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Lesson 1 of 3Payroll & HR

Payroll Basics

Payroll is one of the largest expenses for any business and the most regulated. Getting it right means happy employees, tax compliance, and no penalties. Getting it wrong means legal trouble, employee distrust, and hefty fines.

CTC Breakdown — Where Does the Money Go?

Example: Employee with CTC of

₹12,00,000 per year

Earnings (What Employee Sees)

Basic Salary (40%)₹4,80,000
HRA (50% of Basic)₹2,40,000
Special Allowance₹2,35,200
Gross Salary (Monthly: ₹79,600)₹9,55,200

Deductions (From Employee)

Employee PF (12% of Basic)₹57,600
Professional Tax (Maharashtra)₹2,500
TDS (estimated, New Regime)₹72,000
Total Deductions₹1,32,100

Employer Costs (Hidden from Employee)

Employer PF (12% of Basic)₹57,600
Gratuity (4.81% of Basic)₹23,088
Insurance (Group Mediclaim)₹15,000
Total Employer Cost Beyond CTC₹95,688
Net Take-Home (Monthly)~₹68,600 / month

The Payroll Cycle — 7 Steps

1

Gather Attendance Data

Collect working days, leaves taken, overtime hours, late arrivals, and half-days from the attendance system.

2

Calculate Gross Pay

Base salary + allowances + overtime + bonuses + commissions for the period. Apply prorated amounts for partial months.

3

Calculate Deductions

Employee PF, ESI, Professional Tax, TDS (income tax), loan EMIs, and voluntary deductions (insurance, investments).

4

Compute Net Pay

Gross Pay − Total Deductions = Net Pay (take-home). This is what gets credited to the employee's bank account.

5

Generate Payslips

Create detailed payslips showing all earnings and deductions. Mandatory to provide to employees every pay period.

6

Process Bank Transfers

Upload salary file to bank for batch processing. Ensure correct bank account details. Most companies pay by 1st or 7th of month.

7

File Statutory Returns

Submit PF (ECR), ESI returns, TDS (Form 24Q), Professional Tax returns, and maintain registers as required by law.

Payroll Across Countries

CountrySocial ContributionEmployer RatePay Cycle
🇮🇳 IndiaPF + ESI~13-17%Monthly
🇮🇪 IrelandPRSI11.05%Monthly / Fortnightly
🇦🇺 AustraliaSuperannuation11.5% (2024)Fortnightly / Monthly
🇸🇬 SingaporeCPF17%Monthly
🇺🇸 USAFICA (Social Security + Medicare)7.65%Bi-weekly / Monthly
🇬🇧 UKNational Insurance13.8%Monthly / Weekly
🇲🇾 MalaysiaEPF + SOCSO~14-15%Monthly
🇨🇦 CanadaCPP + EI~8-10%Bi-weekly / Monthly

Key Takeaways

CTC ≠ Take-Home. Employees receive 60-75% of CTC after deductions for PF, tax, and insurance

The payroll cycle has 7 steps: attendance → gross pay → deductions → net pay → payslips → bank transfer → statutory filing

Employer costs go beyond CTC: PF contribution, gratuity, insurance, and training add 10-20% above CTC

Every country has unique payroll obligations — PF (India), Super (Australia), PRSI (Ireland), FICA (USA)

Automate payroll to reduce errors, ensure compliance, and save 8-10 hours per month on manual calculations