There’s a pre-defined legal framework within which any given organisation must function. This framework is termed as statutory compliance. Basically, the organisation must treat its employees in a way that is in adherence to various central and state labour laws.
The word statutory can be defined as ‘enacted by statute’ or ‘regulations’, and compliance means ‘agreement’. Combining Statutory Compliance forms agreement of regulations’ or ‘to follow regulations’.
Statutory compliance adherence provides a great deal of security, starting from employees’ minimum wages to the company’s business existence. Every country develops its own set of rules for organizations to follow, that adds up every year. Organizations put a lot of effort and money to adhere to these laws. However, it is not possible for every organization, especially SMEs, to invest a lot of money in this.
statutory Compliance in HR is crucial from both the employee and employer perspectives. The Indian Government has enacted various employee benefit acts such as industrial relations, minimum wages, social security, women and child employment, health and safety, as well as organization benefit acts including provident fund, trade union, ESI, professional tax, and more. It’s important to note that these acts can vary from state to state and country to country. While these acts may change for different states in India, it is not necessary.
Non-compliance with these laws can result in legal consequences that can threaten the existence of a business. Therefore, companies allocate significant resources in terms of money, time, and personnel to ensure compliance. They often seek advice from legal and finance taxation experts. By practicing efficient compliance measures, companies can minimize risks and stay updated with the latest laws.
Regardless of the type of organization (private, LLP, partnership-based) that provides salaries to employees, adherence to these laws is essential to avoid reputation and business threats during statutory audits.
The statutory benefits applicable can be categorized as follows:
For Employees:
- Ensures the payment of minimum wages and equal remuneration for men and women.
- Promotes fair treatment of employees and fosters better industrial relations.
- Helps prevent inhumane working conditions and guarantees workplace health and safety.
- Provides social security through compensation and incentives.
For Employers:
- Protects the existence of the organization.
- Provides protection against illegal wage demands from trade unions and employees.
- Maintains the organization’s reputation and client engagement.
- Mitigates the risk of fines and penalties.
Non-adherence to statutory compliance can result in several disadvantages, including:
- Financial threats and losses.
- Employee conflicts and trust issues.
- Endangering the organization’s existence.
- Diminished trust from clients and stakeholders.
It is important for organizations to prioritize statutory compliance as part of their operations to ensure legal and ethical practices, safeguard their reputation, and create a conducive work environment for their employees.
We Talforce Services Pvt. Ltd. has an experience of more than 20+ years in the field of HR Solution, Payroll Management, Recruitment and Compliance Services.
