Preparing Payroll, EPF and Personnel Records Before Your First Hire Starts

Before your first employee starts work, confirming the hire is not enough. Payroll calculations, EPF coordination, personnel records and payment approvals should operate as one workable process.

The most reliable approach is to define who supplies the data, who reviews payroll, who initiates payment and who retains records. A suitably qualified professional firm can then confirm the registration and filing requirements that may apply to the proposed employment arrangement.

For foreign companies entering Sri Lanka, the first hire often establishes the foundation for all future HR and payroll processes. If the employment contract, role details, bank payment information and statutory registration records do not align, each additional hire may create repeated rework.

Start with the employment arrangement

Before setting up payroll and EPF processes, document the core facts of the employment relationship. The company should decide and retain records of the following:

• The employee's name, contact details, address and identity information;
• Job title, department, reporting line and work location;
• Agreed start date, probation arrangement, working hours and principal responsibilities;
• Agreed salary structure, including the conditions for fixed and variable components;
• Payroll frequency, payment method and the employee's receiving bank account details;
• Whether bonuses, commissions, reimbursements, allowances, equipment issuance or other benefits are involved;
• Who is authorised to sign the offer documents, employment contract and any subsequent salary-change documents on behalf of the company.

These are not merely HR form fields. They directly affect payroll template design, payment authorisation, accounting entries and the assessment of statutory items. Even where a company has only a small initial team, verbal arrangements should not be the sole record.

Payroll preparation: build the calculation and approval chain first

Payroll is not simply a monthly bank transfer. Each amount should have a clear basis, be reviewed by an appropriate person and remain traceable. Companies can establish their internal process in the following order.

1. Record fixed pay and variable items separately

List the employee's agreed fixed salary, approved bonuses or commissions, expense reimbursements and other items separately. Each category should have supporting approval evidence, such as an employment contract, salary adjustment notice, sales performance record or reimbursement claim.

The same person should not decide the amount, prepare the payroll and initiate payment. Even in a small team, the process can include at least three steps: confirmation by the business lead, review by finance or an external accountant, and payment approval by an authorised person.

2. Set a payroll data cut-off date in advance

The company should set its own data cut-off date for each payroll cycle. This should cover the latest submission point for attendance, leave, commissions, reimbursements and salary changes. The internal process should also state how items arising after the cut-off will be handled, so payroll is not repeatedly revised shortly before payment.

3. Retain an evidence trail for every payroll run

For each payroll cycle, it is advisable to retain at least the payroll version, approval records, employee change list, payment instruction, bank payment evidence and accounting support. Where an external payroll provider assists with processing, the company should still appoint an internal person with final confirmation responsibility. The accuracy of employee payroll data should not be left entirely to a third party.

EPF coordination: confirm the registration route before routine processing begins

EPF-related matters should be included in the project plan before, or when, the first employee actually starts work, rather than being addressed only after the first payroll cycle has ended. The company should confirm with its appointed professional firm and the relevant official channels:

• Whether the company currently meets the conditions for the relevant registration;
• How employer and employee information should correspond;
• Which payroll items need to be included in the calculation;
• Who will handle filings and payments; and
• What supporting documents need to be retained.

At this stage, it is useful to prepare a responsibility matrix for registration and monthly processing, including at least the following items:

Item	Information to be provided internally	Coordination party	Evidence to retain
Employer information confirmation	Company name, registered address and authorised signatory details	Company representative and professional firm	Current version of company base information
Employee information collection	Identity information, start date, role and salary details	HR or business lead	Employee information confirmation record
EPF applicability and registration confirmation	Description of the employment arrangement and salary structure	Appointed professional firm	Professional advice or processing record
Monthly payroll data review	Fixed pay, variable items and employee changes	Company finance team or designated approver	Approved payroll record
Filing, payment and filing of records	Confirmed amounts and payment information	Designated execution party	Receipts, payment evidence and filing checklist

A company should not assume that all employees, all pay items or all payment arrangements receive the same treatment. Specific requirements relating to EPF, payroll deductions, employment documents and ongoing filings should be confirmed against the latest position of the relevant authorities and the advice of an appointed licensed professional firm.

Personnel records: create an onboarding pack, not scattered folders

A complete personnel file for the first employee should begin from the employee's first day. Documents can be managed in four categories.

Employment confirmation documents

These include the offer confirmation, employment contract, job description, start-date confirmation, salary terms and subsequent change documents. Signed documents should be retained in their executed form, with editing rights appropriately controlled.

Identity and payment information

This includes identity documents supplied by the employee, address and contact information, emergency contact details, bank receiving information and information collected by the company for necessary registrations. Access to this information should be limited to authorised personnel. It should not remain dispersed across personal messaging applications for extended periods.

Work and payroll records

These include attendance records, leave records, performance or commission support, reimbursement records, payroll records, payslips and payment evidence. Where an employee is responsible for sales, cash, procurement or customer information, the file should also retain the scope of authority and handover records.

Statutory and professional processing records

These include records of registrations, filings, payments and communications with professional firms in relation to EPF, tax, labour or other potentially applicable matters. The company should retain final versions and evidence of submission or payment, rather than relying only on chat screenshots or draft documents.

Put HR, finance and business leads into one process

A common issue when the first employee starts is not that documents are completely missing, but that different responsible people hold inconsistent information. The business lead may know the employee has started, while finance does not know about a salary change. An external accountant may receive a payroll file without the contract or approval basis. The employee may have submitted bank details, but payment authorisation has not yet been set up.

For this reason, it is advisable to hold one internal confirmation meeting before the employee starts. The meeting only needs to resolve four points:

1. Whether the employee's employment terms have been confirmed;
2. Who will calculate and review payroll;
3. Who will follow up on EPF and related matters; and
4. Who will maintain the personnel file.

After the meeting, prepare a one-page responsibility list and review the process once after the first payroll cycle is complete.

For foreign companies that require Chinese-language coordination, MMD Business Support can assist in organising onboarding document checklists, coordinating local recruitment and office resources, following up multi-party communications, and connecting clients with legally qualified labour, tax, accounting or other professional firms. Specific employment, payroll, EPF and filing arrangements should be decided by the company based on its own business circumstances and professional advice.

Final pre-start checklist

Before the employee formally starts work, the company can confirm the following items one by one:

• Have the employment contract and job responsibilities been confirmed by both parties?
• Have the salary structure, payment cycle and approver been defined?
• Have the employee's identity information, contact details and bank receiving information been collected?
• Has responsibility been assigned for recording attendance, leave, reimbursements and salary changes?
• Are the payroll template, payment authorisation and accounting-entry process ready?
• Have EPF and any other potentially applicable registration, filing and payment matters been confirmed with the relevant official channels and professional firms?
• Have the personnel file location, access permissions and update owner been defined?
• Is a review planned after the first payroll cycle to check payroll records, payment evidence and filing completeness?

Companies may refer to the latest public information on the Sri Lanka Department of Labour website at https://labourdept.gov.lk/ and the Inland Revenue Department website at https://www.ird.gov.lk/. Requirements should also be verified with the relevant authorities and professional firms based on the company's actual employment arrangements.

This content is provided for general information only and does not constitute legal, tax or immigration advice. Specific requirements should be confirmed based on the latest guidance from Sri Lankan authorities and appointed licensed professional firms.