HR Statutory Compliance for Indian Businesses: Needs, Benefits and Implementation

The last thing a growing business needs is to be bogged down by regulatory breaches or legal
hassles, and this is where the absolute necessity of ‘statutory compliance’ comes in. HR
Statutory Compliance, in the broader sense, has to do with how a company is legally obligated
to protect its people’s health, safety, and welfare. India has its own set of rules and regulations
that organizations ought to follow. Complying with these statutes is how a country can ensure
that its corporations act responsibly and fairly. The regulatory framework landscape in our
country is constantly evolving, and organizations invest a lot of money and effort to stay
abreast of all the changes happening.

Why is Statutory Labour Compliance Important?

Statutory compliance is vital for organizations of all sizes and businesses. It helps them stay in
the government’s good books and avoid being penalized. The government asks companies to
adhere to specific standards and regulations laid down by the law.
In addition, statutory compliance helps an organization in several ways:

• It helps them understand the laws and regulations that govern their industry.
• A thorough understanding helps an organization be on the right track to following all of
  these laws and regulations.
• Statutory compliance in business becomes easy as organizations are not bound by
  personal opinion or bias towards one particular set of rules.

Why Is Statutory Compliance Required, And Its Importance
for Businesses in India?

The term ‘statutory compliance’ has become popular in business circles over the last few years,
but what does it really mean?

Statutory compliance is an integral part of any business strategy, as it ensures that you follow
all the rules and regulations the government sets. This relates to various labor and taxation
rules prevalent in India. These rules tend to change across states.

An excellent example of statutory compliance in business in India would be GST (Goods and
Services Tax), which was launched in 2017. This new tax system has been implemented across
various sectors, such as food, beverages, textiles, etc.

Every company will likely have to comply with GST in some way or another. Your business
might suffer fines or penalties if you need to learn how to do this properly.

However, in India, there needs to be more clarity and clarification about statutory compliance
concerning several regulations, such as the Prevention of Corruption Act 1988. This section is
interpreted in multiple ways when it comes to its application to penalize offenses against new
offenses.

This is why it is critical for businesses in India to have a sound knowledge of these rules and
ensure 100% compliance with them as per states. It eliminates the chances of inviting costly
penalties, boosts PR, and contributes to employee morale.

Effect of Pandemic on Statutory Compliance in Business

The pandemic has impacted statutory compliance in India, especially in healthcare, education,
and employment.

The onset of the pandemic compelled the government to impose a blanket ban on all air travel,
except for essential trips by health workers. The ban was lifted only when there was a
“satisfactory level” of containment of the virus. To reach this level, organizations had to redo
their employee policies, such as mandatory vaccination, and train employees to overlook other
employees complying with the pandemic-related regulations.

Several organizations felt the need for statutory compliance service to enable the pandemic-hit
businesses efficiently execute all the to-dos in the statutory compliance audit checklist.
The importance of statutory compliance service was also majorly felt during the employer
onboarding process. Owing to the pandemic-induced mobility restrictions, HR professionals
had to rely on specialized compliance services to conduct online onboarding of recruits. The
statutory compliance service providers liaised with the employer and the employees to:

• Help the latter understand how to use the internal communication system and
  document folders.
• Help them set up their login credentials and ensure they get access to the required
  hardware and software to get started.

How Do You Ensure Statutory Compliance?

When the government passes a law, it wants to ensure that companies do certain things.
Whether it is ensuring safety standards or promoting waste management, there are many ways
you ensure statutory compliance in business. Here’s how:

1. Ensure your organization has all the required details of the statute and regulations. This
   includes:
   a) The name of the statute, regulation, or code that applies to your organization.
   b) The date on which the law was passed or enacted.
   c) The authority under which it was passed or enacted.
   d) The format in which it is written (legislative-type or executive-type).
   e) A description of how your business will comply with this law (e.g., what activities you
   need to perform).
2. Ensure that employees understand their legal responsibilities, rights, obligations, and
   liabilities due to their actions (if any). This can be done through training programs, education
   materials, etc.

What is Statutory Compliance in Payroll?

Statutory compliance in payroll is a legal requirement of the government that requires
employers to ensure that they pay their employees correctly and in accordance with the law.
This type of compliance can be broken down into three main areas: minimum wage, holiday
pay, and pension contributions.

The minimum wage is an essential aspect of statutory compliance in business as it is a legal
requirement to pay your employees correctly. You must ensure you are not underpaying your
employees, as this can invite costly litigations if flagged by a whistleblower within your
organization.

