Payroll & social security
Outsourced payroll services
Payroll errors turn into wage claims, interest and prosecution. We run your payroll on your own pay structure and work out every statutory line, so each payslip holds up to any inspector or auditor.
- No short wages or claims
- PF, ESI, PT and LWF paid on time
- Bonus and gratuity worked out
- Routine, statutory and MIS reports
Anatomy of a payslip
What we check on every line
A payslip is a set of calculations, and the employee, an inspector or your auditor can question any of them. The amounts below are a simple illustration. The notes say what each line is and what we check before the payslip goes out.
Payslip for October
IllustrationAn example only. The basic pay shown does not comply with minimum wages, which vary by state, and these figures cannot be taken as a reference.
Earnings
- Basic pay₹10,000
- House rent allowance₹5,000
- Other allowances₹5,000
Deductions
- Provident Fund₹1,200
- Employees' State Insurance₹75
- Professional Tax₹200
- Income tax (TDS)₹0
Employer contributions
- Provident Fund₹1,200
- EDLI insurance₹50
- PF admin charges₹50
- Employees' State Insurance₹325
Basic pay
The fixed core of pay and the base for PF. Under the Labour Codes, excluded allowances cannot run above half of total pay. Here basic is exactly half, so nothing is added back to wages.
House rent allowance
The Code on Wages lists house rent allowance among the exclusions from wages, so no PF is paid on it. We count it towards the half-of-pay limit on exclusions.
Other allowances
Conveyance and similar allowances. If exclusions ever add up to more than half of total pay, we add the excess back to wages for PF, ESI, bonus and gratuity.
Provident Fund
The employee's 12% of PF wages, here the ₹10,000 basic. Basic is within the ₹25,000 PF wage ceiling (raised from ₹15,000 on 17 September 2026), so PF membership is compulsory for this employee.
Employees' State Insurance
The employee's 0.75%, for those earning up to ₹21,000 a month. It is worked out on wages as the Codes define them, here the ₹10,000 basic, not the full ₹20,000. We watch for the increment that takes an employee past the limit.
Professional Tax
A state levy, deducted at the slab of the state where the employee works. Slabs and due dates differ by state, and Labour Welfare Fund shows only in the months a state collects it.
Income tax (TDS)
Worked out on the employee's projected taxable income for the year, then spread over the months left. At this salary no tax falls due.
Provident Fund
Your 12%, matching the employee's. Of it, 8.33% goes to the Employees' Pension Scheme and the balance to the employee's PF account.
EDLI insurance
0.5% of PF wages for the Employees' Deposit Linked Insurance scheme, which covers the employee's family.
PF admin charges
0.5% of PF wages, paid by you to EPFO as administration charges, on top of your 12% contribution. It is never deducted from the employee.
Employees' State Insurance
Your 3.25% of wages, on the same base as the employee's share. It funds medical care for the employee and dependants at ESI hospitals and dispensaries.
The cost of non-compliance
When a payslip is wrong, the employer pays
A payroll error is rarely just an arithmetic problem. Under the Labour Codes and the Income-tax Act, 2025, short wages and unpaid deductions carry their own penalties.
Exposure under the law
Source
Up to ₹50,000
for paying less than due
01Wages paid short
Paying an employee less than the Code requires is an offence. A repeat within five years can bring up to three months' imprisonment or a fine of up to ₹1 lakh.
Code on Wages, 2019, s.54(1)(a) and (b)
Up to 10×
the claim, as compensation
02An employee's wage claim
When a claim is upheld, the authority can order compensation of up to ten times the amount found due, on top of the dues themselves.
Code on Wages, s.45(2)
1–3 years
and a ₹1 lakh fine
03PF or ESI deducted, not deposited
Deducting the employee's contribution from salary and not paying it in carries imprisonment of at least one year.
Code on Social Security, 2020, s.133(i)(a)
3 months–7 years
rigorous imprisonment
04TDS on salary not paid
Tax deducted from salaries and not paid to the Government can be prosecuted, with interest of 1.5% a month from deduction to payment.
Income-tax Act, 2025, s.476(1) and s.398(3)
Why NK One
Every filing, zero penalties.
Every payroll we run is worked out on the Code wage definition, and every deduction is paid in on time, so no wage claim or interest notice follows.
Zero-penalty guarantee
No late fees, no interest, no surprise demands on anything we file for you. Every due date is tracked by people who have done this for 20 years.
Direct partner access
Since 2007, clients speak to the partners who run NK One, not a new compliance executive learning on your account.
Common mistakes
Where payroll usually goes wrong
Most payroll errors are not arithmetic. They come from a structure or a change that the statutory lines were never updated for, and they surface months later in a notice or a final settlement.
