Category: Compliance Management

Statutory Compliance – Everything You Need To Know!

Statutory Compliance – Everything You Need To Know : Introduction

In India, organizations invest time and efforts to rest assured that the company’s payroll is compliant as per the required proper laws and regulations. Legal problems are amongst the major concerns for an organization.

These compliances are not necessarily violated with an intent to do so, most of the time the violation is a result of loopholes that occur within the organization. Non-compliance poses a constant threat to business ventures, which is the reason why keeping up with statutory compliance becomes a necessity.

You may also like to read : What is Compliance Management?

What is Statutory Compliance?

Statutory compliance can be understood as a pre-defined legal framework. This legal framework acts as the boundary within which the organizations must function. When the policies, protocols, or activities of an organization fail to stay within the limits of statutory compliance, they end up violating the laws and invite legal trouble.

What is Statutory Compliance

Statutory compliance presents guidelines that provide a basic discourse with laws that protect the interests of the employees working in an organization. These laws are formulated by Central and State Labour Laws.

They are aimed at maintaining a balance between the employee, the employer, and the organization. Irrespective of the size of the organization, every enterprise is required to abide by these laws.

Benefits of Statutory Compliance

Statutory compliance offers benefits to the major components of an organization i.e. – the employee, the employer, and the organization itself.

Given below are some of these benefits –

Benefits for employees

Statutory Compliance ensures that the employees receive fair treatment and get paid on time. It looks after the work conditions and healthy work environment for employees.

Benefits for the organization and the employer

Statutory Compliance upholds clarity in terms of defined rules and regulations. This allows the organization and the employer to conform to them and save themselves from legal penalties.

Statutory Rules in India

Statutory Rules in India

Given below is the list of Statutory Rules that a company must embrace in India –
  1. Shops and Commercial Establishments Act (S&E)
  2. The Employees Provident Funds and Miscellaneous Provision Act – 1952 (EPF)
  3. The Employees State Insurance Corporation Act – 1948 (ESIC)
  4. The Professional Tax Act (PT) 1975
  5. The Labour Welfare Fund Act (LWF) 1965
  6. The Contract Labour (Regulation & Abolition) Act – 1970 (CLRA)
  7. The Child Labour (Prohibition & Regulation Act), 1986
  8. The Minimum Wages Act-1948
  9. The Payment of Wages Act-1936
  10. The Payment of Bonus Act-1965
  11. The Maternity Benefit Act-1961
  12. The Payment of Gratuity Act-1972
  13. The Equal Remuneration Act-1976
  14. The Industrial Establishment (N&FH) ACT 1963
  15. The Employment Exchange  ACT-1959
  16. Sexual Harassment of Women at Workplace  ACT, 2013
  17. The Employees Compensation ACT-1923
  18. The Industrial Employment  ACT 1946
  19. The Industrial Disputes ACT 1947
  20. The Apprentice ACT, 1961
  21. The Interstate Migrant Workmen ACT, 1979
  22. The Factories ACT, 1948
  23. The Trade Unions Act, 1926

Significant terms related to Employee Compensation :

TDS deduction

TDS stands for Tax Deducted at Source.

It is reduced by the employer from the employee’s income. Components like HRA, Special allowance, Leave travel allowance, Children’s education allowance, Medical allowance and Investments affect the amount of TDS deducted.

As per the guidelines laid down by the income tax laws 2020, an employee gets the freedom to choose from the old and new tax regimes. Depending on this choice, the tax deduction is made from their income.

 What is PF?

 What is PF?

PF stands for Provident Fund.

It is a mandatory contributory fund that is collected for the future of the employees after they retire or leave their job. In case of the sudden demise of the employee, the fund is handed over to their family.

The Statutory Compliances associated with PF contribution are:
  1. EPF (Employee Provident Fund)
  2. EPS (Employee Pension Scheme)

Any company that has an employee count of twenty or more, requires to be EPFO-compliant.

What is PT? 

PT stands for Professional taxes.

Professional Taxes are the taxes that are imposed by the state government. Every state has its own laws for administering the professional tax. The common factor amongst all states is their slab-based system.

Professional tax is mandatory for all individuals who are employed. In case of non-compliance to PT, a penalty is imposed by the state on the non-compliant party.

Professional taxes

What is Gratuity?

Gratuity is the term for the amount that is given to employees by an employer when they quit the job. The condition for an employee to expect gratuity is that they must complete five years of service in the company before leaving the job.

To calculate Gratuity one can use the following formula-

Gratuity = (Basic + DA) divided by 26 x Number of years of service x 15

The Minimum Wages Act, 1948

As the name suggests, the Minimum Wages Act aims at standardizing the minimum wage rates in all Indian companies. The minimum wage is determined by both the Provincial Government and the Central Government. These wagers can get established for any sector, occupation, or region.

The Minimum Wages act assures that competent and incompetent laborers are paid enough to meet their basic ends and sustain a livelihood. It majorly acts as legal protection against labor exploitation.

The Shops and Commercial Establishments Act (1953)

The Shops and Commercial Establishment Act intends to bestow rights and statutory commitments to employers and employees. This act is to be conformed by employers and employees who are involved in shops and business ventures that pertain to the unorganized business sector.

This act requires compulsory registration of the commercial venture or shop within 30 days of starting with their work.

Statutory Compliance Acts

Conclusion

Statutory compliance aims at providing protection and ensuring well-being for the employees, the employer, and the organization. In India, these compliances associate with numerous labor and taxation laws mentioned above in the article.

These laws are declared by the State and Centre, and change at the discretion of the same. It is important for business organizations to conform to these laws and protect themselves from legal penalties issued on non-compliance to the same.

