HRMS software in India: a buyer’s guide to compliance
State-by-state rules, the four Labour Codes, employee data under the DPDP Act, and the payslips, records and filings Indian employers owe, so you can test any HRMS before you buy.
Last updated 21 October 2026
What should HRMS software do in India specifically?
HRMS software for India has to follow rules that change by state, such as Professional Tax and Labour Welfare Fund; calculate wages under the four Labour Codes in force since 21 November 2025; protect employee data under the DPDP Act; issue wage slips and keep registers; and produce the salary files, returns and certificates Indian employers file.
Where ERPStack is today
ERPStack is in development. It is not yet available to download or buy, and the features on this page are planned, not shipped.
Sign upWhich HR rules change from state to state?
A business with staff in two states runs two sets of rules. Central law sets PF, ESI and TDS, but several items on the payslip are state matters, and HRMS software has to apply them by the state each employee works in.
| Rule | How it varies | What the software needs |
|---|---|---|
| Professional Tax | Each state that levies it sets its own slabs, within a cap of ₹2,500 a person a year under Article 276(2) (Sixtieth Amendment). Karnataka, for example, charges ₹200 a month on salary of ₹25,000 and above (schedule). | State-wise slabs, registrations and payment dates |
| Labour Welfare Fund | Set by state law, with small fixed contributions from employer and employee. Maharashtra collects every six months, based on staff on the register on 30 June and 31 December (MLWF Act and Rules). | State-wise amounts and periods, deducted only in the right months |
| Shops and establishments | Each state has its own shops and establishments law, for example the Karnataka Shops and Commercial Establishments Act, 1961, covering registration, working hours and holidays. | The registration and rules for each location |
| Minimum wages | Fixed by the appropriate government for each kind of work, and now apply to all employments, with a national floor wage set by the Centre (PIB). | A check that no employee is paid below the rate for their state and work |
Central and state governments each notify their own rules under the Labour Codes. Until new rules are final, the old rules stay in force to the extent they are in line with the Codes (MoLE FAQ).
What did the four Labour Codes change for HR software?
The Code on Wages, 2019, the Industrial Relations Code, 2020, the Code on Social Security, 2020 and the Occupational Safety, Health and Working Conditions Code, 2020 came into force on 21 November 2025, replacing 29 central labour laws (PIB release). These are the changes an HRMS has to reflect.
| Code | What changed | What HRMS software should do |
|---|---|---|
| Code on Wages | One definition of wages: basic pay, dearness allowance and retaining allowance, with other allowances above 50% of total remuneration added back (MoLE FAQ). Monthly wages are due before the seventh day of the next month, and dues on exit within two working days (MoLE handbook). | Compute statutory wages separately from basic pay; flag late salary runs and slow exit settlements |
| Code on Social Security | PF covers establishments with 20 or more employees and ESI those with 10 or more; fixed-term employees qualify for gratuity after one year (MoLE handbook). Gratuity on the new wage definition applies from 21 November 2025 (MoLE FAQ). | Track headcount against thresholds; accrue gratuity on Code wages; treat fixed-term contracts separately |
| OSH Code | Appointment letters for all workers and free annual health check-ups for those over 40 (PIB). Workers can carry forward up to 30 days of leave; overtime is paid at twice the normal rate (MoLE FAQ). | Generate appointment letters; cap leave carry-forward; pay overtime at the correct rate |
| Industrial Relations Code | Industrial establishments with 20 or more workers must set up a grievance redressal committee (MoLE handbook). | Record committee members and grievances, if you use the HRMS for it |
The Codes also bring a single registration, licence and return in place of many separate filings (PIB). The forms are set by the rules each government notifies, so check that any HRMS is updated as they change.
How should HRMS software handle employee data under the DPDP Act?
An HRMS holds some of the most sensitive data a business has: PAN, Aadhaar-linked numbers, bank accounts, medical records and salaries. The Digital Personal Data Protection Act, 2023 applies to all of it (Act text), and the DPDP Rules, 2025, notified on 14 November 2025, set an 18-month phased timeline to comply (PIB).
