A run-in with the law is something no company would want. While some actions that could lead to violating the law, such as theft and violence, are obvious, a business has to constantly deal with many non-so-obvious ones too.
Running a compliant payroll is one of them. It is not as simple as doing some arithmetic calculations and paying out compensation to employees. Payroll usually constitutes one of the biggest expenses in a company. This makes it a sensitive subject in itself that needs to be handled with care. Bring on the various awards, negotiations, state as well as central laws that could keep changing, and you have a situation that could blow up in the face if not handled professionally.
The act of hiring people to work for your company brings upon you the responsibility of managing them in line with the various laws and regulations enacted from time to time. These laws are enacted because the regulators also have an interest in ensuring that the employed people get a fair deal.
If not done right, it can extract a heavy toll.
According to HR experts and auditors, violations in this area usually happen not because of an intention to defraud and cheat, but simply on account of lack of knowledge or processes and controls that are unable to handle the complexity.
The complexity in payroll management
India can be a somewhat complex ecosystem with intersecting laws and jurisdictions. Some of them are:
Tax deducted at source (TDS)
It is governed by the Income Tax Act. The employer needs to obtain a Tax Account Number (TAN) and register as a deductor. The deduction rate could be different for each employee in the company and change from one year to another.
Provident Fund (PF)
PF deductions are and contributions are governed by the Employees Provident Fund Act and have to be made for qualifying employees by companies where the number of employees exceeds the defined minimum.
Employees’ State Insurance (ESI)
Applicable to employees earning less than the defined minimum, the scheme provides medical, cash, maternity, disability, and dependent benefits to the insured employees.
Professional Tax
Varies from state to state and is applicable for certain professions.
Returns
There are a variety of reports and returns that need to be filed on different portals.
Achieving payroll compliance
Large corporations might have the scale to justify hiring experts for the task.
Others would be well advised to seek professional help from HR Payroll Outsourcing experts like Ushankk, who provide the required expertise covering all aspects of payroll compliance. Ushankk invests in the latest technology and tools for payroll compliance and makes them available for payroll processing for their clients.
Many companies who have tried to do it manually, with the help of spreadsheets, have come to grief at one point or another.
Interestingly, several large corporations also work with experts like Ushankk to proactively manage payroll compliance and mitigate non-compliance risk and cost.
As some human capital consulting firms might say, “Compliance is not a choice. It is a requirement.”