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Payroll interview questions and answers

Payroll interview questions test how salaries are calculated, paid and reported correctly and on time.

Below are 60 Payroll questions with the correct answer and a short explanation, grouped from fresher to experienced level. Try each one before you open the answer.

Take the Payroll MCQ testPractise 507+ Payroll questions for points

What Payroll interviews usually check

  • ✓Salary structure and gross to net
  • ✓PF, ESI and professional tax
  • ✓Payroll inputs and cut-offs
  • ✓Reconciliation and controls
  • ✓Full and final settlement

Payroll interview questions for freshers easy

1. Reimbursement or allowance

What is the difference between a phone reimbursement and a phone allowance?

  1. A.A reimbursement is paid yearly; an allowance is paid on exit
  2. B.A reimbursement is taxed; an allowance is always tax-free
  3. C.They are the same thing under different names
  4. D.A reimbursement repays actual bills; an allowance is a fixed amount
Show answer

Answer: D. A reimbursement repays actual bills; an allowance is a fixed amount

A reimbursement pays back real costs against bills or receipts, often up to a limit. An allowance is a fixed sum paid regardless of actual spend. Tax treatment can differ, so the policy and offer wording matter.

2. Who levies professional tax

In India, professional tax on salaries is levied by which authority?

  1. A.The Employees Provident Fund Organisation
  2. B.The central government through the Income Tax Department
  3. C.State governments, so rules differ from state to state
  4. D.The employer, at its own discretion
Show answer

Answer: C. State governments, so rules differ from state to state

Professional tax is a state-level tax. Each state decides whether to levy it and sets its own slabs and deduction months, and some states do not levy it at all. Payroll must apply it based on the employee work location.

3. Calculating overtime pay

An employee hourly rate is 200. Company policy pays overtime at 1.5 times the hourly rate. The employee works 10 approved overtime hours. What is the overtime pay?

  1. A.3,000
  2. B.2,000
  3. C.1,500
  4. D.5,000
Show answer

Answer: A. 3,000

Overtime rate = 200 x 1.5 = 300 per hour. Overtime pay = 300 x 10 = 3,000. Only approved hours should be paid, and the rate multiple must follow policy and any applicable law.

4. Where LOP inputs come from

Where should payroll normally take loss of pay days from?

  1. A.An employee verbal update to the payroll team
  2. B.Last month LOP repeated
  3. C.Payroll own estimate
  4. D.Approved attendance and leave records from the HR or attendance system
Show answer

Answer: D. Approved attendance and leave records from the HR or attendance system

LOP must be based on approved attendance and leave data, ideally from the HRMS or time system, locked at cut-off. Taking informal updates or estimating leads to disputes and audit issues.

5. What ESI provides

What does the Employees State Insurance (ESI) scheme mainly provide to covered employees?

  1. A.Medical care and cash benefits for sickness, maternity and employment injury
  2. B.A retirement pension only
  3. C.Income tax refunds
  4. D.Housing loans
Show answer

Answer: A. Medical care and cash benefits for sickness, maternity and employment injury

ESI is a social security scheme that gives covered employees and their families medical care, along with cash benefits during sickness, maternity and work injury. It is funded by employer and employee contributions.

6. Rolling headcount forward

Which formula is used to roll payroll headcount from one month to the next?

  1. A.Opening x attrition rate = closing
  2. B.Closing - opening = joiners + leavers
  3. C.Opening + leavers - joiners = closing
  4. D.Opening + joiners - leavers = closing
Show answer

Answer: D. Opening + joiners - leavers = closing

A headcount roll-forward starts from last month's closing number, adds new joiners and removes leavers. The result should match the number of people paid this month, so it quickly shows missed joiners or leavers still being paid.

7. Booking the employer PF share

How is the employer's share of Provident Fund recorded in the books?

  1. A.As an employee cost expense, with PF payable credited
  2. B.As an asset until the PF is deposited
  3. C.As income received from the PF office
  4. D.As a deduction from the employee's gross salary
Show answer

Answer: A. As an employee cost expense, with PF payable credited

The employer's PF contribution is an extra cost of employing staff, so it is debited to an expense such as contribution to provident fund. Until it is deposited, the amount sits in PF payable as a liability.

8. Reconciling the salary bank account

A company uses a separate bank account just for salaries. What does reconciling it each month mainly check?

