Statutory Compliance in Payroll- A Complete Guide

All organisations should abide by certain laws and regulations put forth by the government. These laws are in place to ensure the welfare of the employees, employer and the organization. HR compliance encompasses policies and measures to ensure that the company's employment practices exhibit an out-and-out understanding of laws and legislations applicable under the respective constitution. 

Failure to withhold taxes is considered as a punishable offence but non-remittance of withheld tax to the government is considered more graver crime. Both the scenarios are treated as law violations and can result in huge penalties and imprisonment of the employer. This compliance should be strictly maintained by the employer to ensure employee welfare and smooth running of the organization. 

 

Statutory Compliance in HR

 

Statutory compliance in HR is the predefined legal framework which every organization should follow. Although a lot of work hours and efforts goes into compliance with such a framework, no organization should afford to go wrong with it. Failure to do so will result in penalties and legal actions. 

Some Major statutory requirements in India

The Minimum Wages Act, 1948: This act was established to ensure the minimum rate of wages in certain employments. The State government fixes the minimum wage rate according to the employment classes. 

The Shops and Commercial Establishments Act (1953): This act provides statutory obligations to employers and employees who work in restaurants, theatres, hotels, centres of public entertainment, and other commercial establishments. 

TDS Deduction: This ensures tax deductions tax deduction at source under section 192 of the income tax, 1961. This applies to all the employers having salaried employees working under him. 

ESI fund statutory compliance: ESI (employees’ state insurance) is a health insurance and social security scheme that comes under ESI act 1948. This fund is managed by the Employees' State Insurance Corporation. The monthly wage limit for ESIC is 21,000 per month and the contribution is 4%. 

EPF deduction compliances: EPF is a fund wherein employee and the employer contributes an equal prefixed amount of money which can be leveraged by the employee afterwards. In most cases, the deduction amount is calculated as 12% of basic salary and dearness allowance. All the organizations having more than 20 employees should be strictly compliant to EPFO. 

Professional tax: It is levied by the state government following a slab based system. It is mandatory for every working personnel and non-compliance can attract penalties. 

Gratuity: This falls under payment of gratuity act 1972. Gratuity is a benefit paid to the employees for certain services they render to the organization. It is usually paid during the retirement of the employee but can also be paid if certain requirements put forth by the employer is met. 

Maternity benefit act: This act protects the vocation of women employees during the time of her maternity and grants her certain benefits for welfare. The act allows full paid absence from work and also other allowances for the benefits of the child. This act applies to all the organizations having 10 or more employees.