How to manage payroll for employees in multiple states
As a company grows and opens offices or employs people in multiple states, payroll compliance becomes significantly more complex. Many statutory requirements are state-specific — professional tax rates, minimum wages, leave entitlement, and factory act compliances vary by state.
Professional Tax (PT): is levied by most Indian states on employed individuals. The rate, the threshold, the applicable income slabs, and the frequency of filing vary by state. Maharashtra has different PT rates from Karnataka, which has different rates from Delhi (which doesn't levy PT at all). For each state where you have employees, register for PT under that state's applicable legislation and deduct and remit at the correct rate.
Minimum wages: the minimum wage for a given category of work varies by state, by zone within a state (metropolitan, non-metropolitan), and by the category of work (skilled, semi-skilled, unskilled, highly skilled). Ensure the wages you're paying meet the applicable minimum in each state for each category of employee.
State leave entitlement laws: most states have their own shops and establishments acts (for non-manufacturing establishments) and factories acts (for manufacturing). These specify minimum leave entitlement, which may differ from your company's leave policy. Where the state law provides more leave than your policy, the law takes precedence.
Centralised payroll with state-specific compliance: run payroll centrally but ensure the software handles state-specific differences — different PT slabs for different states, different minimum wages for different locations, and different leave rules. Most good payroll software (Greytip, Keka) handles multi-state compliance, but you must configure it correctly for each state.
Labour welfare fund: several states require employer and employee contributions to a state labour welfare fund. Contributions are small (typically ₹12–25 per employee per year from the employer) but the obligation exists. Check applicability in each state where you have employees.