Small Business Payroll India: How to Run Payroll for 5-50 People

Last Updated on August 3, 2026 by Shankar Jadhav

Small business payroll India is the one thing founders can’t afford to get wrong

Small business payroll India setups have one thing in common: no room to get it wrong. Payroll is not glamorous. It is also the one HR function where a mistake shows up in every employee’s bank account, WhatsApp status, and Glassdoor review - in the same week.

If you run a small business payroll India setup with 5 to 50 employees and no dedicated HR team, this piece is for you. It covers what payroll actually involves in 2026, the three ways to run it, the monthly deadlines you cannot miss, and the mistakes that cost founders the most.

What “running payroll” actually means

Payroll is not just paying salaries. In India, it is a 6-step monthly cycle:

1. Calculate gross salary for every employee, adjusting for leave, overtime, and any variable pay.

2. Compute deductions:

• TDS (Tax Deducted at Source) on salary
• Employee PF (12% of basic + DA, if you have EPFO)
• Employee ESIC (0.75% of gross, if you have ESIC and their gross is ≤ ₹21,000/month)
• Professional Tax (varies by state)

3. Pay net salary into employee bank accounts, ideally on the same day every month.

4. Deposit statutory dues to the government:

• TDS: by the 7th of the following month
• PF: by the 15th of the following month
• ESIC: by the 15th of the following month
• Professional Tax: varies by state (usually monthly)

5. File returns:

• PF monthly ECR filing
• ESIC monthly contribution filing
• TDS quarterly return (Form 138 in FY 2026-27, formerly Form 24Q)

6. Issue documents:

• Monthly salary slip to each employee
• Annual Form 130 (formerly Form 16) by 15 June
• Any interim TDS certificates for exits

Miss any of these and something either breaks (employee take-home) or triggers a notice (statutory).

Your three options for small business payroll India setups

Option 1: Spreadsheet + manual filings (the DIY route)

You calculate salaries in Excel. You log into EPFO, ESIC, and TRACES portals yourself. You draft salary slips in Word.

• Cost: Near-zero direct cost. But 6–10 hours of founder or office manager time every month.
• Best for: 1–5 employees, all on the same salary structure, no ESIC.
• Breaks at: Any of these - 8+ employees, first F&F exit, first TDS notice, first CTC restructuring, first ESIC-eligible hire.

Option 2: Payroll software (the SaaS route)

You subscribe to a cloud payroll platform. It calculates salaries, generates slips, and files returns. Popular options in India: Zoho Payroll, GreytHR, Keka, RazorpayX Payroll, SalaryBox.

• Cost: ₹50–₹300 per employee per month, depending on features.
• Best for: 10–50 employees, comfortable using software, someone in-house who can learn the compliance rules.
• Breaks at: Compliance complexity you didn’t budget for - multi-state teams, contract staff on ESIC, gratuity provisioning, or the first EPFO inspection notice.

Option 3: Outsource payroll to a specialist

A payroll partner runs the full cycle for you. They calculate, deposit, file, and handle notices. Your job is to send them monthly inputs (new hires, exits, leave, variable pay) and approve the final salary sheet.

• Cost: ₹200–₹500 per employee per month for a good India-specialist provider. Higher for global platforms.
• Best for: 15+ employees, founders who don’t want to touch statutory compliance, companies expecting to scale past 50.
• Breaks at: Almost nothing, if you pick a reliable partner. The main risk is picking a bad partner.

The 2026 monthly compliance calendar for small business payroll India

Print this and stick it on your wall.

Miss the 7th, 15th, or Form 130 deadline and you attract interest, penalties, or employee complaints.

Five small business payroll India mistakes that cost the most

1. Forgetting to register with EPFO when you cross 20 employees. Once you hit 20, you have 30 days to register. Miss it and you owe backdated PF plus damages. See our guide on EPFO and ESIC registration thresholds.

2. Not registering for ESIC when you hit 10 employees. ESIC applies from 10 employees. Salary threshold for coverage is ₹21,000/month gross. Common trap: hiring a junior at ₹18,000/month without registering.

3. Missing the June 15 Form 130 deadline. ₹100 per day per employee penalty. If you have 30 employees and delay by a week, that is ₹21,000 gone.

4. Getting TDS on salary wrong. Under the Income Tax Act 2025, salary TDS calculations use the new tax slabs. Payroll systems that haven’t updated will over- or under-deduct. Verify before you file.

5. Not tracking F&F properly. India’s new Labour Codes require full and final settlement within two working days of an employee’s last working day. Most small companies still process F&F 30-45 days later. That is now a statutory violation.

When to move from DIY to outsourced small business payroll India

The right signal is not headcount alone. Move to a payroll partner when any two of these are true:

• You have crossed 10 employees
• You handle payroll for more than one state (professional tax and shop & establishment vary)
• You have your first ESIC-eligible hire
• You spend more than 8 hours a month on payroll admin
• You have received your first statutory notice (PF, ESIC, or TDS)
• You are planning to scale to 50+ people in the next 12 months

Any two of these and DIY is now costing you more (in time, risk, and errors) than an outsourced service.

Where HRTailor fits

HRTailor runs end-to-end payroll for Indian companies with 5–100 employees. That means we handle the calculations, statutory deposits, filings, Form 130 issuance, and any notices - under a flat monthly fee per employee. Your job is to send us the monthly inputs and review the final sheet.

Built specifically for Indian SMEs. Pricing, workflow, and compliance depth sized for companies below 100 employees.

FAQ

Q: Can I really run payroll for 20 people in a spreadsheet?
Technically yes. Practically, you will miss a deposit, misfile a return, or lose the plot the first time you have an exit + a new hire + a bonus in the same month. It works until it doesn’t.

Q: Do I need a CA to run payroll?
Not for the payroll itself. You do need a CA for annual TDS assessment and any statutory notices. Most SMEs work with a CA for the annual finalisation and use software or outsourcing for monthly payroll.

Q: What if we hire our first person and no one else for a year?
For a single employee below PF/ESIC thresholds, a spreadsheet + net banking + a monthly TDS deposit is manageable. But add a second person and it starts to break.

Q: Do I need separate systems for full-time employees and contractors?
Different tax treatment (TDS under different sections) and different compliance (PF/ESIC only for employees). Most payroll software handles both. Some outsourced partners charge extra for contractor payments.