Statutory Compliances and Payroll in India: All an Employer should know

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Statutory Compliances and Payroll
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In the human resources space, statutory compliance refers to the legal framework that an organisation should abide by in treating its employees. Every country has a myriad of state and central labour or employee laws that organisations ought to comply.


In fact, a lot of time and money is invested in ensuring that all the compliances are met that include but are not limited to wages, professional taxes, maternity, etc. Since it involves regulations and rules pertaining to employment, statutory compliance becomes one of the biggest HR risks for a workplace.


Thus, it becomes imperative for employers to be well-versed with the various statutory compliances associated with employment regulations and labour rules.


Why Statutory Compliance and Regulation?

It is important for both small and large enterprises to adhere to statutory compliances to safeguard their business from legal tussles. Here, a comprehensive knowledge of compliances becomes necessary to mitigate the risks associated with non-compliance.


In today’s cutthroat business ecosystem, it can be very daunting for businesses to handle statutory compliances without a good employee management or payroll management system.


Now talking about India, there are plethora of statutory requirements that businesses in the country ought to adhere to for keeping away from any legal complexities. If a company fails to abide by the required statutory compliances, it might incur heavy penalties. Worst case, it can cost your entire business.


Statutory Compliances for Payroll in India

Here are some common statutory requirements that businesses in India have to adhere:


1. Minimum Wages Act: This regulation requires fixing minimal wage prices for unskilled as well as skilled labourers. It not only assures remuneration for minimal survival needs of the labourers, but also takes care of their medical, education and other needs.


The act being subject to state, statutory compliance is applicable for the remuneration of minimum wages to workers spread across various states. Pocket HRMS has a provision to map this challenging need with multi-location and geography support. Besides this, ‘overtime’ wages is also a statutory requirement as per the Factory Act & Payment of Wages Act. It includes industries such as construction and manufacturing.


2. TDS Deduction: Every employer has to deduct TDS under the section 192 of the IT (Income Tax) act 1961 if an employee’s pay is higher than the amount that is exempt from taxation. Employers also have to maintain Form 16 and 24Q.


Some of the salary components affecting TDS deduction include investments, travel allowance, children education allowance, HRA, special allowance and medical allowance.


3. PF and ESI Fund Deduction: ESI fund regulated by the ESIC is applicable to all those employees whose income is 15,000 INR or less than that per month to offer medical and cash benefits to them and their families.


PF (Provident Fund) is a mandatory contribution fund for the future of an employee for retirement purposes or for their immediate dependants in case of death.


4. Gratuity: It is the amount provided to employees by their employers when they leave their jobs after completing five successful years with the organisation.


5. Professional Tax: Employment or professional tax is a state based tax. It is one of the statutory deduction from an employee’s gross income before computing his/her tax.


Pocket HRMS is a cloud based payroll solution that can take good care of all the aforementioned statutory compliance requirements in India for businesses of all sizes and verticals.


The software allows you to manage ESI and PF preferences, professional tax, salaries, TDS and calculates salaries after all the necessary deductions automatically. It allows generating form 24Q and forming 16 at the click of a button to help manage all the statutory requirements in an effortless and efficient manner.


For more information on how our cloud based payroll software can help keep a check on a number of HR & statutory compliances for your business, contact us here. You can also give us a shout-out at Twitter and Facebook or write to us at


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