Payroll Services in India

Mercans stands out as the leading provider of high-quality payroll services in India, offering both Managed and SaaS solutions. Our unwavering dedication to delivering exceptional payroll outsourcing in India is unmatched. With our extensive experience in the payroll sector, Mercans guarantees precise and compliant payroll services, making us the preferred choice for businesses of all sizes.

You can rely on Mercans for timely and accurate payroll transactions, enhanced by the convenience of multi-currency payments tailored to the Indian market. As your dedicated local payroll provider in India, we boast a team of in-country payroll specialists who are thoroughly knowledgeable about local regulations. We provide comprehensive support to ensure a seamless payroll experience customized to your specific business needs.

Choose Mercans for unmatched expertise and reliability in payroll outsourcing in India and payroll services in India.

Payroll Provider in India – Roles and Responsibilities

Mercans offers comprehensive payroll solutions in India that extend beyond basic payroll calculations. As a leading payroll provider in India, we leverage advanced technology to streamline administrative tasks for employers and enhance the employee experience. Here’s what sets Mercans apart:

• Automatic Payroll Processing: We minimize the time and effort spent on calculating wages and processing payments with our automated payroll systems. Our flexible payment options cater to diverse business needs, making us a top choice for payroll in India.
• Tax Withholding and Wage Garnishment: Our systems ensure accurate and timely withholding of taxes, garnishments, and other deductions from employee wages, maintaining compliance with local regulations.
• Tax Filing Services: Mercans manages tax filing on behalf of our clients, including year-end reporting. This comprehensive service alleviates the burden of tax compliance and reporting.
• Compliance Expertise: We stay updated on regulatory changes and notify clients about updates to wage and tax laws affecting their business. Our cloud-based systems provide real-time compliance updates, ensuring your payroll processes remain in line with current regulations.
• Payroll Reporting: Our solutions offer detailed reporting capabilities, allowing employers to generate comprehensive reports on wages, taxes, hours worked, and other key payroll metrics.
• Employee Self-Service: Our self-service portal empowers employees to review pay statements, update withholdings, and modify personal information independently, reducing administrative overhead.
• Product Support: Mercans provides exceptional support with expert specialists available to address client inquiries promptly. Our support is available 24/7 through phone and online chat, ensuring you have the assistance you need when you need it.

Mercans, your trusted payroll provider in India, for advanced payroll outsourcing in India and experience unparalleled efficiency, accuracy, and support.

Payroll Solutions in India

Discover the power of efficient payroll management with Mercans’ tailored solutions in India. Our versatile models ensure local compliance, facilitate multi-currency transactions, and seamlessly integrate with global Human Capital Management (HCM) and Enterprise Resource Planning (ERP) systems, making accurate payroll processing straightforward.

Explore Our Customizable Models

• SaaS (Software as a Service): Designed for enterprise businesses handling complex multi-country payrolls, our SaaS model addresses challenges related to diverse data points, locations, currencies, and languages. It optimizes operations for peak efficiency.
• Managed Services: Perfect for mid-sized to large enterprises managing multi-country payroll, our Managed Services model offers on-demand HR expertise. It ensures security, reliability, and compliance while supporting seamless payroll operations.
• HRMS (Human Resource Management System): Tailored for mid to large businesses in growth phases, our HRMS model provides a comprehensive suite of functionalities, including payroll and benefits management. Businesses can select specific features to create a customized and efficient payroll solution.

Everything you need to know before running payroll in India

India Overview

India remains one of the fastest-growing major economies, despite challenges like inflation and supply chain disruptions. The U.S.-India trade relationship is strong, with trade reaching $191 billion in 2022. India’s economy grew by 7.2% in the fiscal year 2022-2023, with the IMF forecasting 6.3% growth for 2023-2024.

Despite market access barriers and a focus on self-reliance, India remains an attractive destination for U.S. companies, including payroll companies in India. These companies offer vital support in managing complex payroll needs and ensuring regulatory compliance, providing valuable opportunities in this dynamic market.

Minimum Wages

India offers some of the most competitive labor costs in Asia, with a national minimum daily wage of approximately INR 178 (about USD 2.13). This equates to a monthly wage of around INR 5,340 (approximately USD 63.97).

