Compliance is about rules, regulations, plans, and policies that ensure the smooth functioning and execution of roles, responsibilities, and duties. HR plays a very important role in identifying, recruiting, hiring, and retaining the right people—the best talent with the necessary knowledge, skills, and abilities—to develop strategies and achieve goals within a stipulated period of time and the allocated budget. This is a descriptive study that emphasizes the importance of compliance in an organization, as well as its execution and implementation for the smooth facilitation of duties. This research has employed secondary sources of data collection to elaborate on certain areas for a better understanding of the concepts.
ABSTRACT
Compliance is all about rules, regulations, plans , policies for a smooth functioning and carrying out of roles, responsibilities, duties. HR plays a very important role in identifying, recruiting, hiring , retaining the right people , the bestest of talent with knowledge, skills, abilities, talents to make strategies and achieve goals within a stipulated period of time and within the allocated budget. This is a descriptive research which emphasises the importance of “compliance “ in an organisation and execution and implementation of the same for a smooth facilitation of duties. This research has employed secondary sources of data collection method to elaborate upon certain areas of research for a better understanding of the concepts.
INTRODUCTION
HRM plays an important role in bringing about an equilibrium between demand and supply. Compliance is the most important part in any organisation, compliance management comprises compliance management and regulation for a smooth conduct and functioning of all of the aspects of management. Any organisation is governed by plans, policies, rules, regulations , laws , fair set of labour laws. Compliance Management is based on the premise of regulation and management which are an absolute necessity. Breach of the statutory and legal compliance will only attract fines, penalties, damage . Every country, however , has its own fair share of labour laws governing maternity leave, gratuity, overtime, pension, health benefits, life insurance etc.
DEFINITION
Very broader definition of HR Compliance would be that the policies , plans of any organisation must be in alignment with the laws specified by the government of the centre and state which are mandatory and legally , updating them as regulations change and organisation grows. It’s a critical component of HR but, is overlooked.
When looking at compliance especially employee document management , the following aspects must be kept in place
1) A file exists for all of the employees (past/present) and all the necessary details and documents must be submitted as required by the law.
2) The access to the files must be limited
3) All the documents have classification applied and those requiring additional details are kept separate.
4) Documents must be reviewed so that those close to expiration can be kept up to date.
5) Documents must be produced upon the request of the employees.
6) A process to preserve documents of employees whose litigation is pending or reasonable anticipated.
7) A retention schedule dictates how long the documents must be preserved and when they should be destroyed.
RESEARCH METHODOLOGY
It’s a Descriptive Research as it explains the concept in depth of Compliance in India and some of the must have policies with the researcher having no control over the variables and simply elaborating the concepts and facts as they exist.
REVIEW OF LITERATURE
A Literature review for HR Compliance in India typically explores Legal and regulatory frameworks in India, Execution ideas , Consequences faced upon non-adherence , HR policies, Compliance system in India, its impact on organisations etc, Here is an overview of the same:
1) Legal and Regulatory Reforms
1) Labour Laws
India’s Compliance is governed by a fair share of labour laws like Payment of Gratuity, 1972, EPF Act , 1952, ESI Act , 1948 etc. Labour laws which are passed by the Federal Government are legally binding on the organisations and must be incorporated in an organisation’s Compliance Documents and all other policies which are applicable to the company and adopted must be in alignment with the Federal Government’s policies.
2) Recent Reforms
Recent reforms like Occupational Safety , The Code on Wages 2019 , Industrial Relations Code 2020 , Health and Working Conditions 2020 etc are all to streamline, simplify and consolidate existing legislation
2) How to go about the HR Execution?
Any breach of the mandatory legal and statutory compliance will only be hazardous to the organisation in all the aspects of management starting from initiation , planning , staffing , delegating , controlling , leadership , achieving those aims and objectives , levelling up , upgrading the status , stature , attracting , recruiting , hiring and retaining the best talent etc, So ,how does one go about creating and executing HR compliance? Compliance should define the individual and organisational behaviour patterns and get it in alignment with the set , targeted organisational aims and objectives and when onboarding an employee, he must be given a walkthrough of all of those laws, policies, plans, programmes, fines, penalties. Merely writing and signing up the plans and policies wouldn’t get you anywhere , periodically and effectively communicating them to the employees and skilfully getting them familiar with the same so as to avoid the breach lest face consequences and auditing these HR compliance policies regularly with a stringent set will only remove legal liabilities.