 

 

 

 

What is Compliance Management 

What is Compliance Management –Introduction 

The potential of a company is not just highlighted by its performance but also by its work culture and professional ethics. Compliance Management is one important aspect that saves an enterprise from getting tagged as non-ethical on the grounds of mismanaged compliances and non-adherence to standards and policies laid down by the industry and the law.

Compliance Management

What is Compliance Management?

Companies need to ensure that their work standards are in tandem with the policies enlisted by the law. Compliance Management assists them in monitoring the same. It regulates and evaluates the system to make sure that all ongoing processes in the company acknowledge and fulfil the standards of the industry and take care of all security measures. It also keeps a check on the work structure to ensure that all the corporate and regulatory policies are met by the company.

Good Office Management Can Build Great Team Spirit!

A major feature of compliance management is to build an infrastructure that recognizes processes that are not compliant and do not keep up with the regulatory policies or industry standards.

What is the importance of Compliance Management?

To understand the importance of Compliance Management, take an example of a simple instance from your school days. There were certain rules with respect to your behaviour, dress code and academics in school. If you broke any of those rules you would end up in trouble.

Every act of disobedience led to different kinds and extents of punishment. Similarly, there are numerous regulations and industry standards that are required to be followed by companies. These standards aim at creating a healthy, ethical and legal workspace for companies, employees and customers.

Non-compliance with any of the guidelines, laws and regulations can lead to penalties, charges, the convulsion of company certificate or cancellation of their legal permit.

Importance

Compliance management makes it easy to keep up with all compliance updates and ensure a safety belt around your enterprise. It keeps the company up to date with all federal and legal legislations.

Organisations need to comply with the dynamic rules and manage their personnel in a better way. It prepares them against all chances of penalties or accusations on grounds of inadequate management.

The company can even face fatal consequences like imprisonment for senior management in case of any complaints that are proven to be true. This highlights the role of Human Resources to balance the workspace and ensure that the rights of their employees are considered and they are always treated fairly.

Steps for successful management of compliance in a business 

As discussed earlier in our article, compliance management is a crucial aspect that contributes to the growth of an enterprise. In order to build a thriving system for managing and monitoring the compliance infrastructure of a business venture, here are a few steps that need to be considered :

  1. Assess your system: Identify processes in your systems that do not comply with the regulations and violate them to cause damages to the image and functioning of your company.
  2. Organize your system: Invest ideas in building a system that prioritises correction, updates and improvements. Organize your action plan and build a proper framework for the same.
  3. Remediate your system: Stay active in changing the configuration of your system the moment you detect any irregularity or violations.
  4. Report and address changes in your system: Validate and address all the changes that are made to your system.

Challenges in Managing Compliance

On your way to successfully manage your compliances, there will be a plethora of challenges that will come your way. Some of those challenges are :

Transformation in security and compliance standards

There is a dynamic change in compliances and security threats. These constant changes require a quick and prompt response and need the company HR to be ready for taking up on all evolving regulations.

Scattered infrastructure

A single company deals with different aspects, departments and platforms for operation. This makes it difficult for HR to get a complete overview of their integrated workspace and the compliance infrastructure applied to them. The absence of a convenient overview makes it difficult to evaluate, detect and respond to risks and threats.

Audit-CM

Big enterprises and workforce 

While working in an environment with a large team, big enterprises often land in situations where they are unable to manage the arduous company strength and a lack of coordination and communication is highlighted. This increases the possibilities of a data breach, non-regulation of industry standards and chances of overlooking company policies and regulations.

Tips to construct an efficient Compliance Management System

A multifaceted approach is all you need to beat all the challenges and keep an eye on the compliances of your company effectively. It will assist you in staying on track with all regulatory updates and monitoring all conflicts.

Here are some simple yet impactful practices that can assist you in staying on track with all aspects of compliance management –

Constant system inspections

It is essential to keep a check on your system and regularly monitor its functioning. This allows you to recognize compliance issues and come up with a remedy for the problem. A prompt inspection schedule can save your company from defense susceptibility, fines and other legal threats.

Opt for Automation 

With the evergrowing possibilities of success, companies expand and grow in terms of their workforce and infrastructure. This growth brings in the challenges of managing a larger system and eventually requires more attention and care. Manually fulfilling these requirements might leave space for a number of errors and expose the system to compliance threats. This is where automation will help you and your company.

There are numerous software available in the market which provide automated compliance management and ensure prompt and active care of the same. With these softwares you can get automated assistance in compliance management with respect to Human Resources in a user-friendly and comprehensive manner even if you are a startup or a small-medium business enterprise.

Compliance Management System

Integrate your management tools

Companies often deal with diverse platforms and require different tools to manage them separately. In order to form a coordinated work structure and manage all compliances in an effective manner, it is a great step to integrate all your management tools. You can manage them with the help of an application programming interface.

Conclusion

Compliance Management holds eminent significance in different organisations. It is important for them to comply with all the regulations, rules and standards laid down by their industry and law.

To keep up with these compliances, the HR teams need to be equipped with the right information, prompt management tools and sophisticated management infrastructure. This will enable them to protect their employees from any kind of injustice and ensure the safety of their company along it.

With the flourishing industrial growth in all sectors, compliance management has become an important tool in ensuring the success and credibility of a company.

Compliance management simplifies the task of identifying, monitoring, rectifying and updating all compliance issues, regulatory problems and security threats. It will save them from legal troubles and provide them with a clear path for making their mark in the industry.

 

Crafted By: Aditi Srivastava

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