- Purpose. Section 7(i) allows processing for the purposes of employment without separate consent. Data used for anything beyond that needs its own lawful basis.
- Security. Section 8(5) makes the employer responsible for reasonable security safeguards, including for processing done on its behalf by a software provider.
- Transfers abroad. Section 16 lets the Central Government restrict transfers to countries it notifies. Ask where data and backups are hosted.
In practice, look for role-based access so a manager sees only their team, an audit log of who viewed or changed salary data, and a way to delete or archive records of people who have left.
What payslips, records and filings must an Indian employer produce?
| Document | Requirement | Source |
|---|---|---|
| Wage slip | Issued in the prescribed form to every employee on or before payment of wages | Code on Wages, s.50 |
| Registers | Attendance-cum-muster roll, wages, overtime, and fines and deductions; physical or electronic; kept for 5 years | Code on Wages, ss.19, 21, 50 |
| Appointment letter | For every new recruit | OSH Code |
| Quarterly salary TDS statement | Form No. 138 (formerly Form 24Q), due 31 July, 31 October, 31 January and 31 May | Income-tax Rules, 2026, r.219 |
| Annual TDS certificate | Form No. 130 (formerly Form 16) to each employee by 15 June after the tax year | Income-tax Rules, 2026, r.215 |
Salaries themselves are usually paid through a bulk transfer file uploaded to the company’s bank. Each bank has its own file layout, so ask whether the HRMS can produce the file for your bank directly, and whether it reconciles failed credits back to the payroll run. Deductions from wages, other than those the Code authorises, are not allowed, and together they cannot exceed 50% of wages in a wage period (MoLE handbook).
How do you test HRMS software for India before buying?
| Test | What a good answer looks like |
|---|---|
| Run a salary with high allowances | Code wages show the 50% add-back, and PF and gratuity use it |
| Add an employee in a second state | Professional Tax and Labour Welfare Fund switch to that state’s rules automatically |
| Cross the PF or ESI headcount threshold | The software flags the new obligation instead of waiting for you to notice |
| Process an exit | Full and final settlement inside two working days, with leave encashment and gratuity |
| Download a wage slip and registers | The prescribed fields are present, and registers export for five years of history |
| Produce TDS data | Figures for Form No. 138 each quarter and Form No. 130 at year end, under the 2026 forms |
| Ask about data | A clear answer on hosting location, access controls, audit logs and deletion |
For the calculation itself, with a worked example, read payroll software India. For a wider view of what an HR system covers, see HRMS software.
What is ERPStack planning for HR in India?
ERPStack is an ERP for Indian small and mid-sized businesses that Perimattic is building, with HR and payroll as planned modules. The plan for India:
- A work state on every employee record, driving Professional Tax and Labour Welfare Fund rules.
- Statutory wages under the Labour Codes’ definition, with the 50% add-back shown.
- Wage slips, registers and appointment letters from the same records.
- Role-based access and an audit log on salary and personal data.
- Bank salary files and the data needed for TDS statements and certificates.
Status: ERPStack is in development and nothing on this page is available to use yet. Sign up to tell us which states and rules you need covered first.
This page is general guidance, not legal or tax advice. Rules and rates were checked on 22 October 2026.
More on HR and payroll
HRMS in India, answered
Do I need employee consent to keep HR data under the DPDP Act?
Not for employment itself. Section 7(i) of the Digital Personal Data Protection Act, 2023 lets an employer process personal data for the purposes of employment without separate consent. Using that data for anything else needs a lawful basis, and the employer must still keep it secure and handle breaches as the Act and Rules require.
Does HRMS data have to be stored in India?
The DPDP Act does not require all personal data to stay in India. Section 16 lets the Central Government restrict transfers to countries it notifies, and other laws or sector rules can be stricter. Ask any HRMS provider where data is hosted, where backups are kept and who can access them.
Which state rules matter most for a multi-state employer?
Professional Tax and Labour Welfare Fund differ the most, because each state sets its own rates, slabs and filing periods, and some states do not levy them at all. Each state also has its own shops and establishments law and minimum wages, so HRMS software should store the work state of every employee.
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