Working Hours and Overtime Pay

According to Indian labor laws, the working day for an adult worker—whether unskilled, semi-skilled, or skilled—should include rest intervals and should not exceed 12 hours in any given day.

Below is a summary of the working hours, including rest and meal breaks, for four major metropolitan cities in India, as per their respective state-specific S&E Acts:

An adult (18 years or older) cannot work more than 48 hours a week or 9 hours a day. Additionally, the total work period, including breaks, should not exceed 10½ hours. Otherwise, overtime rules will apply.

Overtime

Overtime is regulated by various statutes, which set different working hour limits. Employees classified as workmen in factories and commercial establishments, as determined by state authorities, are eligible for overtime payments. Under several acts, including the S & E Act for various states, overtime wages can be up to twice the normal wage.

Payroll Cycle

Mercans supports four distinct types of payroll cycles, each tailored to different payment schedules and requirements:

• Normal Payroll Cycle
  • Description: This cycle handles regular wages or salaries, paid on a specific day each period. It includes adjustments for tax deductions, such as national and state taxes, and other deductions like pre-tax benefits and contributions.
  • Example: Monthly salaries, adjusted for taxes and deductions, are processed through the normal payroll cycle.
• Off-Cycle Payroll
  • Description: This payroll cycle is used for one-time payments outside the regular cycle, such as bonuses, expense reimbursements, or missed overtime. It runs between regular payroll periods and requires an off-cycle bank transfer and accounting updates similar to the normal payroll process.
• Retroactive Payroll
  • Description: Retroactive payroll adjusts payments for previous periods, correcting errors or reflecting changes in compensation or benefits. It ensures accurate reporting of past earnings and deductions. However, frequent adjustments can complicate financial reporting, so it is advisable to minimize retroactive changes and address them before major financial reports.
• Final Payroll
  • Description: Issued when an employee exits the company, this payroll includes final compensation, unpaid allowances, reimbursements, outstanding bonuses, and any accrued vacation pay. In some cases, companies may choose to compensate employees for their notice period without requiring them to work. Ensure compliance with local laws regarding the timing of final paycheck issuance.

Mercans is dedicated to managing these payroll cycles efficiently, ensuring compliance and accuracy in every payroll process.

13th Month Salary

In India, there is no mandatory requirement for employers to provide a 13th month salary. When offered, this bonus is typically calculated at 8.33% to 20% of an employee’s basic salary for those earning less than INR 21,000 per month. For employees earning more or in companies with fewer than 20 employees, the bonus is discretionary. If given, the 13th month salary is usually paid at the end of the financial year or as a lump sum around the festival season in October or November. This bonus is considered an additional cost to the employer and is taxable as part of the employee’s standard income.

Termination and Severance Pay

Termination

Regardless of the reason for terminating an employee, organizations must adhere to various federal and central regulations. Key guidelines to follow before dismissal include:

Typically, notice periods for terminating employees range from 30 to 90 days. Government approval is required if an organization plans to lay off more than 100 employees from sectors like industrial facilities, mining, or plantations. Other industries also need to notify the government about employee terminations.

Indian labor laws allow for employee dismissal under certain conditions, such as disobedience, dishonesty, theft, intentional damage to company property, accepting bribes, prolonged unauthorized absences, habitual tardiness, unacceptable workplace behavior, or negligence.

When conducting layoffs, the policy generally dictates that the most recently hired employee should be the first to be dismissed. Furthermore, organizations should give preference to previously laid-off employees when re-hiring for similar roles.

Dismissal of employees requesting or on maternity leave could violate the Maternity Benefit Act of 2017. Additionally, while non-compete agreements are not enforceable under Indian law, non-solicitation clauses can be used in limited situations. Indian states typically provide up to 10 to 15 days of paid vacation annually, along with up to 10 days of paid sick leave and an additional 10 days of unpaid leave. Employees who are on leave according to these regulations cannot be legally terminated.

Severance Pay

In India, employees become entitled to severance pay under specific circumstances. Severance pay is applicable when an employee experiences constructive dismissal, which occurs when an employer’s actions compel the employee to resign within the prescribed timeframe. Additionally, if an employee is laid off for 35 or more consecutive weeks, they may be eligible for severance pay. Entitlement also arises in cases of company bankruptcy or insolvency and during permanent business closures, which result in employee layoffs.

