Why Statutory Compliance is required to do business in India - Paysquare

Why Statutory Compliance is required to do business in India

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Why Statutory Compliance is required to do business in India

Every company has one common thing at its core – people. Without people, no organization can function. These people are the company’s employees, who work in various roles to fulfill its purposes. For a company to function well, it needs to be organized and streamlined, with proper norms and regulations set in place. These regulations extend to every facet, including the company’s interactions with its employees and its finances. This is known as statutory compliance.

 

What is a statutory compliance?

In the Human Resources definition (payroll and taxation), statutory compliance is the legal structure within which a company must conduct itself with regards to the treatment of its employees.

 

Why is statutory compliance is important?

Statutory compliance relates to the various labour and taxation laws prevalent in India. These laws change on a State and National level, and it is mandatory for companies to obey them. Non-compliance with these regulations can land a company into legal trouble such as penalties, fines, or worse. This is why companies spend a good deal of resources for ensuring statutory compliance.

 

It is important to have sound understanding of the various labour and taxation laws in India to keep abreast with any changes that need to incorporated, since the law is very dynamic and rules keep changing from time to time.

 

Does Statutory Compliance differ among organizations?

No, it does not. Statutory compliance for a partnership firm, private limited company, LLP,  or any type of company broadly remains the same. Any organization that hires employees or workers and pays them salary or wages must comply with labour laws with regards to monetary compensation, payment of taxes, protection and safety of employees, and fairness of labour.

The following are some labour Acts in India that require statutory compliance.

  • The Workmen’s Compensation Act, 1923
  • The Trade Unions Act, 1926
  • The Payment Of Wages Act, 1936
  • The Industrial Employment Standing Orders Act, 1946
  • The Industrial Disputes Act, 1946
  • The Employees’ State Insurance Act, 1948
  • The Minimum Wages Act, 1948
  • The Factories Act, 1948
  • The Employees Provident Fund & Miscellaneous Provisions Act, 1952
  • The Employment Exchanges(Compulsory Notification Of Vacancies) Act, 1959
  • The Apprentices Act, 1961
  • The Payment Of Bonus Act, 1965
  • The Contract Labour (Regulation & Abolition) Act, 1970
  • The Payment Of Gratuity Act, 1972
  • The Equal Remuneration Act, 1976
  • Inter State Migrant Workmen( Regulation Of Employment & conditions Of service ) Act, 1979.
  • The Child Labour (Prohibition & Regulation Act), 1986

 

And now let’s look at the tax compliances that companies are required to give importance to:

  • Maintaining books of accounts that present a complete and fair overview of the financial position of the company. These books must be maintained in compliance with the relevant accounting standards and must be audited by a certified auditor or Chartered Accountant.
  • Depositing advance taxes and TDS on time, and filing returns according to the norms. This differs according to the nature of the company.
  • Conducting a statutory audit as and when the law demands it.
  • All other paperwork and documentation regarding formation and registration of the company, among others, must be in place.

 

All these laws must be adhered to as they are mandatory for every organization in India.

Ensuring Statutory Compliance

Understandably, it is difficult to know each and every labour and taxation law and its nitty-gritties. What could be the solution to ensure complete statutory compliance without any errors? A proper payroll management system.

What a payroll management system calculates?

  1. How much tax is to be withheld when calculating the salary of an employee.
  2. How much net salary is to be paid to an employee after tax and other deductions.

Both labour and taxation law compliance is taken care of with the payroll management system. Once all the basic information is entered, it does all the calculations for every employee. Just make the required modifications as and when they come, and the system takes care of the rest.

 

Importance and Advantages of Statutory Compliance

The most important advantage of statutory compliance to employees is that it ensures fair treatment of labour. It prevents employees from being exploited or made to work for unmanly hours or in inhuman conditions. It also ensures that they are paid fairly in proportion to the work that they have done, and that companies comply with the minimum wage rate.

The advantage to organizations is the timely payment of taxes, which avoids a lot of legal trouble like penalties and fines. A set of predefined rules makes it easier for the Government to collect revenue as well as for companies to organize their financials. Statutory compliance is important to prevent legal troubles. Companies can be fined monetarily as well as be tried in a court of law, depending on the scale of non-compliance.

 

In Conclusion, Statutory compliance is very important, and must be given due consideration. Companies must have a proper payroll management system in place for streamlining it.

 

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