What Is Statutory
Compliance?
Statutory compliance, in HR, refers to the legal framework
within which organizations must operate, in the treatment of their employees.
Every country has several hundreds of federal and state labour
laws that companies need to align with. This list is forever being added
to.
A lot of your company’s effort and money goes into ensuring
compliance to these laws which could deal with a range of issues; from the
payment of minimum wages to maternity benefits or professional taxes.
Therefore, dealing with statutory compliance requires for
companies to be well-versed with the various labor regulations in their country
of operation.
What Is The Need For
Statutory Compliance?
Adhering to statutory compliances is necessary for all big and
small companies in the world to keep their businesses safe from the legal
trouble. A deep knowledge of statutory compliances is required to minimize the
risk associated with the noncompliance of statutory requirements and payroll.
In today’s competitive
and legal business world, it is very challenging for employers to manage statutory compliances without
a good payroll consultant . This blog discusses the
statutory requirements for Indian payroll system.
There are a number of
statutory requirements for Indian companies and companies have to spend a
significant amount of time in their payroll management to ensure that they are
compliant with the legal regulations. If companies fail to adhere to statutory compliances, they may have to face
heavy penalties which are several times more than complying with legal
guidelines.
The Statutory Compliances
Required For Indian Payroll
The common Statutory requirements that companies have to follow
for their payroll management in India are:
Statutory Requirements
For Minimum Wages
This act provides for fixing minimum rates of wages for skilled
and unskilled laborers. It not only guarantees money for bare minimum survival
requirements of workers but also takes care of education, medical requirements,
and some level of comfort of workers.
The Minimum Wages Act
being a state subject, the statutory compliance of a centralized Payroll
management is to cater for the payment of minimum wages to an organization’s
workers spread out across different states.Payment of ‘Overtime’
wages to workers is also
a statutory requirement as per the Factory Act & Payment of Wages Act. It
affects sectors like manufacturing & construction.
TDS Deduction
Every employer who is paying salary to employees has to deduct
TDS under section 192 of the Income tax Act, 1961, if the salary is more than
maximum amount exempt from tax. The employers also need to generate Form 24Q
and Form 16 in time. Some of the salary components that impact TDS deduction
are: HRA, Special allowance, Leave travel allowance, Children education
allowance, Medical allowance, Investments.
Statutory Compliances For
ESI Fund And PF Deduction
ESI fund, maintained by ESIC is applicable to employees earning Rs
15,000 or less per month to provide the cash and medical benefits to them and
their families.
PF is a compulsory contributory fund for the future of employees
after their retirement or for their dependents in case of their early death.
Professional Taxes
Professional tax or employment tax is a state-based tax. It is
one of the statutory deductions from the gross income before computing the tax.
Gratuity
Gratuity is the amount given to employees by employer when they
leave the job after completing five years in service. Gratuity is calculated as
Basic + DA divided by 26 * No of years of service *15.
The payroll consultant
takes care of all the above given compliance requirements and statutory
deductions required in India. They allows you to manage your PF and ESI
preferences, manage professional tax, select the salary heads applicable to
you, manage TDS through investment declarations and automatically calculate
salaries after TDS deduction while processing payroll.
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