{"id":13296,"date":"2026-05-29T16:08:25","date_gmt":"2026-05-29T10:38:25","guid":{"rendered":"https:\/\/www.tankhapay.com\/blog\/?p=13296"},"modified":"2026-08-20T13:31:04","modified_gmt":"2026-08-20T08:01:04","slug":"payroll-challenges-businesses-face","status":"publish","type":"post","link":"https:\/\/www.tankhapay.com\/blog\/payroll-challenges-businesses-face\/","title":{"rendered":"Payroll Challenges Businesses Face in India (2026)"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_78 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.tankhapay.com\/blog\/payroll-challenges-businesses-face\/#What_is_a_payroll_challenge\" >What is a payroll challenge?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.tankhapay.com\/blog\/payroll-challenges-businesses-face\/#Payroll_compliance_challenges_vs_payroll_processing_challenges\" >Payroll compliance challenges vs payroll processing challenges<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.tankhapay.com\/blog\/payroll-challenges-businesses-face\/#Payroll_challenges_Indian_businesses_face\" >Payroll challenges Indian businesses face<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.tankhapay.com\/blog\/payroll-challenges-businesses-face\/#1_Multi-state_Professional_Tax\" >1. Multi-state Professional Tax<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.tankhapay.com\/blog\/payroll-challenges-businesses-face\/#2_Labour_Welfare_Fund_calendars\" >2. Labour Welfare Fund calendars<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.tankhapay.com\/blog\/payroll-challenges-businesses-face\/#3_Contract_labour_and_principal_employer_liability\" >3. Contract labour and principal employer liability<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.tankhapay.com\/blog\/payroll-challenges-businesses-face\/#4_Establishment_law_variation\" >4. Establishment law variation<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.tankhapay.com\/blog\/payroll-challenges-businesses-face\/#5_Wage_restructuring_under_the_Code_on_Wages\" >5. Wage restructuring under the Code on Wages<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.tankhapay.com\/blog\/payroll-challenges-businesses-face\/#6_Form_and_section_renumbering_under_the_Income-tax_Act_2025\" >6. Form and section renumbering under the Income-tax Act 2025<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.tankhapay.com\/blog\/payroll-challenges-businesses-face\/#7_Minimum_wage_revision_tracking\" >7. Minimum wage revision tracking<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/www.tankhapay.com\/blog\/payroll-challenges-businesses-face\/#Payroll_challenge_severity_matrix\" >Payroll challenge severity matrix<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/www.tankhapay.com\/blog\/payroll-challenges-businesses-face\/#Payroll_challenges_that_apply_everywhere\" >Payroll challenges that apply everywhere<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/www.tankhapay.com\/blog\/payroll-challenges-businesses-face\/#System_and_vendor_fragmentation\" >System and vendor fragmentation<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/www.tankhapay.com\/blog\/payroll-challenges-businesses-face\/#Data_quality_and_integrity\" >Data quality and integrity<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/www.tankhapay.com\/blog\/payroll-challenges-businesses-face\/#Software_underutilisation\" >Software underutilisation<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/www.tankhapay.com\/blog\/payroll-challenges-businesses-face\/#Payroll_talent_concentration\" >Payroll talent concentration<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/www.tankhapay.com\/blog\/payroll-challenges-businesses-face\/#Payroll_data_security\" >Payroll data security<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-18\" href=\"https:\/\/www.tankhapay.com\/blog\/payroll-challenges-businesses-face\/#Payroll_cost_visibility\" >Payroll cost visibility<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-19\" href=\"https:\/\/www.tankhapay.com\/blog\/payroll-challenges-businesses-face\/#If_you_operate_across_borders\" >If you operate across borders<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-20\" href=\"https:\/\/www.tankhapay.com\/blog\/payroll-challenges-businesses-face\/#How_to_fix_the_most_common_payroll_problems\" >How to fix the most common payroll problems<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-21\" href=\"https:\/\/www.tankhapay.com\/blog\/payroll-challenges-businesses-face\/#Payroll_challenge_self-diagnostic\" >Payroll challenge self-diagnostic<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-22\" href=\"https:\/\/www.tankhapay.com\/blog\/payroll-challenges-businesses-face\/#Statutory_exposure\" >Statutory exposure<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-23\" href=\"https:\/\/www.tankhapay.com\/blog\/payroll-challenges-businesses-face\/#Process_integrity\" >Process integrity<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-24\" href=\"https:\/\/www.tankhapay.com\/blog\/payroll-challenges-businesses-face\/#Continuity_and_control\" >Continuity and control<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-25\" href=\"https:\/\/www.tankhapay.com\/blog\/payroll-challenges-businesses-face\/#When_to_fix_internally_when_to_buy_when_to_outsource\" >When to fix internally, when to buy, when to outsource<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-26\" href=\"https:\/\/www.tankhapay.com\/blog\/payroll-challenges-businesses-face\/#In-house_vs_managed_payroll_how_each_handles_these_challenges\" >In-house vs managed payroll: how each handles these challenges<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-27\" href=\"https:\/\/www.tankhapay.com\/blog\/payroll-challenges-businesses-face\/#Final_perspective\" >Final perspective<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-28\" href=\"https:\/\/www.tankhapay.com\/blog\/payroll-challenges-businesses-face\/#FAQs\" >FAQs<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-29\" href=\"https:\/\/www.tankhapay.com\/blog\/payroll-challenges-businesses-face\/#What_are_the_biggest_payroll_challenges_for_Indian_businesses\" >What are the biggest payroll challenges for Indian businesses?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-30\" href=\"https:\/\/www.tankhapay.com\/blog\/payroll-challenges-businesses-face\/#What_is_the_difference_between_payroll_compliance_and_payroll_processing_challenges\" >What is the difference between payroll compliance and payroll processing challenges?