By Delhi Legal Company · Payroll & Labour Advisory · Updated July 2026
You hire your tenth employee on a Tuesday. Nobody sends you a letter. No portal lights up. Your ESIC obligation has just begun anyway, and it began that Tuesday — not on the day you eventually get around to registering.
This is the structural trap in Indian payroll compliance, and it catches new employers with remarkable consistency. Coverage is triggered by headcount, automatically, by operation of law. Registration is what you do afterwards. When those two dates drift apart, the gap does not disappear — it becomes a backdated liability, with contributions payable for every month in between, plus interest, plus damages.
A business that crosses twenty employees in March and registers for EPF in August owes contributions from March. Both halves — employer share and employee share. And by then the employee share cannot realistically be recovered from salaries already paid, so the employer absorbs the whole of it. What should have been a routine 12% becomes 24% plus interest, on five months of payroll, for a company that thought it was being efficient.
The mechanics themselves are not difficult. Two registrations, a monthly calculation, one deposit deadline on the 15th, and a handful of returns. What makes payroll compliance feel harder than it is: the thresholds are invisible until crossed, several separate laws run in parallel with different rules, and 2026 brought a genuine structural change that most existing salary structures have not yet absorbed.
What changed in 2026: the four Labour Codes came into force from November 2025, introducing a single statutory definition of “wages” with a 50% rule — basic wages must be at least half of total remuneration. Salary structures built on low basic pay and high allowances now understate PF and gratuity every month they remain unchanged. Details in Section 3.
This guide covers what triggers coverage and when; the new wage definition and why it changes your PF outflow; EPF and ESIC registration, rates and calculations; the monthly deposit and filing cycle; TDS, professional tax and labour welfare fund; the penalties for slipping; the records inspectors actually ask for; and a month-by-month calendar. A detailed FAQ follows at the end.
1. The Two Thresholds That Start Everything
Before any of the calculation matters, one question decides whether you are in scope at all: how many people do you employ?
| Scheme | Threshold | Governing law and authority |
|---|---|---|
| ESIC | 10 or more employees | Employees’ State Insurance Act, 1948 — administered by ESIC |
| EPF | 20 or more employees | Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 — administered by EPFO |
Three points about counting that cause most of the errors:
Everyone counts. The headcount includes permanent employees, contractual staff, part-time workers, and apprentices. It is not a count of people on your regular payroll — it is a count of persons employed. Businesses that engage a dozen people through a contractor and four directly often assume only the four count. They do not.
Crossing once is enough. ESIC coverage is triggered where an establishment employs ten or more persons on any day of the preceding twelve months. The threshold is not an average and not a year-end position. A seasonal spike to twelve people in October brings you into coverage even if you are back to eight by December.
Once covered, always covered. Falling below the threshold later does not automatically end coverage. The establishment remains covered, and employees who are members stay members.
The backdating problem. Coverage attaches from the date you cross the threshold, not the date you register. Contributions are payable for the intervening period regardless of whether you knew. Because the employee’s share cannot be recovered from salaries already disbursed, the employer typically bears both halves — and then interest and damages on top. Monitor headcount monthly against both numbers. This is the cheapest control in the entire compliance function.
Voluntary coverage
An establishment below the threshold can opt into EPF voluntarily, with the consent of the employees and the approval of the authority. Smaller employers sometimes do this deliberately — PF is a meaningful signal in hiring, and it avoids a scramble later when growth crosses twenty. If you expect to cross within a year, registering early is usually simpler than registering retrospectively.
2. What Is Actually Deducted: Rates and Ceilings
Two schemes, two entirely different bases of calculation. Confusing them is the single most common payroll error.
EPF — calculated on basic wages plus dearness allowance
| Component | Rate | Notes |
|---|---|---|
| Employee contribution | 12% | Of basic wages + DA |
| Employer contribution | 12% | Split into EPS and EPF (below) |
| — to EPS (pension) | 8.33% | Capped at ₹15,000 wages, so a maximum of ₹1,250 per month |
| — to EPF | 3.67% or more | The balance of the employer’s 12% |
| Statutory wage ceiling | ₹15,000 | For the employer’s mandatory share |
| EDLI and administrative charges | As notified | Employer only — not deducted from salary |
The ₹15,000 ceiling is where confusion usually starts. It means the mandatory employer contribution is capped at 12% of ₹15,000 — ₹1,800 per month. Many employers contribute on actual basic wages above that figure, either by policy or by long practice, and that is permitted. What is not optional is the floor.
