Statutory and Compliance

Statutory and Compliance

Statutory compliance, in HR, refers to the legal framework within which organizations must operate, in the treatment of their employees. Every country has several hundreds of federal and state labour laws that companies need to align with. This list is forever being added to. A lot of your company’s effort and money goes into ensuring compliance to these laws which could deal with a range of issues; from the payment of minimum wages to maternity benefits or professional taxes. Therefore, dealing with statutory compliance requires for companies to be well-versed with the various labor regulations in their country of operation.

What is Statutory Compliance?

Statutory compliance, in HR, refers to the legal framework within which organizations must operate, in the treatment of their employees. Every country has several hundreds of federal and state labour laws that companies need to align with. This list is forever being added to. A lot of your company’s effort and money goes into ensuring compliance to these laws which could deal with a range of issues; from the payment of minimum wages to maternity benefits or professional taxes. Therefore, dealing with statutory compliance requires for companies to be well-versed with the various labor regulations in their country of operation.

Employee Provident Fund

Employee Provident Fund is a very important tool of retirement planning. The tax free interest (compounding) and the maturity ensures a good growth of your money. If continued for a very long term, it can help immensely in meeting ones retirement goal. But while fulfilling other goals or during emergencies, we fall short of funds even after taking all recourse and do force borrowing. At this moment EPF can be helpful due to certain benefits it provides which most of us are unaware of.

What is the Need for Statutory Compliance?

Statutory compliances is necessary for all big and small companies in the world to keep their businesses safe from the legal trouble. A deep knowledge of statutory compliances is required to minimize the risk associated with the noncompliance of statutory requirements.
In today’s competitive and legal business world, it is very challenging for employers to manage statutory compliances without a good payroll management software . Each country has various kinds of compliance requirements. This blog discusses the statutory requirements for Indian payroll system.
There are a number of statutory requirements for Indian companies and companies have to spend a significant amount of time in their payroll management to ensure that they are compliant with the legal regulations. If companies fail to adhere to statutory compliances, they may have to face heavy penalties which are several times more than complying with legal guidelines.

PF procedure
New Company Registration
• Filing of necessary papers and obtaining PF registration code number for new establishment within prescribed time as per Act.
• Form 5A (Return of ownership).
• Form 9(Revised)
• Submission of digital signature.
• Guide on different Forms required for PF
• Submission of digital signature.
• Guidance on PF calculation.
• Guidance on PF condition.
• No filing returns.

Monthly Process
• PF Form filled
• Guide employee about the benefits about PF.
• Support in withdrawal procedure
• Understand them about KYC documents required for PF
• Preparation of monthly payouts for EPF & depositing the same.
• Filling of all necessary Challans.
• Maintaining monthly PF ECR file.
• Maintenance of all statutory registers required by the Provident Fund authorities.
• Filing of nomination and declaration Form (Form no.2 and Form no11) of the new employees.
• All assessment & inspection from EPF department, as and when required.
• Informing and advising with regards to any amendment/changes in the concerned Act.

Annual Process
• Assist with PF authorities for annual PF Slips.

PF Withdrawal & Transfer
• Ensuring that PF withdrawals and transfer are within prescribed time as per the Act.
• Form 19, 10C& 15G after 60 days of leaving of the employee after scrutinizing the same submitting with EPFO.
• Documents require for PF withdraw (Pan Card, Cancelled Cheque, Passbook First page photo copy, Aadhar Card, Any Address proof, 2 revenue Stamp).
• Receipt of Acknowledgment of PF Withdrawal.
• PF cannot be withdrawn before 5yrs.
• You can withdraw total money from EPF Account, when you resign or retire & apply for settlement of PF.
• Receipt of PF Transfer Forms (Form 13) from new appointee and sending them to PF Consultant/RPFC for getting the fund transferred through the concerned RPFC office.
• Scrutiny of papers to ensure that same are within the norms as specified under the rules.
• Acknowledging the transfer received.

Pf Calculation:
• Employee’s – 12% on basic earned
• Employer – 13.67 % on basic earned ( 8.33% – Pension, 3.67 % Employee PF fund, 1.61% – Admin charges)

Benefits:
1. You savings for the Future. Important tool for retirement planning.
2. Pension Benefits
i. Pension to Member
ii. Pension benefit to Family (on death of member)
iii. Pension scheme certificate (After attaining the age of 58 & above, the member can apply for Pension by surrendering the certificate.)
3. Withdrawal Benefits
i. If not eligible for pension, member may withdraw the amount accumulated in his pension account
ii. The calculation of this amount is based only on (i) Last average salary and (ii) Service (Not based on actual amount available in Pension Fund Account)

The Statutory Compliances Required for Payroll
The common Statutory requirements that companies have to follow for their payroll management in India are:
Statutory requirements for Minimum wages
This act provides for fixing minimum rates of wages for skilled and unskilled laborers. It not only guarantees money for bare minimum survival requirements of workers but also takes care of education, medical requirements, and some level of comfort of workers.
The Minimum Wages Act being a state subject, the statutory compliance of a centralized Payroll management is to cater for the payment of minimum wages to an organization’s workers spread out across different states. Payment of ‘Overtime’ wages to workers is also a statutory requirement as per the Factory Act & Payment of Wages Act. It affects sectors like manufacturing & construction.

TDS deduction

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 maximum amount exempt from tax. The employers also need to generate Form 24Q and Form 16 in time. Some of the salary components that impact TDS deduction are: HRA, Special allowance, Leave travel allowance, Children education allowance, Medical allowance, Investments.
Statutory compliances for ESI fund and PF deduction
ESI fund, maintained by ESIC is applicable to employees earning Rs 15,000 or less per month to provide the 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

Professional tax or employment tax is a state-based tax. It is one of the statutory deductions from the gross income before computing the tax.

Gratuity

Gratuity is the amount given to employees by employer when they leave the job after completing five years in service. Gratuity is calculated as Basic + DA divided by 26 * No of years of service *15.

EDLI

The EDLI (Employees’ Deposit Linked Insurance Scheme) provides assurance benefit (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 of employees subject to a maximum of Rs 6500/-. EDLI applies to all the organizations where EPF Scheme applies.

The EmpXtrack Payroll Software takes care of all the above given compliance requirements and statutory deductions required in India. It allows you to manage your PF and ESI preferences, manage professional tax, select the salary heads applicable to you, manage TDS through investment declarations and automatically calculate salaries after TDS deduction while processing payroll. In addition, it allows you to capture Challans and generate form 16 and form 24Q to manage all your statutory compliances with ease and efficiency.

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