Indian payroll is deceptively hard. Behind every salary slip sits PF, ESI, professional tax, TDS, gratuity and a calendar of statutory filings that change by state and by financial year. ERPNext — through the Frappe HR module — runs all of it from the same system that holds your accounts, so payroll posts straight to the ledger instead of living in a separate spreadsheet.
Most growing Indian companies start payroll in Excel, graduate to a standalone payroll SaaS, and then discover the data never quite reconciles with their books. ERPNext closes that gap: HR, payroll and accounting are one application, so a payroll run is also a journal entry, and your statutory liabilities show up in the same general ledger as everything else.
Quick answer
ERPNext (via the open-source Frappe HR app) handles end-to-end Indian payroll — salary structures, PF, ESI, professional tax, income-tax (TDS) computation, salary slips and statutory reports — with payroll posting directly into ERPNext accounting. It is the right fit for companies that want HR, payroll and finance in one system they own, rather than a separate payroll subscription. Mith Tech configures and runs Frappe HR for Indian businesses from Bengaluru.
What "ERPNext HR" actually is
The HR and payroll capability in ERPNext is delivered by Frappe HR (previously called ERPNext HR / the HRMS app). It is a full HRMS covering employee lifecycle, attendance and leave, expense claims, performance, recruitment and payroll. Because it is built on the same Frappe framework as ERPNext accounting, every payroll run can create the corresponding accounting entries automatically.
That integration is the whole point. A standalone payroll tool gives you salary slips; you then re-key the totals into your accounts. With Frappe HR, the salary structure assignment, the payroll entry, the salary slips and the ledger postings are one connected chain.
If you are weighing ERPNext as your core system more broadly, our ERPNext implementation cost guide for India covers the wider picture, and the Frappe HR product page details the HR module specifically.
The Indian statutory stack, module by module
Indian payroll compliance is really five moving parts. Here is how each maps into ERPNext.
Provident Fund (EPF / EPS)
The Employees' Provident Fund applies to most establishments with 20 or more employees. The standard contribution is 12% of basic wages from the employee and 12% from the employer. The employer's 12% is split: a portion goes to the Employees' Pension Scheme (EPS) and the remainder to EPF, with EPS calculated on a statutory wage ceiling of ₹15,000 per month.
In ERPNext you model PF as salary components — an employee-side deduction and the employer-side contribution — driven by formulas referencing the basic component. The PF wage ceiling and split are configured once and applied to every salary slip.
Employees' State Insurance (ESI)
ESI applies to employees earning up to ₹21,000 per month (gross) in covered establishments. The contribution is 0.75% from the employee and 3.25% from the employer on gross wages. ERPNext handles the eligibility threshold and the dual contribution as salary components, so an employee who crosses the wage ceiling mid-period is treated correctly.
Professional Tax (PT)
Professional tax is a state-level levy, so the slab and amount differ by state — in Karnataka it is a fixed monthly deduction above a wage threshold; other states such as Maharashtra and West Bengal have their own slabs, and some states do not levy it at all. ERPNext supports state-specific PT as a deduction component, which matters if you employ people across multiple states.
Income tax / TDS on salary (Section 192)
Employers must deduct income tax at source from salaries under Section 192, based on each employee's projected annual income, declared investments and chosen tax regime (old vs new). ERPNext computes the annual tax liability, spreads it across the remaining pay periods, and reflects the monthly TDS on the salary slip. Employee tax-saving declarations and proof submission are captured in the system so the deduction adjusts through the year.
Gratuity
Gratuity is payable under the Payment of Gratuity Act to employees who complete five years of service, calculated on last-drawn basic and tenure. ERPNext records the gratuity rule and computes the payable amount at separation.
Statutory rates, wage ceilings and slabs are revised periodically by the relevant authorities and vary by state and financial year. Treat the figures above as the prevailing framework, and confirm current rates for your state before each payroll cycle.
How a payroll run works in ERPNext
The payroll flow is built from a few connected documents:
| Step | ERPNext document | What it does |
|---|---|---|
| 1. Define pay | Salary Structure | Component-based earnings + deductions with formulas (basic, HRA, PF, ESI, PT, TDS). |
| 2. Assign pay | Salary Structure Assignment | Links a structure to an employee from an effective date, with their CTC base. |
| 3. Feed inputs | Attendance / Leave | Days present, loss-of-pay days and leave feed into the salary calculation. |
| 4. Run payroll | Payroll Entry | Generates salary slips for a department/branch/company for the period in one action. |
| 5. Pay & post | Salary Slip + Journal/Bank Entry | Produces each slip and books salary, statutory liabilities and net pay to the ledger. |
Because the Payroll Entry creates the accounting entries, your PF payable, ESI payable, PT payable and TDS payable all appear as liabilities in the same general ledger as the rest of your finances — ready to be cleared when you make the statutory payments.
Attendance, leave and the inputs to payroll
Payroll is only as accurate as its attendance data. Frappe HR supports:
- Attendance via biometric/device import, the mobile check-in (with geolocation), or manual marking.
