The payroll guide

How a salary is put together

An Indian salary is a structure, not a number. Cost to company splits into basic pay, house rent allowance, other allowances, and the employer’s own contributions. Basic pay is the anchor: provident fund, gratuity and several statutory calculations are all derived from it, so the split you choose at offer time decides the take-home for years afterwards.

What comes out of it

• Provident fund — employee and employer contributions, computed on basic pay, deposited monthly against each member’s UAN.
• Employees’ State Insurance — applies below a wage threshold, with both employee and employer shares.
• Professional tax — a state levy, so the amount and even whether it applies at all depends on where the employee works.
• Income tax deducted at source — projected across the financial year from declared investments, then trued up.

The monthly cycle

A payroll run is the same sequence every month: freeze attendance and leave, capture changes to the establishment — joiners, exits, revisions, one-off payments — compute gross and deductions, review the variance against last month, then disburse and file. The variance review is the step teams skip and the one that catches errors while they are still cheap to fix.

Filing and returns

Provident fund and ESI returns are monthly. TDS is deposited monthly and returned quarterly, with Form 16 issued to employees after the year closes. Professional tax filing frequency varies by state. Missing a deposit date is the expensive kind of mistake — interest and penalty attach automatically.

Where the errors come from

• Attendance corrections applied after the run was frozen.
• A mid-month joiner or exit prorated by hand.
• Investment declarations collected late, producing a painful March for everybody.
• Professional tax applied at the head-office rate for an employee who works in a different state.
• Full and final settlements computed outside the payroll system and never reconciled back into it.

How WebHR handles it

Attendance, leave and payroll sit in one system, so the freeze is a state change rather than a spreadsheet export. Statutory components are computed per employee against the rules that apply where they actually work, anomalies are flagged against the previous run before disbursement, and payslips and Form 16 are issued from the same records the run used.

Rates, thresholds and filing dates change from time to time. Treat this page as an orientation to the shape of the problem, and your auditor or payroll consultant as the authority on the current numbers.