Basic Terms of Statutory compliance

1. Meaning-:
Statutory means "of or related to statutes," or what we normally call laws or
regulations. Compliance just means to comply with or adhere to. So
statutory compliance means you are following the laws on a given issue.
The term is most often used with organizations, who must
follow lots of regulations.
When they forget or refuse to follow some of those regulations, they are out
of statutory compliance. A company that follows all the rules, is in statutory
compliance.
Purpose-:
Safeguarding the employees and the enterprise from un toward risks by
managing and consulting on issues such as retirement benefits and
Taxation

2. Statutory
Compliance for
HR
 ESI
 Provident Fund
 Profession Tax
 Gratuity
 The Minimum Wages Act
 The Maternity Benefit Act
 The Payment Of Bonus Act
 The Payment Of Wages Act

3. Provident Fund
 PF and Miscellaneous Provisions Act, provides
for compulsory
contributory fund for the future of an
employee after his retirement or
for his dependents in case of his early death
 It extends to the whole of India except the
State of J&K
 Every factory engaged in any industry
specified in Schedule 1 in which
 20 or more persons are employed
 Every other establishment employing 20 or
more persons or class of such
establishments which the Central Govt. may
notify and any other
establishment so notified by the Central
Government even if employing
less than 20 persons
 PF is contributed from both the sides @12% of
the basic salary.
Contribution for the purpose of Employees'
pension Scheme is
8.33% of (12% of employers contribution
towards PF) or Rs.540/- which
ever is less, will be transferred to Employees’
pension scheme and the
balance amount will go towards Employee PF.

4. Employee State
Insurance Act
ESI
Was originally applicable to
non-seasonal factories using
power and
employing 20 or more
persons; but it is now
applicable to non-seasonal
power
using factories employing 10
or more persons and non-
power using factories
employing 20 or more persons
All the employees in the
factories or establishments to
which the Act applies
shall be insured under this
Act
The contribution comprise of
employer’s contribution and
employee’s
contribution at a specified
rate
Contribution rate : 1.75% - employees
4.75% - employers
The ceiling 10,000/- gross salary. After reaching
the ceiling one will be
exempted. (with effect from 1.10.2006)
Employer is liable to contribute & deduct
specified rate of amount and submit
it to the Corporation within 21 days.
Two contribution periods each of six months:
1st April to 30th Sept
1st Oct. to 31st March
Two corresponding benefit periods of six
months :
1st January to 30th June
1st July to 31st December

5.  Professional tax or employment tax
is a state-based tax. It is allowed as
a
 deduction from the gross income
before computing the tax.
 Duration of deduction is half year-
1st day of April to 30th September
1st day of October to the 31stMarch
of a year.
 PT is deducted slab wise-
1 to 2500-nil
2500 to 3500 -Rs 60
3501 to 5000 - Rs 120
5001 to 10000- Rs 175
 and above 10000 Rs 200 per month
except Rs 300 in the month of
February.
 Each and every employee receiving
pay from the revenue of the
Central Government or any State
Government is entitled to pay
profession tax.
 Any organization whether
incorporated or not, which is
owned or controlled by the Central
Government or any State
Government is eligible
to pay PT

6. Gratuity
 Gratuity is an amount given to employees
by employer
when they leave the job after completing
five years or
minimum 240 days per year or after
retirement. The number
of year may differ from company to
company
 Gratuity is payable under the payment of
wages act.
 Gratuity shall be payable to an employee
on the termination
 of his employment after he has rendered
continuous service
 for not less than five years.
(a) on his superannuation, or
(b) on his retirement or resignation, or
(c) on his death or disablement due to
accident or disease
 Gratuity is calculated as Basic + DA
divided by 26 * No of
 years of service *15

7. The Minimum
Wages Act 1948
This act provides for fixing
minimum rates of wages.
Wages shall mean all
remuneration payable to an
employed person on the
fulfillment of
the contract employment and
includes HRA.
It Includes (i) a basic rate of
wages and special allowance
call the cost of living
allowance (ii) a basic rate with
or without cost of living
allowance plus any
concession on the
supply of essential
commodities. It excludes
(i) The value of rent free
accommodation, supply of
light, water, medical.....
(ii) Contributions paid by the
employer towards the PF or
any scheme of social
insurance

(iii) Travelling allowance / Travelling
concession
(iv) Gratuity
 The appropriate government may fix-:
A minimum rate of wages for time work ("a
minimum time rate").
A minimum rates of wages for piece work ("a
minimum piece rate").
A minimum rate of wages on a time work
basis ("a guaranteed time rate")
A minimum rate of overtime work done (“a
overtime rate")
 Penalty:-
 The inspectorate staff of the Labor Department
takes action on complaints received
 from workmen/Unions.
 The penalty for violation of is fine of R.500/- or
imprisonment up to a period of six
 months or both.
 If a worker gets less payment, he can also file a
claim before the Competent Authority
appointed under the Act, which are Deputy
Labor Commissioners for the respective
districts.
 The authority can impose penalty up to 10
times the difference in minimum wages that
 was due and paid

8.  To regulate employment of women for certain periods before and after
 child birth and to provide for maternity benefit.
 Payment of maternity benefit shall apply to women workers to whom
 ESI Act does not apply.
 The Act applies to all establishments in which ten or more people are
 employed.
 The maternity benefit shall be at the rate of average daily wage for the
period of actual absence. The maximum period of entitlement shall be
12 weeks of which not less than 6 weeks shall precede the expected
date of delivery.
 Maternity benefit shall be payable to employee or any other persons as
 per the nomination.
 The Amount of benefit up to the period of expected delivery shall be
paid in advance. The balance due for the subsequent period shall be
paid within 48 hours from delivery of child.

9. The Payment Of
Bonus Act, 1965
The Payment of Bonus Act
imposes statutory liability
upon the
employers of every
establishment covered under
the Act to pay bonus
to their employees.
It provides for payment of
minimum and maximum
bonus and linking
the payment of bonus with
the production and
productivity.
 The Act applies to every factory where 10 or
more workers are working
and every other establishment in which 20 or
more persons are
employed, on any day during an accounting
year
 Every employee receiving salary or wages up
to RS. 3,500 p.m. and
engaged in any kind of work whether skilled,
unskilled, managerial,
supervisory etc. is entitled to bonus for every
accounting year if he has
worked for at least 30 working days in that
year
 Penalty
The punishment provided for contravention of
any provisions of the
Act or any rule made there under is
imprisonment for a term, which
may extend for 6 months or with fine, which
may extend to Rs. 1000/- or
with both.

10.  It is a central legislation which applies to the persons employed in the
 factories and to persons employed in industrial or other establishments
 This Act does not apply on workers whose wages payable in respect of
 a wage period average Rs. 1600/- a month or more.
 This Act has been enacted with the intention of ensuring timely
 payment of wages to the workers without unauthorized deductions.
 The salary in factories/establishments employing less than 1000
workers is required to be paid by 7th of every month and in other cases
by 10th day of every month.
 A worker, who either has not been paid wages in time or an
unauthorized deductions have been made from his/her wages, can file a
Claim either directly or through a Trade Union or through an Inspector
under this Act.

11.  The present day legal climate is one of uncertainty and confusion. In most cases,
a law comes to light only after its contravention, resulting in severe penalties.
Statutory Compliances is a must in keeping you away from the long arm of the
law!