Every organization adheres to a legal framework set up by the government to regulate business operations and manage the workforce, which, in the HR jargon, is known as statutory compliance. For being in good books of the law, companies need to comply with their country’s well-defined sets of state & central labour laws. From minimum wages to professional tax deductions, a humongous amount of money, time, and effort goes into maintaining and meeting such compliance needs.
The necessity to always remain compliant also calls for keeping the data error-free, thereby avoiding legal troubles. And in the 21st century, of course, there is a solution to achieve all of that conveniently- a Payroll Software.
In this blog, we will walk you through the major areas around payroll statutory compliance:
- Statutory compliance checklist that is ticked off by payroll software
- How it ensures error-free payroll processing
- The ways it helps HRs achieve utmost payroll efficiency
- How incorporating payroll software proves beneficial for employees and employers
According to Annapurna Finance – a satisfied client of HROne, “Smooth, error-free and 100% compliance adhered payroll, with employee salaries now being processed in just less than 2 days is a major achievement for us.”
Ever since automated payroll systems started to thrive in the marketplace, businesses jumped at the opportunity and started making investments in the software. One of the most sought-after modules that an all-inclusive HRMS like HROne offers is Payroll due to its efficiency around multifarious functions. Since we are talking about a system that can make your payroll 100% compliant, a checklist of statutory compliance that the software sticks to becomes a must-have!
STATUTORY COMPLIANCE CHECKLIST
- EPF – Employees’ Provident Fund
- TDS – Tax Deducted At Source
- ESI – Employees’ State Insurance
- LWF – Labour Welfare Fund
- PT – Professional Taxes
- Other Statutory Acts and Reports
Let’s try and understand each component of the statutory compliance checklist in detail:
1. EPF – Employees’ Provident Fund
Employees’ Provident Fund (EPF) is a scheme in which the retirement benefits of working professionals are accumulated. Under the scheme, an employer has to contribute 12% of the Gross Earnings towards the scheme and an equal contribution is paid by the employee. The total collection is then deposited into the employee’s EPF account. Using a top-notch payroll system, one can manage PF calculations accurately & timely and generate challans automatically for filing ECR. Moreover, employee details can also be collected in bulk with a few clicks and used for filing PF returns later.
2. TDS – Tax Deducted At Source
The concept of TDS was introduced with an aim to collect tax from the very source of income. As per this concept, a person (deductor) who is liable to make payment of specified nature to any other person (deductee) shall deduct tax at source and remit the same into the account of the Central Government. TDS also encompasses the salary paid by the employer to an employee. Employers are expected to consider all investments made by the employee and adjust income or loss from sources such as House Rent before computing the final TDS. A payroll software helps employers to calculate TDS as per employees’ income slabs, deposit the deducted TDS to the government on a monthly basis and file the TDS return manually on a quarterly basis.
3. ESI – Employees’ State Insurance
ESI stands for Employee State Insurance, managed by the Employee State Insurance Corporation which is an autonomous body created by the law under the Ministry of Labour and Employment, Government of India. This scheme is a self-financed health insurance started for Indian workers. Every month, employers and employees have to make a nominal contribution for the employee to enjoy the ESI benefits. Doing quick & correct ESI calculations and generating ESI challan reports become a cakewalk when you switch to the right payroll system.
4. LWF – Labour Welfare Fund
Labour welfare fund is a statutory contribution managed by individual state authorities. It is an aid in the form of money or necessities for those in need. It provides facilities to labourers in order to improve their working conditions, provide social security, and raise their standard of living.
5. PT – Professional Taxes
Professional tax is the tax levied and collected by the state governments in India. It is an indirect tax, only applicable in select states. Just like TDS, PT is deducted from an employee’s salary. PT deducted from an employee’s salary is also exempted from taxable income for the assessment year. Payroll management software delivers these evaluations and accurate remittance reports as per the state PT laws. Challans for taxes are generated in the government-recommended format to save time of the HRs.
6. Other Statutory Acts and Reports
It becomes quite easy to access compliance forms and reports such as those under the Shops and Establishment Act, Factories Act, and CLRA among others within a snap of the fingers when you have an avant-garde payroll software at your disposal.
Once all the aforementioned statutory deductions are made at the time of processing payroll, the company then remits the amount to respective government agencies. Post that, the dues are paid via challans. Then, the quarterly/half-yearly/annual returns or reports are filed and submitted to the government bodies… Everything done automatically using an integrated payroll software.
“49% of workers would begin a new job search after only two issues with their paycheck.” – The Workforce Institute at Kronos Incorporated
– The Workforce Institute at Kronos Incorporated
So, it brings us to the next question- How do we ensure that the whole process is free from payroll errors and discrepancies? The answer is simple- with a Payroll Software.
The latest payroll software in the market comes with built-in smart algorithms for error detection and mitigation. Whenever there is a deviation in payroll data such as pay components from the standard inputs of the previous months, the software highlights the same in an error list. So, you can easily say “Toodles” to recurring payroll errors and keep employees as well as HRs happy!
The current scenario is such that HRs cannot imagine their lives without a proper payroll management system in the organization.
We asked CHROs the best ways in which payroll software can make the lives of HRs and concerned payroll experts easier.
This is what they said:
- Adhering strictly to the HR statutory compliance of India and updating the software automatically of any changes in statutory laws
- Using robust features to automate calculation & deduction of statutory payments, conducting statutory computations and reporting
- Availing data to be uploaded on respective official websites and generating challans and managing critical statutory requirements related to HR processes
- Easing the process of filing transfer and withdrawal forms for statutory deductions and filing returns with government agencies as per schedule
- Helping in registration and renewal of required licences like Contract Labour Licenses, EPF, ESI, PT, and Factory Licenses
The topic would be incomplete without throwing some light on how payroll management software benefits both employees and employers by staying compliant. Let’s have a look.
Now we know how statutory compliance can make or break a company’s reputation and business integrity. So, it’s time to just run the darn payroll, and leave error rectification and statutory compliance to your payroll software!
Read HROne’s – an intelligent and enterprise-ready HCM suite’s exclusive payroll guide that gives you a deep dive into the world of Payroll by answering the most important payroll questions.