Payroll is one of the most recurring compliance areas for Indian employers. Even when salary processing is accurate, statutory filings can slip due to weak calendars, incomplete employee data, or inconsistent attendance controls.
A strong payroll compliance framework links HR, finance, and statutory filings into one repeatable process. This reduces penalties, prevents employee grievances, and improves audit readiness.
What Payroll Compliance Typically Includes
Payroll compliance for most employers includes:
- Employee onboarding documentation and statutory registrations
- Monthly salary processing and payslip issuance
- Statutory deductions and deposits such as PF, ESI, PT, and TDS
- Periodic returns and reconciliations
- Labour law registers and records
- Full and final settlement controls
Step 1 Build a Clean Employee Master
Payroll accuracy starts with employee master data. Ensure you capture:
- PAN, Aadhaar, and bank details
- UAN and PF details
- ESI number where applicable
- Address and state for PT and local compliances
- Salary structure and components
- Joining documents and declarations
Practical tip: Validate PAN early to avoid higher TDS and Form 16 errors.
Step 2 PF Compliance Basics
Provident fund compliance typically involves:
- Correct PF wage definition and eligible components
- UAN creation and linking
- Monthly ECR preparation and upload
- Timely payment and challan retention
- Handling new joiners and exits
Common risk areas:
- Wrong wage base for PF
- Missing UAN linking
- Delayed ECR upload
Step 3 ESI Compliance Basics
ESI applies based on employee eligibility and wage thresholds. Key controls include:
- Employee coverage identification
- Monthly contribution computation
- Timely filing and payment
- Maintaining supporting attendance and wage records
Common risk areas:
- Incorrect inclusion or exclusion of employees n- Late payment leading to interest and damages
Step 4 Professional Tax PT Compliance
Professional tax is state specific. Employers should:
- Register under the applicable state PT law
- Deduct PT based on slabs
- Deposit and file returns as per state timelines
- Track location wise applicability for multi state payroll
Common risk areas:
- Wrong slab mapping
- Missing registration for new locations
Step 5 TDS on Salary Compliance
TDS on salary under Section 192 requires:
- Collecting employee declarations and proofs
- Computing taxable income and deductions
- Monthly TDS deduction and deposit
- Quarterly Form 24Q filing
- Annual Form 16 issuance n Common risk areas:
- Late deposit leading to interest
- Incorrect HRA or 80C proof handling
- PAN errors causing mismatch in Form 26AS
Step 6 Labour Law Registers and Governance
Depending on the state and establishment type, employers must maintain registers and records such as:
- Attendance and leave records
- Wage register and payslips
- Overtime records
- Bonus and gratuity records
- Shops and Establishments registrations
Practical tip: Maintain a compliance file by location with registrations, renewals, and inspection records.
Monthly Payroll Compliance Checklist
1 Freeze attendance and approved leave data 2 Process payroll and validate exceptions 3 Generate and issue payslips 4 Compute and deposit PF and upload ECR 5 Compute and deposit ESI and file returns where required 6 Deduct and deposit salary TDS and maintain challans 7 Deduct and deposit PT and file state returns 8 Reconcile payroll payable and statutory ledgers 9 Maintain working papers and approvals
Quarterly and Annual Checklist
Quarterly
1 File Form 24Q and reconcile challans and deductions 2 Review PF and ESI reconciliations and resolve mismatches
Annual
1 Issue Form 16 and Form 12BA where applicable 2 Prepare gratuity and bonus computations where applicable 3 Review minimum wages and salary structure updates 4 Conduct payroll compliance review and update SOPs
How Perfect Accounting Can Help
Perfect Accounting and Shared Services supports payroll processing and compliance:
- Employee master setup and payroll SOPs
- Monthly payroll processing and payslip issuance
- PF ESI PT and TDS compliance calendar and filings
- Payroll reconciliations and MIS reporting
- Full and final settlement support
- Payroll compliance review and audit readiness