Running payroll is more than paying salaries — it involves calculating pay, deducting PF, ESI, professional tax and TDS, filing returns, and issuing payslips, all on a monthly cycle.

This guide explains the payroll process for employers.

What is How Payroll Processing Works?

Payroll processing collects attendance and inputs, computes gross and net pay, deducts statutory amounts, disburses salaries, and files the related returns (EPF ECR, ESI, TDS).

Accuracy and timeliness are essential to stay compliant and keep employees satisfied.

Step-by-step process

  1. Collect inputs. Gather attendance, leave, new joiners and exits, and any variable pay.
  2. Compute salary. Calculate gross pay and apply PF, ESI, professional tax and TDS deductions.
  3. Disburse. Pay net salaries and generate payslips.
  4. File statutory returns. Deposit PF/ESI and TDS, and file the monthly/quarterly returns.

Frequently asked questions

What statutory deductions apply to salary?

Employee PF, ESI (if applicable), professional tax (state-dependent) and TDS on salary.

When are PF and ESI due?

PF and ESI contributions are generally deposited by the 15th of the following month.