The first payroll usually gets run in a hurry. Salaries are due, someone builds a sheet, payslips go out, everyone moves on. The problem is that the first run sets the pattern — the salary structure, the deduction logic, the registrations you did or did not complete — and unwinding any of it six months later is considerably harder than getting it right once.
Most first-payroll problems are structural rather than arithmetic: registrations completed after the first payslip instead of before, a salary structure imported from a spreadsheet template, TDS not deducted because the business assumed a threshold applied, and deposits processed but never confirmed.
Running your first payroll this month? WhatsApp us your headcount and salary structure and we will flag what needs fixing before it goes out.
Quick Summary — Fix These Before Month One
| Item | Get it wrong and | Fix before |
| Employer registrations | Obligations backdate to when you crossed the threshold | First payslip |
| Salary structure | PF and ESIC base recalculates upward | First payslip |
| TDS on salary | Interest, and shortfall recovered later | First payslip |
| Statutory deposits | Processing is not the same as depositing | First deposit date |
| Payslip format | Employees cannot verify their own deductions | First payslip |
Registrations After the First Payslip
The most common sequencing error. Salaries go out, and registration happens when someone gets round to it.
The obligation does not begin when you register. It begins when you cross the threshold. ESIC applies at 10 or more employees, EPF at 20 or more, and both start from the month the count is crossed, not from the month the paperwork is filed. Register late and you carry the intervening months with you.
Professional tax and TDS have their own triggers. PTRC is required once you have salaried employees, and a TAN is required before you can deposit salary TDS at all.
Complete the registrations first. It sounds obvious and it is the single most common thing that does not happen.
A Salary Structure Copied From Somewhere Else
The second structural mistake, and the expensive one.
Under the Code on Social Security, 2020, basic pay must be at least half of total remuneration. Structures with a low basic and a long list of allowances were common practice for years, because they reduced statutory cost. That logic no longer holds — where basic falls below half, the wage base for PF and ESIC is recalculated upward when it is assessed.
Foreign parents in particular import a home-country structure that is light on basic and heavy on allowances, because that is efficient in their own jurisdiction. In India it quietly raises the contribution base.
Design the structure for Indian law before the first payslip. Changing it later is possible but employees read a restructure as a cut, whatever the arithmetic says.
TDS Skipped in Month One
Salary TDS under Section 192 applies from the first payslip where the employee’s income is taxable across the year. There is no headcount threshold and no grace month.
The common error is treating the first month as too early to calculate. It is not — TDS is deducted on estimated annual income, spread across the year. Skip the first two months and you compress the same liability into ten, which employees notice and dislike.
Deposits are due by the 7th of the following month. Collect employee declarations for regime choice and deductions in month one rather than in January, when everyone is filing at once.
Processing and Depositing Are Different Events
Payroll being processed and payroll deposits being made are two separate things, and only one of them is visible on a payslip.
An employee can hold a payslip showing PF deducted while the contribution was never deposited. The employee finds out when their passbook does not update. The employer finds out later, with interest and damages attached.
Whoever runs payroll should confirm each month that the deposits were actually made, with challan references, not that the payroll was processed. On a monthly reporting pack, that is one line, and it is the line worth having.
Payslips Employees Cannot Read
A payslip should show gross components, each deduction separately, and the net. Employees who cannot see how their PF or TDS was arrived at ask HR, and HR asks whoever runs payroll, every month.
Where PF is deducted, the employee’s UAN should appear. Where TDS is deducted, the employee should be able to trace it to Form 16 at year end. A payslip that hides the arithmetic creates work rather than saving it.
The Sequence That Works
Complete the employer registrations. Design the salary structure for Indian law. Collect employee declarations and PAN. Run payroll with TDS from the first payslip. Deposit the statutory amounts and keep the challans. Then confirm, in writing, that each deposit was made.
Reversing any part of that order is what creates the backlog most businesses carry into their second year.
Frequently Asked Questions
We have four employees. Does any of this apply?
ESIC applies at 10 and EPF at 20, so neither yet. Salary TDS, professional tax and a TAN can all apply from the first employee.
Can we deduct TDS from month three instead?
You can, but the annual liability then compresses into fewer months and employees see a larger deduction later. Deducting evenly from month one is easier for everyone.
Our payroll software handles this. Do we still need to check?
Software processes correctly if it is set up correctly. Registration status, salary structure and deposit confirmation all sit outside it.
Can we change the salary structure later?
Yes, but employees generally read a restructure as a pay cut even when net pay is unchanged. Getting it right at the start avoids that conversation.
Who is responsible if deposits are missed?
The employer, with interest and damages. Using a vendor does not transfer the liability.
References
- Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
- Employees’ State Insurance Act, 1948
- Code on Social Security, 2020 — definition of wages
- Income Tax Act, 1961 — Section 192 and TDS deposit timelines
- Maharashtra State Tax on Professions, Trades, Callings and Employments Act, 1975
⚠️ Thresholds, wage ceilings and rates change through notification, and professional tax varies by state. Confirm your position with your advisor before your first run.
Related Reading: Registering as an Employer in Maharashtra: The Full Sequence · Salary Structure Design: How to Split CTC Correctly · New Labour Codes: What Actually Changes for EmployersCall or WhatsApp: +91 7448200422Email: info@taxkitab.comWe run payroll end to end under Payroll & HR Compliance. If you would rather learn to run it yourself, our Academy covers PF, ESIC, TDS and the labour codes.
