The ever-changing legal and statutory compliance landscape makes it challenging for companies to stay up-to-date with various labour and tax laws. Plus, every industry in India has its own set of rules and regulations, and non-compliance can lead to heavy penalties and legal action.

A payroll service provider takes care of all compliance changes and ensures that your business is always on the right side of payroll compliance laws. Additionally, a HRMS third-party payroll service provider has staff with in-depth knowledge of various central and state labour laws that businesses need to comply with and help avoid legal troubles.

The payroll management solution offered by the payroll service provider enables HR professionals to calculate taxes that should be deducted from an employee’s salary and pay the right amount of wages after necessary tax deductions.

What Exactly is Payroll Compliance or Statutory Compliance In India?

In simple terms, statutory or payroll compliance means adhering to rules and regulations laid down by central and state governments and all labour and taxation laws come under statutory compliance. These payroll compliance laws ensure the welfare of employees, employers and the company.

Statutory compliance covers:

  • Shops and Commercial Establishments Act (S&E)
  • The Employees Provident Funds and Miscellaneous Provision Act – 1952 (EPF)
  • The Professional Tax Act (PT) 1975
  • The Employees State Insurance Corporation Act – 1948 (ESIC)
  • The Labour Welfare Fund Act (LWF) 1965
  • The Minimum Wages Act-1948
  • The Maternity Benefit Act-1961
  • The Contract Labour (Regulation & Abolition) Act – 1970 (CLRA)
  • The Child Labour (Prohibition & Regulation Act), 1986
  • The Equal Remuneration Act-1976
  • The Payment of Bonus Act-1965
  • The Payment of Wages Act-1936
  • The Payment of Gratuity Act-1972
  • The Factories Act, 1948
  • The Employees Compensation Act-1923
  • The Industrial Establishment (N&FH) Act 1963
  • The Employment Exchange (Compulsory Notification of Vacancies) Act-1959
  • The Interstate Migrant Workmen (Regulation of Employment and Conditions of Services) Act, 1979
  • The Industrial Employment (Standing Orders) Act 1946 – Model Standing Order Only
  • The Industrial Disputes Act 1947
  • The Apprentice Act, 1961
  • The Trade Unions Act, 1926
  • Sexual Harassment of Women at Workplace Act

A business of any shape or size must abide by these laws and deal with its employees within this legal framework. All companies that hire employees and pay salaries must comply with these labour laws. Non-compliance with the labour laws can result in penalties, fines, lawsuits, and other legal action.

Statutory compliance is not easy, and a company must be well-versed to ensure adherence to these rules and regulations. Since the regulatory landscape is ever-changing, payroll service providers can help businesses to stay compliant and always be on the right side of Indian law.

What Happens If You Don’t Follow the Rules?

Non-compliance with state and national laws can have serious ramifications and you can end up in legal trouble. If a company is not compliant with statutory laws, it could be at risk of penalties, legal action and reputational damage.

  • Penalties and Fines

One of the most common consequences of statutory non-compliance are penalties. Non-adherence to statutory rules and regulations can result in a range of penalties such as hefty fines, imprisonment, audits, and in extreme cases, the shutdown of the facility. However, the fine amount or penalty depends on the severity of non-compliance. The government defines the penalties imposed on any business that does not stay on the right side of the law.

  • Damage to Reputation

For any business, its reputation is uncompromisable, and non-compliance with statutory laws can put a business’s reputation at stake. Non-adherence could also result in loss of trust and integrity. Failure to comply with statutory rules and regulations could result in customers, current and potential employees, and other stakeholders doubting the company’s authenticity. Furthermore, a criminal conviction for non-compliance can result in a major setback for any company and compliance failure could lead to public outrage, a fall in share prices, and negative perceptions and opinions about the company.

  • Lack of Opportunities

A damaged reputation puts a company at a disadvantage in a highly competitive economy. Additionally, organizations may be barred from conducting business in specific industries due to bans or penalties resulting in loss of opportunities.

  • Cancellation or Suspension of Licence

Businesses must obtain licenses to run an establishment. Non-compliance with statutory rules and regulations can result in the cancellation or suspension of licenses.

