How to run payroll for multiple companies in India

Who needs multi-company payroll

Three kinds of organisations hit this problem: business groups with several private limited companies or LLPs; payroll outsourcing firms that run payroll for many client companies; and manpower and labour contractors who deploy staff to many principal employers.

All three share the same challenge: every entity has its own statutory registrations and deadlines, but the payroll team is one team.

Step 1 — Set up each entity correctly

• Legal name, PAN and TAN for TDS — each company deducts and deposits its own TDS.
• PF establishment code and ESI employer code per company (and per branch where separately registered).
• States of operation, because professional tax and labour welfare fund are state laws with different slabs and due dates.
• Salary bank account and the bank's salary-file format.
• Approvers: who reviews and who releases payment for that company.

Step 2 — Standardise components, not structures

Use one master list of salary components (Basic, HRA, Special allowance, Conveyance, Bonus, Arrears…) across all companies, each with fixed rules about whether it is PF-able, ESI-able and taxable. Individual companies can then build different salary structures from the same components.

This is what makes group-level reports possible — "total PF liability across all entities this month" only works if PF wages mean the same thing everywhere.

Step 3 — Handle state-wise statutory rules

Step 4 — One calendar, staged approvals

Run every company on the same monthly calendar — attendance cut-off, calculation, review, approval, payment, statutory deposit — but with separate approvals per company. A run checklist and a snapshot of each approved run make later audits and disputes straightforward.

Before going live on new software, run at least one month in parallel with the old payroll and investigate every difference by employee and component.

Step 5 — Cost allocation and client billing

Groups often share employees across companies; payroll bureaus bill clients for each payroll. Both need cost allocation: splitting each employee's cost across companies, branches or projects by fixed percentages or by attendance.

For payroll bureaus, billing rules (per employee, per payslip, slab-wise tiers, or a percentage of gross) should be configured per client so invoices are generated from the approved payroll rather than from a separate sheet.

Common mistakes

• One PF code used for employees of a different entity.
• PT deducted on the head-office state for employees working in another state.
• Mid-year transfers between group companies without carrying YTD salary and TDS.
• Bank files built by hand per company — the most common source of payment errors.

Frequently asked questions