  1. A.That the HR system and payroll have the same headcount
  2. B.That the tax regime of each employee is correct
  3. C.That bank debits match the approved net pay and payments
  4. D.That every employee received a payslip
Show answer

Answer: C. That bank debits match the approved net pay and payments

Matching the bank statement to the approved net pay and statutory payments shows that only authorised amounts left the account. Unexpected debits, duplicate transfers or missing payments show up quickly in a dedicated account.

9. Payslip versus register

An auditor picks five payslips and agrees them to the payroll register. What is being tested?

  1. A.That joiners signed their offer letters
  2. B.That the payroll budget was approved by the board
  3. C.That employees were told the same amounts as were recorded
  4. D.That the bank charges for transfers were correct
Show answer

Answer: C. That employees were told the same amounts as were recorded

The payslip is what the employee sees and the register is what was recorded and paid. If they differ, either the employee was misinformed or the books are wrong. Agreeing them confirms the two outputs come from the same calculation.

10. Backing up payroll data

Why should payroll data be backed up and restore-tested regularly?

  1. A.So the auditor does not need to visit
  2. B.So employees can download older payslips faster
  3. C.So tax rates do not need updating
  4. D.So payroll can still run on time if the system fails
Show answer

Answer: D. So payroll can still run on time if the system fails

Salaries must be paid on time, so losing payroll data is a serious business risk. Regular backups, plus testing that they can actually be restored, let the team recover and pay staff even after a system failure or ransomware.

11. Keeping payroll records

Why must payroll records be kept for several years after payment?

  1. A.Banks need them to open new accounts
  2. B.Employees must sign them again each year
  3. C.Tax, labour and audit rules can require them later
  4. D.The payroll software deletes data each month
Show answer

Answer: C. Tax, labour and audit rules can require them later

Tax assessments, labour inspections, audits and disputes can look back several years. Laws set minimum retention periods, so payroll keeps registers, approvals and returns securely for at least that long.

12. Who changed this salary

An auditor asks who changed an employee's basic salary last March and who approved it. What payroll feature answers this?

  1. A.The payslip PDF, which lists every person who viewed it
  2. B.The bank statement for that month's salary transfer
  3. C.The employee's leave balance report
  4. D.The audit trail, which logs each change with user and time
Show answer

Answer: D. The audit trail, which logs each change with user and time

An audit trail records who created, changed or approved payroll data and when, including before and after values. It supports internal controls, investigations and statutory audits. Shared logins defeat it, so each user needs their own account.

13. Splitting salary cost across projects

An employee's monthly cost to the company is ₹1,00,000. Timesheets show 60% on Project A and 40% on Project B. How should the cost be allocated?

  1. A.₹1,00,000 to Project A only
  2. B.₹50,000 to each project
  3. C.₹60,000 to Project A and ₹40,000 to Project B
  4. D.₹40,000 to Project A and ₹60,000 to Project B
Show answer

Answer: C. ₹60,000 to Project A and ₹40,000 to Project B

Cost allocation charges salary cost to cost centres or projects in proportion to time or another agreed driver. Here 60% of ₹1,00,000 is ₹60,000 and 40% is ₹40,000. The employee's pay does not change; only the accounting split does.

14. Voluntary PF and the employer share

An employee opts to contribute 20% of basic to PF through VPF. Does the employer have to match the extra 8%?

  1. A.No, the employer pays only its statutory share
  2. B.Yes, it must match up to 20%
  3. C.Yes, half of the extra amount
  4. D.Only if the employee is above ₹15,000
Show answer

Answer: A. No, the employer pays only its statutory share

Voluntary Provident Fund lets employees contribute above 12%, and it earns the same EPF interest. The employer is not required to match the voluntary part. Payroll just adds the extra amount to the employee's EPF contribution in the ECR.

15. Who pays PF administration charges

Along with contributions, the ECR shows EPF administration charges. Who bears them?

  1. A.The employee
  2. B.The employer
  3. C.Both equally
  4. D.The Central Government
Show answer

Answer: B. The employer

Administration charges (currently 0.5% of EPF wages, with a monthly minimum) are an employer cost. They cannot be recovered from the employee. EDLI administration charges have been nil since 2017.

16. ESI contribution periods

ESI divides the year into two contribution periods. Which are they?

  1. A.January–June and July–December
  2. B.April–September and October–March
  3. C.April–March as one period
  4. D.Each calendar quarter separately
Show answer

Answer: B. April–September and October–March

ESI contribution periods run from 1 April to 30 September and 1 October to 31 March. Each has a matching benefit period that starts three months later. Coverage decisions based on wages are tied to these periods.