3) Example of HR Compliance breach
If a company has planned a systematic layoff of employees, or a person on maternity leave cannot be terminated just like that , an individual eligible for overtime must be monetarily compensated right then and there or else it violates the HR compliance ,statutory and legal requirements for ensuring a smooth facilitation of HR ethics
4) Consequences of non-adherence to HR
1) Attracts heavy penalties, fines, legal, financial, reputational damage.
2) Non-adherence to statutory and legal compliance will only create additional disastrous consequences for the company like increased turnover, low retention, affects employee engagement , lower productivity and lack of competitive advantage.
3) Any organisation with an absent HR Compliance system will only face increased issues especially in case of accidents, injuries , workplace related incidents.
4) 4) Any organisation with no compliance system will face chaos, commotion and lack of discipline and obedience will only reduce the organisational effectiveness and efficiency.
5) How to go about the HR Compliance in an organisation?
1) List out the compliances which are applicable to your company , it depends on various factors like the industry, location , business size, volume of employees etc.
2) Every state and the central government have their own laws , a company must decide what fits them right.
3) Communicate the compliances to the HR department
4) Effectively distribute the compliances among the team members.
5) Appoint an individual with knowledge and skills of legal and statutory compliance who exclusively handles this department and role in the organisation.
6) Be updated with regular changes in rules, policies
7) Regularly and periodically audit the HR compliance with stringent set of laws.
8) Communicate it to all of the employees
9) Create a checklist and regularly update it and communicate it to keep transparency , accuracy and objectivity constant and intact.
6) Impact on Organisations
1) Risk Management
HR Compliance will only reduce potential financial, legal risks. It will in return enhance organisational effectiveness, efficiency.
2) Operational Efficiency
Streamlining , consolidating , simplifying the existing policies will only improve the overall operational efficiency , productivity and employee engagement.
7) Some of the “Must Have” HR Policies are as follows:
1) EPF
1) 12% contribution by the employer which is further divided into
2) 3.25%- EPF Account
3) 8.33%- ESI Account
4) 0.47%- EDLI Account
5) And another 12% would be contributed by the employee which would directly be deposited into the employee’s EPF Account which is non-deductible & non-taxable.
• EPF Benefits
6) Family
7) Health
8) For diseases which are unconventional and serious in nature
9) To acquire movable & immovable property.
10) Rehabilitation
11) Funeral expenses
12) Financing insurance & life insurance policies.
13) Any individual above 58 years of age can withdraw his PF or go for a monthly pension and if working for 10 consecutive years , his PF becomes non - taxable, any individual who has worked less than 10 years can withdraw with subject to incurring a tax penalty
14) Any individual who is leaving the company can transfer his PF account or simply withdraw and encash it by submitting an application and would have to wait for another 60 days (unemployed), any individual who in case joins some other company in under 2 months , this individual will have to wait for another 45days after submitting an application for encashment
15) Retirement & Health benefits
16) Medical benefits
17) Maternity benefits
18) In case of the death of an employee, his accumulated PF fund will be passed on to the legal heir/nominee.
2) ESI 1948
1) Applies to any organisation with 10 or more than 10 employees with power let alone to 20 or more than 20 employees without power.
2) Can only be availed by employees whose basic salary is less than 21000
3) ESI contribution
4) 3.25% on the employer’s part
5) 0.75% on the employee’s part
• Benefits
6) Retirement Benefits
7) Rehabilitation Allowances
8) Medical Benefits- 91 days of leave which can be used in 2 consecutive periods.
9) Maternity Benefits- 12 weeks of confinement, 6 weeks before & 6 weeks after, additional 1 week in case of mis-carriage and extra 1 month in case the health worsens.
10) Funeral allowance- upto Rs 1500 to take care of the funeral expenses.