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-31\" href=\"https:\/\/www.tankhapay.com\/blog\/payroll-challenges-businesses-face\/#Which_payroll_challenges_are_most_expensive_to_get_wrong\" >Which payroll challenges are most expensive to get wrong?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-32\" href=\"https:\/\/www.tankhapay.com\/blog\/payroll-challenges-businesses-face\/#How_do_you_fix_payroll_problems\" >How do you fix payroll problems?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-33\" href=\"https:\/\/www.tankhapay.com\/blog\/payroll-challenges-businesses-face\/#Is_it_hard_to_run_payroll_in-house_in_India\" >Is it hard to run payroll in-house in India?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-34\" href=\"https:\/\/www.tankhapay.com\/blog\/payroll-challenges-businesses-face\/#What_payroll_risks_belong_in_a_risk_register\" >What payroll risks belong in a risk register?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-35\" href=\"https:\/\/www.tankhapay.com\/blog\/payroll-challenges-businesses-face\/#What_are_the_main_payroll_processing_challenges\" >What are the main payroll processing challenges?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-36\" href=\"https:\/\/www.tankhapay.com\/blog\/payroll-challenges-businesses-face\/#At_what_point_should_a_business_stop_fixing_payroll_internally\" >At what point should a business stop fixing payroll internally?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-37\" href=\"https:\/\/www.tankhapay.com\/blog\/payroll-challenges-businesses-face\/#Why_do_companies_outsource_payroll\" >Why do companies outsource payroll?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-38\" href=\"https:\/\/www.tankhapay.com\/blog\/payroll-challenges-businesses-face\/#Do_payroll_challenges_differ_by_industry\" >Do payroll challenges differ by industry?<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<p><span style=\"font-weight: 400;\">Payroll problems facing Indian businesses include Multi-State Professional Tax &amp; Labour Welfare Fund compliance, contract labour liabilities arising from the OSH Code, 2020, differences in establishment law under the OSH Code and the Shops Act of each State, wage structure changes under the Code on Wages, and system fragmentation. These are mostly process and timing issues, not lack of knowledge issues.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">A company running payroll in one state with fifty employees has one set of problems. The same company in four states, with contract workers on site, has a different set entirely.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Most payroll advice treats these as the same problem at different scales. They are not.<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"What_is_a_payroll_challenge\"><\/span>What is a payroll challenge?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">The term gets used loosely, which makes it hard to act on. A useful definition separates the symptom from the cause.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">A payroll challenge is a recurring failure in the payroll function that produces financial exposure, statutory risk or employee impact, and that cannot be fixed by correcting a single cycle.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The distinction matters because a one-off calculation error is a mistake. A calculation error that recurs every month because the wage base was configured wrong is a challenge.<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Payroll_compliance_challenges_vs_payroll_processing_challenges\"><\/span>Payroll compliance challenges vs payroll processing challenges<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">These two terms get used interchangeably, and they describe different failures. Knowing which one you have determines what you fix.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Processing challenges are operational. Compliance challenges are regulatory. In practice most <a href=\"https:\/\/www.tankhapay.com\/blog\/payroll-compliance-penalties\/\">compliance penalties<\/a> begin life as an undetected processing error.<\/span><\/p>\n<div class=\"table-responsive\">\n<table class=\"table-class\">\n<tbody>\n<tr>\n<th><\/th>\n<th><b>Payroll processing challenges<\/b><\/th>\n<th><b>Payroll compliance challenges<\/b><\/th>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">What fails<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Calculation, integration, data, timing<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Deductions, deposits, registers, filings<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Who notices first<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Employees<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Authorities, usually months later<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Typical cause<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Manual steps, disconnected systems, late data<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Wrong wage base, missed threshold, stale state rules<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Detection<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Immediate, through queries and complaints<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Delayed, often at audit or inspection<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Cost<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Trust, HR time, rework<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Interest, penalties, retrospective liability<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Fix<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Process and system change<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Structural correction plus back-dated remediation<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p><span style=\"font-weight: 400;\">The reason this matters: a business that fixes processing problems and assumes compliance follows will still fail an inspection. The reverse is also true.<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Payroll_challenges_Indian_businesses_face\"><\/span>Payroll challenges Indian businesses face<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">These seven are specific to operating in India. They are also the ones who most globally skip all payroll content entirely.