How To Prepare Employees’ Monthly Salary Process? Know The Benefits

Employees’ monthly salary is one of the most important parts of an effective Human Resource Management system for an organization. Especially, from the South Asian Perspective, you must know how to conduct employees’ monthly salaries & benefits. Otherwise, you cannot cope with taxation, VAT, and audit.

Unlike in Western countries, where weekly, daily, and monthly payment systems are available, in South Asian countries, monthly salary is often disbursed.

Whether it is Weekly or Monthly, you need to know the stages of preparing employees’ monthly salaries & benefits.

Another name for this is – the payroll.

How To Prepare Employees’ Monthly Salary

Figure 1 Disbursing Monthly Salary Is A Very Important Part Of HRM

What is included in employees’ monthly salary & benefits?

Employees’ Monthly salary & benefits consist of various parts of facilities an employee gets as a part of the organization. Following are the main parts of employees’ monthly salary & benefits –

  • Original gross monthly salary including the basic salary, house rent, allowances, TA & DA, and everything else.
  • Overtime and possible commission details (Mostly disbursed afterward the disbursement of employees’ monthly salary & benefits)
  • Paid leave and unpaid leave details.
  • Any food expenses associated with the benefits.
  • Provident-related details, taxation, and any other monetary details necessary to be included.

Processing Employees’ Monthly Salary & Benefits in 10 simple steps

Step – 1: Defining the Policy of Employees’ Monthly Salary & Benefits

The first step in preparing the employees’ monthly salary & benefits is to define the organization’s policy regarding the monthly salary and benefits the employees. It may include –

  • Basic Salary
  • Other benefits like house rent, medical allowance, etc.
  • Policy for paid & unpaid leave
  • Overtime payment
  • Taxation at salary disbursement etc.

How To Prepare Employees’ Monthly Salary

Figure 2 You Should Convey The Policies For Feedback

Step – 2: Conveying the policies & gathering inputs

This is the second step of preparing the Employees’ Monthly Salaries & Benefits. At this stage, you should convey the policies to the employers ie the management as well as all the parties involved. Like –

  • Department Heads
  • Employee Themselves
  • Any other members involved in the payroll process

From the stakeholders, you need to gather additional data available for preparing the Employees’ Monthly Salary & Benefits. Like –

  • Any kind of increment happened for the employee
  • Overtime conducted by the employee happened during the period
  • Any kind of absence – paid or unpaid, maternity leave taken by the employee
  • If the employee wants to encash any leave allowed by the employer
  • Taxation information regarding the salary disbursement of a particular employee
  • Any insurance or health benefits to be availed related to Employees’ Monthly Salary & Benefits
  • Any advance or loan associated with the salary

And any other information that can influence the monthly salary disbursement.

Step – 3: Verification of the information

At this stage, you should put all the information in the software. If it is made with a spreadsheet, then it is often called a “Salary Sheet”.

After that, you need to crosscheck the information you have gathered.

You can cross-check with primary and secondary sources like the employee personal file, employee database, department heads, line manager or supervisor, and promotion letters.

Step – 4: Employees’ Monthly Salary & Benefits Calculation

At this stage, you should be confirmed about all the policies and information involved in the process. Now you need to calculate the gross salary and all the other benefits an employee avails of that month. In a word, you should convert your information into monetary values.

report sheet

Figure 3: A template to process a salary sheet. Source:

Either you can do it manually or you can use software to do it. Here is an example of preparing a salary sheet with Microsoft Excel.

For verification, you should recheck it with other members of your HR management team.

Step – 5: Possible Deductions

After providing all the inputs regarding the employees’ monthly salary and benefits in the monthly payroll sheet, you should also provide the necessary deductions information.

Deductions can include –

  • Provident Fund
  • Gratuity
  • Leave
  • Late coming deduction
  • Deduction for advance
  • Deduction for Taxation
  • Deduction for Food allowance


Step – 6: Conveying to the Accounts Department

Most organizations keep their Finance & Accounts departments together. Keeping records of salary disbursement is a vital part of the administrative process for any organization.

You should convey all the information to the accounts department. They have to keep the records and disburse the amount under the employees’ names.

So, at this stage, you should convey all the necessary information to the accounts department.

atm card

Figure 4 You Can Disburse The Salary With The Bank

Step – 7: Disbursement of the Monthly Salary

At this stage, you should take care of the disbursement process for the salary. Most of organizations disburse their salary through the banks. The employee must have a corporate account under their name at a specific bank where the company account is established already.

