid less 10% of the basic salary and 50% of the basic salary if staying in a metro city and 40% in a non-metro city.
Deductions
Deductions are the sum of TDS, PF, ESI, and PT, etc.
- TDS is the sum of (Basic + Allowances – Deductions) * 12 – IT Declarations
- PF deduction(Provident Fund) is 12% off Basic or 15,000(Basic * 0.12), whichever is lower
- ESI is 1.75% off – Gross Pay or 21,000, whichever is lower
IT Declarations
IT Declarations is the sum of 80C, 80D, 80CCC, 80CCD etc.
How using a payroll calculator can ease your HR processes
Step 1: Attendance maintenance
Basically, a human resource management software provides the “Employee Self-Service” module which allows an employee to log in their attendance and leaves using the time-tracker facility. This helps the HR team to easily retrieve employee attendance data.
Step 2: Manage arrears and other adjustments
In this step, the HR team can modify Loss-of-Pay leaves of employees and thereby make adjustments to arrears, or even add bonus payments, incentives, overtime payments, etc.
Step 3: Final check of employee salary details
After successful completion of the above two steps, the last one is to take a quick check at the employee salary structure break-down like allowances, tax, deductions, etc. and confirm the employee’s net salary amount.
After this is done, the payroll process gets completed. The HR team can mail the salary slip or download the bank-sheet.
The difference between a weekly paycheck and yearly salary: How Does it work
Payroll is typically calculated as follows:
The standard number of hours worked per year is 2080. We don’t use leap years in payroll calculations because it’s an outlier.
36,000 / 2080 = 17.31 per hour.
If you are salaried, you will get the standard 40 hour week, which would equal 692.40 per week.
List of Payroll Calculator
Here goes the list of payroll calculator and areas it’s most used:
#1: Sumopayroll: Payroll System for Businesses in India
It is the preferred HR & Payroll software for Indian businesses. It automates key areas of HR & Payroll management, leaves & expense tracking. Unlike traditional payroll management system, we are a modern new generation platform focused on user experience and simplifying complex workflows. With more than 350+ highly satisfied customers. we deliver a high-quality software service on a 24 x 7 basis.
#2: HRMantra: Global Payroll Calculator Software
HRMantra is the world’s most powerful HR & payroll software helping automate the most complicated hire to retire HR processes rapidly using its off-the-shelf ready to use parameterized features. HRMantra is available on both On-Premise and Cloud models and has a fully integrated Mobile App for the Self Services driven functions.
#3: Paycheckcity: Salary payroll System
Calculate your net pay or “take-home pay” by entering your per-period or annual salary along with the pertinent Federal, State, and local W-4 information into this free Arizona Paycheck Calculator. PaycheckCity.com for paycheck calculators, withholding calculators, tax calculators, payroll information and more.
#4: Accase.com: Payroll calculator Poland
Accase.com is designed to take the administrative burden off your shoulders, offer the right legislative guidance, and assure secure employee information exchanges and accurate data processing.
#5: ADP: Hourly Paycheck Calculator
With ADP hourly payroll calculator you can enter up to six different hourly rates to estimate after-tax wages for hourly employees.
#6: QuickBooks.intuit.com: Free Paycheck Calculator for Hourly and Salary employees
QuickBooks.intuit.com is a free paycheck calculator that makes it easy for you to calculate paychecks for all of your workers, including employees you pay hourly wages and your employees who are earning a salary. It’s a cinch to get started—just enter your employee’s pay information and we’ll do the rest for you instantly.
We crunch the numbers and give you a rundown of the paycheck amount as well as how much to deduct for things like social security, tax withholding (including federal income tax and local taxes), and voluntary deductions, too.
We use the most up-to-date tax information for local tax and federal withholding to make sure our calculations are accurate. Want to include overtime, bonuses, or commissions? It’s easy to do!
How to calculate Salary and Hourly paycheck using QuickBooks.intuit.com
Salary Income Paycheck Calculator
If your employees are paid a set salary, the salary paycheck calculator is the perfect option. Use it to estimate net vs. gross pay for W2 or salaried employees after federal taxes, local taxes. If your employee has requested a voluntary deduction for tax withholding, no problem—you can include that info when using the calculator.
Hourly Wage Paycheck Calculator
Need to calculate paychecks for your 1099 workers? Our hourly paycheck calculator accurately estimates net pay (sometimes called take-home pay or home pay) for hourly employees after withholding taxes and deductions.
#7: Gusto.com: Employer payroll tax Calculator
Gusto employer tax calculator quickly gives you a clearer picture of all the payroll taxes you’ll owe when bringing on a new employee.
#8: Payrollcenter.com (OnPay): Free Payroll Tax Calculator and Tax Rates for United State
OnPay free payroll tax calculator makes it simple to handle withholdings and deductions in any state. Employers can use it to calculate net pay, figure out how much to withhold, and know how much to include in employees’ paychecks.
#9: SurePayroll.com: Free Salary and Hourly Paycheck Calculator
Sure salary paycheck calculator can calculate take-home wages for your employees.
You can also use the calculator to calculate hypothetical raises, adjustments in retirement contributions, and changes to medical insurance premiums.
In addition to our free salary paycheck calculator, our payroll calculators page contains an hourly paycheck calculator among many others.
The payroll calculators on our website are designed to provide general guidance and estimates about the payroll process. If you have any specific questions, contact us or request an instant payroll quote online.