Quick answer: To add a new employee to payroll in India: issue the appointment letter on or before joining, collect PAN, Aadhaar and bank details, link the employee's UAN (new joiners generate it themselves on UMANG with face authentication) and register them with ESIC if covered, record the tax regime and Form 124 declarations, set up the salary structure and state deductions, and pay the first, pro-rated salary by the 7th of the following month.
Most payroll errors start on day one: a missing UAN that blocks the PF return, an ESI registration done late, a bank account typed wrong, or tax deducted without the employee's regime choice. This guide sets out the onboarding steps for payroll in order, the documents and forms to collect, what the Labour Codes and EPFO's 2025-26 changes require, a sample new employee payroll form, what the first month's pay looks like, and what an employee costs the employer on top of salary.
Step-by-step: how to add a new employee to payroll
- Issue the appointment letter on or before the joining date, with the salary structure, designation and social security coverage.
- Collect documents and bank details and verify PAN, Aadhaar and the bank account before the first payroll.
- Set up PF: get the employee's existing UAN or ask them to generate one on UMANG, link it to the establishment, and record nomination details.
- Set up ESI if the employee is covered: register them on the ESIC portal from the date of joining and share the insurance number.
- Record tax details: regime choice, Form 124 declarations and any salary from a previous employer in the year.
- Create the payroll record: employee code, salary components, state of work (for PT and LWF), cost centre and payment details.
- Run the first payroll with the pro-rated salary, statutory deductions and a wage slip.
"On payroll" means the employee is employed and paid directly by the company, which deducts and deposits PF, ESI, professional tax and TDS for them; contract workers and consultants paid on invoice are not on the company's payroll.
Step 1: appointment letter under the OSH Code
The Occupational Safety, Health and Working Conditions Code, 2020 requires every employer to issue a letter of appointment to every employee, and the OSH (Central) Rules, 2026, in force from 8 May 2026, prescribe its format. The letter is issued on or before joining and sets out the designation, wages, category of skill, social security coverage and other particulars; the Central Rules also require the employee's Aadhaar number in the letter, with the employee's consent (PRS review of the OSH Central Rules). Establishments under state rules should check the state format.
The appointment letter is also where the payroll basics are fixed: the CTC and its breakup, the days basis for part months, and the notice period. See our guides to CTC and salary structure under the Labour Codes.
Step 2: documents to collect from a new employee
| Document or detail | Used for |
|---|---|
| Signed appointment letter and joining report | Date of joining, salary terms |
| PAN | TDS and Form 130; without PAN, tax is deducted at a higher rate |
| Aadhaar (with consent) | UAN, ESI registration, appointment letter |
| Bank account number and IFSC, cancelled cheque or bank letter | Salary credit; also seeded with the UAN |
| Existing UAN and ESI insurance number, if any | Continuing PF and ESI accounts |
| Previous employer's relieving letter and salary details for the year | Service record and TDS (Form 122) |
| Address and date-of-birth proof, photographs | Personnel file, ESI family details |
| Nominee and family details | PF, EDLI, ESI and gratuity nominations |
Step 3: PF and UAN for a new joiner
Existing PF member: the employee gives their UAN, and the employer links it to the establishment with the date of joining. Previous service then continues in the same account, and the old balance can be transferred.
First-time member: since 1 August 2025, a new UAN is generated through the UMANG app using Aadhaar face authentication, rather than by the employer on the portal (KPMG note on the EPFO circular); employers still generate UANs for international workers and Nepal and Bhutan nationals. The employee needs the UMANG and Aadhaar Face RD apps and an Aadhaar-linked mobile number. Help them through it in the first week, because EPFO accepts the monthly ECR only for UANs that are Aadhaar-seeded and verified, so a missing UAN holds up the first PF return (EPFO revamped ECR). Contributions start from the date of joining, on PF wages up to the ₹25,000 wage ceiling where the employer restricts PF to it. The filing itself is covered in our PF ECR guide.
Nomination: ask the employee to file their PF e-nomination on the member portal as soon as the UAN is active.
Step 4: ESI registration
An employee whose wages are within the ESI ceiling (₹21,000 a month) in an ESI-covered establishment is registered on the ESIC portal from the day of joining. The registration records the employee's and family members' details and generates an insurance number; the employee can then download the e-Pehchan card and use ESI medical benefits. Contributions are 0.75% from the employee and 3.25% from the employer on wages paid, deposited by the 15th of the following month (see our ESI guide and ESIC challan guide).
Step 5: income tax set-up
- Regime: the new tax regime is the default; record the employee's choice so TDS is estimated on the right basis.
- Declarations: collect the employee's Form 124 declarations (formerly Form 12BB) for rent, loans and investments, with proof later in the year; see our investment declaration guide.
- Previous employer: if the employee worked elsewhere earlier in the tax year, collect that salary and TDS on Form 122 so the annual tax is spread correctly over the remaining months.