11) Injury benefit- In case of injuries faced by the employees , the monetary compensation would be given to the family
12) Employee Dependant Benefit- In case of injury let alone death , 70% of average regular hourly wages would be given to the nominee/ family and must be claimed within 3 days of the incident else will be lapsed. Includes temporary & permanent disability as well.
3) Payment of Gratuity 1972
1) Any individual who has worked 5 consecutive years will automatically be entitled to availing the benefits of Gratuity.
2) Applies to all the positions , organisations
3) It is payable within 30 days due of Gratuity period maturity
4) Max Ceiling - 10 L
5) Notice is declared in a language which is understood by the majority
6) Gratuity calculation - 4.8 % of a person’s basic or
7) Calculating Last year’s salary *26/12
8) An employer is deemed to fill out Form A especially within 30 days of an individual nearing the Gratuity eligibility
9) Employees fill out the forms
10) F(Nominee)
11) H(Change of Nominee)
4) Payment of Bonus , 1965
1) Applies to any organisation with 10 or more than 10 employees with power let alone to 20 or more than 20 employees without power.
2) Can only be availed by employees whose Basic Salary is less than 21000
3) Min - 8.33%* BS+DA
4) Max -20%* BS+DA
5) Payable only within 8 months close to the ending of the accounting period
6) Annual - Annual return file before Dec 30th through Form D
7) Disqualification - In case of fraud , misappropriation, mishandling , vandalization of property, defamation etc
5) Performance Appraisal
An individual must be rewarded for his skills, talent , knowledge , abilities, integration of the same to produce a whole to achieve the organisational aims & objectives , it could be monetary benefits , non - monetary benefits , could be given to an individual or the group responsible for driving organisational growth and achieving the targets of the year within the budget rather at expenses even lesser than the estimated keeping the operational costs low.
6) Travel Policy
An individual would definitely be monetarily reimbursed for incurring expenditure on his business/official trip which is expected to be within the permissible limit for the group of designations/positions he belongs to.
7) Sexual Harassment Policy
It is extremely important for a woman to feel safe in the environment that she is working in especially around the men so that she can work effectively , efficiently fuelling the speed of carrying out the administrative , operative tasks. Strong action must be taken against the perpetrators of harassment (mental/physical/emotional) and some remedial measures for the victim who may have gone through a mental trauma. It includes touching inappropriately , gawking , ogling , lascivious conduct through eyes, expressions, physiological cues , cat walking , anything which makes a woman feel uncomfortable especially when passing the person by(like - singing songs, hand gestures, winking , lacking sense of proximity etc)
8) Whistleblower
An HR must carry out his duties with objectivity , transparency , accuracy and most importantly keeping the company policies pertaining to that area in mind , breach of which is only going attract legal and financial consequences. An HR is expected to have a strong sense of justice , morality , law , discipline , structure , limits in order to carry out his tasks with a neutral perspective towards all.
9) Grievance Committee/Internal complaints committee
In case of a company with 15 or more/10 or more employees, above mentioned committees must be set up to address the problems of the employees which could be a source of distress taking a toll on their performance and on all of the interconnected inter-related following aspects not delivering the desirable results.
10) Drug & Alcohol abuse Policy
Individuals would have to undergo a drug and alcohol test to confirm the disassociation with the intoxicating substances. Individuals aren’t allowed to drink , smoke , abuse illegal substances on the premises of the office , association and being caught red handed would only lead to termination. This policy is strictly followed for the employees being sent abroad on site for work.
11) Adaptive Work-culture Policy
This policy is about accommodating the employees and assimilating and integrating them into the work culture by helping though the guidelines on work culture, benefits (job specific ), dress code , cafeteria , permitted and prohibited rules and regulations etc
12) Dress Code
Individuals are expected to dress formally , decently and sophisticatedly as per the company rules and policy.
13) Maternity Policy
12 weeks of leave , 6 before and 6 after confinement for childbirth , post-delivery care.
14) Menstrual Policy
A woman should have either paid/unpaid but 2 days(which of the 2 during the menstrual cycle will be decided by her and if to take a leave or not is also something she would decide for herself) of leave every month so, a total of 24 days in a year.