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Each has a common failure mode, and in most cases the failure is silent until an authority surfaces it.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"1_Multi-state_Professional_Tax\"><\/span>1. Multi-state Professional Tax<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Professional Tax is levied by state, at state-specific slabs, on state-specific calendars. Some states do not levy it at all.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">A business operating in four states holds four registrations, four slab tables and four remittance schedules. There is no central calendar and no central notification.<\/span><\/p>\n<ul>\n<li><span style=\"font-weight: 400;\"><strong>The common failure<\/strong>: applying the head office state&#8217;s slab to every employee, regardless of registered work location. This became far more common after 2020, when employees relocated and never returned.<\/span><\/li>\n<li><span style=\"font-weight: 400;\"><strong>What it costs:<\/strong> interest and penalty per state Act, calculated retrospectively from the date of the error.<\/span><\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"2_Labour_Welfare_Fund_calendars\"><\/span>2. Labour Welfare Fund calendars<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li><b>LWF <\/b><span style=\"font-weight: 400;\">also operates on a state-by-state basis, and its cycle is less consistent compared to that of PT, ranging from monthly to yearly cycles.<\/span><\/li>\n<li><b>The threshold level is also variable. <\/b><span style=\"font-weight: 400;\">The variation in the threshold is not often communicated in a manner that reaches the payroll team.<\/span><\/li>\n<li><b>The common mistake made<\/b><span style=\"font-weight: 400;\"> is failing to make a payment on the half-yearly cycle because of a twice-a-year payment cycle that cannot develop into a habit.<\/span><\/li>\n<li><b>What it costs:<\/b><span style=\"font-weight: 400;\"> a penalty under the applicable state Act, and it compounds quietly because nobody checks between cycles.<\/span><\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"3_Contract_labour_and_principal_employer_liability\"><\/span>3. Contract labour and principal employer liability<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">In the OSH Code, 2020, replacing the Contract Labour (Regulation and Abolition) Act, 1970 with the coming into force of the Labour Codes on 21 November 2025, and in the Code on Social Security, 2020, the employer-in-principle is liable if the contractor does not pay the wages, PF, or ESI to his workers. The primary regulations for the OSH Code, issued on 8 May 2026 through G.S.R. 345(E), increased the threshold for contractor licensing from 20 to 50, so any business that had assessed itself on the basis of the lower figure was doing it incorrectly.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Most businesses treat the contractor&#8217;s obligations as ending with the contractor. The law does not.<\/span><\/p>\n<ul>\n<li><b>The common failure: <\/b><span style=\"font-weight: 400;\">eight direct employees and five contract workers is thirteen, which crosses the ten-employee ESI threshold. The business registers for neither.<\/span><\/li>\n<li><b>What it costs:<\/b><span style=\"font-weight: 400;\"> you incur the statutory obligations that have not been paid by the contractor in addition to your threshold breach.<\/span><\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"4_Establishment_law_variation\"><\/span>4. Establishment law variation<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">The factory is governed by the OSH Code, 2020, which subsumed the Factories Act, 1948 on 21st November 2025. The office is governed by the state Shops and Establishments Act, which remained untouched in the Labour Codes. Different registers, different hours of work, different overtime and different inspection systems.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">A manufacturer with a corporate office runs both at once, in the same organisation, under the same payroll team.<\/span><\/p>\n<ul>\n<li><b>The common failure:<\/b><span style=\"font-weight: 400;\"> applying one register set across all locations, or assuming the law that governs the head office governs the plant.<\/span><\/li>\n<li><b>What it costs:<\/b><span style=\"font-weight: 400;\"> registers cannot be made in the specified form during the time of\u00a0 inspection, which converts a routine visit into another whole finding.<\/span><\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"5_Wage_restructuring_under_the_Code_on_Wages\"><\/span>5. Wage restructuring under the Code on Wages<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">The Code on Wages mandates that basic wages along with DA should constitute at least 50% of total wages. Wage structures that deliberately set low basic wages to save PF expenses are now obsolete.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The four Labour Codes became operational centrally from 21 November 2025, while each state continues to notify its own rules on various schedules.<\/span><\/p>\n<ul>\n<li><b>Common mistake:<\/b><span style=\"font-weight: 400;\"> Taking this to be just another year-end revision. PF calculations are done each cycle on the basis of wage structure, so an incorrect structure will result in a shortfall each month.<\/span><\/li>\n<li><b>What it costs:<\/b><span style=\"font-weight: 400;\"> PF back dues are calculated from the date of incorrect calculations, along with interest and penalties.<\/span><\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"6_Form_and_section_renumbering_under_the_Income-tax_Act_2025\"><\/span>6. Form and section renumbering under the Income-tax Act 2025<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">The Income Tax Act, 2025, replaced the 1961 Act from April 2026, renumbering the sections and forms that payroll systems generate and that employees receive.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">It is a purely administrative change with operational impacts on all templates, correspondence, employee communications and system configurations.