Short answer: Choose a payroll provider on evidence, not promises. The right provider covers PF, ESIC, Professional Tax and TDS in every state you operate in, shares proof of every deposit and return, runs payroll on one system, gives you one accountable person and writes timelines into an SLA. Ask to see how each of those works before you sign.

Payroll is a trust function. Your employees notice the day a salary is late, and the authorities notice the day a deposit is late. Outsourcing it can save money and management time, but only if the provider is genuinely good at the work. This checklist gives you twelve questions to separate the two.

Before you start: what do you actually need?

Write down your situation first. Providers will tailor their pitch to whatever you tell them, so be specific.

  • Headcount today, and expected in twelve months
  • States and cities where you employ people
  • Pay frequency, salary structures and variable pay
  • Any staff on contract or supplied by agencies
  • Your current set-up, and anything you know is behind

Then decide which model you are buying. Payroll outsourcing keeps employees on your rolls and hands over the processing. Payrolling moves people onto the provider’s rolls, so the provider becomes the employer. They are different services with different obligations.

The twelve questions

Coverage

1. Do you cover every state we operate in? Professional Tax, Shops and Establishments and labour welfare rules differ by state. Ask which states the provider handles today and how it tracks changes.

2. Do you handle all four core obligations? PF, ESIC, PT and TDS on salaries should sit with one provider. Splitting them creates gaps between deductions and deposits.

3. Do you handle registrations, not just filings? A provider that only files returns will not notice a missing PT registration in a new state.

Evidence

4. How will we know each deposit was made? You should receive challans and acknowledgements, not just a confirmation email. Ask to see a sample monthly compliance report.

5. Do you keep a compliance calendar for us? Every obligation, due date, owner and status in one place. Ask to see what one looks like.

6. How do you reconcile? Deductions, deposits and returns should match every month. Ask how mismatches are caught and fixed.

Process

7. What is the monthly cycle? Look for a clear input cut-off, a review step, client approval before payment and a report after. If the provider can’t describe it simply, it probably doesn’t run it consistently.

8. Does it all run on one system? Payroll, attendance, leave and employee records in one HRIS reduce errors from rekeying.

9. How do you onboard us mid-year? Year-to-date figures matter, especially for TDS. Ask how existing data is migrated and checked before the first run.

Accountability

10. Who is our single point of contact? One named account manager should own reporting, the calendar and reviews.

11. What is in the SLA? Pay dates, deposit timelines, query response times, reporting and review frequency. Ask how performance is measured and how often it is reviewed with you.

12. How do you protect employee data? Payroll holds sensitive personal data. Ask how access is controlled and how the provider handles its obligations under the Digital Personal Data Protection Act, 2023 and the rules made under it.

Red flags

  • The price is quoted before anyone asks about your states, headcount or structures.
  • Proof of payment is “available on request” rather than shared as routine.
  • Compliance is described as an add-on to payroll, not part of it.
  • No one can say who your account manager will be.
  • The provider claims it has never made an error. Every payroll team makes mistakes. Good ones catch them before they reach employees or authorities.

How should you compare costs?

Compare the full cost of the alternative, not just the provider’s fee. An in-house payroll function carries salaries, software, training, cover for leave and the cost of late or wrong filings. Outsourcing to a specialist typically saves 20–40% against in-house teams or several vendors, but the bigger value is often fewer errors and less management time.

Run a short trial of the relationship

Before signing, ask the shortlisted provider to walk through one of your recent payroll months: the inputs, the calculations, the deposits and the returns. You will learn more from that hour than from any proposal.

Where Novelworx fits

Novelworx runs full-cycle payroll through a central HRIS, with salary processing, payslips, statutory deductions and bank transfers, and deposits and files PF, ESIC, PT and TDS on a compliance calendar we manage. Every client gets a dedicated account manager, monthly reporting and quarterly reviews against the SLA. Clients whose compliance we manage have recorded zero statutory penalties.

See how Payroll & Compliance works, read how a compliance calendar works, consider payrolling if you’d rather not be the employer, or get a scope and SLA.