Payroll Compliance in India: Founders’ Handbook (2025)

Payroll Compliance India 2025: Founders’ Handbook

The Payroll Compliance India 2025 anchors this founders’ handbook. We cover PF/EPF, ESIC, Professional Tax, TDS on Salary, Minimum Wages, Bonus, Gratuity, Shops & Establishments, onboarding documents, exits & full-and-final (F&F) and monthly payroll SOPs for lean teams. Looking for help? Our Virtual CFO & payroll outsourcing is known as a Top payroll service in India with Top-notch service in India.

1) Top payroll compliance scope (India)

Top founders track the full stack: EPF (PF), ESIC, Professional Tax (PT), Labour Welfare Fund (LWF), Payment of Wages, Minimum Wages, Income-tax TDS on salary, Form 16, Bonus Act, Gratuity Act, POSH and Shops & Establishments.

• Register on official portals: EPFO Unified, ESIC, state PT, Shops & Establishments.
• Maintain appointment letters, policy handbook, KYC, UAN/ESIC mapping, and HR registers.

2) Best onboarding documents & UAN/ESIC

Standardise onboarding so compliance is automatic.

• Offer/appointment letter with CTC & statutory deductions.
• KYC pack: PAN, Aadhaar, bank, address proof, education/work docs.
• UAN capture/creation and ESIC IP creation (where applicable).
• Policy acceptance: Leave, POSH, Code of Conduct, IT & Data.
• State Shops & Establishments compliance kit.

3) CTC structure: Top tax-efficient setup

Use a clean CTC with Basic, DA (if any), HRA, Special Allowance, and statutory contributions (PF/ESIC) as applicable. Keep minimum wages aligned by location & skill category and document cost-to-company clearly to avoid disputes.

4) Monthly payroll SOPs: PF/ESIC/PT/TDS

A repeatable SOP keeps lean teams compliant.

• Inputs cut-off: attendance, new joiners/exits, LOP, variable pay.
• Payroll run: compute gross, PF/ESIC/PT, TDS on salary, net pay.
• Approvals: maker–checker, variance vs prior month, CTC map.
• ECR upload & PF challan; ESIC contribution; PT payment (state-wise); TDS payment & challan.
• Issue payslips, ledger JV, and salary bank advice.
• Quarter/Year-end: Form 24Q, Form 16, bonus/gratuity provisions.

Note: Statutory due dates vary by law and state. Keep a compliance calendar and alerts for PF/ESIC/PT/TDS filings.

5) Bonus & Gratuity: key rules

Where applicable, define eligibility, calculation and payout timelines for Bonus and Gratuity. Reflect the policy in appointment letters and employee handbook; provision monthly to avoid year-end shocks.

6) Registers, payslips & audits

Maintain statutory registers, attendance & leave records, salary sheets, payslips, bank proofs, and challans/return acknowledgements. Schedule internal audits for PF/ESIC/PT/TDS & minimum wages.

7) Exits & Full-and-Final (F&F)

Standardise exits to reduce risk.

• Notice & assets recovery checklist.
• Leave encashment, incentives, statutory payouts.
• F&F statement, relieving & experience letters issued on time.
• Update UAN/ESIC, and payroll master for cut-off.

8) State specifics: PT, LWF & S&E

Professional Tax, Labour Welfare Fund, and Shops & Establishments are state-wise. Keep city/location master data, rate cards, and due dates per state; update when headcount expands.

9) Founder tips & common mistakes (Best fixes)

• Unmapped UAN/ESIC — Fix: verify at onboarding; reconcile monthly ECR/IP.
• PT missed in new states — Fix: maintain a state PT matrix and register early.
• Variances vs payslips — Fix: tie-out bank advice, JV and returns monthly.
• Weak documentation — Fix: centralise payslips, challans, returns & letters.
• No audit trail — Fix: enable maker–checker logs and founder dashboard.