17. When ESI must be paid

By which date must ESI contributions for a month's wages be paid?

  1. A.7th of the following month
  2. B.21st of the following month
  3. C.Last day of the same month
  4. D.15th of the following month
Show answer

Answer: D. 15th of the following month

ESI contributions are due by the 15th of the month after the wage month, the same as PF. Late payment attracts simple interest at 12% a year and may attract damages. Online payment through the ESIC portal is standard.

18. Registering an employee under ESI

When a covered employee joins, payroll registers them on the ESIC portal. What identifies the employee for ESI benefits?

  1. A.An Insurance Number (IP number)
  2. B.Their UAN from EPFO
  3. C.Their PAN
  4. D.The employer's code only
Show answer

Answer: A. An Insurance Number (IP number)

Each insured person gets a unique Insurance Number (IP number) and an e-Pehchan card, which they use for treatment and benefits. Family members are linked to it. The same number continues if they change to another ESI-covered employer.

19. The four Labour Codes

Which four Labour Codes came into force on 21 November 2025, replacing 29 central labour laws?

  1. A.Wages, Pensions, Taxation and Trade Unions
  2. B.Employment, Insurance, Factories and Bonus
  3. C.Wages, Industrial Relations, Social Security, OSH
  4. D.Salaries, Benefits, Contracts and Safety
Show answer

Answer: C. Wages, Industrial Relations, Social Security, OSH

The four codes are 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). They took effect from 21 November 2025, with rules being notified by the Centre and states. Payroll is affected most by the Wages and Social Security codes.

20. Deadline for monthly wages

Under the Code on Wages, by when must monthly wages be paid?

  1. A.Before the 7th day of the following month
  2. B.Before the 15th day of the following month
  3. C.On the last working day of the month
  4. D.Within 30 days of the month end
Show answer

Answer: A. Before the 7th day of the following month

The Code on Wages requires monthly wages to be paid before the expiry of the seventh day of the next month. Weekly and daily wages have shorter deadlines. Late payment can lead to claims and penalties.

Payroll intermediate interview questions medium

21. Payroll analytical procedure

A company had a steady 120 employees during the year, with an average monthly salary of ₹50,000 each. Recorded annual salary expense is ₹7,80,00,000. What is the difference between recorded and expected salaries?

  1. A.₹6,00,000
  2. B.₹7,80,00,000
  3. C.₹72,00,000
  4. D.₹60,00,000
Show answer

Answer: D. ₹60,00,000

Expected salaries = 120 × ₹50,000 × 12 = ₹7,20,00,000. Recorded ₹7,80,00,000 − expected ₹7,20,00,000 = ₹60,00,000, about 8.3% higher. If this exceeds the auditor’s threshold, it should be explained, for example by bonuses or arrears, or investigated for ghost employees or errors.

22. Prorated bonus with a performance factor

An annual bonus target is 1,20,000 for a full April to March year. The employee joined on 1 October and gets a performance factor of 90%. Bonus is prorated by months worked. What is the bonus?

  1. A.1,08,000
  2. B.54,000
  3. C.60,000
  4. D.66,000
Show answer

Answer: B. 54,000

Months worked = October to March = 6, so the prorated target = 1,20,000 x 6 / 12 = 60,000. Applying the 90% factor gives 60,000 x 0.9 = 54,000.

23. Net salary payable in the journal

For the month, gross salary is 10,00,000. Employee PF is 60,000, TDS is 80,000 and professional tax is 4,000. Employer PF is 60,000. What amount is credited to net salary payable?

  1. A.9,40,000
  2. B.8,56,000
  3. C.8,60,000
  4. D.7,96,000
Show answer

Answer: B. 8,56,000

Net salary payable = gross - employee deductions = 10,00,000 - 60,000 - 80,000 - 4,000 = 8,56,000. Employer PF is a separate expense credited to PF payable, so it does not reduce the employees net pay.

24. LOP in February on a 30-day basis

A company always prorates on a fixed 30-day month, whatever the actual month length. Monthly gross is 30,000. In February, which has 28 days, the employee has 1 LOP day. What is the deduction?

  1. A.1,071
  2. B.1,000
  3. C.1,154
  4. D.1,034
Show answer

Answer: B. 1,000

On a fixed 30-day basis, per-day pay = 30,000 / 30 = 1,000 in every month, so 1 LOP day = 1,000. Using the actual 28 days would give about 1,071. The chosen basis must be in policy and applied consistently.

