Monday, March 20, 2017

What Do All Statutory Compliances Include? - A Guide For HRs


As an HR online Professional Statutory Compliances must be followed in any organization. No matter how big is an organization, none of the owners are blessed with the freedom of not fulfilling the statutory compliance. It is the responsibility of an organization to fulfill the statutory requirements and it is necessary for them to stay updated with changing laws.

Ultimately, this becomes the burden for HR solutions. They’ve to put a substantial amount of efforts in fulfilling these statutory compliances. Let’s learn more about major statutory requirements that come under the “must” category for any organization.

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1. Provident Fund - PF:

The Employees’ provident Fund 1952 is enacted to provide a sort of social security to the industrial workers. This Act is applicable to all the employees who are employed in a factory or in connection with the work of a factory or any other organizations covered by the schemes other than an ostracized employee is entitled are required to become a member of the fund from the DOJ the organization or factory.

The amount will be later paid to the employees after their retirement or death or any such cases if the employee is unable to work. Contributions under this scheme:

  • Employees: 12% on Basic + DA
  • Employer : 3.67% on Basic + DA, Administrative Charges: 1.10% on Basic +DA 31 Jan 2015, 8.33% on Basic + DA

2. Employee State Insurance Company - ESIC:

ESIC is a health insurance scheme and self-financing security for all Indian workers. The employee contributes 1.75 % with a total contribution of 6.5 % and the employer contributes 4.75 % for the employees who are earning 15000 or less per month. ESIC provides medical benefit for employees as well as their families, maternity and sickness benefits. ESIC also provides dependents benefit for dependents in case of death because of employment injury.

Forms to be used under this scheme:

Form No. 1, Form No. 1B, Form No. 72, Form MRO 266, Form No.6, Form 37

3. Profession Tax:

Profession tax is charged by the state government of India. Indians whose income in the form of salary or any other profession has to pay profession tax. This differs from state to state in India.The business owner has to furnish a return to tax department within a specific time and in the prescribed format. The return should include tax payment proof. But, not all state foist tax.

List of states which have levied Professional tax:

West Bengal, Karnataka, Andhra Pradesh, Telangana, Maharashtra, TamilNadu, Gujarat, Assam, Kerala, Chhattisgarh, Orissa, Meghalaya, Bihar, Tripura, Jharkhand and Madhya Pradesh.

4. Gratuity:

It is a part of salary received by employees from their employers as a gratitude for the services during their employment tenure. It is one of the retirement benefits that employers gives their employees while leaving the company. The maximum amount payable is Rs. 10,00,000.

Payment of Gratuity

Continuous service of 5yrs (not necessary in case of death or disablement)
Resignation, disablement due to accident or disease or death
In the case of death, the amount will be paid to legal heir or nominee.
On termination due to retirement or superannuation
Gratuity calculation - Monthly rate of wage last drawn X 15

5. The Minimum Wages Act 1948

This Act sets the limits on how much wages to be paid to the high skilled, skilled, semi-skilled, unskilled labors. The minimum wages vary state to state and it keeps on updating every 6 months depending upon the state policy. The records to be maintained under (sec. 18) and the Registers should contain the following factors

Particulars of employed persons and the work performed by them
The wages paid and the receipts given by them.

6. The Maternity Benefit Act 1961:

It aims to protect the dignity of motherhood and of the new person by providing healthy maintenance of women and the child during the maternity time. Especially, when she is not working. This regulates the employment of women in the organizations before and after childbirth. It also provides maternity benefit and certain other benefits.

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Maternity Benefit Eligibility:

Must work in an organization for 80 days in a year before her date of Delivery.
Women who are earning less than 15,000 aren’t eligible for maternity benefit. However, they may be offered ESI scheme by their employer.

7. Payment Of Bonus Act 1965:

Aims at providing the bonus to employees of particular organizations, as a part of productivity or production or profit and also for the connection with employees. If an employee receives the salary up to 10,000 per month and engaged in any kind of work whether high skilled, skilled, unskilled or supervisory etc. is entitled to this bonus for the accounting year if he has worked for minimum 30 working days.

Minimum Bonus

For every accounting, year is 8.33 % of the salary paid by the employer
Rs 60 in case of employees below 15 years
Rs. 100 in case of employees above 15 years

Maximum Bonus

  • The Maximum Bonus payable is 205 of the salary for that accounting year.
  • Time Limit: The bonus should be paid in cash within 8 months from the close of the accounting year.

8. Payment of Wages Act 1936:

Aims at avoiding unnecessary delay or hinder of payment of wages without any deduction from the wages.

The Applicability of the Act:

  • Any factory such as a saw mill, godowns, ginning factory, yards and so on... as defined in Factories Act, 1948.
  • Air transport service Dock, Inland vessel, Wharf or Jetty, mechanically propelled
  • Motor transport service engaged in carrying passengers or tramway service or good or both by road for hire or reward.
  • Workshop or another establishment etc.
  • Mine, quarry or oil-field plantation

9. Workmen’s Compensation Act 1923

It intends in providing financial protection to employees and their dependents as compensation, in the case of accidental injury.
Employer’s Liability

  • Death
  • Permanent partial disablement
  • Permanent total disablement
  • Temporary disablement whether total or partial
  • Occupational disease

HR solutions should stay updated with the changes in these mentioned acts, and fulfill the requirement for compliance. The statutory requirement is an integral part of the payment process. Hence it certainly has to be automated.

An automated payroll system can carry out smooth functioning, without any inconvenience to the HR online, ultimately reducing the burden.




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