Quick answer: Payroll in India is usually grouped in three ways. By method: manual, spreadsheet (Excel), payroll software (cloud or on-premise, including Tally), outsourced, employer of record (EOR) and hybrid. By frequency: monthly, fortnightly, weekly or daily, with no wage period longer than a month under the Code on Wages. By run: regular, off-cycle, bonus or arrears, and full and final. Whatever the type, the legal employer stays responsible for wages, PF, ESI, TDS and other dues; with an EOR, that legal employer is the EOR.
"Types of payroll" means different things to different people. A business owner usually wants to know whether to run payroll in Excel, buy software or outsource it. An HR student may be asked to list payroll types by frequency. An accountant may mean the payroll vouchers in Tally. This guide covers all three views, compares the options, and helps you choose the right type for your organisation. If you are new to the subject, start with what is payroll.
Types of payroll by processing method
This is the classification that matters most for an employer, because it decides cost, control and the risk of errors.
1. Manual payroll
Salaries are worked out by hand or with a calculator and recorded in registers. It is now rare, except in very small shops and establishments. It is cheap but slow, and errors in attendance, PF, ESI or TDS are common.
2. Spreadsheet (Excel) payroll
Payroll is calculated in Excel or Google Sheets with formulas for gross pay, deductions and net pay. It suits businesses with a small, stable team. It is flexible and low-cost, but depends on one person's skill, and broken formulas or copy-paste errors can go unnoticed. With lookup formulas, data validation and a linked attendance sheet, an Excel sheet can semi-automate payroll, but statutory rule changes still need manual updates. Our payroll in Excel guide shows how to build a reliable sheet.
3. Payroll software
Dedicated software calculates pay, statutory deductions and reports, and generates payslips and returns. It comes in three forms:
- Cloud payroll: hosted by the provider, accessed online, with automatic updates for rule changes. Many offer mobile apps for payslips and attendance.
- On-premise payroll: installed on the company's own systems, with more control but more maintenance.
- Payroll in accounting software: such as the payroll features in TallyPrime, which link salary directly to the books. See our guide to payroll in Tally Prime.
Many HRMS products include payroll alongside attendance, leave and employee records, so data flows into payroll without re-keying.
4. Outsourced payroll
An external provider runs payroll on the employer's behalf, using attendance and pay data the employer sends each month. The provider calculates pay, prepares payslips and statutory returns, and may make the payments. It saves internal effort and brings specialist knowledge, but the employer must still check the output and remains responsible under the law.
5. Employer of record (EOR)
An EOR becomes the legal employer of staff who work for another company, often a foreign company without an Indian entity. The EOR handles contracts, payroll, PF, ESI, TDS and compliance, and charges a fee. It is a full employment arrangement, not just payroll processing.
6. Hybrid payroll
Part of the work is done in-house and part by a provider or software. A common pattern: HR keeps attendance, inputs and approvals in-house, software calculates pay, and a provider files returns. Hybrid models balance control and effort.
Comparison of payroll methods
| Method | Best for | Cost | Control | Error risk |
|---|---|---|---|---|
| Manual | Very small units | Lowest | Full | High |
| Excel | Small, stable teams (roughly under 20–25) | Low | Full | Medium to high |
| Payroll software | Growing businesses | Subscription or licence | High | Low, if inputs are right |
| Outsourced | Businesses without payroll staff | Per-employee fee | Medium | Low to medium |
| Employer of record | Foreign firms, short projects | Highest | Low | Low |
| Hybrid | Mid-size and multi-state employers | Medium | High | Low to medium |
Types of payroll by pay frequency
Under the Code on Wages, 2019, the employer fixes the wage period as daily, weekly, fortnightly or monthly, and no wage period may be longer than one month. Section 17(1) sets the payment deadline for each (and wages on removal, dismissal or resignation are due within two working days; see our full and final settlement guide):
| Frequency | Common for | Pay by |
|---|---|---|
| Monthly | Salaried staff in most organisations | Before the end of the 7th day of the next month |
| Fortnightly | Some factories and plantations | Before the end of the 2nd day after the fortnight |
| Weekly | Construction, some manufacturing | On the last working day of the week |
| Daily | Casual and daily-rated workers | At the end of the shift |
Our guides to payroll calendar and pay period and salary payment rules explain how to set dates and cut-offs.
Types of payroll runs
- Regular payroll: the normal monthly (or weekly) run for all employees.