Key Factors for Calculating Severance Pay

The severance package varies depending on the company, but certain key factors are essential in determining the amount. Employers should consider the employee’s salary during their tenure, the length of their employment, and their role or designation within the company. Performance history and other relevant factors also play a crucial role in calculating the severance pay.

Severance Pay Calculation Formula

In India, severance pay can be calculated using the following formula:

Employee’s Weekly Salary×Number of Weeks×Number of Years=Total Severance Allowance\text{Employee’s Weekly Salary} \times \text{Number of Weeks} \times \text{Number of Years} = \text{Total Severance Allowance}Employee’s Weekly Salary×Number of Weeks×Number of Years=Total Severance Allowance

Components of a Severance Package

A typical severance package may include several components. This generally covers the remaining regular pay of the employee, an additional payment based on the duration of service, and compensation for unused vacation or sick leave. It also includes payment for the notice period and may extend to medical, life, or dental insurance. Some employers offer continuation of insurance benefits, excluding payment of bills. Additional components might be stock options, retirement benefits, and unemployment benefits, provided the employee was not terminated for serious misconduct.

Company Registration in India

India has made significant progress in fostering a business-friendly environment. Despite these advances, starting a business in India involves several essential legal and procedural steps. Mercans is here to guide you through the process, ensuring a smooth and efficient company registration experience.

Business Registration Steps:

• Choose Your Business Structure: Select the appropriate legal structure—Sole Proprietorship, Partnership, LLP, Private Limited Company, or Public Limited Company—each with its own legal requirements and benefits.
• Obtain Director Identification Number (DIN): Apply online for a provisional DIN, then submit the signed application along with identity proof to the ministry for approval.
• Get a Digital Signature Certificate: Secure a Digital Signature Certificate from authorized agencies for online transactions, including tax filings and annual reports.
• Register for Taxes: Obtain necessary tax registrations, such as GST, based on your business’s turnover and nature.
• Register Your Business Name: Choose a unique name and check its availability on the Ministry of Corporate Affairs (MCA) portal. Secure approval for your company name.
• Prepare Internal Documents: Draft the Memorandum of Association (MOA) and Articles of Association (AOA), detailing your company’s structure and internal rules.
• Obtain Certificate of Incorporation: Complete the INC-29 form on the MCA portal and submit it with the MOA, AOA, and payment receipt. The certificate will be mailed to your registered office.
• Receive PAN & TAN: Your Certificate of Incorporation will include PAN and TAN numbers from the Income Tax Department.
• Secure Necessary Licenses: Obtain any industry-specific licenses or permits required by local authorities.
• Open a Business Bank Account: Establish a separate account to manage your business finances.
• Register for Professional Tax: Depending on your state, register and pay professional tax.
• Register Trademarks and Copyrights: Protect your intellectual property by registering trademarks, copyrights, and patents.
• Comply with Labour Laws: Adhere to relevant labour laws, including those on minimum wages and workplace harassment.
• File Periodic Returns: Submit annual returns and financial statements as required.
• Ensure Ongoing Compliance: Stay updated with regulatory changes to avoid penalties and legal issues.

Payroll Compliance in India

Payroll compliance in India involves several ongoing requirements:

• Tax Compliance: Companies are required to withhold taxes from employee salaries based on prescribed slab rates. These taxes must be deposited into the Government Treasury within specific deadlines. For salaries paid from April to February, taxes should be deposited within seven days after the end of each month. Taxes for March must be deposited by April 30. Starting April 2023, a new tax regime with reduced slab rates became the default. Employees can choose to opt for the old tax regime if it benefits them more. Additionally, companies must file quarterly tax returns using Form 24Q within deadlines specific to each quarter.
• Issuance of Withholding Tax Certificates: Companies must issue Form 16 to employees, certifying the amount of tax withheld and deposited. This certificate must be issued by June 15 each year for the previous financial year.

Employee Benefits

Companies must also comply with regulations concerning employee benefits:

• Employee State Insurance (ESI): This is mandatory for companies with 10 or more employees, depending on the location. ESI contributions must be made for employees earning below a certain threshold and are due by the 15th of the following month.
• Profession Tax (PT): Profession tax registration is state-specific. Companies must determine if they need to register based on their location and deduct PT accordingly. Remittance deadlines vary by state, such as by the 20th of the following month in Karnataka or semi-annually in Tamil Nadu.
• Shops and Establishment Act & Labour Welfare Fund: These registrations and contributions depend on the state. For example, Karnataka requires registration by January 15, while Tamil Nadu requires it by January 31.

