Look for statutory handling across every state you operate in, a salary structure you can define rather than accept, clean attendance and leave inputs, arrears and off-cycle runs, full and final settlement, a complete register and audit trail, employee payslip access, an accounting export, and approval controls. Then test each one on your own data during the demo.
Every vendor's slide says it handles provident fund, employees' state insurance, professional tax and tax deducted at source. That tells you very little, because the difficulty is not naming the obligations, it is keeping up with them when they differ by state and change without much warning. Ask the vendor to open the configuration for a state you actually operate in, and show you where each obligation is set, who updates it when the rules move, how quickly that update reaches your account, and what happens if you disagree with their interpretation. Then take the answers to your own advisor. No [payroll software](/payroll-software) removes your obligation to confirm the current position with a qualified advisor or the relevant authority.
Salary structures rarely stay still. You will add a component for a new grade, split an allowance, change how a reimbursement is treated, or inherit an odd arrangement from an acquisition. Ask whether you can create a component yourself or must raise a ticket, whether components can be driven by a formula off other components, whether a structure can differ by grade and by location, and what happens to an employee mid-year when their structure changes. A system that hard-codes one structure will push you into workarounds within months, and workarounds are where payroll errors breed. Ask to see the screen where a new component is created, not a description of it.
A run is only as good as what feeds it. Attendance days, leave without pay, overtime, shift allowances, one-off incentives, loan instalments and reimbursement claims all arrive from somewhere, and each handoff is a chance for a number to be typed twice. Check whether the tool reads directly from your [attendance management system](/attendance-management-software), whether leave balances flow in without a manual export, and what the import template looks like when a source system cannot connect. Ask what happens to a late input that arrives after the cut-off. If the answer is that the run gets reopened, find out who is allowed to do that and whether it leaves a trace.
Ordinary months are easy and every product handles them. The shortlist is settled by the awkward cases: a promotion backdated by a couple of months, a revision approved after the run closed, a bonus paid outside the cycle, an employee who leaves mid-month and must be settled before the next payday. Ask how the system computes arrears against the earlier period's rules rather than today's, whether an off-cycle run posts to the same registers as the regular one, and whether a full and final settlement is a proper feature or a spreadsheet wearing a payroll label. If a demo cannot show these, you are being shown the happy path.
The register is the artefact you will be asked for when someone queries a payslip, when finance closes the books, and when an inspection arrives. It should show every employee, every component, every deduction and every total for a closed period, and it should not change afterwards. Separately from the register, you want an audit trail: who altered a salary, who approved the run, who reopened it, what the value was before and after, and when. Ask whether the trail can be exported, whether an administrator can edit it, and whether a superuser can remove a record without leaving evidence. A tool that lets history be rewritten quietly is not a payroll system.
Queries consume more HR time than processing does, and most of them are the same handful: where is my payslip, what is this deduction, how do I submit an investment proof, why did my take-home change. A capable [employee self-service portal](/employee-self-service-portal) answers those without a ticket, showing current and historical payslips, the tax computation as the system sees it, declaration and proof submission, and reimbursement claims. Check what an employee sees on a phone, since many will never open it on a laptop. Check also what happens after someone leaves, because a former employee still needs their documents and you do not want to be emailing them by hand.
Bring your own month. Send the vendor an anonymised extract of one real period, including the messy rows you would normally fix by hand, and ask them to run it in front of you. Have your own payroll administrator hold the mouse for part of the session rather than watching. Score against a written list you fixed before the call, splitting must-haves that end the conversation from preferences that only break a tie. Ask each vendor the same questions in the same order so the notes compare. Then ask for the export at the end, because how easily your data comes back out is the feature you will care about most on the day you leave.
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