Question

Your manager, Charlene Hayes, has asked you to prepare a memo outlining the steps to calculate a net pay. The information will be used in training new employees in the Payroll Department, so be as detailed as possible. Point form is acceptable for ease of reading.

Answer 1

To calculate net pay following points are to be considered

1. First of all we need to take salary register of employees and identify the total no of employees; joinee during the year, resignee during the year.

2. A reconcillation of total no of employees should be there.

3. Secondly, we should take the CTC provided to the employee which is as per appointment letter.

4. Thirdly, to calculate the net pay

(a) we should add the following -

Basic Pay, DA, HRA, Special Allowances, Leave Travel Allowances, joining bonus & statutory Bonus, Medical Allowance, Educational Allowance, Car running and maintenance.

After adding all these components we will get the gross salary of the employee.

(b) We should deduct the following from the gross salary

TDS, PF, and other specific deductions

We will get the net pay of the employee.

- Points to be kept in mind

1. We should check that only proportionate salary is given to employee from the date of his joining.

2. We should check if any employee has resigned then , similarly proportionate salary is paid.

3. Leave travel policy should be complied.

4. Bonus policy should be checked.