The EPS cap has a practical consequence worth understanding: for an employee earning above ₹15,000 in basic wages, the pension component stays at ₹1,250, and the excess employer contribution flows into EPF instead. This is why higher earners accumulate larger EPF balances but not larger pension entitlements.
A live development worth tracking. On 5 January 2026, the Supreme Court directed the Central Government and EPFO to decide within four months on revising the ₹15,000 wage ceiling, which has been unchanged since 2014. Figures between ₹21,000 and ₹25,000 have been discussed in policy circles. No revised ceiling has been notified as of this writing, so ₹15,000 continues to apply — but any employer building a payroll budget for the year ahead should watch for the notification, because an increase raises both employer and employee contributions materially.
ESIC — calculated on gross wages
| Component | Rate | Notes |
|---|---|---|
| Employee contribution | 0.75% | Of gross wages |
| Employer contribution | 3.25% | Of gross wages |
| Total | 4% | Unchanged since July 2019 |
| Wage ceiling for coverage | ₹21,000 | ₹25,000 for employees with disabilities |
ESIC applies only to employees earning gross wages up to ₹21,000 per month. Above that, the employee is outside the scheme — though they still count toward the ten-employee threshold that brought the establishment into coverage in the first place.
“Wages” for ESIC means all remuneration paid in cash: basic salary, dearness allowance, house rent allowance, city compensatory allowance, overtime, and any allowance paid regularly. It excludes annual bonus, employer PF contribution, gratuity, and reimbursements.
The mid-year increment trap. ESIC runs on two contribution periods — April to September and October to March — not calendar months. An employee whose gross crosses ₹21,000 in January does not exit ESIC in January. They remain covered and contributing until 31 March, and only fall out from 1 April. Payroll systems that drop the deduction the moment the increment lands create a shortfall that surfaces at inspection.
The difference in one line
PF is calculated on basic plus DA. ESIC is calculated on gross. Overtime is included for ESIC and excluded for PF. Getting this backwards in a payroll template produces errors in every month it runs, and the correction is retrospective.
3. The 2026 Change: The New Wage Definition and the 50% Rule
This is the most consequential development for payroll in years, and it is the one most existing salary structures have not adjusted for.
The four Labour Codes — the Code on Wages, the Code on Social Security, the Industrial Relations Code, and the Occupational Safety, Health and Working Conditions Code — consolidate 29 earlier labour statutes and came into force from November 2025, with rules notified through 2026.
Their most practically significant feature is a single, uniform definition of “wages” that applies across PF, ESIC, gratuity and bonus, replacing the differing definitions each earlier statute used.
How the 50% rule works
Under the new definition, wages comprise basic pay, dearness allowance and retaining allowance. Certain excluded components — HRA, conveyance, overtime, bonus, commission and similar allowances — sit outside the definition. But the codes add a corrective: where those excluded components exceed 50% of total remuneration, the excess is added back into wages.
The practical effect is a floor. Basic wages must effectively be at least 50% of total remuneration for the purposes of PF, gratuity and related calculations, regardless of how the salary is labelled.
Consider a common structure:
| Component | Old structure | Effect under the codes |
|---|---|---|
| Basic | ₹12,000 (30%) | Excluded components exceed 50%, so the excess is added back — wages for PF and gratuity are treated as ₹20,000, not ₹12,000 |
| HRA | ₹16,000 | |
| Special allowance | ₹12,000 | |
| Total | ₹40,000 |
Illustrative only. Actual treatment depends on the components in your structure and applicable state rules.
Three consequences follow:
- PF contributions rise. The 12% rate is unchanged, but the base it applies to is larger. Monthly outflow increases for both employer and employee.
- Gratuity provisioning rises, because gratuity is calculated on the same wage base.
- Take-home pay falls for affected employees, even though CTC has not changed. This needs communicating before it appears on a payslip, not after.
If your salary structure has not been reviewed since November 2025, review it now. A structure with basic pay well below 50% understates PF and gratuity every month it continues, and the liability accrues quietly. This is currently the most common finding in payroll reviews of small and mid-sized employers.
Two further points from the codes worth noting: establishments with up to 300 workers (raised from 100) may now retrench or close without prior government approval, and standing orders apply from 300 workers rather than 100. The Code on Social Security also extends coverage to gig and platform workers for the first time — relevant if you engage delivery, driver or freelance-platform labour.
Implementation of certain provisions varies by state, since states notify their own rules. Verify the position for each state you operate in rather than assuming a uniform national position.