<\/span><\/p>\n<ul>\n<li><b>The common failure: <\/b><span style=\"font-weight: 400;\">systems and documentation updated at different times, so a payslip references one numbering scheme and the annual certificate another.<\/span><\/li>\n<li><b>What it costs: <\/b><span style=\"font-weight: 400;\">there is no fine, but rather confusion among employees and unnecessary calls at tax time.<\/span><\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"7_Minimum_wage_revision_tracking\"><\/span>7. Minimum wage revision tracking<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Minimum wage notifications are provided based on skill categories and updated at regular intervals for the dearness allowance portion, normally at April and October.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">A multi-state business will have a different revision cycle for each state, based on skill category, without any consolidated feeds.<\/span><\/p>\n<ul>\n<li><b>The common failure: <\/b><span style=\"font-weight: 400;\">revising the states you remember and underpaying the other.<\/span><\/li>\n<li><b>What it costs:<\/b><span style=\"font-weight: 400;\"> underpayment, and according to the Code on Wages, the fix for it is much more than that.<\/span><\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"Payroll_challenge_severity_matrix\"><\/span>Payroll challenge severity matrix<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Not all payroll challenges deserve equal attention. Some are expensive and obvious; others are cheap to fix and easy to miss until they compound.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">This matrix ranks them on three things: what the failure costs, how hard it is to spot before an authority does, and what fixing it takes.<\/span><\/p>\n<div class=\"table-responsive\">\n<table class=\"table-class\">\n<tbody>\n<tr>\n<th><b>Challenge<\/b><\/th>\n<th><b>Financial exposure<\/b><\/th>\n<th><b>Detection difficulty<\/b><\/th>\n<th><b>Fix cost<\/b><\/th>\n<th><b>Priority<\/b><\/th>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Contract labour liability<\/span><\/td>\n<td><span style=\"font-weight: 400;\">High, contractor&#8217;s dues become yours<\/span><\/td>\n<td><span style=\"font-weight: 400;\">High, invisible until inspection<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Medium, process and verification<\/span><\/td>\n<td><span style=\"font-weight: 400;\">1<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Code on Wages restructuring<\/span><\/td>\n<td><span style=\"font-weight: 400;\">High, PF arrears retrospective<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Medium, surfaces at audit<\/span><\/td>\n<td><span style=\"font-weight: 400;\">High, affects every structure<\/span><\/td>\n<td><span style=\"font-weight: 400;\">2<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Multi-state Professional Tax<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Medium, interest and penalty per state<\/span><\/td>\n<td><span style=\"font-weight: 400;\">High, silent until a state queries<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Low, configuration<\/span><\/td>\n<td><span style=\"font-weight: 400;\">3<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Minimum wage revisions<\/span><\/td>\n<td><span style=\"font-weight: 400;\">High, remedy exceeds shortfall<\/span><\/td>\n<td><span style=\"font-weight: 400;\">High, nobody notices a missed notification<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Low, tracking process<\/span><\/td>\n<td><span style=\"font-weight: 400;\">4<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Establishment law variation<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Medium, inspection findings<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Medium, surfaces on a visit<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Medium, register setup<\/span><\/td>\n<td><span style=\"font-weight: 400;\">5<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Data quality and integrity<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Medium, compounding errors<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Medium, employees surface it<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Medium, standardisation<\/span><\/td>\n<td><span style=\"font-weight: 400;\">6<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">System fragmentation<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Medium, hidden in HR time cost<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Low, everyone knows<\/span><\/td>\n<td><span style=\"font-weight: 400;\">High, platform change<\/span><\/td>\n<td><span style=\"font-weight: 400;\">7<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Labour Welfare Fund cycles<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Low, penalty per state Act<\/span><\/td>\n<td><span style=\"font-weight: 400;\">High, twice-yearly builds no habit<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Low, calendar<\/span><\/td>\n<td><span style=\"font-weight: 400;\">8<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Payroll talent concentration<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Medium, continuity risk<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Low, but ignored<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Medium, documentation<\/span><\/td>\n<td><span style=\"font-weight: 400;\">9<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Data security and DPDP<\/span><\/td>\n<td><span style=\"font-weight: 400;\">High if breached<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Low until it happens<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Medium, controls<\/span><\/td>\n<td><span style=\"font-weight: 400;\">10<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Form renumbering<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Low, mostly administrative<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Low, visible immediately<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Low, template update<\/span><\/td>\n<td><span style=\"font-weight: 400;\">11<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p><span style=\"font-weight: 400;\">The first four rows represent your initial working priority. These rows have a commonality, that ids, high exposure along with high detectability. It is this combination that makes an otherwise manageable issue into a liability.