15) Employee separation
Clearance of “No- Dues”, handling of property matters, their feedback and suggestions on the employee welfare policies and recommendations in the current practices to keep the retention rate and engagement followed by productivity and efficiency of current workforce high for a better , holistic , all rounded growth ,exit interviews , data handling also offering a feedback and suggestions on their performance so far, their engagement, participation, personalised KRAs etc for a mutual development of both the parties. These are some of the ways to carry out a smooth employee separation practice.
16) Probation & Training
An individual on probation would be trained and developed not just for carrying out the current responsibilities, duties of the current job profile and the position at which an individual is appointed, his performance and potential evaluation would be done throughout the probation period before absorbing him full time into the company.
17) Code of Conduct
In terms of behaviour, personality, interaction , team work , collaboration , approach, outlook, understanding , dressing etc everything adds up to showing the character of a person and a person is expected to be decent , pleasant and approachable at all times.
18) Employment contract
Could be written/ implicit ,It consists of information like schedule, working days, approved CTC, job profile, role, responsibilities, duties , location , if it is written there is a legal validity , if unwritten , its vague as its based -on word , it’s a promise, there is no legal validity or proof if tomorrow either of the 2 parties backs off from keeping the word , here the contract is based on mutual understanding , trust and faith but , is considered binding.
19) Payment of wages 1936
Individuals should be paid wages on par with organisational profitability and market standards and most importantly in alignment with their knowledge, skills, abilities, talent , work profile , experience etc , they have to be paid lawfully , legally , rightfully , fairly without unnecessary deductions & hassles.
20) Minimum Wages Act , 1948
Individuals should be paid minimum set by the centre for them to cater to the basic needs of food , shelter, clothing, medical and health.
21) Non- Discrimination
No discrimination on the basis of caste, creed, gender, religion etc when it comes to payment , treatment.
22) Recruitment , hiring , Onboarding
The individuals matching the set out criteria must be shortlisted to be interviewed by the respective Recruitment Line Manager followed by the higher authorities with qualifying subsequent interview rounds only to be taken onboard once selected amongst the shortlisted ones and with fitment and salary offered once accepted by the person , the HR Manager would make sure to prepare himself first followed by taking the help of other departments depending upon his work profile & requirements for the same to set up the work station and to generate his employee code and account number to get him onboard with certain mandatory benefits given to the individuals by the company once they have reached the target number making the provision of a benefit mandatory. An HR Manager has to keep taking updates from the employee on his settling and atmosphere in the company to make sure that the employee quickly assimilates into the company culture and collaborates with his team mates and the department only to soon enough be nudged to take up the challenges , deal with new issues , crack complex business problems with the lessons gained from previous experiences when assigned additional responsibilities with a levelled up designation and most importantly when his abilities , skills help him shine in his respective field , he would also be persuaded to perform cross department functions and work teams.
OBJECTIVES OF THE STUDY
1) To study the importance of the compliance system and about its execution and implementation.
2) To study about various “Must Have” HR policies for a smooth functioning and facilitation among various departments for flow of communication , command and for achievement for organisational aims and objectives.
NEED OF THE STUDY
1) To understand the importance of compliance and certain aspects to be kept in mind for Employee Document Management.
2) To study the Execution of Compliance System in India
3) To understand various HR policies and their significance
4) To have a basic , fundamental understanding of the consequences of non-adherence to compliance.
CONCLUSION
HR Compliance is about rules, regulations , plans , policies, programmes and abidance by the same. Every state and the federal government has its own plans, policies, programmes, rules, laws , one company must decide what is applicable to them. A compliance system with regulation and a structured, organised , thorough , comprehensive , well-established plans , policies, laws is an absolute necessity. A compliance management tool that updates regularly , has checklists, creates alerts, communicates and audits regularly , keeps in alignment with the current changing industry trends. Having a person with a strong focus, knowledge, skills of legal and statutory compliance to exclusively handle this vital area will prevent unnecessary legal and financial burden, the person will maintain harmony by regularly communicating , auditing these laws and communicating and punishing the ones violating the same. Statutory compliance governs every aspect of HR starting from employee search to writeup , probation , termination and everything in between. It is to create a positive workforce, culture and strive for competitive advantage.
