In any payroll program, how does the program values (e.g employee id, hours worked,hourly rate) work with an .in file. Does the .in file have to be in a specific folder....I am using Bloodshed Dev C++.

That information is not in a *.ini file. Its in a database, such as MySQL and Microsoft SQL Server (there are lots of others too). The simplest kind of database is a plain text file. *.ini files only contain program configuration information that the user can change via an options menu, although it can contain other information too.