<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Payroll_challenges_that_apply_everywhere\"><\/span>Payroll challenges that apply everywhere<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Six challenges are not India-specific but hit Indian businesses hard, usually because they compound the statutory ones above.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">They are ordered by how often they turn out to be the root cause of something else.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"System_and_vendor_fragmentation\"><\/span>System and vendor fragmentation<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Most medium enterprises carry out payroll within a payroll system, an attendance system, leave tracking system, and one or more reconciliation spreadsheets.<\/span><\/p>\n<p><em><span style=\"font-weight: 400;\">As per the PayrollOrg&#8217;s Global Payroll Week report, around 57% of organizations claimed to use a single payroll system in 2024 as compared to 44% in 2023. This report is for global enterprises and not restricted to India, hence, consider this as general guidance regarding the magnitude of the issue.<\/span><\/em><\/p>\n<p><span style=\"font-weight: 400;\">The consequence is not just effort. Compliance updates made in one system do not propagate to the others, and audit records become difficult to assemble.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Data_quality_and_integrity\"><\/span>Data quality and integrity<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">The Dayforce Future of Payroll Survey, run with the American Payroll Association and the Global Payroll Management Institute and again global rather than India-specific, found that 69% of companies report at least one payroll data problem, and one in four lacks adequate tools for data analysis.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The root cause is usually definitional rather than technical. The &#8220;salary&#8221; field in the HRMS does not mean the same thing as the &#8220;taxable salary&#8221; field in payroll.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Leadership assumes payroll is running correctly because payments go out. Errors in deduction logic and allowance categorisation accumulate silently underneath.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Software_underutilisation\"><\/span>Software underutilisation<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Buying payroll software does not solve payroll challenges if the software is not used. The same Dayforce survey found 37% of organisations admit they do not use all the functionality they have, and 34% still carry significant manual effort despite owning automation.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">This is expensive in both directions. You pay for capability you do not use, while carrying the cost and risk of the manual process it was bought to remove.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The fix is rarely a new system. It is usually an implementation review, user training and someone owning adoption.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Payroll_talent_concentration\"><\/span>Payroll talent concentration<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Most small and mid-sized businesses depend on one or two people who carry the payroll knowledge. That knowledge is rarely documented.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">When that person leaves, the organisation does not just lose a resource. It loses its compliance memory: which state rules were configured how, which historical decisions were made and why.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">This belongs in a business continuity risk register, not an HR one.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Payroll_data_security\"><\/span>Payroll data security<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Payroll holds salary data, bank details, identity numbers and tax records. That combination makes it a higher-value target than most other business systems.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The Digital Personal Data Protection Act, 2023, and the DPDP Rules, 2025, which are used to implement the act, provided a consent and purpose framework for processing such data, and the responsibility is placed on the employer irrespective of who processes the payroll.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The practical question to answer: who can see payroll data, who can change it, and is there a log of both?<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Payroll_cost_visibility\"><\/span>Payroll cost visibility<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Labour is a primary cost in most Indian businesses, and payroll holds the only real-time view of it.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Overtime patterns by department, contractor spend by function, and workforce cost as a share of revenue all sit in payroll data and are rarely reported upward.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The businesses that connect payroll to finance reporting get a planning advantage. Most treat payroll as a transaction and never look.<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"If_you_operate_across_borders\"><\/span>If you operate across borders<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Multi-country payroll adds a different layer: tax withholding models, social security funding, statutory benefits and reporting cadence all vary by country.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">That is a separate problem from the ones above and is covered in <\/span><a href=\"https:\/\/www.tankhapay.com\/blog\/how-payroll-compliance-varies-across-countries\/\"><i><span style=\"font-weight: 400;\">how payroll compliance varies across countries<\/span><\/i><\/a><span style=\"font-weight: 400;\"> and in <\/span><a href=\"https:\/\/www.tankhapay.com\/blog\/multi-country-payroll\/\"><i><span style=\"font-weight: 400;\">multi-country payroll<\/span><\/i><\/a><span style=\"font-weight: 400;\">.<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"How_to_fix_the_most_common_payroll_problems\"><\/span>How to fix the most common payroll problems<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Every challenge above has an immediate fix and a structural one. The immediate fix stops the bleeding. The structural fix stops it recurring.