Day 28: Payroll – Salary, PF & ESI
✅ Today you will learn
- Enable payroll and statutory features
- Create employees, pay heads and salary details
- Compute PF and ESI for employee and employer
- Record attendance and the payroll voucher
- Print payslips and pay statutory dues
🏢 In the real world
Rohit now has two employees: Anil, a sales assistant earning ₹18,400 gross, and Priya, the accounts assistant at ₹26,000. Salary must be correct to the rupee, PF and ESI must be deposited by the 15th, and each employee wants a proper payslip. TallyPrime payroll does this every month from one setup.
Statutory rules used here
| Item | Employee | Employer | Applies when |
|---|---|---|---|
| PF (EPF) | 12% of PF wages | 12% (8.33% to pension EPS, capped on ₹15,000 wages; rest to EPF) | Establishment covered; employees with PF wages up to ₹15,000 must join |
| ESI | 0.75% of gross | 3.25% of gross | Gross wages up to ₹21,000 per month |
| Professional tax | State-specific | — | Not levied in Uttar Pradesh |
| Salary TDS | Section 392 (Income-tax Act, 2025) | — | If estimated annual income is taxable |
The four Labour Codes took effect on 21 November 2025. Under the Code on Wages, “wages” (basic + DA + retaining allowance) should be at least 50% of total remuneration – if allowances exceed 50%, the excess is added back for PF and gratuity. Anil’s basic is 65.2% of gross, so no add-back.
Payroll masters in TallyPrime
- 1F11 → Maintain payroll = Yes and Enable payroll statutory = Yes → enter PF and ESI registration details.
- 2Create Employee Group (Sales, Accounts) and Employees with date of joining, PAN, UAN, ESI number, bank details.
- 3Create Payroll Unit “Days” and Attendance Type “Present” (attendance/leave with pay) and “Absent” (leave without pay).
- 4Create Pay Heads: Basic, HRA, Conveyance, Special Allowance (Earnings for employees, on attendance); Employee PF and ESI (Employees’ statutory deductions); Employer PF and ESI (Employer’s statutory contributions).
- 5Define Salary Details for each employee or group with the amounts.
Anil’s salary for October 2026
| Earnings | ₹ | Deductions | ₹ |
|---|---|---|---|
| Basic | 12,000 | Employee PF @ 12% | 1,440 |
| HRA | 4,000 | Employee ESI @ 0.75% | 138 |
| Conveyance | 1,600 | Professional tax (UP: not levied) | 0 |
| Special Allowance | 800 | ||
| Gross earnings | 18,400 | Total deductions | 1,578 |
| Net pay | 16,822 |
PF = 12% × ₹12,000 = ₹1,440. ESI = 0.75% × ₹18,400 = ₹138. Net = ₹18,400 – ₹1,578 = ₹16,822. Employer adds ESI 3.25% = ₹598 and PF 12% = ₹1,440 (EPS ₹1,000 + EPF ₹440). Cost to company for the month = ₹20,438.
Attendance and payroll vouchers
- 1F10 → Payroll Vouchers → Attendance: enter present days for each employee (30 for October here).
- 2Ctrl+F4 Payroll voucher → use Payroll Auto Fill: choose the employee group, period and salary payable ledger.
- 3TallyPrime fills every pay head; check totals; Ctrl+A.
- 4Second payroll voucher for employer contributions (PF/ESI) using auto-fill for statutory contributions.
- 5Payment voucher for net salary (bank transfer) and, by the 15th, for PF and ESI challans.
| Particulars | Debit | Credit | |
|---|---|---|---|
| Dr | Salary (Basic + allowances) | 44,400 | |
| Cr | Employee PF Payable | 3,240 | |
| Cr | Employee ESI Payable | 138 | |
| Cr | Salary Payable | 41,022 | |
| Total | 44,400 | 44,400 |
| Particulars | Debit | Credit | |
|---|---|---|---|
| Dr | Employer PF Contribution | 3,240 | |
| Dr | Employer ESI Contribution | 598 | |
| Cr | Employer PF Payable | 3,240 | |
| Cr | Employer ESI Payable | 598 | |
| Total | 3,838 | 3,838 |
Solved examples
Example 1: Priya – above the ESI limit
Gross ₹26,000 > ₹21,000, so ESI does not apply. PF = 12% × ₹15,000 = ₹1,800. Net = ₹24,200. Employer PF ₹1,800 (EPS ₹1,250 on the capped ₹15,000 wages).
Practice exercises (unsolved – answer hidden)
Try each exercise on paper or in TallyPrime first, then open the answer to check.
🏋️ Practice – do it yourself
Show solution
Basic ₹11,200, HRA ₹3,733.33, Conveyance ₹1,493.33, Special ₹746.67 → gross ₹17,173.33. PF 12% of basic = ₹1,344. ESI 0.75% = ₹129. Net = ₹15,700.33.Show solution
Net ₹41,022 + PF ₹3,240 (employee) + ₹3,240 (employer) + ESI ₹138 + ₹598 = ₹48,238.🏅 Job skills unlocked today
Quick quiz
🧠 Quick Quiz – test yourself
Interview corner
💼 Interview Corner
Explain the employer’s PF contribution split.
Employer contributes 12% of PF wages: 8.33% (on wages capped at ₹15,000) goes to the Employees’ Pension Scheme and the balance to the EPF account; admin charges are paid separately.
What pay-head types are used in TallyPrime payroll?
Earnings for employees, deductions from employees, employees’ statutory deductions, employer’s statutory contributions, employer’s other charges, bonus, gratuity, loans and advances, reimbursements.
Summary
- PF 12% + 12%; ESI 0.75% + 3.25% up to ₹21,000 gross.
- Masters: employee groups, employees, units, attendance types, pay heads, salary details.
- Payroll voucher Ctrl+F4 with auto-fill; attendance from F10.
- October: net ₹41,022; deposit PF/ESI by the 15th.
Day 29: backup, restore, security, Edit Log and data export in TallyPrime.
Frequently Asked Questions
Is PF compulsory for every employee?
Can TallyPrime print payslips in bulk?
Tally and TallyPrime are trademarks of Tally Solutions Pvt. Ltd. This is an independent course, not affiliated with or endorsed by Tally Solutions. All business names, GSTINs and figures in the examples are fictional samples.
