Statutory Compliance for Businesses

Importance of Statutory Compliance for Businesses in India

People are the most important part of an organization. From on-roll employees to off-roll employees, from full-time to part-time workers, every human resource fulfills its function in the organizational machinery. And there have to be set norms and regulations to ensure the organization runs smoothly. These rules dictate how a company handles its responsibilities towards its employees and finances. This is where statutory compliance comes into the picture.

What is Statutory Compliance?

In the world of labour, payroll, and taxation, statutory compliance is a legal structure that a company must abide by when it comes to the treatment of its employees.

Why is Statutory Compliance Important?

Statutory compliance, as mentioned above, is a set of rules about the taxation and labour laws in India. These laws vary based on the fact whether we are talking about state laws, national laws, or laws applicable on union territories (which come under the central government). All the companies have to abide by these laws. Failing to be compliant with these policies can lead to fines, penalties, and even other, more severe legal actions. No wonder companies across all industries make so much effort to stay compliant.

Therefore, all HR professionals need to have extensive knowledge of Indian tax and labour laws. On top of that, they also need to stay updated whenever the statutory compliance policies change.

What are the Various Acts in India that Indian Companies Need to be Compliant with?

Statutory compliance acts can be divided into two sections: taxation and labour.

As far as the taxation laws in India are concerned, every company has to fulfill the following responsibilities under statutory policies:

  • Regular bookkeeping of the financial position of the company. All the account books must comply with the accounting standards. Moreover, all these books must be duly audited and signed by a Chartered Accountant or auditor.
  • Making advance taxes & TDS deposits on a timely basis and filing returns as per the norms, norms. These taxes vary depending upon the nature of the company.
  • Conducting statutory audits as and when a legal requirement comes up.
  • All the company papers its formation and registration, and other papers must be ready and compiled at all times.

Now, let’s take a look at the Labour Acts:

  • The Workmen’s Compensation Act, 1923
  • The Trade Unions Act, 1926
  • The Payment of Wages Act, 1936
  • The Industrial Employment Standing Orders Act, 1946
  • The Industrial Disputes Act, 1946
  • The Employees’ State Insurance Act, 1948
  • The Minimum Wages Act, 1948
  • The Factories Act, 1948
  • The Employees Provident Fund & Miscellaneous Provisions Act, 1952
  • The Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959
  • The Apprentices Act, 1961
  • The Payment of Bonus Act, 1965
  • The Contract Labour (Regulation & Abolition) Act, 1970
  • The Payment of Gratuity Act, 1972
  • The Equal Remuneration Act, 1976
  • Inter-State Migrant Workmen (Regulation of Employment & conditions Of Service) Act, 1979.
  • The Child Labour (Prohibition & Regulation Act), 1986

While all these laws are mandatory for all businesses in India, it’s difficult for companies to stay abreast of these laws at all times. Remembering all these laws and their minute details is not easy. As a result, a payroll management system is implemented to ensure thorough and error-free statutory compliance.

Payroll Management System allows HR professionals to calculate the tax that must be deducted from each employee’s salary and disburse the right amount of salary after all the deductions.

It’s important to know that the payroll management system helps HR professionals comply with both the taxation and labour compliance policies. HR professionals simply need to enter the basic information, and the payroll management system will calculate everything on its own.

Effect of Pandemic on Statutory Compliance

The Covid-19 pandemic has affected every aspect of a business. More than a hundred countries across the world had to bring more than 350 new rules due to the pandemic. Speaking of India, under the Epidemic Act of 1897, the Central and 7 state governments have invoked provisions and powers to handle the situation from the statutory perspective.

The primary areas of interest in the newly invoked provisions are workplace health & safety, employment, data privacy, working capital, supply chains, disclosures, and corporate governance.

Importance of Statutory Compliance for Businesses in India

From fair treatment of labour to ensuring timely and accurate payroll, statutory compliance prevents employee exploitation at many levels. It prevents undue overtime, unmanly working hours, working in inhuman conditions. Statutory compliance also ensures no worker is paid below the minimum wage.

With timely tax payments, organizations can avoid penalties, fines, and other legal troubles. With a predefined set of rules and regulations, companies can organize their finances more efficiently while helping the Government collect revenue easily. Statutory compliance plays a vital role in the prevention of legal troubles.

Failing to comply with the rules and regulations can lead to financial penalties or even court trials. Businesses cannot ignore statutory compliance, especially in the HR department.

Why Your Business Needs Statutory Compliance?

The importance of statutory compliance for businesses in India can’t be overlooked because it brings along some remarkable advantages such as:

Avoiding Penalties: Complying to statutory compliance means a company is adhering to all the taxation and labour rules. As a result, the company doesn’t have the risk of facing legal penalties such as fines, lawsuits, license confiscations, etc.

Enhanced Efficiency: A statutory compliant company has time to dedicate its resources towards growth-oriented decisions and processes. This allows companies to be more efficient, instead of focusing on how to avoid penalties.

Improved PR: Adhering to statutory compliance policies means that your labour and tax work is up to the mark. It means your business practices are top-notch and your organization has commendable work ethics. As a result, the company scores high on statutory compliance parameters, giving it a competitive edge over the others.

Better Employee Morale: Being statutory compliant means the company performs all labour and taxation-related tasks diligently. As a result, the company is productive, has good intent, and takes care of its employees too. As a result, such a company has a greater number of happy employees. Greater employee experience means higher employee morale, leading to less absenteeism and better performance from employees.

Conclusion

Statutory compliance is not necessary only to avoid penalties and legal troubles. Statutory compliance, as you know by now, is also essential for keeping your company in good books in the eyes of the government, the employees, the candidates, and the clients. Being statutory compliant brings you a plethora of benefits that’ll help you make a long-lasting impact in the market. Plus, you have the added advantage of being a step ahead of your competitors. Integrate a well-thought and comprehensive payroll management system to ensure hassle-free statutory compliance.

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