  • Loss of Current and Potential Staff

Whether current or potential, no employee wants to be associated with a company that fails to comply with statutory lawsas they may be considered unstable and untrustworthy. As a result, employees could choose not to work with such companies. In addition, non-compliance, payroll issues, etc. are regarded as red flags by potential employees, and therefore it becomes hard for such companies to find and retain talent.

  • Civil and Criminal Liabilities

Statutory non-compliance can result in business owners and other top management facing civil or criminal lawsuits based on the severity of impeachment of statutory laws.

What Are Your Responsibilities as An Organization?

Every business’s responsibility is to comply with various statutory laws, from timely and accurate payroll to the fair treatment of employees and everything in between. Furthermore, a company must prevent the exploitation of employees at different levels by adhering to laws.

Timely tax payments and working within a predefined set of rules and regulations to stay compliant and always be on the right side of the law, are among the responsibilities of an organization.

How Do Payroll Service Providers Ensure Their Clients’ Payroll Compliance?

In today’s competitive economy, payroll service providers’ robust payroll management solutions are a must for companies to deal with ever-changing statutory compliance laws. HRMS third-party payroll service providers have staff who are well-versed with various central and state employment laws and labour rules and help clients adhere to compliance and safeguard their business from legal battles.

Dealing with the law requires businesses to be well-versed in multiple payroll compliance rules and regulations. Payroll service providers help companies adhere to statutory compliance and keep them safe from legal trouble. They offer a comprehensive payroll management system and a HR and leave management system to ensure hassle-free statutory and payroll compliance. In addition, they provide timely and accurate payroll and tax payments which are vital to staying compliant and avoiding legal trouble.

The payroll service provider offers payroll management solutions that allow businesses to automatically manage TDS, profession tax, ESIC, EPF, and other necessary deductions. The payroll processing system provided by the payroll service provider is robust and scalable. It allows businesses to generate forms and capture challans in order to manage all statutory and payroll compliances effectively and efficiently.

Payroll service providers assist businesses with managing complex salary structures on a unified platform and easily managing aspects such as CTC proration and tax management. In addition, they help companies in the validation of PF register, preparation, uploading, and generation of challans, remittance of PF cheques, and processing and submitting PF forms post validation and filing of statutory returns as per statutory timelines.

TopSource Worldwide Payroll Services Provider In India

TopSource Worldwide is a leading payroll service provider and offers end-to-end payroll management services. We simplify payroll and help companies to stay compliant. We handle payroll complexities and compliance and ensure that our clients don’t have to worry about it.

In addition, our payroll management solution provides timely and accurate payroll processing. Our payroll processing system automates the entire workflow, whether on-time payroll processing or statutory filings, reporting and analytics, and expense management.

Our payroll management solution is designed to work with your processes and systems instead of requiring you to adjust your organization’s system to fit with ours. Our comprehensive services make us stand out from the competition and include:

  • Full spectrum of services – from attendance to payment (with a link to biometric systems)
  • An extensive range of reporting and system options that you can expand into leave and attendance tracking, performance management, expense management, and HR systems.
  • Offers your staff up-to-date and correct information.
  • Ensures full compliance and meets all legal and statutory reporting requirements.
  • Real-time access through web and mobile applications.
  • Secure services managed by chartered accountants.

Full support is provided by our service centres located across major cities in India- Pune, Bengaluru, Noida, Hyderabad, Mumbai, Chennai, Kolkata and Ahmedabad.

In addition, as a third-party payroll service provider, we take care of all statutory filing and compliance-related laws and make sure your business is always on the right side of the law. Our India statutory filing services include the Income Tax Act, Employee Provident Fund, ESIC, Labour Welfare Fund, and Profession Tax.

Conclusion:

A payroll service provider’s staff should be well-versed in various labour and tax laws. In addition, a payroll processing company will help you to avoid penalties and legal action by ensuring you adhere to all payroll compliance rules and regulations.

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Published On: 21/04/22Last Updated: 14/09/22

About the Author: Sachin Disa

Sachin heads the India Payroll business unit and is responsible for global sales into India, India domestic sales and delivery, and local finance support in India. Sachin has over 17 years of experience with the company, his previous roles include head of UK payroll operations, head of accounting support services, head of sales in India and VP of finance.

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