We built an HRMS for a staffing company managing 2,200 contract workers across 40 client sites in Maharashtra and Karnataka. Before our system: attendance was tracked on paper registers, payroll took 8 days to process each month, and compliance filings (PF, ESI, PT) were always last-minute scrambles. After: biometric + geo-fenced mobile attendance, payroll runs in 4 hours (automated statutory calculations), and compliance filings are auto-generated 5 days before due date. The HR team went from 6 people doing data entry to 2 people doing actual HR — employee grievances, retention programs, training. That's what HR tech should do: free humans from paperwork so they can focus on people.
What We'll Cover
Types of HR Software
| Type | Primary Users | Key Features | MVP Timeline |
|---|---|---|---|
| HRMS / HRIS | HR teams, employees | Employee database, attendance, leave, payroll, documents, org chart | 4-6 months |
| ATS (Applicant Tracking) | Recruiters, hiring managers | Job posting, candidate pipeline, resume parsing, interview scheduling, offer management | 3-4 months |
| Payroll software | HR, finance, employees | Salary calculation, statutory deductions, tax declarations, payslips, bank disbursement | 4-5 months |
| Performance management | Managers, employees, HR | OKR/KRA setting, reviews, 360 feedback, calibration, PIP tracking | 3-4 months |
| Workforce management | Operations, shift managers | Shift scheduling, time tracking, geo-fencing, overtime, contract worker management | 3-5 months |
Payroll and Statutory Compliance: The Hard Part
Payroll is the one HR function where you cannot afford bugs. Get salary wrong once and employees lose trust permanently. Get compliance wrong and you face government penalties. Indian payroll is particularly complex because of overlapping central and state regulations.
Indian Payroll Complexity
| Component | Regulation | Calculation Complexity |
|---|---|---|
| PF (Provident Fund) | EPF Act, 1952 | 12% employee + 12% employer on basic + DA. Capped at ₹15,000 basic. New wage code changes coming |
| ESI (Employee State Insurance) | ESI Act, 1948 | 0.75% employee + 3.25% employer. Applicable if gross ≤ ₹21,000/month. State-wise hospital mapping |
| Professional Tax | State-specific | Different slabs for each state. Maharashtra, Karnataka, West Bengal all have different rules |
| TDS (Income Tax) | Income Tax Act | Old regime vs new regime. HRA, 80C, 80D, LTA exemptions. Monthly projected tax calculation |
| Gratuity | Payment of Gratuity Act | 15 days salary per year after 5 years of service. Different calculation for piece-rate workers |
| Bonus | Payment of Bonus Act | Minimum 8.33%, maximum 20% for employees earning ≤ ₹21,000/month basic |
Payroll Processing Pipeline
- Attendance aggregation: Pull data from biometric devices, mobile check-ins, shift schedules. Calculate working days, overtime, loss of pay. Handle multiple shifts and split duties
- Salary computation: Base salary → add allowances (HRA, conveyance, special) → deduct statutory (PF, ESI, PT, TDS) → deduct other (loans, advances, insurance) → net pay. Run this for every employee every month without error
- Tax declaration processing: Employees declare investments (80C, 80D, HRA rent) at year start. Update projected tax monthly. Reconcile actual proofs in January-March. Re-compute and adjust in remaining months
- Bank disbursement: Generate salary file in bank-specific format (HDFC, ICICI, SBI all have different formats). Upload via API or portal. Handle failures and partial processing
- Statutory filing: Auto-generate monthly PF ECR (Electronic Challan cum Return), ESI contribution file, quarterly TDS returns (24Q). Calculate and file annual returns
Applicant Tracking: Hiring at Scale
Indian IT companies hire in hundreds. Staffing firms process thousands of candidates monthly. An ATS that works for 10 candidates per week won't scale to 500.
- Resume parsing: Extract name, email, phone, skills, experience from resumes. Indian resumes are notoriously unstructured — some are 5 pages with photo, some are 1-page PDFs. Use NLP models fine-tuned on Indian resumes, not just Western formats
- Job board integration: Auto-post to Naukri, LinkedIn, Indeed, Internshala. Pull applications back into ATS. Naukri's Resdex API for active candidate sourcing
- AI-powered screening: Score candidates against job requirements. Not just keyword matching — semantic understanding. "5 years React" should match "senior frontend developer with React experience." But always allow recruiters to override AI scoring
- Interview scheduling: Calendar integration (Google Calendar, Outlook). Automated slot sharing with candidates. Panel interview coordination across multiple interviewers. WhatsApp confirmation (candidates in India check WhatsApp before email)
- Offer and onboarding: Digital offer letter with e-signature. Background verification integration (AuthBridge, IDfy). Pre-onboarding portal: collect documents, assign assets, set up accounts before day 1
Performance Management That Doesn't Feel Like a Chore
90% of employees and managers hate the annual performance review. The reason: it's a backward-looking, bureaucratic exercise that doesn't improve performance. Modern performance management is continuous.
