While compliance is a normal term that indicates adherence to rules and laws, statutory compliance is particularly related to the adherence of labour and HR-related rules and laws.
Every organization needs to follow some government set guidelines and laws which are related to taxes, employees, and payments. These guidelines and laws fall under statutory compliance. When an organization fails to maintain statutory compliance, penalties and fines are imposed by various authorized bodies. This is why obeying statutory compliance in India is important.
In this article, we will discuss the basics of statutory compliance management and ways to stay away from penalties through statutory compliance list.
What is Statutory Compliance?
Statutory compliance in HR indicates a legal framework that allows organizations to operate according to a certain structure. This structure is generally related to the employees of the organization.
However, this structure doesn’t always remain the same. According to the changes in the HR landscape, the governing authorities keep changing the statutory compliance requirements as well.
As a result, a major portion of the HR budgets goes into ensuring compliance and maintaining the integrity of the systems. From wage payments to professional taxes, statutory compliance demands organizations to stay updated with the latest rules during HR operations.
Need For Statutory Compliance Management
Adhering to the compliance keeps every small and big organization away from legal issues. A deep understanding of statutory laws allows these organizations to minimize or mitigate the risks related to non-compliance.
However, the number of rules that Indian Organizations have to follow to maintain statutory compliance often takes the edge away from the company. Even after careful supervision and scrutiny, companies find themselves approaching towards non-compliance or non-adherence.
Hence, to help you follow the statutory compliance without any hassle, we have prepared a statutory compliance updated checklist. You can follow this checklist to stay updated with the current laws and regulations.
Updated Checklist for Statutory Compliance 2021
- The Employees Provident Funds and Miscellaneous Provision Act - 1952 (EPF)
- Shops and Commercial Establishments Act (S&E)
- The Employees State Insurance Corporation Act - 1948 (ESIC)
- The Labour Welfare Fund Act (LWF) 1965
- The Professional Tax Act (PT) 1975
- The Minimum Wages Act-1948
- The Child Labour (Prohibition & Regulation Act), 1986
- The Payment of Wages Act-1936
- The Maternity Benefit Act-1961
- The Contract Labour (Regulation & Abolition) Act - 1970 (CLRA)
- The Payment of Bonus Act-1965
- The Industrial Establishment (N&FH) ACT 1963
- The Payment of Gratuity Act-1972
- The Employment Exchange (Compulsory Notification of Vacancies) ACT-1959
- The Equal Remuneration Act-1976
- The Apprentice ACT, 1961
- The Industrial Employment (Standing Orders) ACT 1946 - Model Standing Order Only
- Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) ACT, 2013
- The Industrial Disputes ACT 1947
- The Employees Compensation ACT-1923
- The Interstate Migrant Workmen (Regulation of Employment and Conditions of Services) ACT, 1979
- The Trade Unions Act, 1926
Statutory Compliance in India
Although every organization needs to follow the above checklist for statutory compliance, here are some of the basic rules and laws that are extremely important. These rules are also the ones which face maximum errors, so, understand these carefully.
The minimum wage act, as mentioned above, defines the minimum amount of money that any worker should get to ensure optimal requirements of the worker are met. This wages act doesn’t only look after the requirements in terms of money but also offers medical help, education, and other relief.
Since this act is a state’s matter, any organization is expected to follow the act as per the relevant state guidelines.
Every employer is expected to deduct TDS of employees as per the guidelines of the act. Of course, a lot of employees don’t come under tax bracket, but as an organization, it is the HR’s responsibility to deduct TDS wherever applicable.
Further, the HR team also needs to produce Form 16 and other necessary documents for the employees. This helps in filing returns so it is important for the HR team to create these documents on time.
ESI and PF
Any employee with a salary INR 15,000 or less is expected to pay ESIC deduction every month. The HR team, on the other hand, is expected to deduct this amount and pay it to the ESIC department to allow employees to gain health benefits.
PF is another compulsory deduction. This money is saved in the PF account and can be withdrawn only after a certain period of lock-in. The PF act is offered with the aim of helping the employee save some amount of money for the future purpose.
If any employee in the organization completes 5 years of service, the company offers gratuity to the employee. The gratuity amount is deducted monthly from the salary of the employee on a regular basis.
Why Statutory Compliance is Important?
- With compliance, a lot of factors related to a company are attached. For instance, if a company suffers non-compliance related to the TDS, the company’s reputation is put at stake. The existing employees start doubting the efficiency of the company and the potential employees may not even join because of this.
- One of the biggest reasons for statutory compliance is to offer equal treatment to every employee of the organization. This equality comes from many of the laws and rules mentioned above in the checklist. Many times, different workers are made to work different hours and other times, wages differ based on multiple factors. To avoid this, statutory compliance offers a clear pathway.
- Due to statutory compliance, there are clear guidelines for tax payments. This not only helps the taxpayers to pay tax on a timely basis but also allows the tax-collectors to easily collect due tax on a timely basis.
- If statutory compliance is not maintained, customer loyalty is severely hampered. Just as employees start doubting the organization for poor compliance structure, customers are also unwilling to work with organizations that have a poor statutory compliance structure.
- Another big reason for maintaining statutory compliance in financial losses. When non-compliance penalties and fines are imposed on an organization, financial losses follow. This can disrupt the cash flow to a great extent.
Things to Remember
Below we have mentioned some of the things that companies should remember for statutory compliance:
- Every organization is required to maintain books and accounts with accuracy to keep details of every transaction of the company. These books should be maintained in accordance with the accounting standards.
- According to the nature and the type of the organization. TDS should be submitted and returns should be filed on time.
- As per the law requirements, multiple companies are expected to conduct an audit. This should be achieved as per the requirements of the law.
- Other than all the above requirements, the proper documentation pertaining to the establishment and registration of the organization should be secured at all times.
Statutory compliance is an important part of every organization. However, statutory compliance is still extremely difficult. Hence, we have created a checklist above and mentioned a few tips to help you cope up with the compliance demands of your organization.