25. Working out net pay

An employee's gross pay is ₹80,000. Deductions are employee PF ₹1,800, professional tax ₹200 and TDS ₹6,000. What is the net pay?

  1. A.₹74,000
  2. B.₹73,800
  3. C.₹72,000
  4. D.₹71,800
Show answer

Answer: C. ₹72,000

Net pay is gross minus all employee deductions: 80,000 - 1,800 - 200 - 6,000 = 72,000. Employer contributions are not deducted from the employee, so they do not appear in this calculation.

26. Register and ledger disagree

The payroll register shows gross pay of ₹62,40,000 but the general ledger salary account shows ₹63,10,000 for the same month. What is the best first step?

  1. A.Post a journal to write off the ₹70,000 difference
  2. B.List all postings to the account and find non-payroll entries
  3. C.Ignore it because the gap is under 2% of the total
  4. D.Change the register so it agrees with the ledger
Show answer

Answer: B. List all postings to the account and find non-payroll entries

Pull every posting to the salary account for the month and separate the payroll interface journal from manual or other entries. The gap is usually a manual journal, a reclass or an accrual. Only after finding the cause should anything be corrected.

27. Two employees, one bank account

A data check finds two different employee IDs paid into the same bank account. What should payroll do?

  1. A.Investigate and confirm both employees and the account owner
  2. B.Accept it, since family members often share accounts
  3. C.Pay both salaries in cash next month
  4. D.Delete the newer employee record straight away
Show answer

Answer: A. Investigate and confirm both employees and the account owner

A shared account can be innocent but is a classic sign of a ghost or duplicate employee. Payroll should verify both people exist and who owns the account with HR and the bank, and hold payment if the answer is unclear.

28. Splitting the employer PF share

An employee's PF wage (basic + DA) is ₹15,000. The employer pays 12%, of which 8.33% goes to the pension scheme (EPS) and the rest to EPF. What are the EPS and EPF parts?

  1. A.EPS ₹550, EPF ₹1,250
  2. B.EPS ₹1,250, EPF ₹1,800
  3. C.EPS ₹1,250, EPF ₹550
  4. D.EPS ₹1,800, EPF nil
Show answer

Answer: C. EPS ₹1,250, EPF ₹550

Employer total = 15,000 x 12% = 1,800. EPS = 15,000 x 8.33% = 1,250 (rounded). EPF = 1,800 - 1,250 = 550. Payroll must post and deposit these to the right accounts, since EPS is capped at a ₹15,000 wage.

29. Arrears in the March payroll

An employee's salary rises from ₹30,000 to ₹33,000 effective 1 January, but the change is only made in March payroll. How much should March payroll pay?

  1. A.₹33,000
  2. B.₹36,000
  3. C.₹39,000
  4. D.₹42,000
Show answer

Answer: C. ₹39,000

Arrears for January and February = 2 x 3,000 = 6,000. Plus March at the new rate = 33,000. Total = 39,000. Arrears should be shown on the payslip and taxed in the year paid, with relief possible under tax rules.

30. UAE sick leave pay

A UAE employee past probation takes 20 days of sick leave, their first this year. How many days are on full pay and on half pay?

  1. A.20 days full pay
  2. B.10 days full pay and 10 days half pay
  3. C.15 days full pay and 5 days half pay
  4. D.20 days half pay
Show answer

Answer: C. 15 days full pay and 5 days half pay

UAE law allows up to 90 days of sick leave a year after probation: the first 15 days on full pay, the next 30 days on half pay, and the remaining 45 days unpaid. So 20 days means 15 full-pay days and 5 half-pay days. A medical certificate is required.

31. Updating the PF exit date

After an employee leaves, what must the employer update on the EPFO portal so the employee can later transfer or withdraw PF?

  1. A.The PAN of the employee's new employer
  2. B.The date of exit and the reason for leaving
  3. C.The salary the employee will get next
  4. D.The F&F cheque number and the bank name
Show answer

Answer: B. The date of exit and the reason for leaving

Marking the date of exit against the UAN closes the member id for that employer. Without it, the account looks active, and the employee faces delays in transfer or withdrawal. Members can also update the exit date themselves after two months in many cases.

