Payroll & Compensation — VP Payroll & Compensation

Phase 2 — Employee Compensation Master Record

Every employee must have a complete compensation record:

employee_record:
  employee_id: ""
  full_name: ""
  legal_name: ""             # as on tax documents
  employment_type: full_time | part_time | fixed_term
  start_date: ""
  department: ""
  cost_center: ""
  location: ""               # jurisdiction for tax purposes
  job_title: ""
  job_level: ""              # e.g. L4, Senior, Director

  compensation:
    base_salary: "$0"        # annual
    salary_currency: USD | INR | EUR | GBP | other
    pay_frequency: bi-weekly | semi-monthly | monthly
    effective_date: ""
    last_increase_date: ""
    last_increase_pct: "%"

  variable_pay:
    target_bonus_pct: "%"    # % of base salary
    commission_plan_id: ""
    equity_eligible: false

  equity:
    option_grants: []        # list of grants with grant date, shares, strike price, vesting schedule
    rsu_grants: []

  benefits:
    health_insurance_plan: ""
    employee_premium: "$0"   # monthly employee contribution
    retirement_contribution_pct: "%"
    employer_match_pct: "%"
    other_benefits: []

  deductions:
    pf_applicable: false     # India: Provident Fund
    esi_applicable: false    # India: Employee State Insurance
    tds_applicable: false    # India: Tax Deducted at Source
    federal_withholding: {}  # US: W-4 elections
    state_withholding: {}

  banking:
    bank_name: ""
    account_number: ""       # encrypted
    routing_number: ""
    payment_method: direct_deposit | check | wire

Phase 3 — Payroll Run Process

3.1 Pre-Payroll Checklist (Run 5 Days Before Pay Date)

MANDATORY PRE-PAYROLL CHECKS:
  [ ] New hires added with effective date and pro-rated pay calculated
  [ ] Terminations processed: final pay, accrued PTO, COBRA notification
  [ ] Salary changes approved and effective dates confirmed
  [ ] Bonus/commission amounts approved by Finance and People
  [ ] Time and attendance data imported (for hourly/part-time employees)
  [ ] Benefits deduction changes applied (new enrollments, life events)
  [ ] Garnishments / court orders applied (if any)
  [ ] Statutory deduction rates verified (PF, ESI, TDS/withholding)
  [ ] Bank account file validated — no employee with missing banking info
  [ ] Payroll budget check: gross payroll vs. approved headcount budget
  [ ] Prior payroll reconciliation complete (no outstanding discrepancies)

3.2 Payroll Calculation Template

EMPLOYEE PAYROLL CALCULATION — [Employee Name] — [Period]
━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━

EARNINGS
  Base salary (period):                 $[X]
  Overtime (if applicable):             $[X]
  Bonus (this period):                  $[X]
  Commission:                           $[X]
  Other earnings:                       $[X]
  ──────────────────────────────────────────
  GROSS EARNINGS:                       $[X]

DEDUCTIONS — EMPLOYEE SIDE
  Federal income tax withheld:         ($[X])
  State/local income tax:              ($[X])
  Employee Social Security (6.2%):     ($[X])
  Employee Medicare (1.45%):           ($[X])
  Health insurance premium:            ($[X])
  401(k) / Retirement contribution:   ($[X])
  Other voluntary deductions:          ($[X])
  ──────────────────────────────────────────
  Total deductions:                    ($[X])
  NET PAY (employee take-home):         $[X]

EMPLOYER COSTS (not deducted from employee — company cost)
  Employer Social Security (6.2%):      $[X]
  Employer Medicare (1.45%):            $[X]
  Federal unemployment (FUTA):          $[X]
  State unemployment (SUTA):            $[X]
  Employer health insurance premium:    $[X]
  Employer 401(k) match:                $[X]
  ──────────────────────────────────────────
  Total employer cost:                  $[X]
  TOTAL COST TO COMPANY (CTC):          $[X]
━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━

3.3 India-Specific Statutory Deductions

INDIA PAYROLL DEDUCTIONS — [Employee Name] — [Month]
━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━

EARNINGS
  Basic salary:                         ₹[X]     (40–50% of CTC)
  HRA (House Rent Allowance):           ₹[X]     (40–50% of basic)
  LTA (Leave Travel Allowance):         ₹[X]
  Special allowance:                    ₹[X]
  Bonus (if applicable):                ₹[X]
  ─────────────────────────────────────────
  GROSS SALARY:                         ₹[X]

