Payroll for IT companies

From CTC to monthly gross

An offer letter quotes CTC, but payroll runs on monthly gross. Take an offer of ₹12,00,000 CTC made up of ₹10,20,000 fixed pay, a ₹1,20,000 annual performance bonus and ₹60,000 of employer costs such as PF and insurance. The monthly gross is ₹10,20,000 divided by 12, which is ₹85,000. Direct Payroll splits that gross into Basic, DA, HRA and Special by your company percentages or salary components. The bonus is paid later through a bonus run, and the employer costs stay out of the monthly gross.

The 50 percent wage rule for IT salary structures

IT structures have often been built with a low basic and a large special allowance. Under the Code on Wages, basic pay plus DA must be at least half of total remuneration, and allowances above that line are added back to wages. On the ₹85,000 gross above, if Basic and DA come to ₹34,000, allowances are ₹51,000, which is ₹8,500 above the half-way mark of ₹42,500. That ₹8,500 is added back, so wages for PF, gratuity and bonus become ₹42,500. Setting Basic at half of gross in your company percentages removes the gap. Read the wage definition rule.

Variable pay, shift allowance and monthly inputs

Each month HR adds the items that change: a quarterly performance bonus, a joining bonus instalment, arrears after an April increment, a UK or US shift allowance, an internet reimbursement for home workers or an on-call allowance for the support pod. Direct Payroll takes these as payroll inputs: earnings such as incentive, bonus, arrears and reimbursement, and deductions such as advance recovery or an adjustment for a joining bonus clawback. Approved overtime arrives on its own. A large annual bonus can go through a separate bonus run so the regular run stays easy to check.

TDS, payslips and the payment date

Direct Payroll calculates employee PF, ESI where it applies and state professional tax, splits employer PF into EPS and EPF, and produces a payslip PDF for every engineer. It does not compute TDS, so income tax under the regime each engineer picks, investment proofs and Form 16 are handled by your payroll team or CA outside ZeniaHR. Once attendance is closed, the run moves from draft to review to finalized, a payment batch is approved, and salaries must reach accounts by the 7th of the following month.

How to set it up in ZeniaHR

1. Set company percentages for Basic, DA, HRA and Special so that Basic plus DA stays at half of gross or more.
2. Enter each engineer's monthly gross as the salary structure and record April increments as salary revisions.
3. Choose the loss of pay basis in the deduction policy, for example calendar days, and the half-day pay fraction.
4. Each month, add payroll inputs for bonus instalments, arrears, shift allowances, reimbursements and clawbacks before the run.
5. Run payroll from draft to review to finalized after the attendance month is closed, then approve the payment batch.
6. Share payslip PDFs through My Self-Service, and handle TDS and Form 16 in your tax process outside ZeniaHR.

Read more about payroll in ZeniaHR.

Roles this applies to

Frequently asked questions