Payroll errors aren’t just accounting mistakes—they’re compliance risks under India’s new labour codes. With the Code on Wages (2019), Code on Social Security (2020), and Occupational Safety, Health and Working Conditions Code (2020) now in force, payroll processing has become a statutory function, not just an HR routine.
This blog features a complimentary /free checklist detailing eight pivotal checkpoints designed to assist HR and payroll professionals in achieving accurate, audit-ready salary processing.
1. Employee Master Data Validation
Ensure all foundational employee data is accurate:
- Employee Code, Name, DOJ, Confirmation, Exit Date
- Designation, Grade, Department
- Salary Structure & CTC breakup
- Bank Account & IFSC
- PAN, Aadhaar, UAN, ESIC Number
Mismatch here = payroll disaster later. Errors in UAN or ESIC can trigger PF/ESI rejection and compliance notices.
2. Attendance & Leave Verification
Before payroll run:
- Finalize and approve attendance
- Map weekly offs and holidays
- Validate leave balances and LOP
- Approve overtime (OT)
- Apply shift/night allowances
- Lock attendance to prevent post-run edits
Under the OSHWC Code, night shift allowances and leave entitlements are enforceable benefits.
3. Earnings Validation
Ensure earnings reflect actual entitlements:
- Basic, HRA, Special Allowance
- Variable pay, incentives
- Arrears and salary revision impact
- Bonus, ex-gratia (if applicable)
Bonus payments must comply with the Payment of Bonus Act, now subsumed under the Wage Code.
4. Statutory Compliance Check
Cross-verify all statutory deductions:
- PF: Eligibility, ceiling, UAN linking
- ESIC: Wage limits, contribution days
- PT: State-wise slabs
- LWF: Applicability by state
- TDS: Tax regime, declarations, proofs
Always cross-check challan amounts before filing. Errors here can trigger penalties under the Code on Social Security.
5. Deductions Accuracy
Validate all deductions:
- PF, ESIC, PT
- TDS
- Salary advance, loan EMI
- Notice pay recovery
Improper recovery of notice pay or EMI without consent may violate Section 18 of the Wage Code.
6. Payroll Processing Controls
Ensure system integrity:
- Payroll cut-off date adhered
- Manual vs system calculation check
- Negative salary validation
- Zero-pay and new joinee checks
Payroll cut-off dates must align with monthly wage payment deadlines under the Wage Code.
7. Salary Register & Reconciliation
Reconcile before finalization:
- Gross vs Net comparison
- Month-on-month variance analysis
- Headcount vs payroll count
- Cost centre mapping
Discrepancies here can trigger labour inspection flags under the Shram Suvidha Portal.
8. Payslip & Bank File Check
Final validation before disbursement:
- Payslip format as per law
- Statutory breakup clearly visible
- Bank file test upload (if applicable)
- Account number & IFSC validation
Payslips must reflect statutory deductions and be issued monthly under the Wage Code.
HR Best Practices
- Maintain a payroll calendar
- Use maker-checker validation
- Monthly compliance checklist sign-off
- Archive payroll data securely.
Disclaimer: This blog is for educational purposes only. Payroll compliance may vary based on state-specific rules, industry practices, and EPFO/ESIC notifications. For case-specific advice, consult a certified Labour Law Consultant or practicing advocate.