Are companies still dealing with larger workloads because of the number of registered and licensed returns that they must file (such as statutory compliance)?
Imagine running a business where your HR and payroll department is spending more time on statutory compliance than on their employees and business growth! Statutory compliance has always created a significant administrative burden for companies in India, particularly for MSME’s, start-ups, as well as companies that have offices in multiple locations, all of which tend to have different labour laws from state to state.
This is where Compliance Simplification can be beneficial. By implementing a single registration, license, and return system, we can help eliminate many of the complexities associated with statutory compliance and create a digital, structured, business-friendly environment that utilizes payroll software, HR software, and a Human Resource Management System (HRMS).
What Is Compliance Simplification and Why Is It Important for Businesses?
The term compliance simplification is widely used in business to describe the creation or development of new ways of interpreting complicated regulations, including employment law and other regulatory requirements for businesses. Historically, the Indian business sector has had a great deal of complexity related to multiple registrations and licenses in both the central and regional government sectors. The result of all this complexity is an increase in mistakes, delays, penalties, and overall administrative costs for the company.
Due to the focus on the improvement of business operations, compliance simplification is intended to increase compliance with regulations that are clearer, more convenient to follow, and easier to report. The implementation of one registration, one licence, and one return will be an important milestone towards achieving this goal. This approach will allow the company to spend more time developing its people and building a larger base of customers rather than wasting its time dealing with paperwork.
What Does ‘One Registration, One License, One Return’ Mean?
The “One Registration, One License, One Return” model means a business needs to:
- Register once (instead of through departments such as taxation, labour, employment, and others) for all registrations required by law.
- Have a single merged License that includes different laws regarding employment standards, payroll, work hours, and work days.
- File one return that combines all required periodic returns under the statutory and other acts into one single return.
This will enable businesses to leave multiple, disconnected means by which they have been complying with the law, and move to a digitalised and simplified procedural structure, especially for those organisations with statutory compliance needs that cross several states and locations.
Why Was the Traditional Compliance System a Challenge for Indian Businesses?
Before compliance simplification, businesses had to deal with:
1. Different Labour Registrations
Businesses were required to have separate registrations with all the relevant organisations for Employees’ Provident Fund (EPF), Employees’ State Insurance Corporation (ESIC), Shops and Establishment (S&E), and the Professional Tax Continuous Registration Programme.
2. Licenses From Many Different Laws
Employers had to obtain and maintain many different licenses originating from many different forms of labour legislation and regulations.
3. Multiple Statutory Return Filings
Filing of monthly returns, quarterly returns, and annual returns to multiple authorities increased the workload of all organisations and also resulted in an increased likelihood of non-compliance.
4. Completely Manual Compliance Procedures
All compliance procedures were based upon written documentation, physical inspections, and manual record keeping, resulting in delays, errors, and inefficiency.
5. Over-reliance on Third Party Consultants
As a result of the complex statutory compliance environment, many businesses are forced to depend on third-party consultants for the completion of filings, audits, and to provide regulatory assistance.
What Is the Impact of Compliance Simplification on Statutory Compliance?
Statutory compliance refers to important legal obligations related to labour laws, payroll, taxation, and employee welfare. Compliance simplification makes statutory compliance:
1. Labour Laws Made Simpler to Comply
Statutory compliance simplification increases the clarity and ease of understanding of statutory compliance requirements through simplified legal language, while presenting the statutory compliance requirements in a logical and easy-to-read format that is more appropriate for use in the business community.
2. Centralised Statutory Compliance Tracking
A single statutory compliance tracking framework enables businesses to track their statutory obligations, due dates, and filings from a single system, rather than tracking them through multiple departments and information systems.
3. Reduced Errors in Statutory Compliance
Simplified statutory compliance processes together with standardised statutory compliance formats reduce the likelihood of calculation errors, incorrect filings, and improper documentation associated with payroll and labour law compliance.
