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Payroll & Salary · Glossary

Payroll

Also called: salary processing, wage processing, payroll management

Definition

Payroll is the end-to-end process of calculating what each employee has earned in a pay period, deducting statutory and voluntary amounts, paying the net salary, and recording and remitting the deductions. In India it covers wages, overtime, LOP, EPF, ESI, professional tax, TDS and the monthly filings that follow.

Payroll in HR versus payroll in accounting

HR uses the word payroll to mean the people-facing process: collecting attendance, approving leave, applying the salary structure, generating payslips and answering queries. Accounting uses it to mean the ledger entries: salary expense, statutory liabilities, bank disbursement and reconciliation. Both views describe the same monthly cycle, and errors in one show up in the other.

In an Indian SME the two usually sit with the same person, often the owner or an accounts executive, working from an attendance register and an Excel salary sheet. The HR side is where most mistakes originate, because attendance, LOP and overtime are entered by hand.

What a monthly payroll includes

A complete payroll run has four layers. Earnings: basic, DA, HRA, other allowances, overtime, arrears and incentives. Attendance adjustments: paid days, LOP days, half-days and comp-off. Deductions: employee EPF, ESI, professional tax, TDS, LWF, advances and loan recoveries. Employer costs: employer EPF and EPS, EDLI and admin charges, employer ESI, gratuity and bonus provisions.

Each layer has its own rules. For example, EPF is calculated on basic plus DA up to the ₹25,000 ceiling that applies from 17 September 2026, ESI on gross wages up to ₹21,000, and professional tax on state-specific slabs.

  • Inputs: attendance days, leave, overtime hours, new joiners and exits, salary revisions
  • Calculation: gross earnings, statutory deductions, net pay per employee
  • Output: payslips, bank transfer file, salary register
  • Filings: EPF ECR and payment by the 15th, ESI by the 15th, TDS by the 7th, PT and LWF on state schedules

Why attendance is the foundation

Every rupee in payroll traces back to a paid day or an hour worked. If the attendance register shows 24 present days when the worker actually did 26, the salary, EPF and ESI are all understated and you will owe arrears. If overtime hours are recorded loosely, you either overpay or breach the twice-normal-rate requirement under the Factories Act and the Code on Wages.

This is why payroll teams push for a locked attendance cut-off date and a formal attendance regularization window before salary is computed.

A 40-person housekeeping contractor's September payroll

The contractor pays daily-rated staff at a monthly wage of ₹15,600, divided by 26 for a ₹600 per-day rate. A worker with 24 paid days earns ₹14,400 gross. Employee EPF at 12% of basic plus DA (₹14,400, all treated as wages) is ₹1,728; ESI at 0.75% is ₹108. Net pay is ₹12,564. The employer separately pays EPF and EPS of ₹1,728, EDLI and admin of ₹144, and ESI of ₹468 for that worker.

How Attend Mitra handles this

Attend Mitra prepares payroll from attendance: paid days, LOP, half-days and overtime flow from the records into an attendance-linked payroll run with EPF, ESI, PT and TDS settings, and the output is payslip PDFs, a salary register and a NEFT bank file. It does not file statutory returns or issue Form 16.

Frequently asked questions

What is payroll in HR terms?
In HR, payroll is the monthly process of turning attendance and salary structure into paid salary: confirming present days and leave, computing earnings and deductions, issuing payslips and handling employee queries. It sits between attendance management and the finance team's disbursement and statutory filings.
What is the difference between payroll and salary?
Salary is the amount an individual employee earns. Payroll is the whole process and the total record for all employees, including employer contributions, deductions, bank transfers and statutory registers. One salary is a line item; payroll is the full monthly cycle.
Which statutory deductions are part of payroll in India?
Employee EPF at 12% of basic plus DA up to the ₹25,000 ceiling, ESI at 0.75% of gross where gross is up to ₹21,000, professional tax on the state slab, TDS on salary where income exceeds the exempt limit, and Labour Welfare Fund in states that levy it.
How often is payroll run in India?
Monthly is the norm for salaried and most daily-rated workers. The Code on Wages requires monthly wages to be paid by the 7th of the following month. Some contractors pay weekly or fortnightly for casual labour, but statutory contributions are still computed and remitted monthly.

Related terms

Payroll Processing
Payroll processing is the sequence of steps that converts a month's attendance and salary data into paid salaries and statutory remittances: gather inputs, compute gross pay, apply deductions, arrive at net pay, disburse through the bank, and file EPF, ESI, TDS and professional tax within their due dates.
Gross Salary
Gross salary is the total of all earnings an employee is paid for a period before any deductions: basic, dearness allowance, HRA, other allowances, overtime, incentives and arrears. It excludes employer contributions such as employer EPF and gratuity provisions, which belong to CTC, and it is the base on which ESI coverage and contribution are determined.
Net Salary (Take-Home)
Net salary is the amount credited to an employee's bank account after all deductions are taken from gross salary: employee EPF, ESI, professional tax, TDS, Labour Welfare Fund, loan or advance recoveries and any LOP already reflected in gross. It is the figure employees mean when they ask about their in-hand salary.
Loss of Pay (LOP)
Loss of pay is the salary deduction for days an employee was absent without paid leave to cover them. Payroll counts LOP days from the attendance and leave records and deducts one day's pay for each, using the company's divisor (26 or calendar days). LOP reduces gross, and therefore EPF, ESI and other proportional deductions for the month, and is shown as a separate line on the payslip.
Payroll Register (Wage Register)
A payroll register, also called a wage register or salary register, is the employer's month-wise record of every employee's paid days, earnings by component, deductions, employer contributions and net pay. It is a statutory register under the Code on Wages and the contract-labour rules, the source from which payslips and EPF, ESI and TDS returns are prepared, and the first record an inspector or auditor asks to see.
Salary Slip (Payslip)
A salary slip, or payslip, is the statement an employer gives each employee for a pay period showing paid days, earnings by component, deductions by component and net pay, along with identifiers such as UAN, ESI number and PAN. Under the Code on Wages every employer must issue a wage slip, and a PDF sent through an employee app meets the requirement where the rules permit electronic form.

Go deeper

Payroll process steps in IndiaPayroll compliance checklistAttendance-linked payrollSalary per day calculator

See how this works inside Attend Mitra

Verified attendance, shift rosters, leave, and payroll-ready reports in one platform built for Indian teams.

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