| Traditional | Modern | Impact |
|---|---|---|
| Annual review | Quarterly check-ins + continuous feedback | 3x more likely to feel goals are relevant |
| Numeric rating (1-5) | Narrative feedback + competency assessment | Reduces "rating inflation" and recency bias |
| Manager-only review | 360-degree (peers, reports, self, manager) | More holistic view, catches blind spots |
| Goals set once per year | OKRs updated quarterly, aligned to company goals | Better alignment with business priorities |
| Paper/Excel-based | Platform with nudges, templates, analytics | 80% completion rate vs 45% on manual processes |
Performance Tech Features
- Goal cascading: Company OKRs → department goals → team goals → individual KRAs. Visual alignment tree showing how each person's work connects to company strategy
- Continuous feedback: Peer recognition, real-time feedback after meetings/projects. Not anonymous (anonymous feedback breeds toxicity). Manager nudges when they haven't given feedback in 2 weeks
- Calibration tools: Cross-team comparison during review cycles. Bell curve analysis (if your org uses forced distribution). Manager calibration meetings with data visualization
- Compensation linkage: Performance rating → compensation band → increment recommendation. Keeps comp decisions data-driven and auditable
Employee Engagement Platforms
- Pulse surveys: Weekly 2-3 question surveys (not annual 50-question marathons). Track eNPS (employee Net Promoter Score) trends. Anonymous but department-level segmentation for actionable insights
- Recognition and rewards: Peer-to-peer recognition ("kudos" or "high-fives"). Manager awards. Points-based rewards redeemable against a catalog. Budget-controlled — HR sets per-person monthly limits
- Internal communication: Company news feed, CEO updates, team announcements. Replace email-based announcements that nobody reads. WhatsApp integration for blue-collar and field workers
- Learning and development: Course catalog (internal + third-party like Coursera/Udemy for Business). Learning paths by role. Mandatory compliance training tracking. Certifications with expiry alerts
- Exit management: Digital exit interview, asset return tracking, full & final settlement calculation, experience letter generation. Offboarding checklist: revoke access, deactivate accounts, knowledge transfer
India-Specific HR Compliance
- New Labour Codes (upcoming): 4 labour codes replacing 29 laws. Major changes: basic salary must be ≥50% of CTC (affects PF/gratuity calculations significantly), overtime rules change, fixed-term employment formalized. Build flexibility into salary structure configuration
- Shops & Establishments Act: State-specific rules for working hours, holidays, leave entitlements. A company operating across 5 states needs 5 different leave policy configurations
- POSH (Prevention of Sexual Harassment): Mandatory Internal Complaints Committee. Annual filing. Your HRMS should track ICC composition, complaint workflow, and annual return data
- Aadhaar-based attendance: UIDAI allows Aadhaar-based biometric for attendance. But privacy implications — requires explicit consent and cannot store biometric data. Prefer Aadhaar e-KYC for onboarding, not daily attendance
- Multi-state compliance: If your employees are in multiple states, track: state-wise minimum wages (updated quarterly), state-wise professional tax slabs, state-specific festival holidays (differs significantly), LWF (Labour Welfare Fund) rates per state
Frequently Asked Questions
How much does it cost to build HR software?
Full HRMS (attendance + leave + payroll + compliance): ₹30-60 lakh (4-6 months). Standalone ATS: ₹15-30 lakh (3-4 months). Performance management platform: ₹20-35 lakh (3-4 months). Employee engagement platform: ₹15-25 lakh (3-4 months). The payroll module alone adds 40% to any HR project because of statutory compliance complexity.
Should I build custom HRMS or use greytHR/Keka/Darwinbox?
Use existing platforms (greytHR, Keka, Darwinbox, Zoho People) if your HR processes are standard. Build custom when: you have unique workforce types (contract + gig + full-time mix), need deep integration with industry-specific systems (hospitals, manufacturing, staffing), or your workforce management is your competitive advantage. Most companies under 1,000 employees should use off-the-shelf and customize through APIs.
How do I handle the upcoming New Labour Codes in my HR software?
The 4 new labour codes (Wages, Social Security, Industrial Relations, OSH) will change salary structures and compliance calculations significantly. Build configurable salary structure templates (not hardcoded). Make PF/ESI/gratuity calculation rules configurable by date range. Store historical calculation rules alongside current ones. The implementation date keeps shifting — design for flexibility, not a specific deadline.