10 questions to ask an India shadow payroll provider

Why ask concrete questions

A provider pitch on India shadow payroll can sound reassuring without actually telling you whether the calculation is right. These ten questions are built to surface specifics — dates, source data, documented positions — rather than general confidence. Background on why the calculation is genuinely three separate bases, not one, is in our shadow payroll guide. The build-vs-partner guide covers the wider decision behind this question.

The ten questions

1. What is the International Worker PF base you use, and where does that data come from each cycle?

What a good answer sounds like: the full global package — home-country base salary, cost-of-living allowance, and any offshore assignment allowances. That is not just the salary delivered through the Indian entity. The provider should describe exactly how they collect that global data every cycle, since this is the single most common source of underfunded PF.

2. How do you handle an assignee who holds a Certificate of Coverage under a Social Security Agreement?

What a good answer sounds like: a clear description of how CoC status is verified before the assignment starts. It should also describe what changes in the calculation once CoC is confirmed — full PF exemption, not a partial adjustment. A provider who cannot describe checking for a CoC before running PF is skipping the single highest-value document in the whole process.

3. What is your current position on Para 83 and the Stone Hill litigation, and how often do you revisit it?

What a good answer sounds like: an accurate, current summary. One High Court has struck the provision down, and two others have upheld it. The Supreme Court has issued notice, without a stay or a ruling on the merits. The provider should describe a process for revisiting this position as the litigation moves, not a one-time call made months ago.

4. If we have establishments in Karnataka, how does your guidance differ from establishments elsewhere?

What a good answer sounds like: an explicit acknowledgment that Karnataka is currently the only jurisdiction where a court has ruled against the provision. This relief does not extend elsewhere. A provider that gives one blanket national answer is not tracking the actual state of the litigation.

5. How do you reconcile the three calculation bases — IW PF wages, Labour Code deemed wages, and Income-tax Act 2025 taxable salary — against each other?

What a good answer sounds like: a description of running all three every cycle and checking they are internally consistent, not just producing a single net payroll figure. If the answer only addresses tax withholding, the PF and Labour Code bases are likely being under-served.

6. How do you split the tax gross-up between non-monetary perquisites and cash tax-equalisation settlements?

What a good answer sounds like: non-monetary perquisites — housing, a company car — are sheltered from further gross-up. This shelter comes from Schedule III, S.No. 10 of the Income-tax Act 2025. Cash equalisation and hypothetical-tax settlements get no such shelter and must be grossed up in full, iteratively. A provider who treats all gross-up the same way is likely overpaying on one side or underpaying on the other.

7. How do you handle gratuity for an assignee on an India-registered fixed-term contract?

What a good answer sounds like: gratuity accrues from one year of service, pro-rata, computed on the deemed-wages base under the Code on Wages. This replaces the older five-year eligibility period that used to make short assignments gratuity-free. A provider still quoting the five-year rule is working from outdated assumptions.

8. What documentation do you retain, and for how long, if we face an EPFO section 7A enforcement action or an income-tax assessment years after an assignment ends?

What a good answer sounds like: a specific description of what records are kept — source data, calculation logic, positions taken on contested items — and in what retrievable form. It should not be a general assurance that “everything is documented.” Ask what a specific request would actually produce.

9. What happens to our data and calculation history if we switch providers or bring this function in-house?

What a good answer sounds like: a clear, pre-agreed offboarding process — what transfers, in what format, on what timeline. A provider who has not thought through this question, or treats it as unlikely to come up, is signalling how portable your own data really is.

10. How do you keep pace with state-level rules, given that most states are still at the draft stage?

What a good answer sounds like: an accurate statement that Central Rules under all four Codes are final as of 8 May 2026. Most state rules remain draft. The provider should describe how they track state-by-state movement, rather than treating the Central position as universally applicable.

Using this in an actual conversation

Ask these questions in order, and note where an answer is vague versus specific. A provider who answers question 1 with “the full package” but cannot describe the actual data-collection process is giving you the right words without the underlying process. The same applies across all ten — the specificity of the answer matters more than whether it sounds reassuring.

If you are running this alongside an in-house build instead of a provider evaluation, these same ten questions work as an internal capability audit. Ask them of whoever owns the shadow payroll function today.

General guidance, not legal advice. Confirm any provider’s specific positions, especially on the contested Para 83 litigation, with your own tax and legal advisors.