- Off-cycle payroll: a run outside the normal cycle, for corrections, missed joiners or urgent payments. See our off-cycle payroll guide.
- Bonus and arrears runs: for annual bonus, incentives or salary arrears after a revision.
- Full and final settlement: the last payment to an employee who leaves.
- Contract labour payroll: wages paid by a contractor for workers deployed at a principal employer, with the principal employer's oversight.
Types of payroll by employee group
Larger organisations often run separate payrolls for different groups because their rules differ: management staff, workers covered by a settlement, contract workers, interns and apprentices, and expatriates. Each group may have different pay components, wage periods and statutory coverage. Keeping them in separate pay groups within one system makes compliance easier to check.
Payroll vouchers in Tally
When payroll is run in TallyPrime, "types of payroll" often means the voucher types used. The payroll voucher records salary for the period by employee and pay head, and can auto-fill earnings and deductions from the salary details. A payment voucher records the salary paid from the bank, and payment vouchers (using Ctrl+F Autofill) record PF, ESI, professional tax and TDS paid to the authorities. See our guide to salary entry in Tally Prime for a worked example.
Payroll roles in an organisation
Payroll jobs follow the same pattern. A payroll executive collects inputs and processes pay; a payroll specialist or analyst handles statutory calculations, reconciliations and queries; a payroll manager owns accuracy, timelines, controls and audits; and in larger organisations a payroll compliance lead tracks law changes across states. Practical training, such as our practical payroll training, helps build these skills. In an outsourced model, the employer usually keeps at least one person to approve inputs and review outputs.
Payroll fraud types to watch for
Whatever type of payroll you run, controls matter. Common frauds include ghost employees (fake or departed staff still on the payroll), inflated overtime or hours, unauthorised pay changes, duplicate payments, and diverting statutory deductions instead of depositing them. Segregating duties, reviewing changes each month and reconciling payroll with bank and statutory payments reduce the risk. Our payroll audit guide covers the checks.
How to choose the right type of payroll
- Count employees and locations: more people and more states mean more statutory variations, which favour software or a provider.
- Check internal skills: without someone who knows PF, ESI, TDS and professional tax, outsourcing or a hybrid model is safer.
- Look at integration: payroll should link to attendance, leave and accounts to avoid re-keying.
- Compare total cost: include staff time, software fees, provider fees and the cost of errors and penalties.
- Plan for control: whichever type you choose, keep approval of inputs and review of outputs in-house.
Remember that outsourcing payroll processing does not move legal responsibility: the employer stays liable for wages, PF (EPFO), ESI, TDS and other dues. Our payroll process guide sets out the monthly steps for any type.
Learn to run payroll in-house. The Practical Payroll e-book explains the full Indian payroll cycle, from inputs to statutory returns, with worked examples.
Frequently asked questions
What are the types of payroll?
Payroll can be grouped by how it is run (manual, spreadsheet, payroll software, outsourced, employer of record or hybrid), by how often employees are paid (monthly, fortnightly, weekly or daily), and by the kind of run (regular, off-cycle, bonus or arrears, and full and final settlement).
What are the different types of payroll systems?
The main payroll systems are manual or spreadsheet payroll, on-premise payroll software, cloud payroll software, payroll modules within accounting software such as Tally, and payroll integrated into an HRMS. Small businesses often start with Excel or accounting software and move to cloud payroll as headcount grows.
How many types of payroll are there?
There is no fixed number. The most useful split for an employer is by processing method, which gives about six types: manual, spreadsheet, software, outsourced, employer of record and hybrid. Payroll can also be classified by pay frequency and by type of run.
Which type of payroll is best for a small business?
For a business with a handful of employees, a well-built Excel sheet or the payroll module in accounting software is often enough. As headcount, states and statutory filings grow, cloud payroll software or an outsourced payroll provider usually saves time and reduces errors.
Does outsourcing payroll transfer legal responsibility?
No. The employer remains responsible for paying wages on time and for PF, ESI, TDS, professional tax and labour law compliance, even if a provider runs the payroll. Contracts should cover accuracy, timelines and data security, but the employer's liability under the law stays with the employer.
What is a payroll voucher in Tally?
In TallyPrime, a payroll voucher records the salary for a period by employee and pay head, and a payment voucher records the payment of salary and statutory dues. The payroll features in Tally are one example of payroll run within accounting software.
Position as of 15 November 2026, under the Code on Wages, 2019. Payment deadlines are those in the Code; check state rules and any settlement that applies to your employees. General information, not legal advice.