32. UAE leave encashment at exit

A UAE employee leaves with 12 days of unused annual leave. Basic salary is AED 6,000 and total salary with allowances is AED 10,000 a month. Using a 30-day month, what is the leave encashment if it is based on basic salary?

  1. A.AED 4,000
  2. B.AED 2,000
  3. C.AED 3,600
  4. D.AED 2,400
Show answer

Answer: D. AED 2,400

UAE law pays unused leave at exit on the basic wage. Daily basic is AED 6,000 ÷ 30 = AED 200, so 12 days give AED 2,400. Using total salary would give AED 4,000, which is more than the legal minimum unless the contract says so.

33. EPS for joiners after September 2014

A person becomes a PF member for the first time in 2025 with PF wages of ₹22,000, and the employer covers them voluntarily. Where does the employer's 12% go?

  1. A.8.33% to EPS and 3.67% to EPF
  2. B.₹1,250 to EPS and the rest to EPF
  3. C.Entirely to EPF, as they cannot join EPS
  4. D.Entirely to EPS
Show answer

Answer: C. Entirely to EPF, as they cannot join EPS

From 1 September 2014, new members with PF wages above ₹15,000 are not eligible for the Employees' Pension Scheme. So the employer's full 12% goes to the EPF account. The ECR must show EPS wages as zero for such employees.

34. Employer versus employee LWF share

In most states with LWF, how does the employer's contribution compare with the employee's?

  1. A.Both always pay the very same amount
  2. B.Only the employee pays, never the employer
  3. C.Only the employer pays, never the employee
  4. D.The employer pays more, often 2–3 times
Show answer

Answer: D. The employer pays more, often 2–3 times

State LWF laws usually set a higher employer contribution than the employee's, often about twice or three times. Both amounts are small and fixed rather than percentages. The employer deducts the employee share and deposits both.

35. LWF in a new state office

A company opens an office in a new state. What should payroll check first about LWF?

  1. A.Whether EPFO has approved the LWF
  2. B.Whether the state has an LWF law at all
  3. C.Whether staff want to join LWF
  4. D.Whether LWF can be paid with GST
Show answer

Answer: B. Whether the state has an LWF law at all

Only some states have Labour Welfare Fund laws, and each defines which establishments and employees are covered. Payroll must check the state law before configuring deductions. LWF has nothing to do with EPFO or GST.

36. Minimum bonus for a full year

An eligible employee worked the full year. Bonus is calculated on ₹7,000 a month at the minimum rate of 8.33%. What is the annual bonus (rounded to the rupee)?

  1. A.₹5,831
  2. B.₹8,400
  3. C.₹6,997
  4. D.₹7,000
Show answer

Answer: C. ₹6,997

Annual base is ₹7,000 × 12 = ₹84,000. At 8.33%, the bonus is ₹6,997.20, about ₹6,997. Many employers simply pay one month's capped wage, which is close to this.

37. Establishments covered by the Bonus Act

From what headcount does the Payment of Bonus Act generally apply to an establishment?

  1. A.10 or more persons
  2. B.50 or more persons
  3. C.20 or more persons
  4. D.Any size
Show answer

Answer: C. 20 or more persons

The Act applies to factories and establishments employing 20 or more persons on any day during the year. Some states have notified a lower threshold of 10. Once covered, it continues even if headcount drops.

38. Losing the right to bonus

Under the Bonus Act, on which ground can an employee be disqualified from receiving bonus?

  1. A.Dismissal for fraud or theft
  2. B.Resignation before year end
  3. C.Taking unpaid leave
  4. D.Being on probation
Show answer

Answer: A. Dismissal for fraud or theft

An employee dismissed for fraud, riotous or violent behaviour on the premises, or theft, misappropriation or sabotage of property is disqualified. Resigning or taking leave only affects the pro-rata amount. Probationers who meet the 30-day rule are eligible.

39. Funding gratuity in advance

A company wants to avoid a large cash outflow when many staff retire together. What is a common way to fund gratuity?

  1. A.Deducting gratuity from monthly salary
  2. B.A group gratuity policy with an insurer
  3. C.Paying the gratuity to staff every year
  4. D.Parking the amount in staff PF accounts
Show answer

Answer: B. A group gratuity policy with an insurer

Many employers set up an approved gratuity trust and buy a group gratuity policy from an insurer, paying premiums based on actuarial valuation. Gratuity cannot be deducted from employees' salaries. Paying it yearly as salary changes its tax treatment and does not meet the statute.