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The third column is the honest one: some of these cannot be solved without either software or outside expertise.<\/span><\/p>\n<div class=\"table-responsive\">\n<table class=\"table-class\">\n<tbody>\n<tr>\n<th><b>Problem<\/b><\/th>\n<th><b>Immediate fix<\/b><\/th>\n<th><b>Structural fix<\/b><\/th>\n<th><b>Needs software or a provider?<\/b><\/th>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Wrong PT applied<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Reconfigure by registered work state<\/span><\/td>\n<td><span style=\"font-weight: 400;\">State-wise rule table, updated centrally<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Software<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Missed LWF cycle<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Deposit with interest, document it<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Standing compliance calendar with owners<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Either<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Contract worker exposure<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Collect contractor challans and registers now<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Verification built into invoice approval<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Process, then software<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Wage base below 50%<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Restructure and compute arrears<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Structure validated at offer stage<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Software<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Stale minimum wages<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Check every state notification since last review<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Subscribed feed or provider responsibility<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Provider<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Register gaps<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Assemble what exists, identify what is missing<\/span><\/td>\n<td><span style=\"font-weight: 400;\">System that generates registers in prescribed form<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Software<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Recurring calculation errors<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Pre-payroll validation checks<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Single data source, defined master data standard<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Software<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Payroll depends on one person<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Document the current configuration<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Cross-training plus system-held logic<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Either<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Late attendance data<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Move the cut-off, escalate exceptions<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Attendance integrated directly to payroll<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Software<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">No compliance memory<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Write down what is configured and why<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Provider carries the knowledge contractually<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Provider<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p><span style=\"font-weight: 400;\">For the full statutory calendar behind most of these, work through the <\/span><i><span style=\"font-weight: 400;\">payroll compliance checklist<\/span><\/i><span style=\"font-weight: 400;\">.<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Payroll_challenge_self-diagnostic\"><\/span>Payroll challenge self-diagnostic<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Most businesses know something is wrong with payroll and cannot name it. This is a fifteen-question check to find out which challenge you actually have.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Answer honestly rather than optimistically. Count your yes answers in each section.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Statutory_exposure\"><\/span>Statutory exposure<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Five questions about where your liability really lies:<\/span><\/p>\n<ol>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Are there employees at your company in multiple states?<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Have contract workers been hired by your company at any of your sites?<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Have there been any changes to minimum wage laws in any state that you work in during the past year?<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Is basic plus DA below 50% of total remuneration for any employee?<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Could you produce your statutory registers, in the prescribed form, tomorrow morning?<\/span><\/li>\n<\/ol>\n<h3><span class=\"ez-toc-section\" id=\"Process_integrity\"><\/span>Process integrity<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Five questions to test the validity of your month-to-month process:<\/span><\/p>\n<ol>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Is attendance information always available post-payroll cut-off date?<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Are adjustments made always postponed until next month?<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Do you reconcile payroll information in more than one system each time?<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Can a single person edit salary information without any second approval?<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Has anybody checked the exception report before payment?