4. Registration: Getting Set Up
Both registrations are online and, done properly, take days rather than weeks. The delay is almost always document readiness, not processing.
EPF registration
Registration is made through the EPFO Unified Portal, via the Shram Suvidha platform. You will need:
- PAN of the establishment and the certificate of incorporation or registration
- Address proof of the establishment and the registered office details
- Bank account details with a cancelled cheque
- Digital Signature Certificate of an authorised signatory
- Details of employees, with Aadhaar, PAN and bank details for UAN generation
- Date on which the twenty-employee threshold was crossed
On registration you receive an establishment code. Each employee then needs a Universal Account Number (UAN), which follows them between employers for life. For a new joiner who already has a UAN, you link it rather than generating a new one — duplicate UANs are a persistent nuisance to correct later.
ESIC registration
Registration is on the ESIC portal. Broadly similar documents, plus a list of employees with wages, and the date of crossing the ten-employee threshold.
Each covered employee receives an Insurance Number and an e-Pehchan card. Employees can nominate family members, who then become entitled to medical benefits — a point worth communicating, because ESIC’s family coverage is often the most valued part of the package for employees at these wage levels.
Under the Code on Social Security, a single unified registration is intended to replace separate EPF and ESIC registrations through an integrated social security portal. Rollout is progressive and state-dependent. Until it applies to you, continue with the existing separate registrations — but expect the process to consolidate.
The other registrations new employers need
PF and ESIC are the two that dominate the conversation, but they are not the whole list:
- Shops and Establishment registration — state-specific, usually required within 30 days of commencing business.
- Professional Tax registration — in states that levy it, both as an employer and for deduction from employees.
- Labour Welfare Fund — applicable in certain states, with contributions typically half-yearly or annual.
- TAN — for deducting and depositing TDS on salaries.
5. The Monthly Cycle
Once registered, payroll compliance becomes a rhythm. The same sequence, every month, on the same dates.
| Date | Obligation | What it involves |
|---|---|---|
| 7th | TDS deposit | Tax deducted from the previous month’s salaries. For March payroll, the deadline is 30 April. |
| 15th | PF deposit and ECR filing | Electronic Challan cum Return on the EPFO Unified Portal, then payment |
| 15th | ESIC deposit | Challan generated and paid on the ESIC portal |
| 15th | PF and ESI for the previous month | Both fall on the same date — contributions on March salaries are due 15 April |
| Varies | Professional tax | Monthly or quarterly depending on the state |
The 15th is the deadline that matters most, because it carries both schemes. If it falls on a Sunday or bank holiday, the deadline moves to the next working day — but do not build a process that relies on that.
Filing the PF ECR
The Electronic Challan cum Return captures, for each employee: UAN, gross wages, EPF wages, EPS wages, and the contribution amounts. You upload it, generate the challan, and pay by net banking. The return and the payment are a single linked process — filing without paying achieves nothing.
Quarterly and annual filings
| Filing | Frequency | Due |
|---|---|---|
| Form 24Q (TDS on salaries) | Quarterly | 31 July, 31 Oct, 31 Jan, 31 May |
| Form 16 to employees | Annual | By 15 June |
| ESIC contribution period returns | Half-yearly | Apr–Sep and Oct–Mar cycles |
| Labour Welfare Fund | State-specific | Half-yearly or annual |
6. TDS on Salaries and Professional Tax
TDS
Every employer must deduct tax at source from salaries where the employee’s income exceeds the exemption limit, deposit it by the 7th of the following month, file Form 24Q quarterly, and issue Form 16 annually.
Bookkeeping and accounting feed directly into this, since the salary ledger is the source of the computation. The practical sequence at the start of each financial year: collect each employee’s declaration of investments and regime choice, compute estimated annual tax, divide across the remaining months, and deduct accordingly — then true up when actual proofs arrive, typically in January and February.
The 2026 tax transition. The Income-tax Act, 2025 came into force on 1 April 2026 and governs income earned from FY 2026-27 onward. Salary TDS for the current year runs under the framework applicable to that year, so confirm the position for the specific financial year you are computing rather than assuming the new Act applies retrospectively. Where employees are choosing between regimes, the choice should be recorded in writing at the start of the year.
Professional tax
Professional tax is a state levy, so it exists in some states and not others, with different slabs and different deposit frequencies. Maharashtra, Karnataka, West Bengal, Tamil Nadu, Telangana, Gujarat and Madhya Pradesh levy it; Delhi, Uttar Pradesh and Haryana, among others, do not.