The accounts department can convey the salary sheet signed by the management and necessary officials.

The bank then disburses the salary and benefits accordingly.

If the company does not disburse the salary through bank accounts, it can send the salary through-

  • Cash disbursement – Pay cash to the employees according to the calculated amount.
  • Cheque – Cheques can be account pay or cash pay.
  • E-wallet – Right now, many companies disburse payments through e-wallets that can be encashed without a cheque or card. E-wallets are associated with mobile phones which make them easy to access.


Figure 5 You Can Also Disburse Cash Salary

Step – 8: Conveying the Disbursement details

Right now, after the disbursement, you should provide all the data to all the necessary parties involved.

Employers, department heads, directors, and everyone is entitled to receive a report on the disbursement.

There may be feedback on the amount of the Employees’ monthly salary & benefits disbursement. You should collect the feedback.

Step – 9: Commissions & Some other benefits

There is a possibility that your organization may disburse the commissions, incentives, and some other benefits after the monthly salary is disbursed. It is not a very old practice.

For this purpose, you should collect the necessary data regarding the commission and incentives. After collecting them, you should cross-check with the necessary departments and company policies.

When you are sure about the number of commissions to be transferred, then you should proceed with disbursement through banks or cash.

Step – 10: Feedback

There are possibilities that, you may find various feedbacks on the disbursement. There may be problems from the bank or the amount can be calculated wrong from time to time.

If any of the problems happen, you should check it with the bank, the department head of that particular employee, and the policies regarding the issue.

If you go through all the parts, you may find that the Employees’ Monthly Salary & Benefits are disbursed perfectly.

Cautions about Payroll Disbursement

There may be problems with payroll disbursement from time to time. You should be cautious beforehand and avoid mistakes. Some cautions you should take while disbursing Payroll-

  • Collect all the necessary benefits an employee should avail. Do not leave even a small amount that should be included in the benefits scheme.
  • Find out if the employee has any kind of loans or advances associated with the salary.
  • Find out medical benefits, insurance, and provident fund amounts you should deduct from the actual salary. These benefits differ from one employee to another. So, you should be very careful and not make the same deduction for everyone through manual or software processes.
  • Be careful about any increment, or promotion made for an employee beforehand. If you do not include the new salary structure in the payroll, you may need to revise it again.

Frequently Asked Questions

1. How do I prepare payroll for my employees?

You should follow the steps for preparing employee payrolls:

  • Step – 1: Defining the Policy of Employees’ Monthly Salary & Benefits
  • Step – 2: Conveying the policies & gathering inputs
  • Step – 3: Verification of the information
  • Step – 4: Employees’ Monthly Salary & Benefits Calculation
  • Step – 5: Possible Deductions
  • Step – 6: Conveying to the Accounts Department
  • Step – 7: Disbursement
  • Step – 8: Conveying the Disbursement details
  • Step – 9: Commissions & Some other benefits
  • Step – 10: Feedback

2. How do I create a compensation and benefits package?

You should follow these steps to create a compensation and benefits package-

  • Find out the reasons for compensation
  • Find out cultural values and morals
  • Find out the amount you should compensate
  • Create values on your compensation package
  • Take feedbacks
  • Announce compensation packages

3. How do you calculate benefits for employees?

For this, you need to find out the cost for employees annually. It is called cost-to-company (CTC). If you can find out and sum up the CTC of all the employees, then you should sum up the total annual salary of the employees. After that, you can find the benefits by this formulae –

Benefits for employees = CTC/Total employees’ salary

4. How would you prepare employees’ compensation components as a company HR?

There are four parts of employee compensation components. If you can prepare them well then you can get the compensation components-Salary, Benefits, Incentives, and Prerequisites.

5. How do you create a salary structure?

Following is a rough formulation of how you should create a salary structure-

(Gross Salary including basic and other benefits + Other possible benefits outside of regular salary) – (Income tax on taxable income + loan/advances + Any other deduction) = Salary Structure


Employees’ Monthly Salaries & Benefits should be calculated with caution. It should be precise and should not leave anything that should be included.

Leave a Reply

You are currently viewing How To Prepare Employees’ Monthly Salary Process? Know The Benefits