40. Deducting a disciplinary fine

A supervisor wants payroll to deduct AED 300 from a worker's pay as a penalty for lateness. What must exist first?

  1. A.Just the supervisor's email request
  2. B.The worker's verbal agreement on the spot
  3. C.A documented disciplinary decision
  4. D.Nothing; any amount can be deducted
Show answer

Answer: C. A documented disciplinary decision

Disciplinary fines are a permitted deduction only when imposed under the employer's approved disciplinary rules, after informing the worker and hearing them. Payroll needs the written decision. Fines also count towards the legal cap on deductions.

Payroll interview questions for experienced candidates hard

41. PF after loss of pay

Monthly basic is 20,000 and the company prorates on a 30-day month. The employee has 6 days of LOP. PF is 12% of basic actually earned. What is the employee PF deduction?

  1. A.2,400
  2. B.2,000
  3. C.480
  4. D.1,920
Show answer

Answer: D. 1,920

Earned basic = 20,000 / 30 x 24 = 16,000. PF = 12% x 16,000 = 1,920. PF follows the wages actually paid, so LOP reduces the PF deduction as well as the earnings.

42. Full and final with gratuity

An employee leaves after 6 completed years. Monthly gross is 60,000 and basic is 26,000. They worked 15 days of a 30-day final month. Leave encashment: 12 days at basic / 26. Gratuity: basic x 15 / 26 x years. Recoveries: laptop 8,000 and advance 10,000. Before tax, what is the net settlement?

  1. A.1,32,000
  2. B.24,000
  3. C.1,14,000
  4. D.1,22,000
Show answer

Answer: C. 1,14,000

Salary = 60,000 / 30 x 15 = 30,000. Leave = 26,000 / 26 x 12 = 12,000. Gratuity = 26,000 x 15 / 26 x 6 = 90,000. Total 1,32,000 less recoveries of 18,000 = 1,14,000.

43. Gratuity provision in a CTC

A company shows gratuity in CTC as (15 / 26) x basic per year of service, spread evenly over 12 months. Monthly basic is 50,000. What monthly gratuity provision appears in the CTC, rounded?

  1. A.2,083
  2. B.2,404
  3. C.2,500
  4. D.4,167
Show answer

Answer: B. 2,404

Annual gratuity accrual = 50,000 x 15 / 26 = 28,846. Monthly = 28,846 / 12 = about 2,404, which is about 4.81% of basic. Using 30 instead of 26 would give 2,083.

44. Clawing back a retention bonus

An employee was paid a retention bonus of 1,20,000 with a 12-month commitment. The agreement says it is repayable pro rata if they leave early. They leave after 8 months. How much is recoverable?

  1. A.40,000
  2. B.80,000
  3. C.1,20,000
  4. D.10,000
Show answer

Answer: A. 40,000

Unserved months = 12 - 8 = 4. Recovery = 1,20,000 x 4 / 12 = 40,000. Recovery must follow the signed agreement, and the tax already deducted on the bonus needs to be considered with tax advisers.

45. Unexplained part of a payroll increase

Last month's gross payroll was ₹60,00,000 for 200 employees. This month 210 employees are paid and the average pay is expected to be unchanged. Actual gross is ₹64,50,000. How much of the increase is unexplained by headcount?

  1. A.₹64,50,000
  2. B.₹4,50,000
  3. C.₹1,50,000
  4. D.₹3,00,000
Show answer

Answer: C. ₹1,50,000

Average pay = 60,00,000 / 200 = 30,000. Expected = 210 x 30,000 = 63,00,000. Actual minus expected = 1,50,000, which needs another reason such as arrears, overtime or a pay rise. This is the core of a payroll analytical review.

46. Back-dated increment at year end

On 25 March the board approves a pay rise backdated to 1 February. It will be paid with arrears in April payroll. The year ends 31 March. What should March accounts include?

  1. A.An accrual for the February and March arrears
  2. B.Nothing, since cash is paid in April
  3. C.Only the February arrears, as March is not over
  4. D.A note that the rise starts in April
Show answer

Answer: A. An accrual for the February and March arrears

The obligation exists at 31 March for work already done in February and March at the higher rate, and the amount can be measured. So the arrears are accrued as an expense and liability at year end, then cleared when April payroll pays them.

47. No PF on high earners

An analytic shows 14 employees with basic pay above ₹15,000 and no PF deduction. What should you conclude first?