- Leave management with leave types, allocation, the application-and-approval workflow, and automatic loss-of-pay handling that flows into the salary slip.
- Shift and roster definitions for businesses running multiple shifts.
- Expense claims and advances that can be settled through payroll.
For a Bengaluru manufacturer or services firm running shifts, this means attendance captured on the floor feeds the same payroll that posts to the books — no re-keying.
Statutory reports and the monthly compliance calendar
ERPNext produces the underlying data for the recurring Indian filings: PF (ECR), ESI returns, professional tax, and Form 16 / TDS information at year-end. A typical monthly rhythm looks like this:
| When | Obligation |
|---|---|
| By 15th | PF (EPF) contribution deposit and ECR filing for the previous month |
| By 15th | ESI contribution deposit for the previous month |
| Monthly / as per state | Professional tax payment and return (state-specific due dates) |
| By 7th | TDS deposited to the government for the previous month |
| Quarterly | TDS return (Form 24Q) |
| Annual | Form 16 issued to employees; annual PT and other returns |
The point is not that ERPNext files these for you automatically — it is that the numbers behind every filing come from one reconciled source, so preparation is data export rather than data reconstruction.
ERPNext payroll vs standalone payroll SaaS
| Criteria | ERPNext (Frappe HR) | Standalone payroll SaaS |
|---|---|---|
| Cost model | Implementation + hosting; no per-employee fee | Per-employee per-month subscription |
| Accounting integration | Native — payroll posts to the same ledger | Export/import or a separate connector |
| Data ownership | Self-hosted; you own the data | Vendor cloud |
| Customisation | Full — components, formulas, custom reports | Limited to the vendor's options |
| Statutory coverage | PF, ESI, PT, TDS, gratuity configurable | Usually built in, vendor-maintained |
| Best for | Companies wanting HR + payroll + finance in one owned system | Teams that only need payroll and want zero setup |
If payroll is genuinely all you need and you want nothing to configure, a hosted payroll product is the lower-friction start. The moment you want payroll, HR and accounting to be one reconciled system — and you would rather not pay a per-head fee that grows with headcount — ERPNext is the stronger long-term base. The same trade-off shows up across the suite; see ERPNext vs Zoho for Indian SMEs for the wider comparison.
When ERPNext HR is the right call
ERPNext HR and payroll make most sense when:
- You already run (or plan to run) ERPNext for accounting, inventory or manufacturing and want HR on the same platform.
- Your headcount is growing and per-employee SaaS fees are becoming a real line item.
- You operate across multiple states and need state-specific PT and location-aware rules.
- You want payroll data and the general ledger to reconcile without manual effort.
- Data ownership and the ability to customise reports matter to you.
It is less compelling if you are a very small team that needs nothing beyond a salary slip and has no appetite for any setup — there, a turnkey payroll app wins on day one.
How Mith Tech sets this up
We deploy and configure Frappe HR as part of an ERPNext implementation: salary structures for your CTC model, the statutory components for your states, attendance integration with your devices, the leave policy, and the payroll-to-accounting mapping. We are an independent open-source studio in Bengaluru — see ERPNext implementation in Bangalore for our local delivery model, or read how the broader Frappe & ERPNext practice fits together.
Frequently asked questions
Is ERPNext HR and payroll free?
The software is free and open source — Frappe HR (the HR/HRMS module) and ERPNext carry no licence fee and no per-employee charge. Your costs are implementation (configuring salary structures, statutory components and integrations) and hosting on infrastructure you own. That is structurally different from payroll SaaS, where you pay a recurring fee per employee per month.
Does ERPNext support PF, ESI and professional tax for India?
Yes. ERPNext models Provident Fund (employee and employer contributions with the EPS wage ceiling), ESI (with the wage-eligibility threshold and dual contribution), and state-specific professional tax as configurable salary components. Because rates and slabs change and PT varies by state, these are set up to your current requirements and updated when the rules change.
Can ERPNext calculate TDS on salary?
Yes. ERPNext computes income-tax deduction at source under Section 192 based on each employee's projected annual income, declared investments and chosen tax regime, then spreads the liability across pay periods so the monthly salary slip shows the correct TDS. Employee tax declarations and proofs are captured in the system.
Does payroll post to accounting automatically in ERPNext?
Yes — that is the main advantage. A Payroll Entry generates the salary slips and the corresponding accounting entries, so salary cost, PF/ESI/PT/TDS payables and net pay are booked to the same general ledger as the rest of your finances. Payroll and accounts reconcile by design rather than through manual export.
Can ERPNext handle employees across multiple states?
Yes. Professional tax and certain rules are state-specific, and ERPNext supports state-level configuration of deduction components, so a company employing people in Karnataka, Maharashtra and elsewhere can apply the correct PT slab per location while running one payroll.
How long does it take to set up ERPNext payroll?
For a typical Indian SME, payroll configuration is part of a broader ERPNext go-live that usually completes in 6–10 weeks. Payroll specifically depends on the complexity of your CTC structures, the number of states, and attendance integration. Contact Mith Tech for a scoped estimate based on your headcount and structures.