This Blog deals with the subject matter, whether the payroll system that you are using is statutory compliant or not? It is very must for the companies to use a statutory compliant payroll system.
What is Statutory Compliance in HR means?
Statutory compliance in HR, refers to the legal framework within which the organizations must operate. Every country has many laws to which the companies must adhere to. A lot of company’s efforts and resources often go into ensuring compliance with these laws. It could deal with a range of issues, from the payment of minimum wages to maternity benefits or professional taxes. Dealing with statutory compliance requires the companies to be well-versed with the various labour regulations in the area of operation.
The Statutory Compliances Required for Indian Payroll
Minimum Wages
This act provides minimum rates of wages for skilled and unskilled labourers. It guarantees money for not only survival requirements but also takes care of education, medical, and some other necessities of life as well.
The minimum wages act being a state subject; the statutory compliance of centralized payroll management is to cater to the payment of minimum wages to an organization’s workers spread out across various states. Payment of overtime is also a statutory requirement.
TDS Deduction
It is mandatory for 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 the maximum amount exempt from the tax. The employers also need to generate Form 24Q and Form 16 in time. The usual components of salary that affect TDS are HRA, Special Allowance, Leave Travel Allowance, Children Education Allowance, Medical Allowance, and Investments.
Statutory Compliances for ESI fund and PF deduction
ESI fund is maintained by ESIC is applicable to employees’ who earn less than Rs 15000 per month. The basic aim is to provide 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
This is a state-based tax. It is one of the statutory deductions from the gross income before computing the tax.
Gratuity
This is the amount given to employees by the employer when they leave the job after completing five years in the service. It is calculated as Basic +DA divided by 26 * no of years of service * 15.
EDLI
EDLI (Employees’ Deposit Linked Insurance Scheme) provides assurance benefits (death insurance cover) to employees along with PF benefit. The employees do not contribute anything towards EDLI. The employers contribute 0.5% of the total wages subjected to a maximum of 6500. EDLI is applicable wherever the EPF scheme is applied.
Thus, whenever you opt for a payroll outsourcing service provider, you need to make sure that your vendor is complying with the points mentioned above. It is essential to follow the laws of statutory compliance to avoid unnecessary hassles in your running of everyday business.