<\/span><\/li>\n<\/ol>\n<h3><span class=\"ez-toc-section\" id=\"Continuity_and_control\"><\/span>Continuity and control<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Five questions related to survival of the payroll function upon exit or audit:<\/span><\/p>\n<ol>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Can the payroll function operate smoothly in case your payroll owner quits today?<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Have you documented the logic used to create your existing statutory structure?<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Are you aware of all parties who can access payroll data, and do you track modifications?<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Have you received any notice from EPFO, ESIC, a labour department or the income tax department in the last two years?<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Do you review payroll cost against revenue at the leadership level?<\/span><\/li>\n<\/ol>\n<h2><span class=\"ez-toc-section\" id=\"When_to_fix_internally_when_to_buy_when_to_outsource\"><\/span>When to fix internally, when to buy, when to outsource<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">This will depend upon where you scored lowest in the diagnostic, not on how many people you have.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Companies tend to reach for software when what they really need is expertise or outsourcing when they really need better upstream data.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">If the problem is on the <\/span><b>process side, solve it inside<\/b><span style=\"font-weight: 400;\">. It is too early to even consider software if the problem starts before the pay cycle starts.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Buy software when calculation, state rules, register generation or system fragmentation are the constraints. These are configuration problems with a technology answer. See <\/span><i><span style=\"font-weight: 400;\">the <a href=\"https:\/\/www.tankhapay.com\/blog\/payroll-software-in-india\/\">best payroll software in India<\/a><\/span><\/i><span style=\"font-weight: 400;\"> for a scored comparison.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">When expertise is the problem and not capacity, then expertise in statutory knowledge from state to state, registration forms, and labour codes means outsourcing is suitable. This is the real reason for having outsourced payrolls in India.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Do nothing yet if you are under fifteen employees, in one state, with fixed salaries and someone reliable maintaining the process. Not every payroll needs an intervention.<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"In-house_vs_managed_payroll_how_each_handles_these_challenges\"><\/span>In-house vs managed payroll: how each handles these challenges<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">The choice is usually framed as cost. It is more accurately a question of where the expertise sits and who carries the risk.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">This comparison assumes both are run competently. A badly run managed service is worse than a well-run in-house team.<\/span><\/p>\n<div class=\"table-responsive\">\n<table class=\"table-class\">\n<tbody>\n<tr>\n<th><b>Challenge<\/b><\/th>\n<th><b>In-house<\/b><\/th>\n<th><b>Managed<\/b><\/th>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Multi-state PT and LWF<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Manual state-by-state tracking<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Within service scope<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Minimum wage revisions<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Depends on someone noticing<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Provider obligation<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Contract labour verification<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Often assumed to be the contractor&#8217;s job<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Part of scope, if contracted for<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Labour Code interpretation<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Depends on team awareness<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Pre-implemented by specialist<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Register generation<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Depends on the system you bought<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Contractual deliverable<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Payroll continuity<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Concentrated in one or two people<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Provider carries the knowledge<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Data security<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Depends on internal controls<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Provider infrastructure, plus your DPDP obligation<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Problem resolution time<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Varies with team capacity<\/span><\/td>\n<td><span style=\"font-weight: 400;\">SLA-governed<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p><span style=\"font-weight: 400;\">The row worth negotiating hardest is the last one. Query resolution is the one thing managed payroll frequently makes slower, and the SLA is where you prevent that.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Final_perspective\"><\/span>Final perspective<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Payroll issues seldom boil down to knowledge issues. Every business knows that Professional Tax is state-wise and that contract employees are considered for the ESI cap.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">They get it wrong with calendar handling, transfer handling, and even the basic premise that what works fine now has always worked fine since two years ago.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The diagnostic above is the fastest way to find out which of those applies to you. If several sections scored badly and you would like a second opinion before deciding what to change, <a href=\"tel:+919891988811\">Request a Risk Assessment<\/a> and we will map your locations, worker categories and statutory position against what you are actually obligated to file.