2025 India payroll Processing is a vital function in any business in India, which ensures employees are paid accurately in the country’s complex regulatory system on a timely basis. When the four Labour Codes — Wage, Industrial Relations, Social Security, and Occupational Safety — are rolled out in 2025, companies must recalibrate to the new compliance ecosystem, which includes a common definition of wages and the extension of social security.
For Indian businesses, but especially for one in Bangalore or an enterprise in Mumbai, it’s crucial to get payroll right to avoid penalties and to maintain the trust that you worked hard to establish with your team. This is where the services by credible HR companies, such as Multi Recruit, with tech-empowered products, step in. There is a step-by-step guide on how to process payroll in 10 easy steps, specifically crafted for the regulatory landscape of 2025.
How does the payroll process work?
1. Establish Explicit Rules for paying the Payroll
Begin by Creating Legal-Compliant Payroll Policies of your own by abiding by the Code on Wages 2025. Structure salary components: Salary structure must be mentioned in fixed value, including basic pay (minimum 50% of CTC), allowances such as House Rent Allowance (HRA), Dearness Allowance (DA), Conveyance, and Leave Travel Allowance (LTA). Elaborate on TDS, EPF, ESI, PT with deduction rules! Specify payment periods and overtime rates under the Minimum Wages Act. Transparent policies minimise conflicts and compliance with the law.
2. Collect accurate employee data
Gather complete and validated information about employees’ PAN, Aadhaar, bank account details, and salary breakup. For new hires, register them under EPF and ESI, if applicable. Utilize HRMS platforms that ensure data protection under the Digital Personal Data Protection Act. The collection of correct data will help to avoid errors in net salaries and statutory filing, thus saving time and penalties.
3. Verify attendance and leave records:
Compile a record of attendance and absenteeism, and obtain a copy of the previous month’s attendance and completed details of the present month’s working days. Integrate with biometric or cloud-based HR software. Don’t forget facts like National holidays, eg, Republic Day on January 26, and leaves under state-specific acts. For example, as per the Factories Act of Tamil Nadu, employees get sick leave, which is a direct factor in payroll. Accurate data is required because of which pay will be deducted for absentees or overtime records.
4. Calculate gross pay:
Compute salary by adding all components like Basic + Allowances Bonuses. Suppose an employee has a basic of ₹20,000, HRA of ₹8,000 based on 40% of basic, Conveyance ₹2,000, and a Bonus of ₹5,000, then the gross would be ₹35,000. As per Wage code 2025, basic and DA should include 50% of the CTC, and the rest should go in allowances. It will affect your current wage structure. Make use of software to prevent errors in calculation.
5. Apply statutory deductions:
Subtract the following contributions mandatory. TDS applicable at 2025-26 tax slabs, e.g., for 5-7 lakh, 5 %. EPF is at 12% employee and employer + 0.5% administration charge on basic and DA, capped at 15,000 if not opted for more. ESI is at 0.75% employees and 3.25% employers up to ₹21,000. PT of different values in different states, in Karnataka, ₹200, and in Maharashtra 2102 ₹2,500 per year. In the above example of ₹35,000, it would result in ₹1,500 TDS, ₹2,400 PF, ₹262.50 ESI, and ₹200 PT.
6. Subtract voluntary deductions.
Add employee-authorized deductions, such as insurance premiums, loan repayments, or charity donations. Allow employees to view and approve deductions on self-service portals to support transparency. You should cross-check these with payslips to avoid any mistakes that can lead to your trust being broken.
7. Compute Net Pay
Net Pay = Gross Pay – (TDS + EPF + ESI + PT + Other Deductions). If you are paid ₹35,000 at a gross salary, the net pay is ₹30,637.50, ₹1,500 TDS, ₹2,400 PF, ₹$262.50 ESI, and ₹200 PT. Calculate using payroll software or double-check by hand to avoid making errors, which can result in employee frustration and legal trouble.
8: Disburse Salaries
Bank Transfer the net pay (NEFT/RTGS) on a predetermined date, i.e. last working day of the month, to validate the Payment of Wages Act. Create electronic pay slips to record payments, deductions, and calculate the amount of money the employee receives. Regular payment helps in avoiding penalties of up to ₹7,500 and keeping employee morale high. With Multi Recruit’s platform, disbursals are smooth and move without mistakes.
9. File Statutory Returns
Submit compliance filings promptly:
- TDS: Quarterly on 24Q Mode, payable by the 31st of next month.
- EPF: Monthly ECR by the 15th of the month on the EPFO website.
- ESI: Monthly by the 15th.
- PT: Monthly, state-specific dates (for Karnataka, 20th).
10. Record Keeping and Auditing
Keep 7-year money records—payslips, returns, and employee information—by law. You must test and monitor compliance through regular internal audits with the Labour Codes fixed and variances corrected. Use tools to help automate real-time reporting and compliance monitoring. Multi Recruit’s system makes recordkeeping as easy as can be with a secure cloud-based service to minimise paperwork.
Why Partner with Multi Recruit?
Multi Recruit is India’s leading Payroll Services and HR Solutions provider for over a decade. Our cutting-edge, tech-based platform automates calculations, keeps you compliant with Labour Codes for 2025, and connects to recruitment services for video interviewing and ATS. Attracting over 300 clients internationally, we bring 20-30% savings, 35-40 days for hires, and devoted support. Transparency with employee portals, compliance know-how, and less risk lets you concentrate on growth.
Conclusion
Exactitude, Compliance, and Efficiency. By adopting these 10 steps, companies can cut through the clutter and prevent costly mistakes. When partnering with Multi Recruit, clients will be able to reap the rewards of our knowledge and systems to make the payroll process simple. Get in touch with Multi Recruit and revolutionize your payroll system and enable your organization.