HR software FAQs for Indian employers
Reviewed by Mellow Editorial Team, HR & payroll content team
HR software for Indian employers must handle statutory compliance specific to India — EPF, ESI, TDS, Form 16, Form 24Q, gratuity — alongside core functions like payroll processing, leave management and employee records. Below are the questions Indian employers most commonly ask before choosing or switching a platform.
What does HR software actually do for an Indian business?
At minimum, good HR software automates payroll calculations, deducts TDS at the correct slab under the new income tax regime (with the 4% health and education cess applied), manages EPF contributions at 12% each for employee and employer, and handles ESI deductions for eligible employees. Beyond payroll, most platforms cover leave and attendance tracking, offer letters and onboarding documents, and expense management.
The compliance calendar matters here. Employers must file Form 24Q quarterly and issue Form 16 to employees annually. Doing this manually is slow and error-prone; software that automates the filings and flags deadlines reduces that risk considerably.
Does HR software handle the new Labour Codes?
India's four consolidated Labour Codes — covering wages, industrial relations, social security, and occupational safety — are in force from 2025. They change how wages are defined, which affects PF and gratuity calculations. Specifically, the definition of "wages" under the Code on Wages has narrowed allowances, meaning a larger portion of a salary package may count as basic wages, potentially increasing PF liability.
Any HR or payroll software worth using in 2026/27 should have already updated its salary structure logic to reflect these definitions. Before committing to a platform, ask the vendor directly: have you updated your wage definition engine for the Labour Codes? Can I see how the system handles a sample CTC breakdown under the new rules? If they hesitate, that is a signal.
What statutory filings and forms should the software generate automatically?
At a minimum, look for:
- Form 24Q — quarterly TDS return for salary
- Form 16 — annual TDS certificate issued to each employee
- EPF ECR (Electronic Challan cum Return) — monthly PF filing
- ESI monthly return and challan
- Gratuity tracking — the software should flag employees approaching five years of service so you are not caught off guard by a gratuity liability
Some platforms also generate payslips in a format that breaks out each statutory deduction clearly, which employees are entitled to receive.
Cloud-based or on-premise — which is right for an Indian employer?
For most small and mid-sized Indian businesses, cloud-based software is the practical choice. Updates to tax slabs, PF rules or ESI thresholds are applied by the vendor without you needing to manage a software upgrade. On-premise systems can work for large enterprises with dedicated IT teams and specific data-residency requirements, but they carry the burden of keeping statutory tables current yourself.
One genuine consideration for Indian employers: where is the data stored? If you have employees whose data is subject to India's data protection regulations, confirm whether the vendor stores data on servers in India or abroad, and what their data processing agreement covers.
What should an employer check before buying?
Compliance depth. Does the platform support both old and new income tax regimes? Can employees choose their regime at the start of the year and have it applied consistently? Does it handle the section 87A rebate for lower-income employees automatically?
Integration with accounting. Payroll journals should flow into your accounting software without manual re-entry. Ask whether there is a native integration with Tally, Zoho Books, QuickBooks or whatever you use.
State-level compliance. Professional Tax rates and filing obligations vary by state. Check that the software covers the states where you have employees.
Multi-location support. If you hire across states or engage contractors and full-time employees, the system should handle different employment types without you needing separate tools. For businesses with internationally distributed teams, how Mellow runs payroll across six countries on one platform explains how a unified approach reduces administrative overhead.
Audit trail. Payroll disputes and tax audits require you to show historical records. Confirm the software retains immutable payroll run history and who approved each run.
How much do Indian HR platforms typically cost?
Pricing usually follows a per-employee-per-month model. Costs vary widely based on the feature set — basic payroll-only tools are cheaper, while platforms that include HRMS, performance management and compliance filing cost more. Most vendors offer tiered plans, so you pay for modules you actually use.
Factor in hidden costs: implementation fees, the cost of migrating historical payroll data, and support charges. A platform priced attractively at the headline rate but with paid support for every compliance query can end up more expensive than a higher-priced option with included assistance during statutory filing periods.
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