  1. A.The system is broken and payroll must stop
  2. B.It is normal, since PF never applies above ₹15,000
  3. C.They are ghost employees and must be removed
  4. D.Check each for a valid reason before calling it an error
Show answer

Answer: D. Check each for a valid reason before calling it an error

Above the ₹15,000 wage ceiling, PF can be optional for employees who were never members, so there can be valid reasons. But it can also mean a missed set-up. Each case should be matched to its PF eligibility and opt-out record before deciding.

48. Accruing a weekly payroll

Factory staff are paid weekly for a Monday to Friday week, and one week of pay is ₹5,00,000. The last pay week fully paid ended on Friday 26 March. The year ends on Wednesday 31 March. How much wage accrual is needed at year end?

  1. A.₹2,00,000
  2. B.₹5,00,000
  3. C.₹4,00,000
  4. D.₹3,00,000
Show answer

Answer: D. ₹3,00,000

Unpaid working days are Monday 29, Tuesday 30 and Wednesday 31 March: three of five days. Accrual = 5,00,000 x 3/5 = 3,00,000. The rest of that week belongs to the new year.

49. Approving one's own bonus

The CFO approves bonuses for the finance team, including the CFO's own bonus. What is the best fix?

  1. A.Payroll checks the CFO's bonus against last year's
  2. B.The board or its pay committee approves the CFO's bonus
  3. C.The CFO's bonus is paid in two parts
  4. D.The CFO signs a second time to confirm
Show answer

Answer: B. The board or its pay committee approves the CFO's bonus

No one should approve their own pay. Senior pay is usually approved by the board or its remuneration committee, which also guards against management override of controls.

50. Rate and volume effects

Headcount rises from 100 to 110 and average pay from ₹50,000 to ₹52,000. Volume effect is measured at the old average pay. What are the volume and rate effects?

  1. A.Volume ₹5,00,000, rate ₹2,20,000
  2. B.Volume ₹7,20,000, rate nil
  3. C.Volume ₹5,00,000, rate ₹2,00,000
  4. D.Volume ₹5,20,000, rate ₹2,00,000
Show answer

Answer: A. Volume ₹5,00,000, rate ₹2,20,000

Volume = 10 extra staff x 50,000 = 5,00,000. Rate = 110 staff x 2,000 rise = 2,20,000. Total = 7,20,000, which equals 57,20,000 - 50,00,000. This split explains a payroll change to management.

51. Too many off-cycle payments

Payroll ran 46 off-cycle payments last quarter, usually on the payroll officer's approval alone. Why is this a concern?

  1. A.Off-cycle runs always double the tax
  2. B.Off-cycle runs can bypass the main payroll's review
  3. C.It means the cut-off date is too late
  4. D.Banks do not allow more than one run a month
Show answer

Answer: B. Off-cycle runs can bypass the main payroll's review

Off-cycle payments often skip variance reviews and senior approval, so they are a route for errors and fraud. They should be limited, need the same independent approval, and be included in monthly reconciliations.

52. PF for a foreign national employee

A foreign national from a country with no social security agreement with India works in India with basic of ₹2,00,000 a month. As an "international worker", what is the employee PF contribution at 12%?

  1. A.₹1,800, because PF is capped at ₹15,000 wages
  2. B.Nil, because foreign nationals are exempt from PF
  3. C.₹12,000, at half the normal rate for foreigners
  4. D.₹24,000, because there is no ₹15,000 wage ceiling
Show answer

Answer: D. ₹24,000, because there is no ₹15,000 wage ceiling

International workers must join PF from day one, and the ₹15,000 wage ceiling does not apply, so PF is on the full ₹2,00,000. 12% gives ₹24,000 from the employee and a matching employer share. Workers from countries with a social security agreement may be exempt with a certificate of coverage.

53. ESI on overtime pay

An ESI-covered employee earns ₹19,000 fixed gross and ₹3,000 overtime this month. How is overtime treated for ESI?

  1. A.ESI is deducted on ₹19,000 only, since overtime is excluded
  2. B.The employee leaves ESI because total pay passed ₹21,000
  3. C.ESI is deducted on ₹22,000, but overtime is ignored for coverage eligibility
  4. D.ESI is deducted only on the ₹3,000 overtime
Show answer

Answer: C. ESI is deducted on ₹22,000, but overtime is ignored for coverage eligibility

ESIC treats overtime as wages for contributions, so both shares are calculated on the total ₹22,000. For checking the ₹21,000 coverage limit, however, overtime is excluded, so the employee stays covered. Mixing these two rules is a common payroll error.