Employment Laws

Companies must also adhere to various labor laws, including the Maternity Benefit Act, Payment of Bonus Act, and Minimum Wages Act. New labor codes are being introduced to replace existing laws, which will impact future compliance requirements.

Payroll Taxes in India

Social Security Contributions

Under the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952, companies with 20 or more employees in India must register for provident fund (EPF) and pension schemes (EPS). These schemes ensure social security and retirement benefits for employees.

Contribution Details

• Rate: Companies contribute 12% of base wages (basic salary plus dearness allowance) to these schemes.
  • EPF: The full 12% goes into the EPF account, accumulating with interest for retirement.
  • EPS: A portion of the employer’s contribution funds the EPS, providing a monthly pension upon retirement or disability.

Payment Deadlines

• Monthly: Contributions must be deposited by the 15th of each month.

Form IW-1 Reporting

• Purpose: Reports details about international workers to the Employees’ Provident Fund Organisation (EPFO). A “nil” statement must be filed even if no international workers are present.

Key Compliance Points

• Registration: Complete with the EPFO and obtain a registration number.
• Updates: Stay informed about regulatory changes and contribution rates.
• Employee Declarations: New employees must complete Form 11 to determine pension eligibility.

Personal Income Taxes

In India, personal income tax is determined based on an individual’s residential status for the relevant tax year. This status is evaluated each year and is based on the individual’s physical presence in India during that year and in previous years. For more details on how residency is determined, refer to the Residence section.

• Resident in India
  • Resident and Ordinarily Resident (ROR): Taxed on worldwide income, regardless of where it is received.
  • Resident but Not Ordinarily Resident (RNOR): Taxed only on income that accrues or arises in India, or is received in India, as well as income from a business or profession set up in India.
• Non-Resident (NR): Taxed only on income that accrues or arises in India or is received in India. Income earned and received outside of India is not taxed.

• Leave Travel Allowance (LTA).
• House Rent Allowance (HRA).
• Specific allowances not included in total income, except those prescribed.
• Exemption for free food and beverages provided by the employer.
• Deduction for professional tax.
• Deduction for interest on housing loans for self-occupied properties.
• Various Chapter VIA deductions, including those for provident fund contributions, tuition fees, insurance premiums, donations, and medical premiums, except for employer contributions to the National Pension Scheme (NPS).

Employee Benefits in India

• In addition to mandatory benefits, many employers offer supplementary benefits to enhance employee compensation packages. Group medical insurance is widely provided, covering hospitalization, maternity care, and advanced treatments such as robotic surgery, with varying coverage for employees’ families. Group personal accident insurance is another common benefit, offering protection against accidental death and disabilities, including income replacement, home modifications, and educational support for children. 
• Group term life insurance is also prevalent, usually based on a multiple of the employee’s salary, with some policies including critical illness riders. For retirement savings, employers often set up Superannuation Funds or encourage participation in the National Pension Scheme (NPS). The NPS, in particular, is favored for its tax benefits and portability. Additionally, many employers provide perks such as vehicle allowances, meal vouchers, and reimbursements for internet and mobile phone expenses. These supplementary benefits not only enhance the overall compensation package but also contribute to employee satisfaction and retention.

Streamline Payroll with Mercans’ Technology and Integrations

• Technology: Meet our cutting-edge technology, which powers our global payroll solutions at the forefront of innovation. Learn more about our technological prowess here
• Integrations: Enhance efficiency and connectivity by seamlessly integrating your Human Capital Management (HCM) system with Mercans’ solutions. Discover the power of integration here
• Recognitions: Partner with an organization recognized for its excellence. Mercans has earned accolades for its commitment to providing exceptional payroll services. Explore our awards and recognitions here

Outsource to Payroll Company in India

In India’s dynamic business environment, Mercans emerges as the premier choice for navigating local complexities. Our unwavering commitment to comprehensive compliance, extensive expertise in Indian labor laws, and broad range of services position us as the ideal partner for your business success. Rely on Mercans to streamline operations, ensure statutory adherence, and drive robust growth in the Indian market.