By Akash Sengar · · 6 min read
The real question
Most small and mid-sized businesses in India start HR on spreadsheets, then move to an HR software subscription. A smaller number build their own HRMS. Neither choice is right for everyone. The question is whether your payroll, policies and integrations fit a standard product closely enough, and what it will cost you, in money and effort, when they do not.
What each option means
Off-the-shelf HR software (SaaS) is a subscription product used by many companies, such as Zoho People, greytHR or Keka. The vendor hosts it, updates it for statutory changes and adds features over time. You configure it, but you do not control its roadmap.
A custom HRMS is built for your business, either from scratch or on a framework. You own the design, the data model and the roadmap. You also own every update, including statutory changes, security and hosting.
There is a middle path: a SaaS product for core HR and payroll, with small custom pieces around it, such as an approval workflow or a report that pulls data from your ERP through the vendor's API.
Custom HRMS vs off the shelf: decision table
| Factor | Off-the-shelf tends to fit when | Custom tends to fit when |
|---|---|---|
| Headcount | Up to a few hundred staff with standard roles | Large or fast-growing workforce with unusual structures |
| States and locations | Few states, standard shops and establishments rules | Many states, sites or contractor-heavy operations the product handles poorly |
| Payroll complexity | Standard salary structures, CTC templates | Piece-rate, shift, incentive or union rules that need code |
| Integrations | The product already connects to your accounting and attendance tools | Deep, two-way integration with your ERP, plant or field systems |
| Data ownership | Vendor contract gives exports and clear data terms | You must control hosting, location and the full data model |
| Labour code changes | You want the vendor to update statutory logic | You have people or a provider who can update it promptly |
| Internal capacity | Small HR and IT teams | An IT team or long-term development partner |
Questions to answer before you compare products
Many HR software decisions go wrong because the buyer compares feature lists instead of their own processes. Before you look at any product, write short answers to these questions with your HR and finance teams:
- How many salary structures do you run, and which allowances and deductions does each have?
- How is attendance captured: biometric devices, mobile check-in, shifts, or timesheets for project staff?
- Which leave types and approval chains do you use, and do they differ by location or grade?
- Which reports do management, auditors and the statutory filings need each month?
- Which systems must exchange data with HR: accounting, ERP, attendance devices, recruitment, single sign-on?
- Who will own the HR system day to day once it is live?
These answers become your requirements. They also make vendor demos far more useful, because you can ask each vendor to show your situation rather than their best features.
Data ownership and security
Employee records include personal data such as bank details, identity numbers and health information about leave, so the DPDP Act applies to them. With a SaaS product, check the contract for data location, subprocessors, breach notification, export on exit and deletion afterwards. With a custom system, you carry all of that yourself: access control, encryption, backups, logging and security testing. Either way, limit admin access, use multi-factor authentication and review who can see salary data.
Labour Codes and statutory change
The four Labour Codes came into force on 21 November 2025, according to the Press Information Bureau. Changes such as the wage definition, gratuity for fixed-term employees and timelines for full and final settlement all touch payroll logic. With a SaaS product, the vendor ships the change and you check your configuration. With a custom system, you design, build and test it yourself, and state rules may keep changing. Our Labour Codes payroll checklist lists what to check either way.
What drives cost
We do not quote prices in guides, because they depend on your scope. These are the factors that drive cost in each model:
Off-the-shelf
- Per-employee subscription fees, which grow with headcount and with modules such as payroll, performance and recruitment.
- Implementation and data migration, whether by the vendor, a consultant or your own team.
- Add-ons for integrations, extra storage or advanced reports.
- Staff time to configure, test and maintain settings.
Custom
- Design and build effort, mainly driven by payroll rules and integrations.
- Hosting, backups, monitoring and security testing.
- Ongoing maintenance and statutory updates for as long as you use it.
- Documentation and handover, so you are not dependent on one developer.
Compare the total over several years, not the first-year figure. A subscription's cost grows with headcount; a custom system's cost continues as long as it runs.
How to choose an HRMS for a small business
- Write down your must-haves: salary structures, attendance and leave rules, states, approvals, reports and integrations.
- Ask two or three vendors to demonstrate your hardest payroll scenario using your own sample data, not their standard demo.
- Check data export: can you get all employee and payroll history out in a usable format if you leave?
- Check where data is hosted, who can access it, and how the vendor handles security incidents. Personal data of employees is covered by the DPDP Act.
- Check how the vendor communicates statutory changes and how fast they shipped the Labour Codes updates.
- Only consider custom if a gap remains that matters to the business and cannot be closed with configuration or a small integration.
This is a method, not a ranking. The products named here are examples, and we make no claims about how they compare.
Running a fair trial
Shortlist no more than three options. Give each the same test: your hardest salary structure, one leave policy, one approval chain and one monthly report, run with anonymised sample data. Score each against your requirements, and ask your payroll team which one they would trust at month end. Their view matters more than a feature list.
Whatever you choose, plan for exit from the start: confirm in writing how you will get your data out, in what format, and how quickly.
Moving from spreadsheets or an old system
Whichever you pick, clean your data first: one record per employee, correct joining dates, current salary structures, leave balances and statutory numbers. Run at least one parallel payroll month, comparing old and new results line by line before you switch.
Our HRMS service covers both routes: Zoho People setup and integrations, or a custom HRMS where it is genuinely needed.
