Avoid these Payroll Compliance Mistakes

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In India, regulatory frameworks are stringent that the companies are obliged to follow. Payroll compliance is one of the complex aspect to meet as there are industry-specific guidelines to be followed on a monthly basis. Along with payroll processing for the employees time, there are allied regulations like Provident fund, ESI and labour ministry related compliance to meet. Employers must follow these at all costs and failing to do so will attract penalties, legal actions that may disrupt the regular flow of a business.

With so many changing regulations understandably, mistakes are ought to be made. Here are some common payroll compliance mistakes made by the employers. Let’s stay on top of the above common payroll compliance mistakes and operate trouble-free.

Avoid these Payroll Compliance Mistakes

Continuing list of Statutory Compliance to meet in 2021

The below list is just indicative of many other niche-specific payroll regulations for employers to meet. Businesses must stay on top of these in order to avoid missing out on payroll compliance.

  • The Employees Provident Funds and Miscellaneous Provision Act – 1952 (EPF)
  • Shops and Commercial Establishments Act (S&E)
  • The Employees State Insurance Corporation Act – 1948 (ESIC)
  • The Labour Welfare Fund Act (LWF) 1965
  • The Professional Tax Act (PT) 1975
  • The Minimum Wages Act-1948
  • The Child Labour (Prohibition & Regulation Act), 1986
  • The Payment of Wages Act-1936
  • The Maternity Benefit Act-1961
  • The Contract Labour (Regulation & Abolition) Act – 1970 (CLRA)
  • The Payment of Bonus Act-1965
  • The Industrial Establishment (N&FH) ACT 1963
  • The Payment of Gratuity Act-1972
  • The Employment Exchange (Compulsory Notification of Vacancies) ACT-1959
  • The Equal Remuneration Act-1976
  • The Apprentice ACT, 1961
  • The Industrial Employment (Standing Orders) ACT 1946 – Model Standing Order Only
  • Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) ACT, 2013
  • The Industrial Disputes ACT 1947
  • The Employees Compensation ACT-1923
  • The Interstate Migrant Workmen (Regulation of Employment and Conditions of Services) ACT, 1979
  • The Trade Unions Act, 1926

Incorrect Employee Listing

We all know that many companies employ full-time employees, employees from contract staffing and individual freelancers. Often times, employers make mistakes in classifying employees as per the engagement. This incorrect listing will affect both the employee and the employer where the employee will be missing out on his wages and for the employer, there will be lapses in meeting the legal salary requirements. Frustration among talent will be high when their timely payroll is not done or done with mistakes.

Improper Payroll Record Management

Proper maintenance of the payroll records should be a top priority for every company. If you have your payroll and HRMS systems hosted on-premise or over the cloud, establish a systematic records of payroll and secure records at all costs as there will be regular checks of your payroll records and failing to submit them will result in fines. The same goes for when an employee files a complaint about payroll issues you can use the payroll records as evidence. Also storing physical records is one of the mandatory record-keeping compliance for all businesses for at least 5 to 10 years. Failing to meet these will trigger unnecessary troubles.

Missing out on Necessary deductions

According to the Income Tax Act, 196, TDS (Tax Deducted at Source) deduction is the means of indirect tax collection. This TDS rule gives the authority to employers to deduct a specific amount of tax before full payment to the employee. TDS rule is applicable to all the employees falling under the Income Tax Slab.

TDS deductions have to be done before the payroll is completed. Likewise professional Tax need to be processed as it has contributions from both employee and employer. Failure to deduct TDS and payment of Professional Taxes will lead to penalties. Professional Tax varies from state to state. Ensuring these timely deductions will ensure trouble-free payroll compliance.

Mistakes Related to Fringe Benefits

This is another common mistake done by the employer to report benefits or perks they pay to their employees as part of their payroll. These fringe benefits can be anything from gift cards, paid vacation, healthcare, or transport. There are also chances for reimbursement disputes when failing to report certain expenses such as telephone bills and conveyance charges. Make sure you have a system in place to ensure all benefits are being taken care during the payroll processing without fail.

Over Burdening Administration Staff

Though many businesses are are aware of systematic payroll processing and outsourcing options they continue their complex payroll operations in-house. By doing this they place a huge burden on their administrative team with a great amount of paperwork on a monthly basis. Continued exploitation of strategic talent in running repetitive stringent payroll compliance may affect consistency and sometimes trigger human errors.

It’s imperative businesses allow human resources function to take professional assistance in running compliant payroll with compliance in mind.

Why go through the trouble when you can meet payroll compliance hassle-free by partnering up with Panacea Services. We have over 26 Years of experience in Payroll Compliance Services in Bangalore, Chennai, and Hyderabad.