On Roll and Off Roll Payroll

Since an employee joins an organization, the payroll starts to count. Though the payroll models are created based on numerous employee job responsibilities, the term payroll is differentiated between On roll and Off roll. Here’s an explanation of each:


What is On Roll payroll


Permanent roll job meaning the on-roll payroll refers to positions where employees are directly hired and employed by the organization for the long term.


The employees are considered part of the organization’s workforce and are entitled to various employment benefits and protections. They are typically covered by the organization’s policies and benefits packages under the company’s payroll structure and have a long-term commitment to the company.


On-roll employees have a permanent workforce, job security, and a direct contractual relationship with the organization and get opportunities for further career growth and progression, promotions, and stability within the company.


What is Off Roll Payroll


Off-roll payroll refers to positions where individuals are hired indirectly through a third party or are engaged on a temporary or fixed-term contract basis. The individuals are not directly employed by the organization permanently. Instead, the company collaborates with third-party agencies, contractors, or other entities to hire them to resolve some specific work.


Off-roll employees may be engaged with organizations for a specific project. They have to cover short-term staffing needs or perform specialized tasks. They can easily perform numerous jobs within some contractual agreement with the third-party entity rather than a direct employment relationship with the organization. Off-roll jobs often have limited employment benefits and fewer long-term job security guarantees.


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1. Components of ON roll payroll


Onroll payroll is mainly for the permanent employees of the workplace. On-roll payroll ensures whether the employee can get the monthly salary and avail of all the benefits or not.


The company hires that employee through a proper hiring process and provides all the benefits during the work phase. How you are thinking about the components of the On-roll payroll model or How a company manages the on-roll or off-roll job? We are sharing the components of the On-roll payroll and Off-roll payroll.


➔ Basic Salary


The basic salary is the fixed amount of money paid to employees as their regular compensation, they perform. It is one of the vital components of the on-roll payroll models.


➔ Allowances


Allowances are additional payments, provided to employees to cover specific expenses or provide certain benefits.


Common types of allowances include housing allowance, transport allowance, medical allowance, and meal allowance.


➔ Overtime Payments


Overtime payments are made to employees who work beyond their regular work hours or on designated holidays.


➔ Incentives and Bonuses


Incentives and bonuses are additional payments made to employees based on their performance, achievements, or meeting targets or milestones.


➔ Employee Benefits


Employee benefits are non-monetary forms of compensation provided to employees as part of their overall package.


These benefits can include health insurance, retirement plans, paid time off (such as vacation and sick leave), parental leave, employee assistance programs, and more.


➔ Payroll Administration Costs


Payroll administration costs cover the expenses associated with managing the payroll process, such as payroll software, payroll staff salaries, processing fees, and other administrative costs incurred in ensuring accurate and timely payment of employee salaries.


2. Components of Off roll payroll


The components of off-roll payroll typically involve temporary employees who neither do jobs in the same company for a long duration nor have any company salary account. Even they don’t have to serve the notice period or sign a bond. You can name them as seasonal employees.


Though there is no employment barrier, still they have to maintain some government-provided laws and policies


The basic components of Off roll payroll are,


➔ Service Fee or Contract Payments


Instead of a fixed salary, employees in off-roll payroll receive payments based on the terms outlined in their contract or agreement with the third-party entity. The payment is credited directly to the employees’ bank account.


The payment structure may vary as the hourly rates, project-based fees, or milestone-based payments.


➔ Reimbursements


Off-roll employees may be eligible for reimbursement of certain expenses incurred during the course of their work.


This can include travel expenses, accommodation costs, or other business-related expenditures. The reimbursement process is typically outlined in the contractual agreement.


➔ Statutory Deductions


Similar to on-roll payroll, off-roll payroll may involve statutory deductions mandated by law.


This can include income tax, social security contributions, health insurance, and other applicable deductions as per local regulations.


➔ Contractor Fees


If the off-roll employees are independent contractors or freelancers, they may charge a specific fee or percentage of the project cost for their services. The contractor fee would be included in the off-roll payroll structure.


➔ Third-Party payroll model


As off-roll employees are engaged through a third-party entity, the company pays the agreed-upon amount or fees to the third party for the services rendered by the off-roll employees.


This payment is typically made based on the terms outlined in the contract between the company and the third-party entity.


3. What is the difference between an on-roll and an off-roll payroll?


On-roll Payroll Off-roll Payroll
The employee under the on-roll payroll is a full-time employee. They join after attending the proper hiring process. The employee under the off-roll payroll is called seasonal employees. They are generally paid a fixed amount, which is defined in their employment contract.
Organizations pay a predefined desired amount to the employee on a monthly basis. They can avail of the DA, benefits, HRA, and other allowances. In the case of the off-roll payroll, the employee gets their pre-mentioned amount through the cheque, DD, or in hard Cash.
EPF or Employee Provident Fund or Numerous health insurance, accidental and health insurance provided by and Mediclaim packages, performance bonuses are available only for the employees under the on-roll payroll. Any kind of benefit like an Employee provident fund or health insurance package is not applicable for employees who are under the off-roll of regular payroll packages.
The job security for the employees who are availed of the on-roll payroll is high. The job security for the employees who are within the off-roll payroll is low. IT solely depends on employee performance and company-specific guidelines.
Employees who can avail of the on-roll payroll must have their salary account. They can be a holder of accidental insurance. Employees who can avail of the off-roll payroll don’t need to have their salary account. They get the predefined lump sum amount, No accidental insurance is applicable for them.


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