Hi Seema,
The administration of payroll is a core HR activity. HR is supposed to formulate and modify the payroll policy as per the requirement of the time, which continually evolves. Payroll administration may become a sensitive activity, especially in Large/Medium Manufacturing units where bargaining/unionized workmen work.
A comprehensive activity should encompass standardizing payroll attributes grade-wise. It should start with earning heads such as Basic, DA, HRA, CCA, Washing Allowance, Production Linked Allowances, etc., and other allowances on one side, and Statutory Deductions on the second side with PF, FPF, ESIC, MS Tax on Profession Trade and Callings, TDS, MLWF (once in a semester), along with other deduction heads like staff advance deductions, society, canteen, etc., as the case may be. Before this, leave management and standardization of the entire workforce is absolutely necessary. There should also be clear and transparent directions regarding overtime and bonus calculation methods. Moving forward, there should also be a provision for the deduction of fines in case it is formulated by the management for late-coming, etc.
As for the HOW about the payroll processing, one has to first study different attributes of the existing payroll system in one's organization. Having assimilated the present structure of payroll, one has to give it a second thought and see if there are any chances to revise and develop the existing system considering the present HR scenario in one's organization.
Having gathered some definite clues along this line, one HAS TO APPROACH THE HIGHER MANAGEMENT FIRST for a discussion about the advantages of the developed system. If the decision-makers think it would be appropriate to formulate a revision in the existing system and have given the green signal to go ahead, one has to seek proposals for developing such a system or get the system developed in-house as the case may be.
Note that the calculation part, generation of various forms, etc., is more or less a prototype; the fundamentals lie in the approach as aforesaid. Hope this primary input will be enough for you to start with.
Regards,
Arun Dixit