statutory compliance

What is Statutory Compliance Management in India, 2022?

Statutory refers to rules and regulations that are related to statutes. The term compliance refers to adherence. As a result, Statutory Compliance refers to adhering to laws and regulations.

In HR, Statutory Compliance refers to the legal framework that an organization must adhere to when dealing with its employees.

Through statutory audits, your organization spends a great deal of time, effort, and money ensuring that payroll is compliant. There are several potential legal issues relating to compliance that every company must consider, ranging from employee fair treatment to protecting the company against unreasonable wage demands from trade unions or aggressive employees. However, a company may never intend to break these laws, but without the necessary protection, it may easily slip through the cracks.

How can you ensure that you will avoid the risk of non-compliance?

It is important to first understand what statutory compliance is and the various compliances that Indian payroll must comply with.

Why is Statutory Compliance important?

Each country has its own set of labour laws that companies must adhere to statutory compliance requires companies to be updated on all the labour regulations in their country. It is also mandatory for companies to adhere to them. Failure to comply with these regulations can result in a great deal of legal trouble, and that is why every company invests a huge amount of money, effort and time to meet compliance requirements from professional tax to the minimum wages act. Experts in labour law and taxation law advise the company in this regard.

Managing a demanding regulatory environment requires every company to be aware of all labour laws and regulations. To maintain compliance and minimize risks, they must formulate efficient methods of doing so.

Doing business in India has become more challenging. The operational aspect of a company's core business is also a challenge for companies in India. Companies operating in India are required to comply with the following statutory regulations and mandates:

  1. Laws governing employment

  2. Laws relating to taxes

  3. Laws relating to labour

  4. Antitrust and competition laws

  5. Regulations related to the environment

  6. Laws about finance and corporations

  7. Laws specific to the industry

  8. Laws governing advertising

  9. Privacy of data

  10. The right to intellectual property

  11. Laws relating to foreign exchange

Under the Companies Act, 2013, directors are required to certify in their annual Director's Report how they have devised systems for ensuring compliance with applicable laws. Additionally, the report should clarify whether the systems were successfully implemented.

To remain compliant with the ever-changing regulatory environment, all Indian companies need professionals capable of bringing about statutory compliance in HR.

What are the advantages of Statutory Compliance?

Statutory Compliance is important for better and equal treatment of employees. It gives the surety of the proper and fair rules apply amongst employees. Let’s look at the benefit and advantages of Statutory Compliance in organisations.

Advantages to Employees

-Ensures that employees are treated fairly

-Make sure they are paid fairly for their work and that their company complies with minimum wage laws.

-Prevents employees from working for long periods or under inhumane conditions.

Advantages to organisations

-Due to their timely payment, they avoid penalties or fines

-Protects the organization from unreasonable wage or benefit demands from unions

-As the company is fully compliant, legal troubles are avoided.

-Increases compliance awareness and mitigates risks

-The risk of adverse events is reduced with compliance in place

What labour acts require Stutaory Compliance in India?

  1. The Child Labour (Prohibition & Regulation Act), 1986

  2. Inter-State Migrant Workmen( Regulation Of Employment & Conditions Of Service ) Act, 1979

  3. The Equal Remuneration Act, 1976

  4. The Payment Of Gratuity Act, 1972

  5. The Contract Labour (Regulation & Abolition) Act, 1970

  6. The Payment Of Bonus Act, 1965

  7. The Apprentices Act, 1961

  8. The Employment Exchanges(Compulsory Notification Of Vacancies) Act, 1959

  9. The Employees Provident Fund & Miscellaneous Provisions Act, 1952

  10. The Factories Act, 1948

  11. The Minimum Wages Act, 1948

  12. The Employees’ State Insurance Act, 1948

  13. The Industrial Disputes Act, of 1946

  14. The Industrial Employment Standing Orders Act, 1946

  15. The Payment Of Wages Act, 1936

  16. The Trade Unions Act, 1926

  17. The Workmen’s Compensation Act, 1923

     

What is Tax Deduction at sources?

According to the Income Tax Act, TDS is deducted from individual payments. The Central Board of Direct Taxes (CBDT) administers the program, which is part of the Indian Revenue Service (IRS).

The person (deductor) paying the assessee is required to deduct TDS from the assessee's income and submit it to the income tax department.

