Salon Payroll in India: Attendance, Overtime, Advances, PF and ESI

Salon payroll is four numbers stacked on top of each other: salary earned from attendance, commission from bills, overtime from the roster, and deductions. PF, ESI and professional tax sit on top once they apply. Since 21 November 2025, most of the rules come from the four labour codes, which replaced 29 central labour laws.

Most owners get the arithmetic right and the design wrong. They run opening hours that create overtime nobody records, give festival advances they can't recover, and settle exits in a week instead of two working days. This guide covers the rules, the maths and those traps. The codes are national, but states write many of the rules under them, and existing rules continue during the transition, so where it says "your state", check with your state labour department or your CA.

#What changed for salon payroll under the labour codes?

The four labour codes (the Code on Wages, 2019, the Industrial Relations Code, 2020, the Code on Social Security, 2020 and the Occupational Safety, Health and Working Conditions Code, 2020) took effect on 21 November 2025. For a salon, these are the parts that touch payroll:

Many states notify minimum wages by zone, so a salon in a smaller town can have a different minimum from one in the state capital. Check the rate for your zone and skill category, not a figure from another city. The hiring guide lists what to put in the appointment letter, and your shops and establishments registration is covered in salon licences and registrations.

#How should you structure a salon salary under the new wage definition?

Keep basic pay (plus any dearness allowance) at or above half of total pay, because whatever is excluded from wages beyond 50% is added back for PF, gratuity and similar calculations. Under the Code on Wages, items such as house rent allowance, conveyance, overtime allowance and commission are excluded from wages, but they all count toward that 50% test.

A big commission month can raise wages for that month, so budget for it rather than discover it. If you pay one consolidated salary with no break-up, the whole salary is already wages, and the test only matters once commission or overtime is added. How variable commission is treated month by month is a question to settle with your CA once, then apply consistently. Setting the commission itself is covered in salon staff commission structures.

#Should you use a biometric device or an attendance register?

Use a biometric device once you have more than a few staff or any argument about hours; a signed register can work for a small team if someone checks it every day. Either way, the Code on Wages requires an attendance register cum muster roll, which can be kept on paper or electronically.

Fingerprints are personal data under the Digital Personal Data Protection Act, 2023. Tell staff what you collect and why, get written consent at joining, and restrict who can see the records. In Salos, Ultra includes one fingerprint scanner and attendance flows straight into payroll; Core and Pro can add both with the Payroll Pack at ₹8,000 a year.

#How should you handle late marks and half-days?

Write a rule that deducts only for time actually missed, allow a short grace period, and don't fine people for lateness unless you follow the legal procedure for fines. The Code on Wages allows deductions for absence from duty. Fines are a separate, tightly limited category: they need fineable acts set out in advance and a chance for the employee to be heard, and they are capped at 3% of wages for the wage period. A flat "₹100 for every late mark" pinned on the wall is a fine, not an absence deduction.

A simple written policy might say:

• A grace of 10 minutes, up to three times a month.
• Beyond the grace, the time missed is deducted at the hourly rate.
• Arriving more than two hours late, or leaving more than two hours early, counts as a half-day.
• Unauthorised absence is deducted at the daily rate.

Pick one divisor (26, 30 or the days in the month), write it in the appointment letter, and use it for absence and overtime alike. A salon that deducts absence at ÷26 (₹692 a day) and pays overtime at ÷30 (₹600 a day) is charging staff more for a missing day than it pays them for an extra one, and they work that out. Fair, predictable rules are a large part of keeping good stylists.

#How do you calculate overtime at twice the rate?

Pay overtime at no less than twice the normal rate of wages for every hour worked beyond the normal working day or week, and only with the employee's consent. The labour codes set double-rate overtime nationally. Normal hours, the spread-over (the span from start to finish, including breaks), rest intervals and how many overtime hours are allowed in a quarter come from the rules under the codes and your state's shops and establishments law.

Formula: Overtime pay = (monthly wages ÷ working days ÷ normal hours a day) × 2 × overtime hours

On weekends and wedding mornings, when you need everyone, record the extra hours in the overtime register the same day, with the client or reason. A stylist who stayed two hours late for a bride remembers it on payday whether or not you wrote it down. If you prefer to give time off instead of overtime pay, agree it in writing and check your state's rules first, because the codes speak of paying overtime wages.

#How should you give and recover staff advances?

Give advances under a written policy with a signed acknowledgment, and recover them in instalments so that all deductions in a month, statutory ones included, stay within 50% of wages. The Code on Wages permits deductions to recover advances; the cap is what makes instalments necessary.