4. Earlier Filing and Submission
Simplified statutory compliance processes can assist companies to complete their statutory obligations on time by reducing the time it takes to prepare returns and reports, and therefore eliminating delays caused by procedures.
5. Improvements in Payroll and HR Integration
Integrated payroll systems and HR systems can improve the accuracy and efficiency of employers’ compliance with statutory requirements by automating the calculation of employee deductions, generating payroll reports, and maintaining consistency between HR and payroll data.
6. Reduced Probability of Statutory Compliance
Statutory compliance simplification will minimise the chances of incurring statutory compliance penalties, statutory compliance notices, and statutory compliance disputes by ensuring accurate, timely, and transparent compliance with statutory employment laws.
How Does Compliance Simplification Benefit HR Teams?
HR teams play an essential role in managing employee-related compliance. Compliance simplification helps HR professionals by:
1. Manual Compliance Tracking Gone
By simplifying the compliance process, HR departments have been able to cut back on the use of manual registers and spreadsheets. Instead of having to maintain this type of record, HR departments now have a simplified way of managing their statutory compliance responsibilities through an automated and systematic approach.
2. Better Accuracy in Filing
Automated compliance formats and processes allow HR professionals to achieve greater filing accuracy when completing statutory filings, maintaining and recording statutory records, calculating payroll-related calculations, and reducing the amount of errors in these processes.
3. Less Time Spent on Compliance
As a result of a decrease in the number of compliance processes, HR departments will be able to utilize more of their time and resources on the more strategic aspects of HR, such as employee development, performance management, and workforce planning.
4. Increased Opportunity
By simplifying the compliance process, HR professionals are able to focus on hiring, performance management, and employee engagement instead of having to allocate all of their time and energy to constantly completing compliance paperwork.
5. Decreased Compliance-Related Anxiety
By reducing the complexity of compliance requirements, HR professionals experience a reduction of compliance-related anxiety from having to continually follow up, create confusion, and meet last-minute filing requirements. Therefore, HR professionals can spend less time worrying about compliance and more time focusing on performance.
6. Minimised Risk of Audit
By having standardized compliance processes and digital documents, HR professionals face a lower risk of having to undergo an audit or receive compliance notices from their regulators.
7. Improved Integration
Simplifying compliance has facilitated smooth integration between HR and Payroll Systems, which has ensured consistency of employee data and accuracy of statutory deductions.
How Does Payroll Software Support the One Return Model?
Payroll software plays an important role in compliance simplification. Modern payroll systems can:
1. Keeping track of Statutory Calculations
Current payroll software allows companies to simplify the process of calculating statutory deductions (PF, ESI, Professional Tax, TDS, etc.) by allowing for automatic calculations using very few manual inputs.
2. Easy to Generate Statutory Compliance Reports
Using one software system, payroll department personnel can easily generate statutory compliance reports as they relate to one filing, one registration.
3. Automated Processes and Alerts
With automatic processes and alerts built into payroll systems, employers are able to remain compliant and meet all deadlines associated with changing labour laws.
4. Attendance & Leave Data Integrated
Payroll systems integrate both attendance and leave data to ensure that salary calculations and related statutory deductions are accurate for every payroll period.
5. Centralised Payroll Information
Having one central payroll database where payroll and related information for each employee is maintained results in greater consistency of the payroll data and provides the framework for audit preparedness.
6. Minimising Payroll Error & Compliance Risk
Automation and validation controls help to reduce errors in payroll processing and are set in place to reduce compliance gaps and eliminate penalties resulting from statutory non-compliance.
Why Is HRMS Essential for Managing Simplified Compliance?
An HRMS (Human Resource Management System) acts as a single source of truth for employee and compliance data. In a simplified compliance environment, HRMS helps by:
1. Centralised Employee Records
When it comes to keeping track of employee records, i.e., Payroll, Statutory Compliance, HRMS will collect all required employee data in one platform, thereby providing consistency across the board for payroll processing, as well as meeting compliance obligations.