As soon as the assessee files the TDS return, the tax calculated from his income will be deducted and the final amount will be refunded.

The following two situations are exempt from TDS:

  1. The receiver may self-declare that he has made the required investments by completing FORM 15G/15H

  2. The Assessing Officer must provide a certificate of exemption

Let's look at some types of TDS that are applied in organisations according to employees

Normal Tax Rates for Individuals & HUF

An individual's normal tax rate will depend on his or her age. A non-resident individual, however, will be subject to the same tax rates regardless of his age.

Non-Resident Individual/HUF

The non-resident individual is applied to employees that are not localised. Mainly their tax deduction starts if they are paid Rs 2,50,000 or above!

Normal Tax Rates applicable to a Domestic Company

The amount assessed will be almost 25% of its turnover or gross receipts for the previous year 2021-22.

Special Tax Rates applicable to a Domestic Company:

There are special tax rates followed by the income tax which is applied from section 115BA to section 115BAB.

Normal tax rates applicable to a foreign company

Foreign companies are taxed at a flat rate of 40%. In addition to tax at 40%, a health and education cess is levied at 4% of income tax.

Normal Tax Rates applicable to a Co-operative Society

A new section 115BAD has been inserted into the Income Tax Act, 2020 to provide an option for cooperative societies to get taxed at 22% plus a 10% surcharge and 4% cess. Residents of cooperative societies have the option of opting for taxation under section 115BAD of the Act as of the assessment year 2021-22. Once the option has been exercised under this section, it cannot be subsequently withdrawn for the same or any previous year.

Where Statutory Compliance is applicable?

-Provide professionals with information about applicable statutory, legal, and regulatory compliance requirements.

-Determine the suitable business locations that must comply with statutory and legal requirements.

-There should be statutory compliance requirements for each business location (including international branches).

-The responsibility for compliance should be assigned to a specific department or individual.

-To identify any gaps in compliance, a compliance review should be conducted.

Challenges that are faced in Statutory compliance in Human resources?

Of course, there are going to be challenges in any kind of law that is pursued and implemented by the government for any kind of organisation. Well, in India there are some of the major challenges that are faced by Statutory Compliances considering the human resource of the company.

Let’s get further and know about the Statutory Compliances challenges

Awareness and knowledge

The professionals in a company often lack expertise and adequate knowledge of statutory compliance requirements. For a company to run smoothly, it must have professionals with proper experience in statutory compliance when it has multiple locations internationally.

Initiatives for segmented compliance

Several departments control various functional activities in most companies. Such companies can't ensure effective compliance within their organizations.

The statutory landscape is dynamic

It is difficult for companies to keep up with the dynamic statutory landscape as regulatory requirements continuously evolve and become more complex.

By investing enough resources in statutory compliance in HR, companies will reap numerous benefits along with protection against non-compliance issues. The employee should also check whether the company is statutory compliant before joining it. To ensure a professional and employee-friendly working environment, all companies in India must comply with statutory HR requirements.

What is Labour Welfare Fund Act, 165?

Workers' welfare includes all facilities that improve their working conditions, provide social security, and raise their standard of living. The Labour Welfare Fund Act has been enacted by several state legislatures specifically to address the welfare of workers. Here is everything you need to know!

Employers, employees, and in some states, the government contribute to the Labour Welfare Fund. There are separate (State) Labour Welfare Fund Acts and (State) Labour Welfare Fund Rules for each state and union territory.

What are the benefits of the Labour Welfare Fund for workers?

-Achieving a higher standard of living

-Providing better working conditions

-Providing social security benefits

-Applicability of the Labour Welfare Fund

Conclusion

It is important to gain knowledge regarding Statutory Compliance which helps in the perfect management of the organisation amongst employees.

It takes a lot of effort, time, and money for every Indian company to ensure that its payroll is compliant through a proper audit. Companies are often concerned about facing legal issues related to compliance, such as aggressive employees, unreasonable wage demands, and union demands.

If a company does not have appropriate protection, it may face legal trouble even if it does not intend to break any laws. Companies are protected by statutory compliance, which helps them to minimize the risk of non-compliance. Increasing non-compliance risks have made it necessary for Indian companies to maintain statutory compliance in their HR departments.

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