What Is Statutory Compliance in Payroll?

Statutory compliance encompasses all areas of an organization’s functioning. The statutory compliance that pertains to payroll is referred to as statutory compliance in payroll. Statutory compliance in payroll can either be handled in-house or by an HR company that will act as a payroll and compliance partner.

Why Is Statutory Compliance Important in Payroll?

Statutory compliance in payroll ensures that the workers are paid fair wages and work fair hours to earn them. It also reduces the risk of lawsuits or penalties incurred by the business because of non-compliance. Finally, it leads to effective dispute resolution and ends up creating a work environment that is healthy, safe, and friendly for everyone.

Who Manages Statutory Compliance in Payroll?

Statutory compliance in payroll is managed either by the HR or compliance team within the company. It is mostly managed by a person with a strong HR or legal background and a good knowledge of the laws applicable in the country. Statutory compliance in payroll can be managed by either one or a few people or an entire team, depending on the size of the company and its needs.

How Statutory Compliance in Payroll Benefits Both Employees and Employers?

Statutory compliance in payroll benefits both employees and employers. Here is how statutory compliance in payroll benefits both:

How it benefits employers:

1. Reduces risk of lawsuits or other penalties arising from payroll non-compliance.
2. Improves the brand reputation as a company that cares about employees.
3. Improves the quality of candidates applying to the company because of better reputation.
4. Improves the trust that employees and investors have in the company, enabling them to tide over difficult times.

And here is how it benefits employees:

1. They get paid on time and can meet their commitments.
2. Employees are paid a fair wage and can demand more if they are paid unfairly.
3. Employees are not discriminated against based on gender or otherwise.
4. They have a way of registering a complaint to secure their rights in case of non-compliance.

List of Payroll Statutory Compliance Requirements

If you are a company operating in India, there are several Acts set by the Government, for the safety, welfare, and wellbeing of the employees, that every company must follow. Here is a payroll compliance checklist that your organization must follow:

1. Employee Provident Fund (EPF) Act, 1952

Ensures that there is an accurate deduction towards a fund to aid employees in a crisis.

2. Employees’ State Insurance (ESI) Act, 1948

Ensures that there is a small allocation of funds to the ESIC, which ensures a minimum amount of insurance for the employee.

3. Professional Tax (PT)

A tax due for deduction from the employee’s salary towards the state, and it can be a maximum of 2500.

4. Income Tax Act, 1961

It specifies that a certain amount of tax will be deducted from the income of the individual and puts forth guidelines on how it must be handled.

5. Payment of Gratuity Act, 1972

When the employee has completed a term, he/she is eligible for a gratuity that must be paid to them by the employer.

6. Payment of Bonus Act, 1965

A bonus must be paid after a certain period, which is directed as per this act.

7. Minimum Wages Act, 1948

An employee must be paid a minimum salary according to the Minimum Wages Act.

8. The Equal Remuneration Act, 1976

It says that employees in the same role must be paid equal wages, irrespective of their gender.

9. Maternity Benefit Act, 1961

This Act provides benefits to mothers and ensures they are paid a minimum salary during the maternity leave as well.

Risks of Payroll Non-Compliance

Payroll non-compliance can lead to several problems for the organization. Some of the risks of non-compliance in payroll are:

1. Possibility of legal issues being raised by employees.
2. Due to non-compliance in payroll, penalties could be enforced by the government.
3. Loss of reputation, which can in turn attract mistrust and hesitation from candidates, vendors, and customers.
4. It can invite unnecessary audits from the authorities which can waste a lot of time.

How Alp Can Be a Statutory Compliance Partner for Payroll

Alp can be your statutory compliance partner in payroll. We will ensure that the payroll process in your company follows statutory compliance and is error-free and accurate for every employee. You can outsource your payroll process in its entirety to us, and we will take care of it.

Rest assured that any compliance issues will be addressed during an audit and that the right resources will be assigned to the job and the stakeholders will be informed of any flaws in the payroll process.

Alp Consulting will be continuously monitoring the payroll process and addressing any issues of misconduct, data breach, or the like, which could lead to employee dissatisfaction and a loss of reputation for the company. Talk to us today to ensure that your payroll is 100% compliant with statutory norms.

Frequently Asked Questions

1. What does statutory compliance in payroll include?

Statutory compliance in payroll includes things like income tax deduction and insurance allocation in payroll, along with the deduction of professional tax and the award of gratuity to eligible employees. It involves also ensuring that everyone is paid a fair wage, irrespective of gender.

2. How to do a payroll compliance audit?

To do a payroll compliance audit, you need to have a payroll compliance consultant and trusted members from your payroll team to share the data with them. A payroll compliance audit can take a few days as a detailed analysis of the company’s payroll will be done. It must follow an established process and there must be well-established KPIs too.

3. Who does a payroll compliance audit?

A payroll compliance audit is done by a payroll compliance professional, and the data is shared by members from the payroll team. This is then shared with the government. A payroll compliance audit could be conducted by the government too to ensure that everything is in order.

4. Are payroll compliance laws the same everywhere?

Payroll compliance laws are different in different parts of the world, with each country having its own tax laws and even terms for gratuity or maternity leaves. This is why a payroll compliance consultant who is familiar with the nation’s laws must handle the payroll compliance process.