For an employer operating in several states, this is where multi-state payroll gets genuinely fiddly: separate registrations, separate slabs, separate returns, and separate deposit dates. It is also where state minimum wage notifications need watching, since each state revises on its own schedule.
7. What Non-Compliance Costs
The penalty structure for PF and ESIC has two components that run together, and both accrue automatically.
Interest and damages
| Scheme | Interest | Damages |
|---|---|---|
| EPF | 12% per annum under Section 7Q, from the due date to actual payment | Under Section 14B, graded by the length of delay — up to 25% per annum of arrears |
| ESIC | 12% per annum simple interest from the 16th | Up to 25% of arrears for prolonged delay |
Damages are assessed separately from interest — they are not an alternative to it. A long-running default therefore accrues both, and the combined figure moves faster than most employers expect.
The exposure beyond money
Non-deduction is treated far more seriously than late deposit. Deducting an employee’s share and failing to deposit it is the gravest version — it is treated as retention of employee money, and the EPF Act carries criminal liability for it. EPFO has been actively issuing demand notices to smaller employers in recent years, and the notices are frequently the first thing an employer hears about an old gap.
Additional consequences worth knowing:
- Directors and officers can be personally liable for defaults in respect of the period they were in charge.
- Inspections are triggered by patterns — a sudden fall in contributions, a mismatch between headcount and ECR entries, or a complaint from an employee.
- Diligence exposure. A PF or ESIC gap is a standard finding in any acquisition or funding process, alongside annual ROC filings, and it usually converts into an indemnity or an escrow rather than being waived.
Contractor labour is your exposure too. A principal employer can be held liable for a contractor’s failure to pay PF and ESIC for workers deployed at your premises. Verify the contractor’s registration, obtain monthly proof of their challans, and check their CLRA licence where applicable — before the workers start, not after a notice arrives.
8. Records: What Inspectors Actually Ask For
Payroll compliance is proved on paper. An establishment that has paid everything correctly but cannot evidence it is, for practical purposes, non-compliant.
Maintain from day one — not from the first inspection:
- Appointment letters for every hire, including contract and part-time staff.
- Wage register and attendance register.
- Overtime register where overtime is worked.
- Payslips issued to every employee, in the prescribed format, showing statutory deductions separately — part of routine payroll processing.
- PF and ESIC challans with proof of payment, month by month.
- Form 16 and TDS return acknowledgements.
- Employee nomination forms for PF and ESIC.
- Leave records and, where applicable, the leave encashment position.
- Full and final settlement records for exits.
- Contractor documentation — licence, registration, and monthly compliance proof.
Two operational points that matter more than they sound: full and final settlement should be capable of closing within the statutory timeframe after an exit, which requires the process to exist before someone resigns. And payslip format under the new codes needs checking against the current requirement, because the wage components shown must align with the new definition.
Where this becomes more than an internal spreadsheet can carry, managed payroll processing is usually the point at which employers stop firefighting and start running a calendar.
9. Your Payroll Compliance Calendar
| When | Obligation |
|---|---|
| 7th of every month | TDS deposit for the previous month’s salaries (30 April for March payroll) |
| 15th of every month | PF deposit and ECR filing; ESIC deposit — both schemes, same date |
| Monthly or quarterly | Professional tax deposit and return, per state |
| 31 July | Form 24Q for Q1 (April–June) |
| 31 October | Form 24Q for Q2 (July–September) |
| 31 January | Form 24Q for Q3 (October–December) |
| 31 May | Form 24Q for Q4 (January–March) |
| 15 June | Issue Form 16 to all employees |
| Half-yearly | ESIC contribution period close — April–September and October–March |
| State-specific | Labour Welfare Fund contributions |
| Ongoing | Headcount check against the 10 and 20 thresholds; state minimum wage revisions |
10. Your New Employer Setup Checklist
- ✓ Track headcount monthly against 10 (ESIC) and 20 (EPF) — counting contract, part-time and apprentices.
- ✓ Register within days of crossing, not months.
- ✓ Complete Shops and Establishment, Professional Tax, LWF and TAN registrations as applicable.
- ✓ Review your salary structure against the 50% basic wage rule under the Labour Codes.
- ✓ Confirm the minimum wage applicable in every state you operate in.
- ✓ Issue written appointment letters to every hire, including contract staff.
- ✓ Generate or link UAN for every employee; collect PF and ESIC nominations.
- ✓ Set up wage, attendance and overtime registers from day one.
