How to Automate Payroll in a Small Indian Company

Quick answer: Automate payroll in layers. First, calculation and payslips: Zoho Payroll, greytHR and Keka all compute PF, ESI, PT and TDS and release payslips. Second, bank payouts. Third, statutory deposits and returns, where RazorpayX Payroll says it automates TDS payments and quarterly filings. Keep one human approval before money moves. A 20-person firm can reach layers one and two in a single month.

How we researched this: We read Zoho Payroll's help pages on pay runs and payslips, RazorpayX Payroll's processing and compliance pages, Keka's and greytHR's payroll pages, the Income Tax Department's TDS guidance and Form 138 manual, Ministry of Labour FAQs on the Labour Codes, ESIC's FAQ, and Press Information Bureau releases on the September 2026 EPF wage-ceiling change. Facts were checked in October 2026.

Payroll is five jobs, not one

A 22-person hosiery unit in Ludhiana that says "payroll takes three days" is usually doing five different jobs under one name. Splitting them shows what software can take over.

Most small companies automate job 2 and stop. Jobs 1 and 4 hide the late-night work: chasing leave data on the 27th and rushing challans on the 14th.

Jobs 1 and 2: inputs and calculation

Zoho Payroll's help page on pay runs gives a good picture of what a tidy monthly cycle looks like. You create a pay run from Home or the Pay Runs module, and the pay schedule triggers reminders for pending runs. The summary shows payroll cost, payday, net pay and a taxes-and-deductions summary. For bulk inputs, the page names Import/Export for LOP details and for one-time earnings and deductions, and a "Skip from Payroll" option for an employee who should not be paid that month. Employee TDS details are available through a TDS sheet.

RazorpayX Payroll describes a similar flow: it collects and validates PAN, address and bank details, computes pay from wages, days or hours worked, leaves and statutory deductions, and lets an admin add one-time deductions or bonuses or skip someone for a month. Its page claims payroll can be done in "3 clicks", but does not spell out what those clicks are, so ask for a live run.

The input problem is usually attendance. If the data lives in a muster or a WhatsApp group, you have automated only the arithmetic. Options to close the gap:

• Link an attendance tool. Zoho Payroll's integration with Zoho People, per Zoho, brings employee, attendance and LOP data together. Keka Attendance and greytHR's attendance module (see our attendance software category) feed leave and overtime into payroll within the same product.
• Use biometric or GPS capture for shop-floor and field staff; our guide to face and geo-fence attendance apps covers options.
• Cut off inputs on a fixed date, say the 25th, and put it in the staff handbook.

Tax computation without a spreadsheet

For salaried staff, the monthly TDS depends on the projected annual tax. Keka Payroll says its payroll computes TDS "based on declarations and regime choices"; RazorpayX Payroll says it deducts TDS "based on their tax declarations and chosen tax regime". Zoho Payroll's employee portal lets staff submit IT declarations and proofs of investment, and its Free plan includes an automatic TDS worksheet.

The Income Tax Department's e-Filing guidance adds a date to remember: salary paid from April 2026 falls under section 392(1) of the Income-tax Act, 2025, and the employer must reset the TDS computation from 1 April 2026 using projected income, deductions and the tax regime. Declarations should reference the 2025 Act, and payroll systems should reflect the new section numbering. If a tool still talks about "section 192" for current salary, ask why.

Job 3: approval, payslips and payment

This is where small firms get nervous, and rightly so.

Approval. Zoho Payroll lets a user submit a pay run for approval, and a reviewer with approval access approves or rejects it. Users with approval rights can "Submit and Approve". Once a regular payroll is approved it cannot be edited, though the help page says you can reject and recall a run before payment is recorded. In a 20-person firm, make the founder or finance head the approver and the HR executive the preparer.

Payslips. The Ministry of Labour's Compliance Handbook says employers must issue wage slips in the prescribed form to all employees on or before payment of wages, and keep registers and records for five years in physical or electronic form. That makes automated salary slip generation a compliance point, not a nicety, and the practical question is delivery. Zoho Payroll emails payslips when you choose Record Payment and then Send Pay Slip on an approved run. greytHR's employee portal and mobile app give staff payslips, Form 16 and IT statements, and RazorpayX Payroll distributes payslips and tax computation sheets through an employee dashboard. Keka says it processed "5000+ payslips in under a minute", a figure from its own page. Whichever app you choose, test that the payslip shows every earning, each deduction and the employer's PF contribution.

Payment. There are three levels of payout automation:

1. Bank advice file. Zoho Payroll's help page says that for bank transfers you download the bank advice and transfer salaries manually. greytHR lists electronic bank-transfer formats for major banks.
2. Payout from inside the software. greytHR's PayNow is a direct-debit facility for paying salaries from the application. Zoho Payroll lists online payments through HSBC and ICICI Bank, and Keka offers payout from the Keka Wallet with "additional charges". RazorpayX Payroll says salaries go to employees' accounts at any bank in India.
3. Payout plus compliance payments. Covered next.