DEDUCTIONS
  Provident Fund — Employee (12% of basic): (₹[X])
  ESI — Employee (0.75% of gross, if applicable): (₹[X])
  TDS (computed on annual projected income):       (₹[X])
  Professional Tax (state-specific):               (₹[X])
  Other deductions (loans, advances):              (₹[X])
  ─────────────────────────────────────────
  TOTAL DEDUCTIONS:                    (₹[X])
  NET TAKE-HOME:                        ₹[X]

EMPLOYER CONTRIBUTIONS
  PF — Employer (12% of basic):         ₹[X]
  ESI — Employer (3.25% of gross):      ₹[X]
  Gratuity provision (4.81% of basic):  ₹[X]
  ─────────────────────────────────────────
  Total CTC:                            ₹[X]
━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━

Phase 4 — Bonus & Variable Pay

4.1 Annual Bonus Framework

bonus_framework:
  company_performance_gate: ""   # minimum company revenue/EBITDA to trigger bonus pool
  bonus_pool_size: "$0"          # total bonus pool funded if gate met
  individual_calculation:
    base: employee.base_salary × employee.target_bonus_pct
    company_multiplier: 0.0–1.5  # based on company performance vs. goal
    individual_multiplier: 0.0–1.5  # based on performance rating
    formula: "base × company_multiplier × individual_multiplier"
  payout_timing: ""              # e.g. "Paid in March following fiscal year end"
  proration_rules:
    new_hires: "Prorated from hire date if employed ≥ 6 months"
    terminations: "Forfeited if terminated before payout date"

4.2 Spot / Discretionary Awards

• Maximum per award: $[X] (without CFO approval)
• Approval required: Manager + HR Business Partner
• Tax treatment: Supplemental wage withholding rate applies
• Timing: Included in next regular payroll run
• Budget: Tracked against spot award pool (typically 0.5–1% of payroll)

Phase 5 — Equity Administration

5.1 Option Grant Tracking

option_grant:
  grant_id: ""
  employee_id: ""
  grant_date: ""
  grant_type: ISO | NSO       # ISO: Incentive Stock Option / NSO: Non-qualified
  shares_granted: 0
  exercise_price: "$0"        # per share (typically FMV at grant date)
  expiration_date: ""         # typically 10 years from grant
  vesting_schedule:
    cliff_months: 12           # typical: 1-year cliff
    total_vest_months: 48      # typical: 4 years
    cliff_shares: 0            # shares vesting at cliff
    monthly_post_cliff: 0      # shares per month after cliff
  exercised_shares: 0
  forfeited_shares: 0
  outstanding_shares: 0        # granted - exercised - forfeited

5.2 Vesting Calendar

Run monthly to identify:

• Employees hitting 1-year cliff (notify and confirm continued employment)
• Monthly vesting events (update cap table)
• Employees approaching option expiration (notify 6, 3, and 1 month before expiry)
• Termination impact: grant-specific post-termination exercise window

Phase 6 — Contractor Payments

6.1 Contractor Invoice Processing

contractor_payment:
  contractor_name: ""
  contractor_entity: individual | company
  tax_classification: 1099-NEC (US) | self-employed | corp-to-corp | B2B
  contract_id: ""             # links to signed agreement
  invoice_id: ""
  invoice_date: ""
  period_start: ""
  period_end: ""
  services_description: ""
  hours_logged: 0             # if T&M
  rate: "$0"                  # per hour or fixed
  gross_amount: "$0"
  expenses_reimbursable: "$0"
  total_payable: "$0"
  w9_on_file: false           # required for US contractors > $600/year
  payment_method: ACH | wire | check
  payment_date: ""

6.2 1099 / Contractor Tax Reporting

• Track all US contractor payments throughout the year
• Contractors paid > $600 in a calendar year require Form 1099-NEC (due Jan 31)
• Maintain W-9 on file before making any payment
• Corp-to-corp arrangements: no 1099 required (payment to a corporation)
• International contractors: no 1099 required; maintain W-8BEN for IRS records

Phase 7 — Payroll Compliance Calendar

Quality Rules

• Payroll must be approved by VP Payroll AND CFO before submission to the payment processor.
• No salary can be increased without an approved salary change request signed by the employee's VP and HR.
• Salary data is strictly confidential — access restricted to People Ops, Finance, and executive team.
• Bank account changes require the employee to submit a voided check or official bank letter — never change via verbal request.
• Every payslip must be delivered to the employee within 3 business days of pay date.
• Payroll tax filings are never late — build 5-day buffer into all deadline calendars.
• Equity grants cannot be issued without Board authorization (or Compensation Committee).