Payroll looks simple until the first month with a joiner, a leaver, two leaves and a loan deduction. Then it is a pile of small rules, each of which has to be right. This guide explains what a small Indian business has to get right and what to check in payroll software.
The deductions to understand
- PF (provident fund): a percentage of basic wages, paid by both employee and employer, with a wage ceiling that applies to the mandatory contribution.
- ESI: a small employee and employer contribution for lower-paid staff, based on gross wages up to a limit.
- Professional tax: a state-wise slab, so a team across states needs more than one rate.
- TDS on salary: an estimate of the employee's annual tax, spread across the year, which depends on the tax regime they choose.
Rates and limits change, so treat any figure you read online, including here, as a starting point and confirm it with your CA.
When Excel stops working
The first signs are salary for part months (joiners and leavers), loss-of-pay days that do not match leave records, and advances recovered by hand. If attendance and leave live somewhere else, you are reconciling three places every month.
What to check in payroll software
- Salary structures with basic, HRA and allowances, and PF and ESI handled by rule.
- Joiners and leavers paid for days worked, not a full month.
- Loss of pay that reads from attendance and approved leave.
- Loans and advances recovered automatically, with the remaining balance tracked.
- Payslips employees can open themselves.
- A bank transfer file, a PF ECR file and an ESI sheet, ready to upload.
- A clear record once payroll is finalised, so a payslip cannot quietly change.
Where FINTY fits
FINTY's HR and payroll covers all of the above for small teams: attendance and leave feed the payroll run, joiners and leavers are prorated, loans are recovered through payroll, and you can download the bank, PF ECR and ESI files. It sits in the same workspace as your CRM and invoicing, so one login covers the business. See pricing or start a free trial.
Frequently asked questions
(See the FAQ section below the article.)