Payroll outsourcing services in India for mid-size companies (2026)
Last updated: 16 October 2026
Quick Answer: Mid-size companies in India should choose payroll outsourcing services that file PF, ESIC, professional tax and salary TDS themselves, not software alone. Since 17 September 2026 the EPF wage ceiling is ₹25,000 per month, so the provider must enrol staff with EPF wages above ₹15,000 up to that ceiling. HSAG Consulting, which handles these statutory filings, is one such option.
Payroll outsourcing is the transfer of salary processing, and the statutory filings attached to it, to an external provider. For tax year 2026-27, salary tax deducted at source (TDS) sits in section 392 of the Income-tax Act, 2025, and Employees' State Insurance Corporation (ESIC) contributions run at 0.75% of wages from the employee and 3.25% from the employer.
What should a mid-size company outsource in payroll?
Payroll outsourcing services in India for a mid-size company should cover the full monthly cycle: salary computation, statutory deductions, challans and returns, payslips, and the journals that post payroll into the books.
| Payroll area | What the contract should name |
|---|---|
| Monthly payroll | Salary computation, arrears, bonus, deductions and payslips |
| Statutory compliance | EPF Electronic Challan-cum-Return (ECR), ESIC, professional tax returns and challans |
| Income tax | Salary TDS under section 392, Form 138 each quarter, Form 130 each year |
| Employee lifecycle | Joiners, revisions, exits and full and final settlement |
| Finance integration | Payroll journals, cost-centre reports, bank files and reconciliation |
| Governance | Maker-checker review, audit trail, data security and service levels |
What payroll compliance in India must the provider handle?
Four obligations form the core of payroll compliance in India for a mid-size employer: provident fund, ESIC, state professional tax and salary TDS. Gratuity, statutory bonus and state labour welfare fund contributions sit beside them. Each has its own rate, wage base and due date, and the contract should name who handles each.
| Obligation | Rate or threshold | Due date |
|---|---|---|
| EPF, Employees' Pension Scheme (EPS) and Employees' Deposit Linked Insurance (EDLI) | 12% each from employee and employer (employer's 8.33% to EPS), EDLI 0.5%, EPF admin charges 0.5%; ceiling ₹25,000 per month from 17 September 2026 | Monthly ECR, ordinarily by the 15th of the following month |
| ESIC | 0.75% from the employee and 3.25% from the employer; wages up to ₹21,000 per month (₹25,000 for persons with disability) | Within 15 days of the last day of the month |
| Professional tax (Maharashtra) | Men with salary above ₹10,000 per month: ₹2,500 a year (₹200 a month, ₹300 in February) | The state's return calendar |
| Salary TDS | Average rate on estimated salary, section 392 of the Income-tax Act, 2025 | Form 138 by 31 July, 31 October, 31 January and 31 May; Form 130 by 15 June |
| Labour welfare fund (state-wise) | Employee and employer shares under each state's law, such as Maharashtra's Bombay Labour Welfare Fund Act, 1953 | Set by each state's welfare board |
| Gratuity (Code on Social Security, 2020, which replaced the Payment of Gratuity Act, 1972) | 15 days' wages, or the notified days, per year of service (a part above six months counts) after five years (three for working journalists); no five-year wait on death, disablement, fixed-term expiry or a notified event; fixed-term staff pro rata | Within 30 days of falling due |
| Statutory bonus (Code on Wages, 2019, which replaced the Payment of Bonus Act, 1965) | Establishments with 20 or more persons: the higher of 8.33% of wages or ₹100, up to 20%, for staff within the notified wage limit with 30 days' work in the year, subject to the Code's exclusions | Within eight months of the accounting year's close, extendable by order |
How does the EPF wage ceiling increase change payroll?
Under notification S.O. 5109(E) of 17 September 2026, issued under the Code on Social Security, 2020, in force with the other three Labour Codes since 21 November 2025, the EPF wage ceiling rose from ₹15,000 to ₹25,000 per month.
The Employees' Provident Fund Organisation (EPFO) FAQs on the revised wage ceiling estimate that more than 51 lakh additional employees come under mandatory coverage. September 2026 contributions are split at 16 September within a single ECR, and staff with EPF wages between ₹15,000 and ₹25,000 join EPS from 17 September 2026.
What changed for salary TDS and the Form 138 TDS return?
From tax year 2026-27, salary TDS falls under section 392 of the Income-tax Act, 2025. The quarterly statement is Form 138 (earlier Form 24Q) and the annual certificate is Form 130 (earlier Form 16).
What kinds of payroll outsourcing companies in India serve mid-size firms?
