In India, statutory compliance is a multifaceted regulatory process through which all types of business models must pass. Numerous statutes, each with several sections, require businesses to meet a variety of statutory compliance requirements. Every business must adhere to the specified statute and labor law compliance standards. This makes outsourcing legal compliance services to a qualified and experienced service provider, particularly for start-ups, a prudent business decision.
Every firm is required to follow specific statutory laws and regulations, and every HR department is responsible for HR statutory compliance involving employee welfare and benefits. HR statutory compliance is adherence to the legal framework with respect to all employees in an organization, such as provident fund, ESI, minimum salaries, and so on.
Abiding by these laws is necessary for all commercial establishments in India to avoid any legal issues. No company can afford to fail to comply with these legal standards. Every small business that cannot afford its own human resource department can outsource its needs to HR consultancy services to prevent non-compliance with statutory regulations and legal disputes.
The Most Important Compliance Requirements for Startups in Different Categories:
1. Compliance requirements under the Companies Act, 2013
Companies registered under the Companies Act of 2013 must follow the terms of the Act. The laws govern the appointment of the company’s directors and auditors, as well as the holding of annual general meetings and board meetings. This Act also addresses basic requirements such as a permanent account number, a tax deduction and collection account, and a bank account. Failure to follow these rules will result in legal ramifications.
2. Needs for labor law compliance
Minimum Wages Act, Industrial Dispute Act, Workmen’s Compensation Act, Sexual Harassment of Women at Workplace Act, and other laws apply to new businesses. Noncompliance will result in harsh penalties, and if an offense is committed again, the punishment amount imposed may be doubled. Furthermore, failure to meet labor law compliance requirements can result in license non-renewal, withdrawal, or cancellation of the firm’s registration.
3. Requirements of the environmental laws compliance
Environmental regulations have become increasingly strict as people’s awareness of nature and the environment has grown. If you don’t comply, you’ll face stiff penalties and severe consequences. In addition to harsh monetary penalties, these regulations allow for the imposition of prison sentences.
4. Provisions of the 1961 Income Tax Act
Every business establishment in India is required to file an income tax return each year and is subject to the Act’s other procedural restrictions. These requirements must be met by new businesses. They must file their returns within the time frame given. If there are any discrepancies, they can be brought to the attention of higher authorities through official appeals.
5. Requirements for GST compliance
Startups with an annual turnover of less than INR 40 lakhs are exempt from GST registration. However, when your start-up business grows, you will be required to comply with the GST Act’s rules. GST paves the way for profits for new businesses by combining different taxes. The GST law is now in effect, and it contains certain specific instructions that must be followed. To combat tax evasion, the GST has enacted some harsh penalties for violators. Some offenses result in both a penalty and the confiscation of property. Remember that noncompliance with the GST can result in fines and jail.
Here is a List of Some Common Statutory Requirements:
1. Minimum wages:
The Minimum Wages Act requires that every business adhere to its rules and regulations. Wages must be determined in accordance with both federal and state government regulations. Wage rates differ depending on the industry, occupation, and type of work. Wages must be paid at least once a month in accordance with the Minimum Wages Act.
2. Provident fund:
Many employees prefer to work for a company that offers a provident fund (PF) because they regard it as a smart way to save money over time. PF is a fund that is formed from both employee and employer contributions each month. Every company with a minimum of 20 employees should register for the PF, according to the Employees Provident Fund Organisation (EPFO). Noncompliance with EPFO guidelines may result in sanctions. To stay in good standing with EPFO and improve employee satisfaction, small businesses might outsource their PF responsibilities to HR consulting services.
3. Employee’s insurance:
The Employees’ State Insurance Corporation Act, which provides health insurance as a social security plan, is another important legislative compliance component in India. Every company with more than 20 employees and a monthly gross salary of less than Rs.21, 000 should apply for this insurance. Both the employee and employer contributions are factored into the ESI wage calculation.
4. Gratuity:
According to the Payment of Gratuity Act, all businesses with more than ten employees must pay employees a gratuity equal to 15 days’ earnings for each year of completed service that does not exceed ten lakh dollars. The gratuity amount is a fixed contribution made by the employer and is thus included in the employee’s CTC.
5. Bonus:
According to the Payment of Bonus Act of 1965, all businesses with more than 20 employees must pay a bonus to eligible employees. Employees earning less than Rs.21, 000 are eligible for the incentive under the Payment of Bonus (Amendment) Bill, 2015. The Payment of Bonus Act contains provisions for determining bonuses.
6. Professional tax:
Professional tax (PT) is a state-imposed tax that is collected by the employer as a deduction from the employee’s salary. The charge for PT varies by state because it is imposed by state governments. It is, however, normally around Rs.200.
Why is Statutory Compliance So Important for Every Company?
- Noncompliance might result in financial penalties and, in some cases, criminal accusations.
- Following the law aids in the development of a company’s reputation and goodwill.
- It is possible to improve business procedures and operational safety.
- It is possible to boost public relations and brand value.
- It is possible to file returns and make timely tax payments.
- Businesses can focus on their core activities and produce profits when they have a system in place to assure labor law compliance.
Compliance Obligation Management that is Efficient
The majority of new enterprises place a premium on profitability and growth. They might not have enough time to deal with the issues that come with following the law. On the other hand, any company’s compliance with all regulations and standards is crucial.
Starting businesses will save money and time by outsourcing compliance services to specialists. Professional human resource service providers will help small and medium businesses comply with labor laws, allowing them to concentrate on their core operations. In addition, start-ups can avoid legal liabilities associated with non-compliance.
Role of the HR Companies in Enabling Startups to Meet All Compliance Requirements
An HR outsourcing firm has extensive knowledge and stay up to date on industry legislation and standards. They provide customized compliance service packages to meet the demands of start-ups in various industries. Complex regulatory requirements can be completed efficiently, and prompt return submission and tax payment can be guaranteed.
Rundown
For an organization whether a startup or well established it is necessary to have compliance with the statutory laws and this becomes difficult to manage whether you are a large or small organization. So, why not outsource the HR statutory compliance and be safe and secure form the legal perspective.