2. Integrated Payroll, Attendance & Statutory Compliance
HRMS manages payroll, attendance, and statutory compliance from a single source, meaning you are able to perform all calculations, deductions, etc., without having to manually update any information.
3. Audit-Ready Compliance Reports
HRMS’s automated reporting process allows you to generate audit-ready, structured reports easily, so you can quickly respond to inspections and subsequent compliance review requests.
4. Digital Filing and Document Management
HRMS also allows you to digitally file and store all compliance documents, which means that you no longer have to worry about losing compliance-related documents, as well as having easy access to them when needed.
5. Visibility into Compliance Status
HRMS provides you with a dashboard and alerts to notify you of closing compliance deadlines, potential non-compliance risks, and opportunities for compliance improvement across all aspects of your business.
What Are the Key Compliance Areas Covered Under the One Return System?
The one return system generally covers:
1. Provident Funds (PF)
Complying with PF regulations helps employers and employees contribute to the PF in a timely manner, make accurate deductions from employee pay, and provide appropriate reporting to promote the long-term financial security of the employees.
2. Employee State Insurance (ESI)
ESI compliance provides medical and social security benefits for employees through calculating contributions correctly, making timely contributions to the ESI, and filing with the ESI statutory bodies.
3. Professional Tax (PT)
Complying with PT regulations includes accurately calculating and submitting state-level amount deductions based on employee salaries and completing regular filings in a timely fashion in accordance with the state’s tax regulations for employees that fall within the specified salary brackets.
4. Labour Welfare Contributions
Complying with labour welfare rules includes making contributions that support the worker welfare schemes in your local area and following state-specific regulations regarding labour welfare funds.
5. Employment-related disclosures
Enable government agencies to ensure transparency within the organization, providing relevant workforce information regarding workforce numbers, wages, working conditions, and statutory compliance to the appropriate governmental bodies.
How Does Compliance Simplification Help Businesses Focus on Growth?
By reducing time spent on paperwork and compliance management, businesses can:
1. More time focused on core business functions
With the reduced workload due to simplified compliance requirements, management and employees can focus their efforts on their main business functions and overall strategy to achieve their important objectives efficiently.
2. Enhanced Employee Experience
Simple payroll and HR processes have resulted in an increase in the value placed by employees on their company due to the regular payroll schedule and their satisfaction with the competitive benefits package.
3. Increase investment in innovation
Time and cost savings that originate from simplifications to the compliance process permit an increase in the number of resources invested into innovation, technology upgrades, and process improvement.
4. Faster business expansion
Businesses can now scale regardless of the regulatory environment, which makes it easier for companies to grow their businesses into new geographic markets, open new facilities, hire employees, and grow by breaking down the previous delays associated with compliance.
5. Increased Productivity Across all Teams
With increased use of automation and simplified workflows, companies are now able to free up time that was previously spent on non-value-added and low-value tasks, allowing employees to focus on creating value-added activities, thereby increasing the employer’s productivity.
6. Better Strategic Decision-making
By reducing the compliance burden, management is able to concentrate on data-driven planning, long-term growth initiatives, and sustainable business expansion.
Conclusion
As organizations transform into a One Registration, One License, and One Return business model, having an appropriate technology partner to provide an automated approach to simplify compliance is important. The Savvy HRMS has been specifically created with this goal in mind by combining statutory compliance, payroll, and HR functions into one accessible platform.
With Savvy HRMS, organisations can:
- Automate compliance calculations and filed documentation.
- Achieve accuracy with respect to PF, ESI, PT, etc., as per labour laws.
- Integrate payroll software with attendance, leave, and employee information.
- Decrease manual labour and risk of noncompliance.
- Maintain audit-readiness at all times.
Would you like to witness firsthand how Savvy HRMS simplifies compliance, payroll, and HR activities for your organisation?
Request a free demo of Savvy HRMS now and get started on your journey to hassle-free compliance.