Holiday pay is another aspect of statutory compliance in payroll that you must be aware of.
This is because it is a legal requirement for employers to give their employees time off work
during public holidays, bank holidays, and other special days.

The pension contribution is another statutory compliance area for employers with employees
covered by pension schemes. If you are an employer who doesn’t offer any pension scheme
cover or if your employee has left your organization before qualifying for one, you might need
to consider this.

Challenges in Statutory Compliances in HR

Statutory compliance in HR is a challenge because of the complex nature of the legislative
framework, which is constantly changing.

The main challenges faced by HR teams are:

Proactive approach to law compliance

While many laws require proactive approaches, most of them are enforced through the courts
and, therefore, must wait for court decisions before they can be put into effect. For example,
suppose the company decides to implement gender pay gap reporting requirements; it must
wait until a court order it to do so or until it reaches a settlement agreement with an employee
who has brought a suit against the company over its failure to implement such requirements.

Subjectivity of laws

In many countries, there is no clear answer on which law applies in any given situation; each
case will require its analysis and interpretation by courts and judges based on local laws. For
example, what is considered harassment under Indian law may not be considered harassment
under US law; similarly, what is considered discrimination under US law may not be considered
discrimination under Indian law.

How Can Companies Implement Statutory Compliance in
HR?

In its true essence, HR compliance helps ensure that you offer your employees a safe and
healthy work environment. Companies that do not comply with regulations may be held liable
for any workplace injuries or illnesses. This can be an expensive liability for a small business,
so it’s essential to understand your responsibilities before you open your doors.

There are various aspects of HR compliance, including:

• Employee records management – Keeping track of employee files, including all employees’ correct job titles and date of birth (DOB); maintaining accurate records for pay slips, leave requests, benefits, etc.
• Employee recruitment – Ensuring that all recruits have been checked against existing databases before hiring them; verifying applicants’ employment history against any blacklisting information from other organizations; checking identity documents such as passports and driving licenses, etc.; taking steps to prevent fraudulent applications from getting accepted.
• Employee orientation – Setting up a well-planned orientation program for new employees

A good HR compliance program will help your company stay on track with regulations and
laws. For example, if you’re required to have an anti-discrimination policy in place, it’s
important that everyone understands what it means and how they should use it. If there are
any discoveries or violations of these policies, your HR team can take care of them without any
problems.

Here are the must-haves in the statutory compliance audit checklist for HR regulations:

Thorough Documentation

Maintaining a document of all the terms and policies relevant to your business genre is
essential. The content can be changed later based on the situation. A perfectly written HR
document scripts the beginning and the end of an employee’s journey with your organization.
It also serves as your first line of defense in case an employee sues you for wrongful
termination, discrimination, and things.

Consistency in Applying Policies

HR managers must make no reservations while applying policies for all employees across
organizations. They must also ensure that all the employees follow the guidelines meticulously.
Therefore, it warrants a regular policy review to ensure that those are communicated to
employees and are followed consistently.

Easy Access to Policies

Ideally, HR managers should maintain a portal that contains all the relevant HR information
and provide access to all internal employees. This eliminates the need for a to and fro
communication between employees and HRs to get hold of a simple information.

Impart Routine Training

An ideal way to ensure your employees’ 100% compliance with company policies is by
conducting routine training on the policies. These pieces of training will help them understand
how they are expected to work and conduct themselves within your organization.

Stay Abreast With Regulations

The onus lies in your HR managers staying updated with all statutory compliance regulations.
This enables the effective formulation of policies and organization-wide compliance with the
same. For instance, it was the duty of the payroll department to implement the dual tax regime
in their payroll administration system to enable employees to choose between the two tax
regimes flexibly.

Conduct Compliance Audits at Regular Intervals

It is essential to conduct compliance audits at regular intervals to determine the efficacy of
your HR policies and identify bottlenecks if any, in advance.

Why Your Business Needs Statutory Compliance?

To Streamline Your Business Processes

As businesses expand, the issues they deal with get more complex, responsibilities get
expanded and so does the much evident importance of statutory compliance. Statutory
compliance could constitute even the simplest of day-to-day tasks such as maintaining the
registers and documents prescribed to the more complex year-end report filings. It can cover
employee matters with regard to hiring, firing, discrimination, harassment, safety, wages,
payroll, benefits and more. To put it simply, business processes end up being streamlined when
statutory compliance is adhered to. As for the key organizational tasks that statutory
compliance entails; these can include licensing and registration, maintenance and upkeep of
requisite registers, calculation of liability and payment thereof, preparation and submission of
periodical statutory reports, attendance of periodical statutory inspections held by government
officials whenever the need arises.