<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"FAQs\"><\/span>FAQs<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<h3><span class=\"ez-toc-section\" id=\"What_are_the_biggest_payroll_challenges_for_Indian_businesses\"><\/span>What are the biggest payroll challenges for Indian businesses?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Multistate Professional Tax and Labour Welfare Fund monitoring, liability for contractual labor under the OSH Code 2020, difference in the law for establishment under the OSH Code and state Shops Acts, restructuring of wages under the Code on Wages, and revision of minimum wage across states.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"What_is_the_difference_between_payroll_compliance_and_payroll_processing_challenges\"><\/span>What is the difference between payroll compliance and payroll processing challenges?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">The processing problems are of an operational nature, such as calculation errors, integration errors, and delayed data; whereas the compliance problems are of a regulatory nature, for example, incorrect deductions, failure to deposit, and incomplete registration records. The majority of the compliance problems initially start out as processing errors.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Which_payroll_challenges_are_most_expensive_to_get_wrong\"><\/span>Which payroll challenges are most expensive to get wrong?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Contract labor liability and the wage base mistake under the Code on Wages. Both have retrospective exposure calculated based on the date of the mistake and not the date of detection, and both are difficult to identify prior to an investigation.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"How_do_you_fix_payroll_problems\"><\/span>How do you fix payroll problems?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Identify whether the cause is process, configuration or expertise. Process problems are fixable internally. Configuration problems need software. Expertise problems need a provider. Applying the wrong remedy is the most common mistake.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Is_it_hard_to_run_payroll_in-house_in_India\"><\/span>Is it hard to run payroll in-house in India?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">It is more difficult. Special expertise in the Labour Codes, renumbering of the Income Tax Act 2025, professional tax and Labour Welfare Fund in multiple states, and contract labour provisions in the OSH Code is needed. Such knowledge cannot be acquired by any ordinary human resource team.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"What_payroll_risks_belong_in_a_risk_register\"><\/span>What payroll risks belong in a risk register?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Statutory non-compliance and risk of penalties, violation of employee data confidentiality, loss of payroll knowledge due to attrition, payroll system downtime during payroll processing, and damage to reputation due to errors in payments. The third is the most commonly overlooked.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"What_are_the_main_payroll_processing_challenges\"><\/span>What are the main payroll processing challenges?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Post-cut-off period attendance data, reconciling in disconnected systems, transferring attendance data manually to the payroll system, postponing correction until next month, and no exception checking prior to payment.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"At_what_point_should_a_business_stop_fixing_payroll_internally\"><\/span>At what point should a business stop fixing payroll internally?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">If the same problem is recurring despite having solved it, if it is taking more than two people to close the loop, or if the answer to a statutory question cannot be provided without outside help, then any one of those three is the indicator.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Why_do_companies_outsource_payroll\"><\/span>Why do companies outsource payroll?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Since the internal team cannot cope with changing regulations, since there is a cost attached to errors, and since it is costly to maintain statutory knowledge for multi-states. Outsourcing changes a compliance risk into a contractual obligation.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Do_payroll_challenges_differ_by_industry\"><\/span>Do payroll challenges differ by industry?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Significantly. There are significant differences in terms of registers and overtime policies between a factory governed by the OSH Code, 2020 and an office governed by a state Shops Act, with the latter having primary employer liability that the former does not have.<\/span><\/p>\n<div style=\"border: 2px solid #004899; padding: 20px; border-radius: 10px; margin: 20px 0;\"><em><span style=\"font-weight: 400;\">TankhaPay, created by Akal Information Systems \u2013 a company with 26 years\u2019 experience in payroll and statutory compliance and CMMI Level 5, ISO 9001, ISO 20000, and ISO 27001 certifications \u2013 integrates a payroll system, payroll outsourcing service, EOR service, NATS apprenticeship management, and global talent mobility solutions on one platform. TankhaPay is used by more than 1,000 companies in India, such as Bank of Baroda and UIDAI.<\/span><\/em><\/div>\n","protected":false},"excerpt":{"rendered":"<div class=\"tmnf_excerpt\">Payroll problems facing Indian businesses include Multi-State Professional Tax &amp; Labour Welfare\u2026<\/div>","protected":false},"author":6,"featured_media":13299,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[159],"tags":[340],"class_list":["post-13296","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-payroll","tag-payroll-compliance"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v27.7 (Yoast SEO v27.7) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Payroll Challenges Businesses Face &amp; How to Solve Them<\/title>\n<meta name=\"description\" content=\"Payroll challenges Indian businesses actually face, ranked by exposure. 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