Author name: Pruthvik

Running payroll in India is not simple. You have PF, ESI, TDS, professional tax, labour welfare fund, and now the four new labor codes active since November 2025, plus the new income tax act effective April 1, 2026, that mandates basic pay be at least 50% of total CTC. Miss any of these, and you are looking at penalties, audit exposure, and unhappy employees. The right HRMS and payroll software handles all of it automatically. This guide covers what payroll software actually does, how to use it, which platforms lead the market in India, and what to pick if Keka is too heavy for your team size. What Is Payroll Software? Payroll software automates the process of calculating employee salaries, deducting statutory contributions, generating payslips, and disbursing payments on time, every month, without manual spreadsheet gymnastics. In India, that means the software must handle: Gross-to-net salary calculation: basic pay, HRA, special allowances, and variable components Statutory deductions: PF (Provident Fund), ESI (Employee State Insurance), TDS (Tax Deducted at Source), and Professional Tax, which varies state by state Labour welfare fund contributions, which differ across states and are often overlooked Form 16 generation at year-end for employees Full & Final settlements under the 2026 Labour Code, these must now be processed within two working days of an employee’s exit Standalone payroll tools focus purely on salary processing. HRMS (Human Resource Management System) platforms bundle payroll with attendance, leave, performance management, recruitment, and employee self-service into one unified system. For most Indian businesses beyond 20–30 employees, an HRMS approach eliminates the data reconciliation nightmare that comes from running separate systems. How Payroll Software Works The monthly payroll cycle in modern software follows a consistent flow: Data ingestion. The system pulls attendance and leave data from integrated biometric devices, mobile punch-ins, or geo-tagged check-ins. Any leave-without-pay days, late arrivals flagged under the policy, or overtime hours are automatically factored in. Salary computation. The engine applies each employee’s CTC structure, splitting basic, HRA, special allowance, and statutory components. Variable pay, incentives, and reimbursements are added. Deductions like loan EMIs, advance recoveries, and voluntary PF contributions are subtracted. Statutory compliance. PF, ESI, TDS, Professional Tax (computed per the applicable state slab), and LWF are calculated automatically. Good software flags anomalies, for example, if a salary revision pushes an employee outside the ESI eligibility ceiling. Payroll review and approval. HR or the finance team reviews a pre-disbursement summary. Any corrections, a missed reimbursement, or an incorrect CTC are made before the run is confirmed. Salary disbursement. The software generates a bank file (typically NEFT/RTGS format or a direct integration with the company’s bank), and payslips are pushed to the employee self-service portal or via email or WhatsApp. Compliance filings. Monthly ECR (Electronic Challan cum Return) for PF and ESI challan generation happens automatically. Quarterly TDS returns (Form 24Q) and year-end Form 16 issuance are built into the calendar. The entire cycle that once took an HR team three to four days can run in under a few hours or, with some platforms, closer to a few minutes for small teams. How to Use Payroll Software If you are implementing payroll software for the first time, here is what the setup and monthly usage typically look like: Setup phase (one-time) Configure your company’s salary structure, define pay components, allowances, and reimbursement categories Import employee master data names, PAN, Aadhaar, bank account details, PF/ESI UAN numbers, and CTC details. Set up statutory configurations, PF applicable or not per employee, professional tax state, ESI eligibility, and TDS regime (old or new). Integrate attendance, connect biometric devices, configure mobile app punch-in rules, or import attendance data from your existing system. Define leave policies, earned leave, sick leave, casual leave, and carry-forward rules. Monthly usage Freeze attendance for the payroll period. Add variable inputs: performance bonuses, arrears, reimbursement claims, and loan EMIs. Run a payroll preview and check the variance report (flags employees whose net pay changed by more than a defined threshold). Approve and process. Download the bank transfer file, generate payslips, and file statutory challans. Most modern platforms make steps 3–5 take under 30 minutes once your data is clean. HRMS and Payroll Software in India The right tool depends on your company size, payroll complexity, and whether you need full HRMS functionality or a payroll-first approach. 1. Keka HR Best for Mid-Market Companies Keka is one of the most widely adopted HR and payroll platforms for mid-sized Indian businesses. It covers the full employee lifecycle: payroll, attendance (including geo-fencing, selfie punch-in, and biometric integration), leave management, performance management, and an applicant tracking system. The payroll engine handles complex salary structures and statutory compliance well. The employee self-service portal is clean, and the mobile app is genuinely usable. Teams of 100–1,000 employees generally find Keka hits the right balance of depth and usability. Where it can feel heavy: smaller businesses sometimes find the configuration overhead and pricing structure better suited to companies that need all of its modules. 2. greytHR Best for Payroll-First SMBs greytHR is trusted by over 25,000 Indian SMEs and has built its reputation on payroll accuracy and statutory compliance depth. The platform covers all India-specific compliance requirements: PF, ESI, TDS, Form 16, and multi-state professional tax and offers 150+ pre-built payroll, attendance, and leave reports. It is not the most visually modern platform, but it is reliable and deeply understood by Indian payroll teams. For a business where payroll compliance is the primary concern and design aesthetics are secondary, greytHR is a solid choice. Starting pricing is accessible for small teams, which makes it a frequent first payroll tool for companies moving off spreadsheets. 3. Darwinbox Best for Enterprise Darwinbox is the go-to HRMS for large Indian enterprises. It was recognised as a Challenger in Gartner’s Magic Quadrant for Cloud HCM Suites in both 2024 and 2025, and Forrester named it a Strong Performer in its Q4 2025 Human Capital Management Wave. The platform handles payroll, attendance, core HR, recruitment, and workforce analytics in