To Safeguard The Interests Of Your Business

Irrespective of the type of the organization, be it private, LLP or partnership-based, it is
essential to execute statutory compliance. Doing so will ensure that the interests of both the
employee and employer are safeguarded in every circumstance. India offers several employee
benefits acts such as industrial relations, minimum wages, social security, women and child
employment, health and safety. Apart from these there are also acts that benefit the
organization like provident fund, trade union, ESI, professional tax, and so on. Being a statutory
compliant company means that each of these acts and laws are adhered to and acted upon.
Nonconformance to the same will definitely lead to drastic legal consequences. The Statutory
Audit is when an inspection mandated by law happens to check on these regulations. Such
audits see to it that the books of accounts presented by organizations are true as per the
finalized statutory audit checklist. With statutory compliance, companies can avoid certain
untoward ‘deer caught in the headlights’ situations that place their reputation and credibility at
stake.

To Stay Ahead of Your Competition

Apart from being on the right and the good side of the law, statutory compliance more
importantly also translates to businesses having a competitive edge. Statutory compliance

enables companies to steer clear of legal implications or expensive penalties, disqualifications
or confiscation of a license. Complying with the requisite regulations will also mean increased
efficiency from all the time, effort and resources being saved in not having to tackle long
winding legalities. An offshoot of statutory compliance is no doubt better public relations,
better stability, better work ethics and employees with higher morale and loyalty when
compared to those in a company with statutory non-compliance.

To Thrive In The Face Of Adversity

The COVID-19 pandemic had put to test the business continuity plans of every company across
the globe. Statutory compliance is crucial to better prepare companies to face adverse
situations such as this. Businesses owe it to their clients and employees to carry on with
operations, while meeting service expectations and fulfilling contractual and regulatory
obligations. The importance of statutory compliance is in proactively preparing organizations
without letting the crisis disrupt the business significantly.

In the wake of adversities like data breaches, cyber-attacks, or weather-related occurrences,
there is a certain level of readiness that business continuity plans need to have and statutory
compliance can help achieve this. Following regulations can help protect the safety and health
of associates and subcontractors, can protect the integrity, confidentiality, and availability of
data, can plan for disruptions, can help identify recovery of technical environments, can
mitigate the negative effects of disruptions on the customers and business operations and
reduce the risk to customers, business operations, and technology. Statutory compliance
ensures that resiliency strategies, recovery objectives, risk management considerations, and
standards for escalation and communication to ensure transparency and trust within the
organization are in place to manage a crisis effectively.

To Improve Collaboration Across Business Functions

When it comes to adhering to statutory compliance, establishing effective policies and
procedures calls for the right amount of collaboration, the right forms of distributive mediums,
and the right methods to measure the understanding of the policies. It is pivotal to ensure that
the company as a whole is on the same page when it comes to matters of statutory compliance.
But there are certain prerequisites that need to be met for this like providing unrestricted
access to local and regional expertise, looking to get expert external support during audits and
inspections when deemed necessary, following ethical practices, being aware of the timelines
for adherence to the many laws and regulations and making sure that the updated documents
and data is made readily available in a centralized location.

The timely and effective compliance could be ensured by meeting with divisional leaders to
understand if the policies and procedures being created are feasible for individual
departments, by zeroing in on the best format of policies for the different audiences within the

company, by seeing to it that the policies and procedures are easily accessible to all the
employees, by setting deadlines for each policy and procedure to be acknowledged and most
importantly by finding the best way to measure the employees’ understanding of the policies
and procedures. Statutory compliance could also guarantee a smooth and hassle-free
onboarding and exit of employees, vendors, and customers for the business.

To Ace The Finer Nuances of Statutory Compliance

For every business to successfully operate in India, compliance with all legal and statutory
norms is indeed a crucial factor. It can be quite a challenging feat to stay current with the latest
developments in the legal framework. Companies can choose from the options of having in
place a statutory compliant software that takes care of all the nitty-gritties of statutory
compliance or outsourcing statutory compliances services. By choosing to outsource, the
company will have at its disposal expert consulting services that come armed with the
personnel and resources for speedy, precise and error-free handling of statutory compliance
processes. The laws pertaining to employees and employers are constantly evolving in India.
Especially when it comes to statutory compliance in small and mid-sized companies, taking the
help of external expert services will seem to be a more viable & sensible option.

Check: manufacturing compliance services in India