Quick answer: payroll software turns salary structures, attendance and leave into accurate monthly pay. In India it must handle loss of pay, allowances and deductions, and help you stay on top of statutory items such as PF, ESI, professional tax and TDS. It should produce payslips employees can download and reports your accountant can use.
This guide covers what Indian payroll involves each month, the features that matter and how to choose payroll software for a growing company.
What goes into an Indian payroll
| Component | Examples |
|---|---|
| Earnings | Basic, DA, HRA, special allowance, conveyance, overtime, incentives, arrears |
| Attendance inputs | Days worked, paid leave, loss of pay, holidays, shifts |
| Statutory deductions | Employee PF, ESI, professional tax, labour welfare fund, TDS |
| Other deductions | Loan and advance recovery, canteen, notice pay recovery |
| Employer costs | Employer PF, EDLI and admin charges, employer ESI, gratuity provision |
| Outputs | Payslips, bank transfer file, payroll register, statutory reports |
Every one of these depends on correct master data: salary structure, joining date, bank details, PAN and UAN.
HR, GPS attendance, shifts, leave, payroll, tax declarations, onboarding, engagement, projects and timesheets — one employee record behind all of it.
Start free See the demoStatutory basics every payroll team tracks
| Item | Key rule | Usual due date |
|---|---|---|
| Provident fund | 12% employee + 12% employer on PF wages; EPS share capped at ₹1,250 | 15th of next month |
| ESI | Gross wages up to ₹21,000; 0.75% employee, 3.25% employer | 15th of next month |
| Professional tax | State-specific slabs, maximum ₹2,500 a year | Varies by state |
| TDS on salary | Based on regime, declarations and projected annual income | 7th of next month (March has a later date) |
| Labour welfare fund | State-specific small contributions | Half-yearly or yearly in most states |
| Gratuity | Provision monthly; pay within 30 days of it becoming due | On exit |
Rules and due dates change, so confirm them with your accountant each year. Our EPF calculator and in-hand salary calculator help sanity-check figures.
A monthly payroll checklist
- Lock attendance and approved leave for the month
- Update changes: new joiners, exits, increments, bank detail changes
- Add variable pay: incentives, overtime, reimbursements, arrears
- Apply deductions: loans, advances, notice recovery
- Run payroll and review a variance report against last month
- Get approval from the finance owner
- Transfer salaries and publish payslips
- Deposit statutory dues and file returns on time
- Record the accounting entry for salaries, payables and employer costs
- Archive the payroll register for audits
Features that matter
Accuracy
- Salary structures with fixed and variable components
- Automatic loss of pay from attendance and leave
- Mid-month joining and exit handled pro rata
- Arrears and one-time payments
Employee experience
- Payslips on mobile, with a history of past months
- Tax regime and declarations submitted online
- Loans and advances visible with recovery schedule
Control
- Role-based access to salary data
- Audit trail for changes to pay and bank details
- Approval step before salaries are released
Integration
- Attendance, leave and shifts in the same system
- Export for bank transfers and accounting
- Reports for headcount cost by department and location
In-house spreadsheets vs payroll software vs outsourcing
| Spreadsheets | Payroll software | Outsourced payroll | |
|---|---|---|---|
| Cost | Low cash cost, high staff time | Per employee per month | Per employee per month, usually higher |
| Accuracy | Depends on one person | Rule-based and repeatable | Depends on provider |
| Control | Full, but fragile | Full | Shared |
| Scales with growth | Poorly | Well | Well |
| Employee self-service | None | Built in | Varies |
Many companies use payroll software internally and ask their accountant to review statutory filings.
How to choose payroll software
- Map your pay structures and test them in a demo, including a mid-month joiner and an exit
- Check attendance integration: does loss of pay flow automatically?
- Ask about statutory support for the states where you employ people
- Look at payslips and reports your employees and accountant will actually use
- Review security: roles, audit logs and data export
- Understand pricing for your headcount and add-ons
- Plan migration: opening balances, year-to-date figures and tax declarations
Special cases to test before you choose
Every payroll tool handles a simple monthly salary. The difference shows in the unusual cases, so test these in a demo:
- An employee who joins on the 17th and has three days of loss of pay
- An increment with arrears from two months ago
- A salary advance recovered over six months
- An employee who switches from the new to the old tax regime mid-year
- A resignation with a notice shortfall and leave encashment
- An employee who moves from one state to another, changing professional tax
If the vendor needs a spreadsheet to handle any of these, expect to do that every month.
Payroll data security
Salary information is among the most sensitive data in a company. Limit access to the few people who run and approve payroll, keep an audit trail of every change to pay and bank details, and require approval before a payroll run is released. Employees should see only their own payslips.
Common payroll mistakes
- Paying from an old salary structure after an increment
- Missing loss of pay because leave was approved outside the system
- Wrong PF wages after restructuring under the 50% wage rule
- Late statutory deposits leading to interest and damages
- Payslips that do not match the bank transfer
Year-end tasks
Payroll does not end in March. Before and after year-end, collect final investment proofs for employees in the old regime, recalculate TDS for the last quarter, reconcile salaries paid with statutory deposits, issue annual salary TDS certificates within the required timeline, and review salary structures before the new financial year's increments. Doing this in the same system as monthly payroll avoids re-keying a year of data.
Payroll as part of HR, not a separate island
Payroll accuracy depends on HR data. When employees, attendance, leave, loans and payroll share one system, the monthly close becomes a review rather than a rebuild. MizUp BMS brings employee records, attendance, leave, salary structures, payroll runs, payslips, tax declarations and loans together, and MizUp Finance handles invoicing and accounts for the rest of the business. For the bigger picture, read what HRMS software is, and use our full and final settlement calculator when someone leaves.
Frequently asked questions
What does payroll software do?
It calculates each employee's salary from their structure, attendance and leave, applies deductions, produces payslips and payroll reports, and keeps a record of every payroll run.
When are PF and ESI contributions due?
PF and ESI contributions for a month are generally due by the 15th of the following month.
Who is covered by ESI?
Employees with gross wages up to ₹21,000 a month in covered establishments. The employee contributes 0.75% and the employer 3.25%.
When must TDS on salary be deposited?
Generally by the 7th of the following month, with a later date for tax deducted in March.
Is cloud payroll software secure?
It can be, if the vendor isolates each company's data, restricts access by role, encrypts sensitive credentials and logs changes to salary and bank details.
