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Every employer is required to comply with the applicable payroll-related laws concerning the employees hired by their organization. Some of the legal requirements are outlined hereunder:
Provident fund (PF)
The Provident Fund (PF) is the fund that comprises all of the contributions made by employees during the time they worked for a corporate organization. The PF regulations require an equal employer contribution.
The employee contribution is calculated as a percentage of the employee’s salary. This contribution, including interest, can be withdrawn at any time by the employee. If the employee is not employed for more than 60 days, they can ask for their contribution, plus interest.
Additionally, they can ask for the balance to be transferred to their current employer. Withdrawn contributions attract tax if drawn within 5 years of continuous service. Hence, it is preferable to transfer the PF balance rather than withdrawing it.
In India, the Provident Fund is administered by the Employees’ Provident Fund Organization (EPFO) under the Ministry of Labor and Employment. Every establishment hiring 20 or more employees is required to maintain a PF fund and tp comply with all Act’s provisions. Specific periodic returns, describing the PF contributions made, are required to be filed by the employers with the designated authorities.
Employees’ State Insurance (ESI)
The ESI scheme in India is regulated by the Employees’ State Insurance Act, 1948. It is a multidimensional social security system tailored to provide socio-economic protection to employees and their dependents covered under the scheme. Every employer, to whom the ESI scheme is applicable, is required to comply with the provisions prescribed within the Act.
Tax Deducted at Source (TDS)
The employer deducts the TDS amount before paying the employee’s salary. The total amount deducted by the employer and paid to the regulatory authorities is dependent on the number of employees hired by the company. The employer is required to remit the full amount into the Central Government’s bank account on behalf of the company employees. This amount is deducted as a means of indirect tax collection as per the Income Tax Act, 1961. The TDS regulations direct employers to deduct a certain amount of tax before the wages or salary is paid to the employees. The TDS is calculated on the employee’s Cost to Company (CTC) salary.
