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Quick Checklist for Payroll Compliances in India

Navigating the intricate labyrinth of payroll processing is a daunting task, especially in a country as diverse and complex as India. While the primary objective remains the accurate and timely disbursement of salaries, the backdrop against which this process unfolds is painted with various compliance checkpoints. Ensuring adherence to these is not merely a procedural necessity but is pivotal to the ethical and legal functioning of an organization. In this article, we will offer a comprehensive checklist for payroll compliance in India, providing a roadmap for businesses to ensure they remain on the right side of the law.

Understanding the Importance of Payroll Compliance:

Before diving into the checklist, it’s imperative to understand why payroll compliance is crucial. In essence, compliance ensures that businesses adhere to legal norms and statutory regulations, thereby protecting employee rights and safeguarding the organization against potential legal ramifications. Furthermore, in the realm of human resource compliance, payroll holds a place of prominence, directly influencing employee satisfaction and trust.

The Comprehensive Checklist for Payroll Compliance in India:

1. Employee Provident Fund (EPF) Act, 1952:

  • Ensure timely and accurate contributions to the EPF accounts of eligible employees.
  • Maintain updated records of employee details for whom contributions are made.
  • Ensure timely filing of Electronic Challan cum Return (ECR) and payment of contributions.

2. Employees’ State Insurance (ESI) Act, 1948:

  • Determine the eligibility of employees based on the wage ceiling.
  • Ensure accurate monthly contributions.
  • Submit half-yearly returns detailing employee contributions.

3. Professional Tax (PT):

  • Stay updated with state-specific PT regulations, as this tax varies across Indian states.
  • Deduct the applicable PT from employee salaries.
  • Ensure timely payment and return filing as per state-specific deadlines.

4. Income Tax Act, 1961:

  • Deduct TDS based on employee salary slabs.
  • Provide employees with Form 16 annually.
  • Ensure the timely filing of TDS returns.

5. Payment of Gratuity Act, 1972:

  • Maintain a record of employees’ tenure.
  • Ensure the creation of a gratuity fund or opt for gratuity insurance.
  • Disburse the gratuity amount to employees who complete five or more years in the organization.

6. Payment of Bonus Act, 1965:

  • Identify eligible employees based on salary and tenure criteria.
  • Calculate and disburse the bonus amount as per statutory guidelines.
  • Maintain proper records of bonus payments.

7. Minimum Wages Act, 1948:

  • Stay updated with state-specific minimum wage rates.
  • Ensure that no employee is compensated below the stipulated minimum wage.
  • Regularly update salary structures, especially for entry-level positions, to stay compliant.

8. Labour Welfare Fund (LWF):

  • Understand state-specific LWF regulations.
  • Contribute to the fund as per the defined frequency (monthly or annually).
  • Maintain records of contributions and ensure timely payments.

9. The Equal Remuneration Act, 1976:

  • Establish a transparent salary structure, ensuring there are no gender-based discrepancies.
  • Maintain records showcasing adherence to this norm.
  • Address any grievances related to salary discrepancies promptly.

10. Maternity Benefit Act, 1961:

  • Provide maternity benefits to eligible female employees.
  • Ensure continued payment during the maternity leave period.
  • Stay updated with amendments to the act, adjusting policies accordingly.

The Role of HR in Ensuring Compliance:

The list of statutory compliances in HR is extensive, and ensuring adherence to each point demands meticulous attention to detail. The HR department plays a pivotal role here, acting as the custodian of compliance. From maintaining updated records and liaising with legal teams to ensuring timely filings and payments, HR is at the forefront of this crucial function. Furthermore, in the context of statutory compliance in payroll, HR needs to collaborate closely with the finance department, ensuring seamless data flow and accuracy.

Conclusion:

The landscape of payroll compliance in India is both vast and intricate. With regulations often undergoing amendments and updates, staying compliant demands constant vigilance and a proactive approach. This checklist, while comprehensive, is a starting point. Organizations, especially those scaling rapidly, should consider investing in advanced payroll systems or partnering with experts specializing in statutory compliance in payroll. Such proactive measures not only ensure compliance but also instill a sense of trust and security among employees, reinforcing the organization’s commitment to ethical and legal business practices. In the end, compliance is not just about ticking boxes; it’s about building a sustainable, ethical, and legally sound business foundation.