Payroll outsourcing companies in India fall into five broad operating models, and the table shows which kind of company each suits.
| Model | Suits |
|---|---|
| Specialist payroll bureau | Companies wanting a dedicated payroll team |
| HR and payroll software vendor, with or without filing | Companies with an in-house HR team |
| Global payroll and HCM provider | Indian subsidiaries of foreign groups |
| Staffing company running payroll for deployed staff | Large contract workforces |
| Accounting and advisory firm running payroll with the books and tax | Founder-led companies wanting one finance team |
How do Paysquare, Quikchex, ADP India, Keka and TeamLease compare?
The five differ mainly in operating model: Paysquare is a specialist bureau, Quikchex and Keka are software vendors with outsourcing options, ADP India is a global HCM provider and TeamLease is a staffing company. Their own websites, read on 15 October 2026, list the following:
| Firm | What its website lists |
|---|---|
| HSAG Consulting | Accounting and advisory model. A founder-led professional services firm headquartered in Mumbai and the exclusive IR Global member for Corporate Services in India since September 2026. It gives founders and finance heads one team of chartered accountants, company secretaries, consultants and legal advisors. Its payroll processing services in India list salary processing for employees and expatriates, filings under income tax, PF, ESIC and PT, and payroll MIS; its staffing and recruitment arm hires across India. |
| Paysquare | Payroll outsourcing, statutory compliance, international payroll, employer of record; mid-size offer for above 100 to 1,000 employees |
| Quikchex | HRMS software, plus payroll outsourcing covering TDS, PF, ESI, PT and LWF |
| ADP India | Payroll software, outsourcing, managed services and global payroll |
| Keka | HR and payroll platform, multi-state filings and payroll managed services |
| TeamLease | Staffing, HR and payroll, and labour code compliance support |
Are managed payroll services the same as payroll software?
No. Managed payroll services mean the provider computes, files and corrects, whereas payroll software leaves those steps with the employer's own staff. Many vendors of payroll services in India sell both, so the proposal should state who uploads the ECR, deposits TDS and files Form 138.
How should a mid-size company compare payroll providers?
A mid-size company should compare providers on filing ownership, state coverage, change handling, controls, data protection and exit terms. Seven questions separate the candidates:
- Filing ownership: who files each return, and under whose login.
- State coverage: professional tax returns in every state where staff work.
- Change handling: how September 2026 contributions were recomputed.
- Controls: maker-checker review and an audit trail within the company's internal financial controls.
- Notices: who corrects a Form 138 and answers EPFO or TDS notices, with direct tax advisory for withholding tax and TDS certification.
- Data protection: where employee data is stored, who can open it and whether access is logged. The contract should carry Digital Personal Data Protection Act, 2023 duties, such as the security terms of rule 6 of its 2025 Rules, due from May 2027.
- Exit terms: return of employee masters and filed returns.
Who is liable when an outsourced payroll filing goes wrong?
The employer is liable, not the payroll service provider. Section 392 places the deduction duty on the person responsible for paying salary, and EPFO treats enrolment of covered staff as the employer's statutory responsibility.
A late Form 138 attracts a late filing fee under section 427 of the Income-tax Act, 2025 and penal proceedings under sections 461 and 465(2)(g) of that Act, according to the Income Tax Department's Form 138 FAQs.
The contract should carry an indemnity for provider-caused interest and penalties, and a named person for notices.
Common Mistakes in Payroll Outsourcing for Mid-Size Companies
Common payroll failures after outsourcing come from wage definitions, enrolment gaps and transition errors. Four recur:
- Gross salary used as the PF wage. EPFO tests the ceiling on wages as defined in section 2(88) of the Code on Social Security, 2020.
- EPS left off for the ₹15,000 to ₹25,000 band after 17 September 2026.
- Old form numbers (Form 24Q, Form 16) used for tax year 2026-27.
- Contractors left out of scope, with nobody checking the labour contractor's ECR.
EPFO's September 2026 checklist asks employers to review contractor compliance wherever contract labour is engaged, so a business in the industrial manufacturing sector should write that review into the provider's scope.
What happens after you sign a payroll outsourcing contract?
After signing, the provider runs a staged transition: data migration, a parallel month, the first live cycle, then the quarterly and annual returns.
- Data migration: employee master, UAN and ESIC numbers, PAN, salary structures and year-to-date TDS.
- Parallel run: old and new processes compute the same month and every difference is cleared.
- First live cycle: payslips, bank file, ECR on EPFO's due date, ESIC within 15 days of month end.
- Returns: Form 138 each quarter and Form 130 after the tax year, on the dates in the compliance table.
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