Answer to Question #97910 in Accounting for Jane Lee

Question

Provide a list of the payments that will need to be remitted to external parties at various frequency levels throughout the year as part of payroll system.

Answer 1

There are several payments in a payroll system which are to remitted to external parties whether to individual or to any organisation or statutory bodies etc. on various intervals like monthly, quarterly or one time etc.. These payments may be broadly categorized in two categories as follows -

(A) Payment made by the employer directly to third parties

(B) Payments made by employer out of the deductions from employee's salaries/wages

(A) Payments made by the employer directly may be subdivided as follows -

(1) Statutory payments: -

a. Payroll taxes as prescribed by the law of the nation.

b. Any penalties or levies imposed by law or any statutory authority in relation to payroll system.

c. Fringe benefit taxes on the value of the free benefits given to employees in lieu of salary.

(2) Other payments: -

a. Healthcare expenses like health insurance premium taken for employees benefits.

b. Expenses which are incurred for other employee benefits.

(B) Payments made out of the deduction made from employees may also be subdivided into -

(1) Involuntary deductions: -

a. Income tax applicable as per income tax law of the nation, on the salaries /wages of employees.

b. Professional tax as applicable as per the law of the local authorities.

c. Provident fund subscriptions like EPF, GPF, PPF etc. to remitted to the concerned authorities / organisations.

d. Any other taxes imposed by the various laws of the nations on the income of the employees.

d. Any court attachment ordered by any judicial authority to be recovered from salary of any employee.

e. Group saving linked insurance premiums to be remitted to insurance company against group insurance.

(2) Voluntary deductions: -

a. Monthly insurance premium on insurance policies taken by employees on their own.

b. Installments of the loan taken by employee from bank with the approval of employer.

c. Any voluntary donation to be made to any trust or authority through employer.

d. electricity bill or water bills on the rent free accommodations provided by the employers.