HR and payroll for healthcare in India
Reviewed by Mellow Editorial Team, HR & payroll content team
Healthcare employers in India face a payroll and HR compliance burden that goes well beyond the standard employer checklist. The combination of clinical licensing requirements, round-the-clock shift patterns, contract staff, and sector-specific wage rules creates obligations that generic payroll processes often miss.
Why healthcare payroll is more complex than most sectors
The workforce structure alone sets healthcare apart. A mid-sized hospital might employ full-time doctors, resident interns, agency nurses, contract housekeeping staff, and visiting consultants — all on the same premises, none on the same pay structure.
Each category carries different statutory obligations. Permanent employees attract full EPF contributions (12% from the employee, 12% from the employer on qualifying wages) and ESI coverage below the applicable wage threshold. Visiting consultants engaged as professionals rather than employees fall outside both schemes — but that distinction has to be demonstrable, not just asserted. Misclassification is an active compliance risk in a sector where the lines between retainer arrangements and employment can blur quickly.
Shift-based pay adds another layer. Night allowances, on-call payments, and overtime calculations must be tracked accurately. Under the Labour Codes that consolidated India's legacy employment laws — in force from 2025 — the definitions of "wages" and working hour limits are standardised, but implementation details still require attention, particularly for establishments that run across multiple states.
Licensing, credentialing and HR records
Clinical staff in India must hold valid registrations — doctors with the National Medical Commission or a state medical council, nurses with the Indian Nursing Council or the relevant state body. These are not just hiring-time checks. Registrations can lapse, be suspended, or carry conditions. An employer who deploys an unregistered practitioner carries significant legal exposure.
HR processes in healthcare therefore need a credentialing layer that most sectors do not require:
- Verify registration at the point of hire and retain documentary proof
- Set calendar reminders for renewal dates
- Re-verify periodically, not just at onboarding
- Record any disciplinary proceedings noted on a practitioner's council record
This applies equally to pharmacists, physiotherapists, radiographers, and other regulated allied health professions. Each has its own council and its own renewal cycle.
Payroll calculations specific to healthcare
TDS and Form 16 for mixed workforces. Salaried employees have tax deducted at source under the normal income tax slabs — up to 30% under the new regime, with a section 87A rebate for qualifying incomes and a 4% health and education cess applied to the tax liability. Visiting consultants and freelance specialists, by contrast, have TDS deducted at the rates applicable to professional fees rather than salary income. Employers must file Form 24Q quarterly for salary TDS and issue Form 16 to employees at year end. Separate TDS filings apply for payments to consultants.
Gratuity planning. Healthcare has high workforce continuity in nursing and administrative roles. Where an employee completes five years of continuous service, gratuity becomes payable on separation. For hospitals with a large, long-tenured nursing workforce, this is a material liability. Accounting for it as an accrual rather than treating it as a contingency at the time of resignation is sound practice — and expected under standard accounting frameworks.
Allowances and their structuring. Shift allowances, professional development allowances, and uniform allowances are common in healthcare. Their tax treatment varies. Some form part of "wages" for EPF computation; others may be structured legitimately outside that base. The definition of wages under the Labour Codes has narrowed the scope for allowance-heavy structures that were common under older legislation. Employers who have not reviewed their pay structures since the Codes came into force should do so.
Contract and agency staff: a specific risk area
Many hospitals rely on contract nurses and housekeeping staff supplied through third-party agencies. The principal employer — the hospital — retains statutory responsibility if the contractor defaults on EPF, ESI, or wage obligations to those workers. This is not a technicality; labour inspectors routinely hold the principal employer liable.
Practical steps to manage this:
- Require contractors to submit monthly EPF and ESI payment challans as a condition of invoice clearance
- Audit contractor compliance at least quarterly
- Retain copies of challans and any correspondence in the event of a future dispute
If you use an EOR or managed payroll arrangement for certain staff categories, ensure the agreement is clear about which entity carries statutory employer obligations and how compliance evidence is shared. How Mellow runs payroll across six countries on one platform illustrates what that accountability structure can look like in practice.
State-level rules and the Shops and Establishments angle
Healthcare establishments are subject to state-specific Shops and Establishments Acts in addition to central legislation. Rules on working hours, weekly offs, and leave entitlements differ by state. A chain of clinics operating across, say, Maharashtra, Karnataka, and Tamil Nadu is effectively managing three different compliance environments for the same categories of staff.
The Labour Codes aim to reduce this fragmentation over time, but state rules remain operative in several areas until each state notifies its own rules under the Codes. For multi-state healthcare employers, this means maintaining a state-by-state compliance calendar rather than applying a single national template.
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