FactoHR Payroll Software India

Payroll Software: How to manage Statutory compliance

Payroll software is all about maintaining the record of employees from hire to retire. It is generally used to manage all the records of employees smoothly and securely. A good payroll software involves everything that effects salary of employees, keeping track of attendance and leave, reimbursement, loan and advances, statutory compliance, etc.

Before we go further on how to maintain statutory compliance with good payroll software, let us have a glance at why is statutory compliance is crucial for any company in India.

The need for Statutory Compliance in India

Statutory compliance is essential for both small and large companies to safeguard their business from legal hassles. A lot of time is spent in ensuring that these compliance are implemented correctly for employees. If a company fails to fulfil the requirements of statutory compliance, it may lead to legal complexities and heavy penalty.

In today’s competitive environment it is very challenging to maintain the compliance easily without a good payroll software. Each country has it’s own compliance requirements. Here is a list of statutory compliance in India:

  • Minimum Wages
  • Provident Fund (PF)
  • Income Tax (IT)
  • Employee State Insurance Corporation (ESIC)
  • Professional Tax (PT)
  • Gratuity
  • Statutory Bonus

Management of Statutory compliance through Payroll Software 

  • Minimum wages

The minimum wage act 1948 is provided to fix minimum wage rate for skilled and unskilled labours. It ensures the minimum survival needs of the workers and helps their families to take care of their education, medical and other necessities. The rates of the minimum wage is determined on the basis of occupation, sector and type of employee. With the help of factoHR, you can configure minimum wage in your CTC which is linked with payroll. This, in turn, solves the problem of penalty that can arise due to a violation of the act.

  • Provident Fund (PF)

Provident fund (PF) is the compulsory contribution of the fund for the future of an employee after the retirement. Any company who has grown to a number of 20 or more employees requires a registration in Provident Fund (PF). It is applicable to the employees whose monthly basic salary is 15,000 INR or less. It is contributed by employee and employer @12% of basic salary. factoHR does this work automatically where past data of employee is generated in the desired format.

  • Income Tax (IT)

Income tax is deducted from the salary of employees according to Income Tax Act, 1961. Through factoHR, payroll software one can calculate income tax of employees easily and automatically. Every employer who is paying salary to employees has to deduct TDS if the salary is more than maximum amount exempt from tax. Auto deduction of TDS amount at the time of payroll is available through factoHR. You can also download form 24Q, form 16B and 16.

  • Employee State Insurance Corporation (ESIC)

Employee State Insurance Corporation (ESIC) is provided by the government to give affordable healthcare to employees as well as their family members. Companies having more than 20 employees and whose gross salary is less than 20,000 INR must be registered under the ESIC Act. factoHR automatically generates ESIC challans as well as ESIC annual reports considering the six-month cycle.

  • Professional Tax (PT)

Professional Tax (PT) or professional tax is calculated on the basis of state in India. It is deducted from the gross income of an employee. Duration of deduction is half year i.e 1st April to 30th September and 1st October to 31st March. PT is deducted slab wise. factoHR can maintain PT slabs for every state automatically at the time of payroll. You can also download form 5A and 5 to generate reports related to PT.

  • Gratuity

Gratuity is the amount given by the employer to the employees at the time of leaving the job after completing five years of their service. Every employee who has completed at least five years of service in the same company has the right to claim their gratuity. Gratuity is payable under the payment of wages act. Gratuity is calculated as Basic + DA divided by 26*no of years of service*15. Through factoHR, you can download gratuity report of your employees.

  • Statutory Bonus

Under the act of pay bonus, the of bonus imposes statutory liability upon the employers of every establishment to their employees. Minimum bonus payable is 8.33% and the maximum is 20% of the basic salary. Employers keep statutory bonus as a part of CTC. Calculation of bonus can be made easy through factoHR. You can also download the report of bonus paid to employees. 

Simplify Statutory Compliance with factoHR?

factoHR is a cloud based Payroll software solution that takes good care of all statutory compliance according to the requirements of government in India. Our payroll software allows you to manage minimum wages, income tax, provident fund, employee state insurance corporation, professional tax, gratuity and statutory bonus automatically. factoHR has ability to manage these compliance seamlessly.

To know more about factoHR – HR & Payroll software, please contact +91 782 000 3100 or visit www.factohr.com.

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Niraj Karelia

Niraj Karelia is the CTO at Version Systems Pvt Ltd and responsible for the management of design, development, implementation, and support of information systems for clients. He is responsible for application development, maintenance, testing, and infrastructure management services worldwide.