Understanding Payroll Statutory Compliance: Key Considerations for Employers

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Understanding Payroll Statutory Compliance Key
Considerations for Employers

• The word statutory translates to "of or related
  to statutes"- rules and regulations, so
  statutory compliance stands for adhering to rules
  and regulations. These rules and regulations are
  a legal framework the government (central and/or
  state) put in place for all businesses to follow
  we are trying to comprehend payroll statutory
  compliance services.
• Here is an Overview of Payroll Statutory
  Compliance
• Significance of Statutory Compliance
• All countries have a set of labour laws that
  businesses need to comply with. For businesses
  to comply with these laws, they should be updated
  with the regulations of their country.
  Non-compliance with these set rules may land the
• company in legal trouble along with fines and
  penalties. This is why all operating businesses
  spend a lot of money and time to meet all the
• Key components of Payroll Statutory Compliance.
• Are Statutory Compliance in HR Payroll
  Different for Every Organization? Whether it is
  a private limited company, partnership firm,
  limited liability company, or Public Limited
  company any other type of company, the payroll
  related statutory compliances remains the same
  for all. Any company that hires employees is
  liable to pay them salaries and comply with all
  the labour laws set by the government.
• What are the Advantages for organizations to have
  an outsourced partner to handle payroll related
  Compliances
• Timely payments of respective authorities ensures
  the company
• doesnt have to pay any fines or penalties.

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• Protects all businesses from any unreasonable
  benefit demands or wages made by trade unions.
• Prevent the business from getting into any legal
  troubles
• Risk of any adverse incidents can be evaded if
  the business is compliant
• What are the Risks an Organization May Face on
  Being Non-Compliant?
• Loss of business integrity and reputation
• Financial losses in the form of penalties and
  fines
• Subject to lawsuits
• Impacts customer loyalty Statutory on Employee
  Salary and Benefit Employees Provident Fund Act,
  1952
• The Employees Provident Fund Act, 1952, is the
  main social welfare contribution for employees
  in India. Both employee and employer need to
  make a contribution towards this fund. 12 of the
  basic pay and Dearness Allowance (DA) is
  contributed towards the retirement fund.
• Section 80C of the Indian Income Tax Act states
  that an employee's contribution towards their PF
  account is eligible for tax exemption, which
  helps the employees to take home more wages. All
  organizations with 20 or more employees must
  comply with this Act.
• Contribution

Statutory Employer Employee
Provident Fund (PF) 12 3.67
Employee Pension Fund NA 8.33
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Employers not complying with this Act face
penalties, fines, and sometimes
imprisonment. Employee State Insurance Act,
1948 The Employee State Insurance Act, 1948,
helps the employees of an organization to cope
with any unfortunate events, including medical
emergencies, situations of disability (of the
workplace), and maternity leave. For every
salary paid, the employer contributes 0.75,
while the employer makes a contribution of 3.25
towards this fund. ESI is compulsory for all
employees who are working in a non-seasonal
factory that employs more than 10 employees.
However, it is valid for only employees who are
earning less than Rs. 21,000 (per salary
check) Sine ESI is applicable for employees
earning less than Rs. 21,000. The payroll
department should regularly check the appraisal
cycle to ensure that the employee is below the
limit. The contribution towards ESI should be
discontinued as soon as the employees' paycheck
surpasses the said amount. Each ESI contribution
cycle lasts six months from April to September
or October to March. Labour Welfare Fund Act,
1965 This Act has been instated to oversee the
welfare of the employees working in certain
types of industries. It offers facilities to the
labourers for their social security, to better
their work conditions and improve their living
standards. The statutory contributions for Labour
Welfare Fund are managed by individual state
authorities. The state labour welfare board
states that the amount and frequency of the
contribution and may be different for every
state. For instance, some states may make the
contributions every six months, while in other
states, this contribution may be an annual
affair. Statutory on Tax liabilities TDS (Tax
Deducted at Source)
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TDS is one of the most significant statutory
rules which needs to be adhered to by all
organizations. It is basically collecting tax
from the individual based on their income. It is
applicable to different types of income,
including salary, commission and interest. A
different tax rate may be applicable for each
employee as it is calculated based on their
salary. Currently, two different tax regimes are
followed in India Old Tax Regime and New Tax
Regime. Old Tax Regime
Income Tax Slab Tax Rate
Up to ?2.5L No tax
?2.5L to ?5L 5
?5L to ?10L ?12,500 20 of total income exceeding ?5L
Above ?10L ?1,12,500 30 of total income exceeding ?10L
New Tax Regime
Income Tax Slab for FY 2020-21 New Tax Rate

Up to ?2.5L No tax
?2.5L to ?5L 5
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?5L to ?7.5L 10
?7.5L to ?10L 15
?10L to ?12.5L 20
?12.5L to ?15L 25
Above ?15L 30
As you see, there are many key components of
payroll statutory compliance. Managing and
adhering to them can be complicated. Therefore,
if you are a small or medium business,
outsourcing payroll services to a reliable
provider is recommended. At PaySquare, we offer
trusted statutory compliance services to our
clients. Get in touch with us to understand how
we can help your business adhere to all the
compliances.