REFERENCES
1) Statutory Compliance HR in India HR Compliance - Aparajitha
2) Understanding Statutory Compliance in HR: Key Regulations and Best Practices (talentproindia.com)
3) What is HR compliance? - OpenText Blogs
4) HR Policies in India: 22 Policies Your company Must Have (2024) (startuphrtoolkit.com)
Frequently asked questions
What is HR compliance according to this document?
HR Compliance is defined as the policies and plans of any organization aligning with the laws specified by the government (center and state), updating them as regulations change and the organization grows. It emphasizes the need for policies to be in accordance with the laws and is presented as a critical component of HR.
What key aspects are important for employee document management compliance?
The key aspects include: having a file for all employees (past/present) with required documents, limiting access to the files, classifying documents, reviewing documents for expiration dates, producing documents upon employee request, having a process to preserve documents of employees involved in litigation, and having a retention schedule for document preservation and destruction.
What research methodology was used for this study?
A descriptive research methodology was used, elaborating on the concept of Compliance in India. The researcher has no control over variables and simply elaborates on existing concepts and facts.
What are the legal and regulatory reforms discussed?
The document discusses Labour Laws like the Payment of Gratuity Act (1972), EPF Act (1952), and ESI Act (1948). Recent reforms mentioned are the Occupational Safety, Health and Working Conditions Code (2020), the Code on Wages (2019), and the Industrial Relations Code (2020).
How should HR compliance be executed according to the document?
Compliance should define individual and organizational behavior patterns aligning with organizational aims. Onboarding should include a walkthrough of all relevant laws, policies, plans, and potential fines/penalties. Communicating policies effectively, familiarizing employees with them, and regularly auditing HR compliance policies are crucial to avoid legal liabilities.
What are some examples of HR compliance breaches?
Examples include systematic layoffs, termination of employees on maternity leave, or failure to compensate eligible employees for overtime work.
What are the consequences of non-adherence to HR compliance?
Consequences include heavy penalties, fines, legal, financial, and reputational damage. It can also lead to increased turnover, low retention, affect employee engagement, lower productivity, and a lack of competitive advantage.
How can HR compliance be implemented in an organization?
The document suggests: listing applicable compliances based on industry, location, and employee size; aligning with state and central government laws; communicating compliances to the HR department; distributing compliances among team members; appointing a dedicated legal and statutory compliance expert; staying updated on regulatory changes; regularly auditing HR compliance; communicating compliances to all employees; and creating a checklist for transparency and accuracy.
What are some "must-have" HR policies mentioned?
The "must-have" HR policies include: EPF (Employee Provident Fund), ESI (Employee State Insurance), Payment of Gratuity (1972), Payment of Bonus (1965), Performance Appraisal, Travel Policy, Sexual Harassment Policy, Whistleblower policy, Grievance Committee/Internal complaints committee, Drug & Alcohol abuse Policy, Adaptive Work-culture Policy, Dress Code, Maternity Policy, Menstrual Policy, Employee separation, Probation & Training, Code of Conduct, Employment contract, Payment of wages (1936), Minimum Wages Act (1948), Non-Discrimination, Recruitment, hiring, Onboarding.
What benefits does EPF provide?
EPF benefits include family benefits, health benefits (including for serious diseases), the ability to acquire movable and immovable property, rehabilitation benefits, funeral expenses, financing insurance and life insurance policies, retirement benefits, medical benefits, and maternity benefits. It also provides benefits to the legal heir/nominee in case of the employee's death.
What are the objectives of the study presented in the document?
The objectives are: to study the importance of the compliance system and its execution and implementation, and to study various "Must Have" HR policies for smooth functioning and facilitation among departments to achieve organizational aims and objectives.
What is the need for the study?
The need for the study is: to understand the importance of compliance and aspects for Employee Document Management, to study the Execution of the Compliance System in India, to understand various HR policies and their significance, and to have a basic understanding of the consequences of non-adherence to compliance.
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- Anonym (Author), 2024, Importance of HR Statutory and Legal Compliance in an Organisation, Munich, GRIN Verlag, https://www.grin.com/document/1504508
