Payroll Statutory Compliance
Payroll in India is very overwhelming. There are various components in payroll such as CTC, Basic, HRA, TA, DA, EPF, Income Tax, Form-16, and so on. Calculating payroll manually is not an easy task for any organization. Therefore, it becomes crucial to have a payroll system that is scalable and robust.
Payroll is just not about paying salaries to employees but it’s an entire process that takes place straight from the employee punching into the generation of his/her pay-slip. It will be a tedious process to work on a month-on-month basis and require dedicated resources.
In India, companies have to ensure that the company’s payroll is compliant with the required laws and regulations. Companies worry a lot about facing legal issues associated with statutory compliance It becomes necessary for companies to have statutory compliance in HR.
What is Statutory Compliance?
Statutory Compliance is established by businesses to adhere to the rules and regulations of the state. Under Statutory Compliance comes all the labor and taxation laws of the state. Companies in India must endure both National and State-level laws. Therefore, all companies dealing with statutory compliance need to be well-versed with the labor regulations.
Non-compliant with the regulations amounts to facing legal troubles such as :
Heavy fines, penalties, or even complete shutdown in extreme cases.
1. Civil or criminal liabilities.
2. Loss of the company’s integrity.
3. Distrust amongst stakeholders.
4. Loss of company’s loyalty among employees, clients, etc.
One needs to have deep knowledge about statutory to avoid risks related to non-compliance.
What are Statutory Rules in India?
About Statutory compliance in the Indian Payroll Management system, there are several standard statutory requirements that companies should chase for their payroll management.
Major Statutory Requirements in India
The Minimum Wages Act, 1948
The Provincial Governments and the Central Government have determined under the Minimum Wages Act, 1948 that the minimum wage rates are fixed for Indian companies.
The minimum wage rate is set and declared at different levels, such as sectoral, occupational, state, and National levels.
These wages can be established for any occupation, region, or sector.
This act ensures that the skilled and unskilled laborers are getting paid well enough and this is further determined by considering the cost of living.
The Central and State Governments in India may notify the employees scheduled and fix/revise minimum wage rates for these scheduled employments under the Minimum Wage Act, 1948.
There are two methods for fixing/revising minimum wages:
1. Committee Method- Committees and subcommittees are set by the government under this method, to make recommendations and inquiries for changing and fixing minimum wages.
2. Notification Method- Under this method, proposals are fixed by the government in the official Gazette for the persons who will be affected and will also specify the date two months prior. After this, the proposals are taken into consideration.
The fixes/revises for the minimum wage of the concerned scheduled employment come into force from the date of its issue after three months.
The Payment of Bonus Act, 1965
This act is catered to an annual bonus to the employee at specific levels in the company and specific organizations such as factories and companies with employees more than 20 employees.
Bonuses under this act are given based on the salaries of the employees and the profit made by the organization.
The eligibility for Bonus Payment Act is Employee, drawing a salary of Rs. 21,000 per month or less, have completed 30 working days in that financial year.
Bonus is supposed to be paid at a minimum rate of 8.33% and a maximum of 20%.
Bonus is made within eight months from the closing of the previous accounting year.
In case employees are dismissed by fraud, misconduct, or even absenteeism, they can be disqualified from playing the bonus.
Maternity Benefits Act, 1961
This employment act has been set up to give job security to women during the time of their maternity. This act is applicable in all organizations having more than 10 employees. The employee is granted full pay for her absence from work during maternity.
To be eligible for this benefit, they must have been working as an employee in an establishment for a period of at least 80 days within the past 12 months. Payment during the leave period is based on the average daily wage for actual absence.
This act applies to organizations only including factories, mines, shops, plantations, government establishments and establishments under the relevant legislation, or any other establishment dictated by the Central Government.
Benefits are as such:
1. Duration of maternity leave is 26 weeks.
2. Parental leave is applicable up to a period of 8 weeks.
3. The Maternity Benefit Amendment Act has also introduced an enabling provision relating to “work from home” for women, which may be exercised after the need of the 6-week leave period. This is dependent on the nature of the work.
