Statutory Compliances : Must for every Progressive Employer

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Statutory Compliances : Must for every Progressive Employer

It is important that we comply with laws of land to make sure that the organisation plays a good citizenship role and governance with compliance's. I am aware that this is a huge subject... however, I would try to cover briefly in this segment for details refer to the respective laws for changes/modifications from time to time... Usually if not taken care at the start or beginning of the organisational growth it may become a very unproductive effort and impacting your business growth.

The applicable basic statutory compliance includes : Provident Fund, Employer State Insurance Corporation(ESIC), Professional Tax (PT - as per state), Income Tax, Gratuity. There are many other specific Acts applicable based on the Industry.

Employers have to comply with the Statutory requirements based on the number of employees they have on their rolls.The Benefits like PF & ESIC are applicable from 20 number of employees in the organisation. In such cases there are two types of Start up/SME employers:

1. Employer who wants to make sure the facilities are available from the day one of employee joining irrespective of their size.
2. Who would like to take care of statutory issues as they are applicable.

The following Inputs would help take decision and budget provisions based on your organisational stage.

Employer 1 above Option 1: If the employer wanted to give the benefits from the day one can opt to outsource the People related issues and the employment with any outsourcing agency who may comply and Provide all the statutory benefits. This way all the statutory related issues are taken care till the time the employer would like to register under the various acts and provide the benefits in such cases the transfer can be done at that point of time.

Option 2: Initially take care of the TDS(Tax Deduction at Source) under Income Tax Act and the Professional Tax Act as per the state government regulations. Register under the PF and ESIC at a point where the required employee strength is available. Also there could be decisions where one would like to outsource the people statutory compliance and Administration as an option which helps in reducing the payroll administration and head count issues if any.

Some of the provisions are mentioned here below for understanding.

Provident Fund ( Central Administration ) :
Applicable: Organisations 20 people onwards
Limit: Applicable to employees with 6500 as basic salary (voluntary Option for employee after the limit of 6.5K)
Contribution: Employee : 12% Employer : 13.61% ( In cases of beyond 6.5 K salaries the employer can define whether to contribute equal or not)
Interest on the contributions : 8.5% p.a (The best possible interest rate for investment with high security in the country)
Pension after Retirement based on the Contributions made for a minimum of 10 years.

Employee State Insurance Corporation(ESIC - Central Administration): Applicable for employers with 20 employees.
Salary Limit: Covered for employees with Gross salary up to Rs.15000/-
Contributions: Employee contributes : 1.75% of Salary and Employer contributes 4.75% of salary
Benefits : very useful and please visit www.hrhelpline.blogspot.com for detailed inputs

Professional Tax : State Tax as implemented by various states.
To Register with the professional tax authorities. The Tax is deducted as per the slabs of employee salary. The same is deducted and paid to the Tax authorities. The employer need to pay certain fee for each of the director every year.

Income Tax Act (Central Tax): Tax Deduction at Source is the responsibility of the employer based on the Income Tax Slabs and applicability's. Employer to obtain a registration with the income tax for deducting and depositing the Tax from employee account. At the end of the year / as and when the employee leave the organisation to issue a Form 16 showing the deductions made and deposits done into their account. This would help the employee to file for their personal tax assessment forms.

Gratuity : Gratuity is applicable for all the employees who completed 5 years of service. Gratuity is calculated based on the Basic + DA paid to an employee at the time of leaving and 15 days for every month for number of years of service. If employee worked for 6 years and 10000 (basic+DA).. The Amount to be paid is : 15/26*6*10000=34615 Rs. The limit for the maximum Gratuity has been revised to 10 lacs.

* This article is to make employer aware of the provisions... and please refer to the latest amendments from time to time to make sure statutory adherence.