Cost Examples, TCO and Selection Checklists
Payroll software for a factory with shift and daily-rated workers: a worked example
A worked example for a 110-worker Indian factory: shifts, biometric attendance, overtime at twice the rate, ESI, PF, contract labour checks and illustrative software costs.
A factory needs payroll software that starts with attendance: shift rosters, biometric punches, overtime at not less than twice the normal rate under the labour codes, quarterly overtime caps, daily-rated wages converted correctly, and ESI and PF on code wages for a workforce that is mostly under the ESI limit. It also needs a way to check contractors' PF, ESI and wage payments for contract labour. In the illustrative example below, a 110-worker plant spends about ₹2.7 lakh in year one on a payroll and attendance suite with biometric terminals. The business, figures and prices are illustrative.
This guide belongs to the best-fit selection method.
The business
| Item | Illustrative profile |
|---|---|
| Location | One plant in one state |
| Own employees | 110: 85 daily-rated or monthly-rated workers on three shifts, 25 staff |
| Contract workers | 40 through two contractors (loading, housekeeping) |
| Attendance | Paper muster plus a time clock today |
| Payroll today | Spreadsheet by the accounts team, 40 hours a month |
What the software must handle
- Shift rosters and attendance: three shifts, weekly offs on rotation, night shift allowances, late marks and short leave.
- Daily wages: daily rate ÷ 8 for hourly and monthly rate ÷ 26 for daily, under the Code on Wages (Central) Rules, 2026; state rules may differ.
- Overtime: hours beyond 8 a day or 48 a week at twice the normal rate, with alerts as the quarterly cap approaches (144 hours a quarter under the OSH (Central) Rules, 2026).
- Minimum wages: the state's rates for each skill category, updated when the state revises them or variable dearness allowance.
- ESI: most workers below ₹21,000 wages; contribution-period continuation for those who cross it. See ESI, PT and LWF.
- PF: code wages with the 50% rule and the ₹25,000 ceiling from 17 September 2026. See EPF.
- Bonus: eligibility up to ₹21,000 and calculation on ₹7,000 or the minimum wage, whichever is higher. See bonus sums.
- Registers: attendance register cum muster roll, wage register and wage slips. See registers.
- Contract labour: records of contractors, monthly proof of their PF/ESI deposits and wage payments to their workers.
A month's pay for one worker (illustrative)
A machine operator has a daily wage of ₹560 and works 26 days plus 12 overtime hours.
| Line | Calculation | Amount |
|---|---|---|
| Basic wages | 26 × ₹560 | ₹14,560 |
| Overtime | (₹560 ÷ 8) × 2 × 12 = ₹70 × 2 × 12 | ₹1,680 |
| Night shift allowance | 6 nights × ₹50 (company policy) | ₹300 |
| Gross | ₹16,540 | |
| Employee PF | 12% × ₹14,560 | ₹1,747 |
| Employee ESI | 0.75% × ₹16,540 | ₹124 |
| Professional tax | State slab (illustrative) | ₹0–₹200 |
Here overtime and the night allowance (₹1,980) are well under half of remuneration, so code wages for PF are the basic ₹14,560; your adviser should confirm which components are excluded. ESI is computed on gross wages under the ESI rules; overtime treatment for ESI should be checked. Employer ESI = 3.25% × ₹16,540 = ₹538. These figures are illustrative; check rates on EPFO and ESIC.
Illustrative cost, year one
| Line | Calculation | Amount |
|---|---|---|
| Payroll + attendance suite | 110 × ₹110 × 12 | ₹1,45,200 |
| Contract labour compliance add-on | ₹3,000 × 12 | ₹36,000 |
| Biometric or face-recognition terminals | 4 × ₹15,000 | ₹60,000 |
| Implementation and shift configuration | ₹30,000 | |
| Year one, before GST | ₹2,71,200 |
Recurring cost from year two (before uplift) = ₹1,45,200 + ₹36,000 = ₹1,81,200. Employee-months in year one = 1,320, so the year-one cost per employee-month is ₹2,71,200 ÷ 1,320 = about ₹205.
Saving on processing time (illustrative). Accounts time falls from 40 to 12 hours a month: 28 hours × ₹400 × 12 = ₹1,34,400 a year. The overtime cap alert and correct ESI continuation also reduce compliance risk. Check payback with the payback calculator.
Choosing the type
For a factory, a payroll + core HR suite with strong attendance or an ERP payroll module integrated with production usually fits better than payroll-only software that expects a clean attendance file. Check the compare page and test the cases below.
Demo tests for a factory
- Upload a week of real punches from your time clock and see how missed punches and shift crossovers are handled.
- Run overtime for a worker who reaches the quarterly cap.
- Revise the state minimum wage mid-month and check arrears.
- Process a worker who leaves mid-month and must be paid within two working days.
- Record contractor challans and flag a contractor who has not deposited ESI.
Frequently asked questions
Do we need biometric attendance?
No law requires a particular method, but accurate hourly attendance is essential for overtime, caps and registers. Biometric or app-based capture reduces disputes.
Should contract workers be in our payroll software?
Usually not if the contractor pays them, but you need records and checks as principal employer. Some suites offer a contractor module.
How do we handle state minimum wage revisions?
The software should store rates by category and effective date, and calculate arrears automatically when a revision is backdated.
Are the wages in the example real minimum wages?
No. They are illustrative. Use your state's notified rates.
Sources
- Ministry of Labour and Employment — Code on Wages and OSH Code rules
- EPFO — PF on code wages
- ESIC — ESI contributions
- Shram Suvidha Portal — central compliance filings