Ask about payout fees and cut-off times before you commit. Our monthly payroll in one day plan shows how to sequence the day.

Jobs 4 and 5: statutory deposits and returns

Late deposits are where small firms pay penalties, so this is the layer worth automating. The consequences are published. The Income Tax Department's guidance says late deposit of TDS attracts interest at 1.5% per month from the date of deduction to the date of payment. ESIC's FAQ says contributions are payable within 15 days of the last day of the calendar month, and that simple interest at 12% per annum is charged for each day of delay.

What the vendors say they automate:

• RazorpayX Payroll: automates TDS payments and timely quarterly filings, and handles Professional Tax registrations, payments and returns based on your state. Its page does not say whether Razorpay files for you or helps you file, so ask.
• Keka Payroll: says it generates the PF ECR on payroll closure, applies state-specific PT slabs, and generates and files quarterly TDS statements and digitally signed year-end certificates.
• greytHR Payroll: lists PF with ECR generation, ESI computations and challans, and one-click quarterly TDS statement generation with FVU validation.

The quarterly statement is now Form 138, earlier known as Form 24Q. The Income Tax Department's manual lists due dates of 31 July, 31 October and 31 January, and 31 May for the last quarter, and says filing needs a TAN, the latest return preparation utility from NSDL (Protean) and a valid FVU file. Our guide to Form 16 and 24Q payroll software compares tools on this step.

When the rules change mid-year: the best test of automation

Three changes landed in the last twelve months, and each one is a fair test of whether your payroll is genuinely automated.

1. Wage definition. The Ministry of Labour's FAQs say the revised definition of wages under the Labour Codes has applied from 21 November 2025. If allowances exceed 50% of total remuneration, the excess is added back to wages. Overtime counts as an allowance for this test, while annual performance incentives are not part of wages. The Ministry's FAQs confirm gratuity now follows the revised definition from the same date, so salary structures built before the Codes deserve a review, and your vendor should explain how it treats the wage base.
2. EPF wage ceiling. The ceiling for mandatory coverage rose from ₹15,000 to ₹25,000 per month from 17 September 2026, according to the Ministry of Labour's press release. PIB reports say the maximum employer pension contribution rises from ₹1,250 to ₹2,083 a month.
3. TDS and form changes from April 2026, described above.

Vendors have handled the EPF change differently. RazorpayX Payroll offers three options for September: apply ₹25,000 for the whole month, keep ₹15,000, or prorate ₹15,000 for 1 to 16 September and ₹25,000 for 17 to 30 September, and says ₹25,000 applies from October. greytHR's admin article calls proration "an open, unsettled question industry-wide" and suggests documenting your approach with a statutory adviser. When you evaluate a tool, ask how it handled the September 2026 change, how fast, and whether you had to do anything.

For the full statutory picture see our guide to PF, ESI and PT calculation software and how to automate PF, ESI and PT compliance.

A 30-day rollout for a 20-person company

1. Days 1 to 5: clean the master data. Check PAN, bank accounts, UAN and ESIC numbers, and the joining date for every person.
2. Days 6 to 10: set salary structures. Group staff into three or four structures, not twenty custom ones. Check them against the 50% rule.
3. Days 11 to 20: run a parallel cycle. Run payroll in the new tool and the old process; investigate every net-pay difference.
4. Days 21 to 25: go live on calculation and payslips. Keep bank transfers manual for one cycle.
5. Days 26 to 30: switch on payouts and set calendar reminders for deposits and quarterly dates.

If budget is the constraint, see our guide to free payroll software for 10 employees. For wider tool lists, browse the payroll software category.

Extras worth automating once the monthly run is stable

Four side-jobs eat HR time in small companies, and each has a deeper guide on this site.

• Exits. Notice-period recovery, leave encashment and gratuity are error-prone by hand; see full and final settlement with payroll.
• Advances. Salary advances and loans are easier to recover when the instalment sits inside the pay run; read about earned wage access and salary advances via payroll.
• Leave. Clean leave balances stop disputes before they reach payroll; see leave management software.
• Employee questions. A self-service portal removes the "where is my payslip" ticket; see how employee self-service portals cut HR tickets.

What automation will not do

• Decide your policy. Whether to prorate, how to treat a half-day or when to hold a salary are management calls.
• Fix bad inputs. A wrong bank account number will still fail a payout.
• Replace an accountant. Interest, notices and assessments still need a human.
• Remove vendor lock-in. Ask for a full export of payslips and year-to-date data before you start.

FAQs