Mistake 01 of 04
A structure that fails the 50% rule
Under the Labour Codes, excluded allowances above half of total pay are added back as wages. A structure built to keep basic pay low can under-pay PF, ESI, bonus and gratuity every month.
How we prevent it
We review compensation structures from a compliance point of view and run every statutory line on the Codes' wage definition.
Working with us
How the payroll reaches you
Your HR and finance teams need to see, question and approve the payroll each month. This is how that works with us.
One relationship manager
Every client has a dedicated relationship manager who knows your structure and your locations. We reply within two working hours.
Salary disbursement support
Once you approve the month's payroll, we support the salary transfer, so that what each employee receives matches the payslip.
Reports at three levels
Routine payroll reports, statutory reports that back each filing, and management MIS meant as a decision aid for your leadership.
Confidential handling
Payroll carries salaries, bank details and PAN for every employee. We keep it on secured systems and treat it as confidential.
Scope of service
The work behind each pay run
The work falls into three parts: the payroll itself, the statutory compliance that runs with it, and advice when your pay structure or workforce changes.
- File01
Payroll processing
Built around your pay structure, however often it changes.
- Monthly payroll run to your own pay structure
- Complex structures with many components handled
- Joiners, leavers and pay revisions taken into the month they happen
- Payslips, payroll records and registers for every pay run
- File02
Statutory compliance
Calculated with the payroll, not added afterwards.
- PF and ESI on wages as the Labour Codes define them
- Professional Tax and Labour Welfare Fund, state by state
- Bonus and gratuity
- Income tax compliance and remittances for contract and temporary employees
- File03
Advice and support
For decisions that change what employment costs you.
- Compensation structuring from a compliance point of view
- Salary structures checked against the 50% rule on exclusions
- Coordination and compliance if a contract or temporary employee has an accident
FAQ
Questions about payroll services
Can't find your answer? Ask us on WhatsApp and we'll reply within 2 working hours.
What do outsourced payroll services include?
Running the monthly payroll on your pay structure, with payslips and payroll records, and the statutory compliance that goes with it: PF, ESI, Professional Tax, Labour Welfare Fund, bonus and gratuity. We also support salary disbursement and send routine, statutory and management reports.
How do the Labour Codes affect payroll?
The Code on Wages, 2019 brought one definition of wages. Excluded allowances cannot exceed 50% of total remuneration, and anything above that is added back as wages for PF, gratuity, bonus and other statutory purposes. If basic pay is a small share of your salaries, the statutory base may rise, so we review the structure before we run it.
What is the difference between payroll processing and payroll compliance?
Payroll processing works out what each employee is paid and produces the payslips. Payroll compliance covers the statutory side: PF, ESI, Professional Tax and Labour Welfare Fund, with their registrations, challans, returns and records. When we run both, the filings come from the same numbers as the payslips.
Is ESI deducted from every employee's salary?
No. ESI covers employees earning up to ₹21,000 a month. The employee contributes 0.75% of wages and the employer 3.25%. When an increment takes an employee past the limit, we track the point at which deductions stop.
Can you run payroll for contract and temporary staff?
Yes. We handle income tax compliance and remittances for contract and temporary employees, and coordinate the compliance if one of them has an accident at work. If you also need the staff engaged on contract, see our contract staffing service.
Do you handle bonus and gratuity?
Yes, both are part of the statutory compliance we run with payroll. Under the Labour Codes both are worked out on the revised wage definition. A fixed-term employee becomes eligible for gratuity after one year of service, without the five-year minimum that applies to others.
Which states' Professional Tax do you handle?
Every state where you have employees and that levies Professional Tax. Slabs, deduction months and due dates differ from state to state, so we apply each state's own rules and file its returns on its own calendar.
What does payroll outsourcing cost?
Statutory costs, such as your share of PF and ESI, are paid by you to EPFO and ESIC. Our own fee depends on the scope of work. Send us an enquiry with your headcount, locations and pay structure, and we will come back with a quote.
Related
Related services
PF & ESI compliance
EPF and ESI codes, UAN and IP numbers, monthly statutory challans, returns and payments.
TDS compliance
Monthly TDS deposits, quarterly TDS returns, and Form 130 and 131 (earlier Form 16 and 16A).
Contract staffing
Temporary and fixed-term staff, with PF, ESIC, TDS and PT handled.
Enquiry
Talk to a compliance expert
Share your states and headcount, and we will get back to you within 2 working hours.
- Call+91 98457 40938
- WhatsApp+91 98457 40938
- Emailinfo@nkonehrsolutions.com
- Head office, Bengaluru1163, 9th Main, 11th A Cross, Nagapura, Mahalakshmipuram, near Rajajinagar Metro Station, Rajajinagar 1st Block, Bengaluru, Karnataka 560086