Step 6: the new employee payroll form
Most employers capture the details in a single new employee payroll form, either in the HR system or as an Excel sheet. A practical format has these fields:
| Section | Fields |
|---|---|
| Identity | Name (as in Aadhaar and PAN), employee code, date of birth, gender, PAN, Aadhaar |
| Employment | Date of joining, designation, department, location and state of work, employment type, reporting manager |
| Salary | CTC, monthly gross, basic, HRA, other allowances, variable pay, days basis |
| Statutory | UAN, PF applicability (restricted or full wages), ESI applicability and insurance number, PT and LWF state, tax regime |
| Payment | Bank name, account number, IFSC, payment mode |
| Nominees | Names, relationship, share, contact details |
In Excel, keep one row per employee and one column per field, with PAN, Aadhaar, UAN and IFSC formatted as text so leading zeros are not lost. The same record feeds the statutory registers the employer has to keep, such as the employee register, and the wage slip issued with each salary payment.
Step 7: the first month's salary
The first salary is usually for part of a month, calculated as monthly salary ÷ days basis × days from joining; our pro rata salary guide works through examples. Under the Code on Wages, monthly wages are paid by the 7th of the following month, so a November joiner is paid by 7 December; if joining falls after the payroll cut-off, pay the part month off-cycle rather than holding it to the next run. PF, ESI and professional tax are worked out on the salary actually paid. Check the figures with the monthly salary calculator, the PF calculator and the ESI calculator.
How much does it cost to put an employee on payroll?
Beyond the gross salary, the employer bears statutory costs. For an employee on ₹30,000 gross with ₹15,000 basic (PF wages), not covered by ESI:
| Employer cost | Rate | Monthly (₹) |
|---|---|---|
| Employer PF (EPF + EPS) | 12% of PF wages | 1,800 |
| EDLI contribution | 0.5% of PF wages (capped at ₹25,000) | 75 |
| PF administration charges | 0.5% of PF wages (₹500 minimum per establishment) | 75 |
| Gratuity provision | 15/26 of a month's wages a year (about 4.81%) | 721 |
| Total on top of gross | 2,671 |
That is about 9% of gross. Add employer ESI at 3.25% for employees earning up to ₹21,000, statutory bonus where it applies, labour welfare fund in states that levy it, and any insurance or benefits in the CTC.
New joiner payroll checklist
- Appointment letter issued and signed on or before joining.
- PAN, Aadhaar and bank account verified; names match across all three.
- UAN generated or linked and Aadhaar-verified before the first ECR; e-nomination filed.
- ESI registration done from the joining date, if covered.
- Tax regime, Form 124 and previous-employer salary recorded.
- Salary structure, state of work and days basis set up in payroll.
- First salary paid by the 7th and the wage slip issued.
Related reading: Payroll process in India · EPF in payroll · Pro rata salary · Payroll compliance calendar
Onboard every joiner into payroll in one sheet. The Complete Indian Payroll Excel Workbook includes an employee master with statutory fields, pro-rates the first month and calculates PF, ESI, PT and TDS automatically.
Frequently asked questions
What does 'on payroll' mean for an employee?
An employee on payroll is employed directly by the company and paid through its payroll, with PF, ESI, professional tax and TDS deducted and deposited by that employer. A contractor's worker or a consultant paid against an invoice is not on the company's payroll, even if they work at its office.
What documents are needed to add a new employee to payroll?
Typically: the signed appointment letter, PAN, Aadhaar (for PF and ESI linking, with the employee's consent), bank account details with IFSC, address and date-of-birth proof, photographs, the previous employer's relieving letter and salary details, any existing UAN or ESI insurance number, nomination details, and the income-tax declaration for the year.
Does the employer generate the UAN for a new employee?
Not any more in the usual case. Since 1 August 2025, a new UAN is generated by the employee through the UMANG app using Aadhaar face authentication. An employee who already has a UAN gives it to the new employer, who links it to the establishment so that contributions continue in the same account.
How much does it cost to put an employee on payroll?
On top of gross salary, the employer pays its PF share (12% of PF wages), EDLI and PF administration charges (0.5% each; EDLI on wages up to ₹25,000), ESI at 3.25% for employees earning up to ₹21,000 a month, and sets aside gratuity (about 4.81% of wages) and bonus where they apply. For a ₹30,000 gross with ₹15,000 basic, that is roughly ₹2,700 a month, or about 9%, before ESI, bonus and benefits.
When is the first salary paid to a new employee?
Monthly wages must be paid by the 7th of the following month under the Code on Wages, so an employee who joins in November is paid for the days worked in November by 7 December. If joining falls after the payroll cut-off, the part month is paid through an off-cycle payment rather than held over.
What is included in a new employee payroll form?
A new employee payroll form collects the details payroll needs: name and employee code, date of joining, designation and department, salary structure, bank account and IFSC, PAN, Aadhaar, UAN and ESI numbers, tax regime choice, state of work for professional tax, and nominee details. Many employers keep it as an Excel template or a form in the HR system.
Position as of 14 November 2026. Based on the OSH Code, 2020 and the OSH (Central) Rules, 2026, the Code on Wages, 2019, the EPF Scheme, 2026 and EPFO's UAN and ECR procedures, the ESI scheme, and the Income-tax Act, 2025. State rules may set their own formats. General information, not legal or tax advice.