Payroll Compliance – An Ultimate Guide

July 18, 2019


Payroll Compliance is defined as the set of processes that go into the generation of payroll and other related procedures. It is the effective calculation and distribution of funds and following of related compliances. It is a must for all businesses. It ensures that all employees are treated and compensated fairly by management. Company’s managers and concerns that deal with payroll must be proficient in related laws and regulations.

To understand payroll compliance, we must first understand the aspect of payroll. Payroll consists of the employees, the amount paid to the employees, and the way funding is used to further company initiatives. Some of the significant aspects of payroll include employee information, salaries, benefits, taxes, and so on.

Some of the significant aspects involved in payroll are:

  • Employee record maintenance
  • Documentation
  • Salaries and Benefits
  • Healthcare and Insurance
  • Analysis

To understand and abide by payroll compliance, HR managers must be aware of the major laws and acts and regulations. Statutory compliance refers to the legal aspects under which an organization works.

Statutory compliance in payroll refers to how an organization adheres to all statues and laws about the aspect of payroll. The process where HR managers gain knowledge and carry out tasks related to payroll processes is called payroll compliance legislation. Every company is required to follow a specific set of standards, laws, and regulations.

 Some of the major laws, acts, and initiatives related to payroll compliance in India are:

  • Minimum Wages Act, 1948.
  • (ESIA) Employees’ State Insurance Act, 1948
  • EPFO (Employee Provident Fund Organization), 1952
  • Payment of the Gratuity Act, 1972
  • Section 196 of the income tax act, 1995- TDS (Tax Deducted at Source)

In certain organizations, HR managers carry out payroll compliance audits. They are assessments or audits done to determine whether the organization is adhering to the rules, laws, and regulations and whether employees are compensated fairly. HR and payroll compliance processes are closely linked. In fact, in most cases, it is the HR department that takes the lead in managing payroll processes and initiatives. Some of the critical elements or procedures are in a payroll compliance checklist, a record of tasks that are to be followed to follow compliance. The payroll compliance checklist and audit help HR managers keep track of all payroll related processes. This helps them find any inconsistencies that could cause them compliance failure leading to fines and penalties.

Payroll processing and compliance were handled in house by HR managers. However, owing to high pressure and competitiveness, organizations began to use software such as OnPay for their payroll processes and then eventually began the process of outsourcing it to licensed third party vendors to handle their payroll processes called third party payroll services.

Payroll compliance is an essential part of the organization’s process. Some of the reasons that make this process integral include:

  • Avoidance of legal tangle and sanctions and fines.
  • Enhancing the company’s image and goodwill in the eyes of the general public.
  • A safe and compliant work environment can help organizations attract top talent.
  • It helps in effectively and legally allocating funds within an organization for both salaries and new initiatives.
  • A compliant organization can also increase the level of integrity with which employees carry out tasks and boost morale and overall effectivity.
  • Organizations that strictly follow compliance also tend to uphold the company’s reputation, which tends to raise stock value and profits.

For any queries related to payroll compliance and legislation, please contact TalentPro to handle your payroll needs.[/vc_column_text][/vc_column][/vc_row]

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