Payroll compliances in India

Payroll and establishment compliance in India directs to the legal framework that the companies must comply with concerning the treatment of their employees. The companies dealing with payroll compliances must be well-versed with several labour laws or rules in India.

What is payroll compliance?

Payroll and establishment compliance in India directs to the legal framework that the companies must comply with concerning the treatment of their employees. A good part of the company's finance and time is contributed to safeguarding compliance with the laws. Everything from being compliant to the payment of the minimum wage to maternity benefits or provident funds requires enough time but expertise who can brief on all of these compliance criteria. Therefore, the companies dealing with payroll compliances must be well-versed with several labour laws or rules in India.

What are the necessary statutory compliances in HR?

The necessary statutory compliances are listed here:

• Organization adhering to minimum wages: The Minimum Wages Act, 1948 prescribes the rates through both the Central Government and the State Government. The wage rates differ depending on the employment, sector, and type of employee. According to this Act, the employer is accountable to pay salaries at least every month on a timely basis. The wage period is fixed at the convenience of the employer, whether daily, weekly or monthly.


• Company registration for Provident Fund: The Provident Fund enables the employees to reserve some part of their income. According to EPFO (Employee Provident Fund Organization) laws and regulations, companies with at least 20 employees must register for Provident Fund. If the company does not comply with EPFO rules and regulations, it will attract heavy penalties.


• Registration of company for ESIC (Employees’ State Insurance Corporation): The ESIC social security scheme grants affordable healthcare to employees and their family members. As per the ESIC Act, all companies with at least 20 employees with monthly salaries less than Rs.21,000 should register under the Act. When a company is falling under the ESIC Act compliance, the Employees CTC requires to be revised, including the ESIC employer and contribution by the employee.


• Including gratuity in employee CTC (Cost to Company): Following the Payment of the Gratuity Act, 1972, gratuity is suitable to all the establishments such as non-governmental organizations, hospitals, and educational establishments with at least 10 employees. As gratuity is a specified contribution from the side of the employer, it is included in the CTC. Therefore, making Gratuity part of the employees' CTC is compulsory.

What are the advantages of the statutory compliance of HR?

The benefits of the payroll compliances are as follows:

• Provides fair treatment to the employees
• Confirm they are paid reasonably for their employment, and their company capitulates with the minimum wage rate. 
• Prevents from employees being forced from working for long hours or cruel condition
• Avoids damages or penalties because of their payments on time
• Covers the organization from excessive wage or benefit requests from trade unions
• It prevents legal problems as the establishment is fully respectful
• Mitigates threats and gains awareness about compliance
• There is a lower risk of an adverse incident with compliance in place.

The disadvantages of non-compliance with the payroll compliance are as follows:

• Punitive measures and economic losses to the organization
• Loss of prestige and business probity
• Customer loyalty will be affected harshly