- ✓ Build a payslip format showing statutory deductions separately.
- ✓ Collect investment declarations and regime choices at the start of the financial year.
- ✓ Diarise the 7th (TDS) and the 15th (PF and ESIC) as fixed monthly dates.
- ✓ For contract labour, verify the contractor’s registration and collect monthly challan proof.
- ✓ Build a full and final settlement process before you need it.
- ✓ Watch for the EPF wage ceiling notification following the Supreme Court direction.
11. Seven Mistakes New Employers Make
1. Registering when convenient rather than when required. Coverage backdates to the threshold-crossing date. The delay converts a 12% obligation into a 24%-plus liability the employer absorbs alone.
2. Counting only permanent staff. Contract, part-time and apprentice headcount all count toward the thresholds.
3. Calculating PF on gross, or ESIC on basic. PF is basic plus DA; ESIC is gross including overtime. A template built the wrong way produces an error every month.
4. Leaving the salary structure untouched since November 2025. Basic pay below 50% of total remuneration understates PF and gratuity continuously under the new wage definition.
5. Dropping ESIC the month an employee crosses ₹21,000. Coverage continues to the end of the contribution period — September or March.
6. Assuming the contractor’s compliance is the contractor’s problem. As principal employer you carry the exposure. Collect their challans monthly.
7. Keeping no records because everything is being paid correctly. Compliance you cannot evidence is compliance you cannot prove at inspection.
Conclusion
Payroll compliance in India rewards two habits and punishes their absence. The first is counting — knowing your headcount against ten and twenty every month, so coverage never begins without you noticing. The second is a calendar — the 7th for TDS, the 15th for PF and ESIC, quarterly returns, and Form 16 in June.
What makes 2026 different is the wage definition. The Labour Codes did not change the 12% or the 4%; they changed what those percentages apply to. An employer whose salary structure still runs low basic and high allowances is under-contributing every month, and the arrears accrue silently until something surfaces them — an inspection, a diligence exercise, or an employee query.
Review the structure, register on time, deposit by the 15th, and keep the registers. Done consistently, this is a modest monthly routine. Done reactively, it becomes the most expensive administrative failure a small employer can have.
Frequently Asked Questions (FAQ)
The questions new employers ask us most often about payroll, PF and ESIC:
1. When does PF registration become mandatory?
A. EPF registration is mandatory once an establishment employs 20 or more persons. The count includes permanent, contractual, part-time and apprentice staff. Coverage attaches from the date the threshold is crossed, not the date you register — so contributions are payable for the intervening period, with interest and damages, if registration is delayed. Establishments below 20 can also opt for voluntary coverage.
2. When does ESIC registration become mandatory?
A. ESIC coverage is triggered where an establishment employs 10 or more persons on any day of the preceding 12 months. It applies to factories, shops, hotels, restaurants, cinemas, transport undertakings and newspaper establishments, and to most commercial establishments in states that have notified the Act accordingly. Crossing the threshold once is enough; falling below it later does not automatically end coverage.
3. What are the PF and ESIC contribution rates in 2026?
A. PF: 12% employee and 12% employer, calculated on basic wages plus dearness allowance. The employer’s 12% splits into 8.33% to the pension scheme (capped at ₹15,000 wages, so a maximum of ₹1,250 per month) and the balance to EPF. ESIC: 0.75% employee and 3.25% employer, totalling 4%, calculated on gross wages, for employees earning up to ₹21,000 per month. ESIC rates have been unchanged since July 2019.
4. Is PF calculated on basic salary or gross salary?
A. On basic wages plus dearness allowance, not gross. ESIC is the opposite — it is calculated on gross wages, and includes overtime, which PF excludes. Confusing the two bases is the most common payroll calculation error, and because it repeats every month, the correction is always retrospective.
5. What is the 50% wage rule under the new Labour Codes?
A. The Labour Codes introduced a single definition of wages covering basic pay, dearness allowance and retaining allowance. Where excluded components such as HRA, conveyance and special allowances exceed 50% of total remuneration, the excess is added back into wages. In effect, basic wages must be at least half of total remuneration for PF and gratuity purposes. Salary structures built on low basic and high allowances now understate PF and gratuity every month until they are revised.
6. Has the ₹15,000 PF wage ceiling changed?
A. Not as of this writing. On 5 January 2026 the Supreme Court directed the Central Government and EPFO to decide within four months on revising the ceiling, which has been unchanged since 2014, and figures between ₹21,000 and ₹25,000 have been discussed. Until a notification is issued, ₹15,000 continues to apply. Any employer budgeting for the year ahead should watch for it, since an increase raises both employer and employee contributions.