Saurav Wadhwa

Co-founder & CEO

Saurav Wadhwa is the Co-founder and CEO of MYND Integrated Solutions. Saurav spearheads the company’s strategic vision—identifying new market opportunities, unfolding product and service catalogues, and driving business expansion across multiple geographies and functions. Saurav brings expertise in business process enablement and is a seasoned expert with over two decades of experience establishing and scaling Shared Services, Process Transformation, and Automation.

Saurav’s leadership and strategy expertise are backed by extensive hands-on involvement in Finance and HR Automation, People and Business Management and Client Relationship Management. Over his career, he has played a pivotal role in accelerating the growth of more than 800 businesses across diverse industries, leveraging innovative automation solutions to streamline operations and reduce costs.

Before becoming CEO, Saurav spent nearly a decade at MYND focusing on finance and accounting outsourcing. His background includes proficiency in major ERP systems like SAP, Oracle, and Great Plains, and he has a proven track record of optimizing global finance operations for domestic and multinational corporations.

Under Saurav’s leadership, MYND Integrated Solutions maintains a forward-thinking culture—prioritizing continuous learning, fostering ethical practices, and embracing next-generation technologies such as RPA and AI-driven analytics. He is committed to strategic partnerships, long-term business development, and stakeholder transparency, ensuring that MYND remains at the forefront of the BPM industry.

A firm believer that “Leadership and Learning are indispensable to each other,” Saurav consistently seeks new ways to evolve MYND’s capabilities and empower clients with best-in-class business process solutions.

Vivek Misra

Founder & Group MD

Vivek is the founder of MYND Integrated Solutions. He is a successful entrepreneur with a strong background in Accounts and Finance. An alumnus of Modern School and Delhi University, Vivek has also undertaken prestigious courses on accountancy with Becker and Business 360 management course with Columbia Business School, US.

Vivek is currently the Founder & Group MD of MYND Integrated Solutions. With over 22 years of experience setting up shared service centres and serving leading companies in the Manufacturing, Services, Retail and Telecom industries, his strong industry focus and client relationships have quickly enabled MYND to build credibility with 500+ clients. MYND has developed a niche in Shared services in India’s Finance and Accounting (FAO) and Human Resources (HR). MYND has also taken Solutions and services to the international space, offering multi-country services on a single platform under his leadership. Vivek has been instrumental in fostering mutually beneficial partnerships with global service providers, immensely benefiting MYND.

Mynd also forayed into a niche Fintech space with the setup of the M1xchange under the auspices of the RBI licence granted to only 3 companies across India. The exchange is changing the traditional field of bill discounting by bringing the entire process online along with the participation of banks through online auctioning.

Sundeep Mohindru

Founder Director

Sundeep initiated Mynd with a small team of just five people in 2002 and has been instrumental in steering it to evolve into a knowledge management company. He has brought about substantial improvements in growth, profitability, and performance, which has helped Mynd achieve remarkable customer, employee and stakeholder satisfaction. He has been involved in creating specialized service delivery models suitable for diverse client needs and has always created a new benchmark for Mynd and its team. Under his leadership, Mynd has developed niche products and implemented them on an all India scale for superior services. Mynd has been servicing a large number of multinational companies in India through its on-shore and off-shore model.

TReDS (Trade Receivable Discounting System) has been nurtured from a concept stage by Sundeep and the Mynd team. M1xchange, Mynd Online National Exchange for Receivables was successfully launched on April 7th, 2017. While spearheading the project, Sundeep and his team have built up the TReDS platform to meet RBI guidelines and enhance the transparency for all stakeholders. This platform and related service has the capability of transforming the way the receivable finance and other supply chain finance solutions are operating currently.

Sundeep is currently focused on providing strategic direction to the company and is working towards achieving high growth for Mynd, which will help in creating the products as per customer needs and increase its top line while maintaining the bottom line. He directly involves, develops, nurtures and manages all key client relationships of Mynd. He has also successfully acquired numerous preferred partners to support Mynd’s technology-based endeavors and scale up its business.

Sundeep has been the on the Board of Directors for many renowned companies. He has played a key role in planning the entry strategy and has set up subsidiaries for many multinational companies in India. In his leadership, Mynd has seen consistent growth at the rate of 20+ % CAGR from the year 2009 onwards. This was primarily because of investing into technology and bringing platform based offering in Accounting and HR domain for the customers.