Hiring your first employee: a compliance checklist
1 min read
Updated 03 Oct 2026
3 views
AI summary
Everything to set up before and after you hire, from the appointment letter to PF, ESI, Professional Tax and TDS, with the headcount that triggers each.
6 sections
Before day one
- Shop and Establishment registration for your premises, if not already done.
- Appointment letter with designation, wages, working hours and leave. The Labour Codes make it compulsory for every employee.
- Salary structure that meets the state's minimum wage for the job category.
- Collect PAN, Aadhaar, bank details and address proof.
- Professional Tax registration as an employer, in states that levy it.
Every month
- Pay wages on time: monthly wages by the 7th of the following month.
- Give a wage slip.
- Deduct Professional Tax where applicable and deposit it by the state's due date.
- Deduct TDS on salary if the employee's estimated annual income is taxable. You need a TAN and must deposit TDS by the 7th.
- Keep attendance, wage and leave registers (electronic is fine).
As you grow
| Headcount | What starts |
|---|---|
| 1 | Appointment letters, wage slips, registers, minimum wages, Professional Tax (state), TDS if salary is taxable |
| 10 | ESI for employees earning up to ₹21,000 a month; gratuity law applies; Internal Committee under the POSH Act |
| 20 | EPF (wage ceiling ₹25,000 a month); bonus for eligible employees |
You can join EPF voluntarily before reaching 20 employees.
Accounting
Record salary with deductions: Salary A/c Dr; To Employee A/c (net pay), To PF/ESI Payable, To PT Payable, To TDS Payable. Pay each liability by its due date. Late deposit of the employee's PF or ESI share makes that amount permanently non-deductible for income tax.
Common mistakes
- Paying staff in cash with no wage slip or bank record.
- Treating regular staff as "contractors" to avoid PF and ESI.
- Missing ESI registration when the tenth employee joins.
- Not issuing Form 130 (salary TDS certificate) by 15 June.
Related
- Labour Codes 2025
- Provident Fund (EPF and EPS) and ESI
- Professional Tax
- TDS on salary: what employers must do
- Salary and payroll entries with PF, ESI, PT and TDS
- Gratuity and bonus
Sources
PreviousGratuity & Bonus Next in Payroll: PF, ESI & PT Salary structure under the labour codes: the 50% wage rule
#first employee#hiring checklist#employer compliance#appointment letter#pf registration#esi registration#professional tax#tds on salary#labour codes#posh
Was this guide helpful?