A workable advance policy has six rules:

1. A maximum, for example half a month's wages for staff with less than six months' service and one month's wages after that.
2. One open advance at a time; a new one only after the last is cleared.
3. A recovery schedule of no more than three instalments, agreed before the money is paid.
4. Payment by bank transfer or UPI, so there is a record.
5. Festival advances decided by a set date (say, 15 September), not one by one the week before Diwali.
6. What happens if the person leaves before it is repaid, in writing.

#How do you handle festival season in payroll?

Plan October and November in September: decide festival advances, leave windows and bonus payments before the requests arrive, because the requests all arrive in the same fortnight as your busiest trade.

• Leave clusters. Staff from Bihar, eastern Uttar Pradesh, Jharkhand, West Bengal and Odisha often travel home for Durga Puja, Diwali and Chhath, with long train journeys each way. Publish leave windows in September, stagger them by rota, cap how many people can be off on any one day, and put each return date in writing.
• Advances. Pay festival advances on one fixed date, under the policy above, so the week before Diwali isn't a queue at your desk.
• Bonus. Keep a customary Diwali bonus and any statutory bonus as separate lines on the wage slip. If you are covered by statutory bonus, ask your CA whether a festival bonus can be counted toward it.
• Wages before travel. October wages are due by 7 November anyway; pay them before people leave, not after they return.

If someone doesn't come back on the agreed date, don't treat it as a resignation on day one. Send a written notice on WhatsApp and by post asking them to report or reply by a fixed date. If there is no reply, treat their service as ended, settle their dues within two working days, and ask your CA or a labour lawyer how to record it.

#When do PF and ESI apply to a salon, and how do you calculate them?

ESI applies once your salon employs 10 or more people and covers staff earning up to ₹21,000 a month. EPF applies once you employ 20 or more and, since 17 September 2026, is compulsory for staff whose PF wages are up to ₹25,000 a month. Count everyone on your payroll, including receptionists and helpers, and ask your CA how to count part-time and contract staff.

The EPF ceiling was ₹15,000 from September 2014 until the Cabinet raised it to ₹25,000 with effect from 17 September 2026. Staff earning between ₹15,000 and ₹25,000 who were outside PF only because of the old ceiling now have to be enrolled. September 2026 straddles the change, so ask your CA how to treat that month.

#How do you calculate full and final settlement when someone leaves?

Add up everything earned to the last working day (salary, commission, overtime and any leave encashment your policy allows), subtract what you are allowed to recover, and pay the balance within two working days of the exit. Gratuity, where due, follows within 30 days.

#What about gratuity, bonus and professional tax?

Gratuity applies once you have 10 or more employees, statutory bonus once you have 20, and professional tax depends on your state.

Gratuity is 15 days' wages for each completed year of service. It is payable when someone leaves after at least five years of continuous service, or after one year for a fixed-term employee, and must be paid within 30 days of becoming payable.

Formula: Gratuity = last drawn monthly wages × 15 ÷ 26 × completed years of service

Wages here follow the codes' definition, so the 50% test above feeds straight into gratuity. For service that began before 21 November 2025, ask your CA how the old and new rules combine. If you hire extra hands for the wedding season on fixed-term contracts, remember that a fixed-term employee becomes eligible after one year, not five.

Statutory bonus applies to establishments with 20 or more employees. Eligible staff, who draw wages up to the limit the government sets and have worked at least 30 days in the accounting year, get between 8.33% and 20% of their wages for the year.

Professional tax is a state tax on employment. Where your state levies it, you deduct it from salaries and deposit it, and the business may need its own registration. Slabs, due dates and forms differ by state, some states don't levy it at all, and the Constitution caps it at ₹2,500 per person a year. Some states also run a labour welfare fund with small employer and employee contributions. Your CA or your state's commercial tax department will tell you exactly what applies.

#What should a salon payslip show?

A payslip should let a stylist check every rupee: the days and hours she worked, the salary she earned, commission with the bills behind it, overtime, each deduction and the amount paid. The Code on Wages requires a wage slip on or before payday, in the format the rules prescribe.

When a stylist says her salary is short, open the slip with her line by line: days, overtime hours, commission statement, each deduction. Don't say "the system calculated it". If you find a mistake, pay the difference that week, not next month.

#Month-end payroll checklist

Run payroll in the same order every month, so nothing is missed between the 1st and the 7th.

#What payroll records must a salon keep?

Keep an attendance register cum muster roll, a wage register, an overtime register and a register of fines and deductions, kept up to date and preserved for five years, on paper or electronically. Also display the minimum rates of wages, normal working hours, the wage period, the wage payment date and the name and address of the Inspector-cum-Facilitator on a notice board, in English, Hindi and the local language.