Every organization has to abide by certain rules and regulations that are statutory and HR department in every organization has to deal with the HR statutory compliance regarding employee welfare and benefits. Adhering to the legal framework with respect to all the employees in an organization like provident fund, ESI, minimum wages etc. is the HR statutory compliance and abiding by these laws is mandatory for all the business establishments in India so as to avoid any legal hassles. No business can take the risk of non-compliance with these statutory requirements. Every small enterprise that cannot bear the burden of a human resource department of its own can outsource its requirements to HR consultancy services to avoid the risk of non-compliance with statutory requirements and getting involved in legal battles.
There are many areas that are covered under compliance including insurance requirements of employees, financial reporting requirements, legal requirements, and safety requirements. HR consulting firms have professionals who are well versed with all the laws and regulations and hiring them for statutory matters will relieve you from these responsibilities. Here is a list of some common statutory requirements.
Minimum wages: Every organization has to follow the rules and regulations given by the Minimum Wages Act. Wages have to be fixed considering both the central government and respective state governments rules. Wage rates are defined per the sector, occupation and nature of employment. It is mandatory to pay wages according to the Minimum Wages Act at least once a month.
Provident Fund: Many employees prefer working in an organization that has provident fund (PF) facility as they see it as a good source of savings for a long term. PF is a fund that is created from the monthly contributions from both employee and employer. Per the Employee’s Provident Fund Organisation (EPFO), every organization that has a minimum of 20 employees should register for the PF. Any non-adherence to the rules of EPFO may attract penalties. Small enterprises may outsource their PF responsibilities to HR consultancyservices to be in the good books of EPFO and also gain employee satisfaction.
Employee’s insurance: Another key statutory compliance component in India is the health insurance provided as social security scheme in accordance with the Employees’ State Insurance Corporation Act. Every enterprise with more than 20 employees whose gross salary per month is less than Rs.21, 000 should register for this insurance. For the ESI both employee and employer contribution are included in the calculation of employee’s salary.
Gratuity: According to the Payment of Gratuity Act, all enterprises with more than 10 or more employees are liable to pay employees the gratuity, an amount equal to 15 days wages for each year of completed service not exceeding 10 lakh. The gratuity amount is a fixed contribution of the employer and thus a part of CTC of the employee.
Bonus: All enterprises that employ more than 20 employees have to pay a bonus to eligible employees according to the Payment of Bonus Act, 1965. Per the Payment of Bonus (Amendment) Bill, 2015, the employees drawing a salary below Rs.21, 000 are eligible for the bonus. The provisions for calculating bonus are mentioned in the Payment of Bonus Act.
Professional Tax: Professional tax (PT) is a tax levied by the state governments and collected by the employer as a deduction from employee’s salary. Since it is levied by state governments, the charge for PT differs from state to state. However, it is usually around Rs.200.
The sheer complexity of the nature of compliance makes it a nightmare for many small enterprises to handle these responsibilities. Such enterprises can concentrate on their core business and HR consulting firms like Accuprosys will take care of the statutory compliance.
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