Hi Seema,
Administration of Payroll is core HR activity. HR is supposed to formulate and modify Payroll policy as per the requirement of time, which continually gets evoluated. Payroll administration may become sensetive activity especially in a Large/Medius Manufacturing units where bargainable / unionised workmen work.
An comprehensive activity should encompass standardizing of payroll attibutes gradewise; and then start with earning heads such as Basic, DA, HRA, CCA, Washing Allownce, Production Linked Allowances etc and other allowances on one side and Statutory Deductions on the second side with PF, FPF, ESIC, MS Tax on Proffn Trade and Callings, TDS, MLWF (once in semester) alongwith other deduction heads like staff adv deductions, society, canteen, etc. as the case may be. Before this, leave management and standardisation of entire force is absolutely necessary. There should also be a clear and transperant directions with regards to overtime and bonus calculation methods. Going ahead, there shold also be a provision for deduction of fines in case it is formulated by the management for late coming etc.,
As far as HOW about the payroll processing, one has to first study different attributes of existing payroll system in ones' organisation. Having accimilated 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 present HR scinario in ones' organisation.
Having got some definate clues in this line, one HAS TO APPREACH THE HIGHER MANAGEMENT FIRST for discussion above the advantages of the developed system. If the decision makers think it would be appropriate to formulate revision in existing system, and have given green signal for for going ahead; one has to seek the proposals for developing such kind of system; or get the system developed in-house as the case may be.
Note that calculation part, generation of various forms etc., is more or less prototype, the fundamentals lie in approach as aforesaid. Hope this primary input will be enough for you to start with.
regards,
arun dixit