Payroll Processing

Overview

Payroll processing is the monthly cycle that turns attendance, leave and pay terms into correct salaries, payslips and statutory deductions. In India a payroll run is never only "salary": it also drives Provident Fund (PF), Employees' State Insurance (ESI), professional tax, tax deducted at source (TDS) on salary, and the accruals for gratuity and bonus. A mistake in one month usually repeats in the returns that follow, so the cycle needs a fixed calendar, a clear salary structure and a reconciliation at the end.

Who needs it

• Startups and small businesses that have no in-house HR or accounts team.
• Growing companies whose headcount has crossed the PF or ESI threshold and who now need monthly challans.
• Manufacturing, retail, healthcare, education and service businesses with many wage earners, overtime or shift allowances.
• Trusts, societies and NGOs that employ staff and still have to deduct tax and contributions.
• Employers moving from spreadsheets or from another provider who want a clean hand-over.

What Zenith does

Zenith listens first: we ask how you pay today, which registrations you hold and where the pain is, then confirm the scope and give a tailored quotation. A relationship manager is assigned and you receive a checklist specific to your payroll.

Depending on the agreed scope, the work covers:

• Setting up or reviewing the salary structure (basic, HRA, allowances, variable pay, deductions) and the employee master.
• Monthly computation of gross pay, loss of pay, overtime, reimbursements, PF, ESI, professional tax and TDS on salary.
• Payslips, a salary register and a bank payment file for your approval.
• Preparation of the PF, ESI and professional tax payment details for the month, and coordination of the related returns.
• Reconciliation of the payroll with your books, with milestone updates at each stage and an explanation when work is handed over.

Tax and statutory filings are prepared and filed only through appropriately authorised professionals, subject to eligibility and applicable rules.

Eligibility and key rules

Item	Rule in public sources
PF	Applies to establishments with 20 or more employees; employee and employer each contribute 12% of PF wages, and the wage ceiling for compulsory coverage is ₹15,000 a month
ESI	Applies to establishments with 10 or more employees (20 in some states) for employees earning up to ₹21,000 a month; employee 0.75%, employer 3.25%
Professional tax	State law; the constitutional cap is ₹2,500 a year per person and slabs differ by state
TDS on salary	Deducted every month on estimated annual salary tax, reported through the quarterly salary TDS return and certified by Form 16
Gratuity	Applies to establishments with 10 or more employees; accrues from joining and is paid on exit
Bonus	Payment of Bonus Act, 1965, an annual obligation where it applies
Minimum wages	Minimum Wages Act, 1948, state-wise rates by industry and skill

PF is computed on the fixed part of pay excluding HRA, so the way a CTC is split between basic and allowances changes the contribution. India's new labour codes are replacing several of these Acts in phases, so Zenith checks which rules apply on the date of each payroll.

Documents required

• Establishment registration or incorporation certificate and PAN.
• PF, ESI and professional tax registration details, where already held.
• Employee master: name, designation, date of joining, PAN, Aadhaar-linked UAN, ESIC insurance number, bank account, and category (permanent, contract, intern).
• Appointment letters or CTC structures and the latest salary register.
• Attendance and leave records for the month, overtime and variable pay inputs.
• Recent PF, ESI, professional tax and TDS challans and returns if you are switching to Zenith.

Process and timeline

1. Scoping call, quotation and onboarding checklist.
2. Employee master and salary structures loaded and verified with you.
3. Pre-payroll: you share attendance, leave, joiners, leavers and changes by an agreed cut-off before month end.
4. Payroll run: computation, review by Zenith, then your approval.
5. Post-payroll: payslips, bank file, statutory payment details, and the monthly reconciliation.
6. Periodic returns and year-end statements as per the agreed scope.

Timelines depend on how complete and timely your inputs are and on authority processing for any registration or filing involved.

Government fees, penalties and due dates

• PF contribution and return are due by the 15th of the following month; ESI contribution is also due by the 15th of the following month.
• ESI half-yearly return dates in public sources: 11 November for April to September and 11 May for October to March.
• Late PF or ESI payment carries simple interest of 12% a year for the period of delay, and damages that rise from 5% to 25% of arrears a year as the delay passes two, four and six months.
• ESI contributions paid after the due date are disallowed as a business expense under income tax.
• Professional tax payment and return dates are set by each state.
• Registration with the portals has no government fee in the public sources read; professional fees are customised and government fees, if any, are shown separately in the quotation.

Amounts and dates above reflect public sources read in October 2026 and change with notifications, so Zenith confirms the current figures in your quotation.

Common mistakes

• Sending attendance and joiner or leaver data after the cut-off, which forces a revised run.
• Calculating PF on full gross pay instead of PF wages, or ignoring the ₹15,000 ceiling rule when employees agree to contribute on higher wages.
• Missing ESI coverage for an employee who crossed ₹21,000 mid-period without checking the contribution period rules.
• Not deducting professional tax in a state where the establishment employs staff.
• Treating contract workers, interns and consultants alike without checking their status.
• Paying challans late and then losing the income tax deduction on them.

FAQs