Payal always believed she was processing accurate payroll, month after month. Goel pointed out a major mistake...
Goel went to meet his friend Payal at the office. He was curious how Payal prepares payroll each month.
"Payal, show me how you manage payroll at your company.", Goel enquired.
"Oh, it's so simple yaar. I will show you.", said Payal. She opened the payroll folder and from the hundreds of spreadsheets, she opened one for July.
Goel glanced at it and immediately exclaimed: "this is a wrong way to do things!"
Payal: "No way! I've been using it for so many years. What's the problem?"
Goel said, "If I see a loss of pay (LOP) column on the deduction side, I know it is wrong."
Payal: "So what's right according to you?"
Goel: "You should prorate the basic based on the days worked. It should be like this."
Payal shrugged and said: "Maybe, but my style is easier."
Goel: "Pagal. With Excel any style is easy as long as you add sufficient columns!"
Payal: "But, why is my style wrong?"
Goel: "Check the PF & ESI totals. You are witholding slightly more PF and ESI this way. The more days an employee is absent, the more inaccurate the deduction."
Payal: "Hmm. But look, the net pay is higher in you style. We will end up paying more!"
Goel: "No, the net pay does appear to be higher but you are not paying more. Also, this is the correct way of computing payroll."
Payal: "What?! How can net pay be higher and we don't end up paying higher?"
Goel: "See, you spreadsheet is concerned with only the payouts to employees. You are not including the employer contribution to PF (12%) and ESI (4.75%), administrative charges, etc. When you consider those components the net cost to company (CTC) is lower in my method."
Payal: "OK. But how much of a difference does it make? Does it really matter?"
Goel: "Maybe a difference of 10-15 rupees may not matter, but if many employees have loss of pay it could add up. See, there is a 3.33% higher PF payout for one day absence. For 5 days of loss of pay, it could be 20% more! But, if you want to benefit the employees by paying more PF & ESI, your method is better..."
Payal: "Oh, never knew this problem. Boss will not like it at all..."
Goel: "Don't worry. Many people do it this way. One person does it the wrong way and it spreads to others."
Payal: "Hehe. I have myself shared the spreadsheet with my friends. I even posted it on CiteHR forums!"
Payal though for a while and asked, "So how do you fix this?"
Goel: "The fix is easy. We just need to add a few extra columns. Every month, just update the loss of pay column and that should do."
Payal: "Thanks. I'll discuss this with my boss."
Goel: "But there is an even better way of managing your payroll. Have you heard of Greytip Online?"
Payal: "No, what's it?"
Goel: "It's an online payroll software that computes the payroll and generates all your PF, ESI, PT and income tax reports, forms and challans without any effort. Just update the loss of pay days and it does everything else. You do minimum work - click a button and payroll work gets done in minutes."
Payal: "Wow, payroll in minutes? It takes 2 days now. :("
Goel: "Check it out for free. Creating your account is as easy as opening a Gmail account! If you like it, tell your friends too."
Payal: "Great, I'll sign up! I'm feeling hungry, let's go for lunch!"