7. What is the due date for PF and ESIC payment?
A. Both are due by the 15th of the following month — contributions on March salaries must reach EPFO and ESIC by 15 April. If the 15th falls on a Sunday or bank holiday, the deadline moves to the next working day. TDS on salaries is separate and due by the 7th, except for March payroll where the deadline is 30 April.
8. What happens if I miss the 15th deadline?
A. Interest accrues at 12% per annum from the due date until actual payment, under Section 7Q for PF and equivalently for ESIC. Damages are assessed separately — under Section 14B for PF, graded by the length of delay and running up to 25% per annum of arrears. The two run together rather than as alternatives. Non-deduction, and deducting the employee’s share without depositing it, are treated far more seriously and carry criminal liability under the EPF Act.
9. An employee’s salary crossed ₹21,000 mid-year. Do I stop ESIC immediately?
A. No. ESIC operates on two contribution periods — April to September and October to March. An employee whose gross crosses ₹21,000 during a period continues to be covered and to contribute until the end of that period, and falls out only from the start of the next one. An employee crossing the ceiling in January remains covered until 31 March. Stopping the deduction in the month of the increment creates a shortfall.
10. Do I have to register if I have fewer than 10 employees?
A. Not for ESIC or EPF on a mandatory basis, though voluntary EPF coverage is available with employee consent and authority approval. Other obligations still apply regardless of headcount — Shops and Establishment registration, TDS and TAN, professional tax where the state levies it, minimum wage compliance, written appointment letters, and wage and attendance registers. Small headcount reduces the scheme obligations, not the employment-law ones.
11. Am I responsible for PF and ESIC of contract workers?
A. Potentially, yes. A principal employer can be held liable where a contractor fails to pay PF and ESIC for workers deployed at your premises. The practical protection is to verify the contractor’s EPF and ESIC registration before deployment, obtain monthly copies of their challans, confirm their CLRA licence where applicable, and make continued compliance a contractual condition of payment.
12. What is a UAN and who generates it?
A. The Universal Account Number is a permanent PF identifier that stays with an employee across every employer for life. For a new joiner who already has a UAN, the employer links the existing number rather than creating a new one; only genuinely first-time members need a UAN generated. Duplicate UANs are a common and time-consuming problem to unwind, so check before generating.
13. What TDS obligations does an employer have on salaries?
A. Deduct tax at source where the employee’s income exceeds the exemption limit, deposit by the 7th of the following month (30 April for March payroll), file Form 24Q quarterly by 31 July, 31 October, 31 January and 31 May, and issue Form 16 by 15 June. Collect investment declarations and the employee’s regime choice at the start of the financial year, then true up when actual proofs arrive.
14. Is professional tax applicable everywhere in India?
A. No. Professional tax is a state levy, so it applies only in states that impose it — Maharashtra, Karnataka, West Bengal, Tamil Nadu, Telangana, Gujarat and Madhya Pradesh among them — and not in Delhi, Uttar Pradesh or Haryana, among others. Slabs, deposit frequency and return formats differ by state, which is why multi-state payroll requires separate registrations and separate calendars rather than one national process.
15. What records should a new employer maintain from day one?
A. Appointment letters for every hire including contract and part-time staff; wage, attendance and overtime registers; payslips showing statutory deductions separately; monthly PF and ESIC challans with payment proof; Form 16 and TDS acknowledgements; PF and ESIC nomination forms; leave records; full and final settlement records; and contractor licence and compliance documentation. Compliance that cannot be evidenced does not help you at an inspection.
16. Should a small business outsource payroll compliance?
A. It depends less on headcount than on complexity. A single-state employer with stable salaries can run this internally with a disciplined calendar. Multi-state operations, contract labour, variable pay, or a salary structure that needs restructuring under the new wage definition are where errors multiply and specialist handling pays for itself. The practical test is whether anyone in the business owns the 15th of the month as a fixed responsibility — if not, that gap is where the liability accrues.
Get Payroll Right From the First Hire
Delhi Legal Company sets up and runs payroll compliance end to end — EPF and ESIC registration, monthly ECR and challan filing, TDS computation and Form 24Q returns, professional tax and labour welfare fund, salary structure review against the new wage definition, statutory registers, and full and final settlements. If you are approaching the 10 or 20 employee threshold, the registration conversation is the one to have now rather than after.
www.delhilegalcompany.com