54. Continuous service for gratuity

A factory worker had several short unpaid breaks in a year but actually worked 245 days in the 12 months. For gratuity, is that year counted as continuous service?

  1. A.No; any break in a year cancels that whole year for gratuity
  2. B.Only if the worker had zero absences in the year
  3. C.Yes; 240 days worked in 12 months counts as a continuous year
  4. D.Only for workers employed in mines underground
Show answer

Answer: C. Yes; 240 days worked in 12 months counts as a continuous year

The gratuity rules deem a worker to be in continuous service for one year if they actually worked at least 240 days in the preceding 12 months (190 days for mines and some other cases). This protects workers with interruptions not caused by their own fault. Payroll and HR need reliable attendance records to apply it.

55. ESI with overtime in a month

A covered employee has gross wages of ₹20,000 and overtime of ₹3,000 this month. What are the employee and employer ESI contributions?

  1. A.₹150 and ₹650
  2. B.₹158 and ₹683
  3. C.₹173 and ₹650
  4. D.₹173 and ₹748
Show answer

Answer: D. ₹173 and ₹748

Overtime is included for contributions, so ESI wages are ₹23,000. Employee share is 0.75% = ₹172.50, rounded up to ₹173. Employer share is 3.25% = ₹747.50, rounded up to ₹748.

56. Benefit paid for an unregistered worker

An eligible worker was never registered under ESI. After an accident, ESIC provides treatment and benefits. What can ESIC do to the employer?

  1. A.Nothing, as the worker got treatment
  2. B.Only charge the missed contributions
  3. C.Recover the cost of benefits from the employer
  4. D.Ask the worker to repay the benefits
Show answer

Answer: C. Recover the cost of benefits from the employer

Under Section 68 of the ESI Act, if an employer fails to register or pay for an eligible employee, ESIC can recover the value of benefits paid from the employer. That is in addition to arrears with interest. Timely registration of every eligible joiner avoids this.

57. Unclaimed wages and LWF

Under many state Labour Welfare Fund Acts, what must an employer do with wages that remain unpaid and unclaimed for the prescribed period?

  1. A.Write them back as company income
  2. B.Transfer them to the Labour Welfare Fund
  3. C.Pay them to the Income Tax Department
  4. D.Distribute them among other employees
Show answer

Answer: B. Transfer them to the Labour Welfare Fund

State LWF Acts typically require unpaid accumulations and fines collected from employees to be credited to the welfare fund. Employers cannot simply write them back to profit. Workers can later claim their dues from the fund.

58. Applying the 50% wage rule

An employee's monthly remuneration is ₹1,00,000: basic plus DA ₹30,000 and allowances excluded by the Code ₹70,000. What are "wages" under the Code on Wages?

  1. A.₹30,000
  2. B.₹50,000
  3. C.₹70,000
  4. D.₹1,00,000
Show answer

Answer: B. ₹50,000

Excluded components are ₹70,000, which is ₹20,000 more than 50% of total remuneration (₹50,000). That ₹20,000 is added back, so wages are ₹30,000 + ₹20,000 = ₹50,000. PF and gratuity would then be computed on this higher base.

59. Retrenchment compensation formula

A worker with 6 years and 8 months of continuous service is retrenched. Average pay is ₹26,000 a month. What is the statutory retrenchment compensation at 15 days' pay per completed year (using 26 days a month)?

  1. A.₹1,05,000
  2. B.₹90,000
  3. C.₹1,20,000
  4. D.₹78,000
Show answer

Answer: A. ₹1,05,000

Service over six months in the last year counts as a full year, so 7 years apply. Fifteen days' pay is ₹26,000 × 15/26 = ₹15,000. Compensation is ₹15,000 × 7 = ₹1,05,000, plus notice pay where notice is not given.

60. Contribution rates in the savings scheme

An employer opts into the voluntary end-of-service savings scheme. What contribution does it pay for an employee with 2 years of service?

  1. A.8.33% of monthly basic wage
  2. B.12% of total wage
  3. C.3% of total wage
  4. D.5.83% of monthly basic wage
Show answer

Answer: D. 5.83% of monthly basic wage

The scheme uses 5.83% of basic wage for employees with less than five years of service and 8.33% for five years or more. These mirror 21 and 30 days of basic pay per year. The employer pays every month instead of a lump sum at exit.

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