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Payroll Compliance checklist in 5 steps for your business


Payroll compliance infers the legal framework against protecting employees’ and employers’ duties.

However, in India, it’s hefty for most companies to adhere to these guidelines and develop payroll-proof strategies. Considering the varying state-level rules, it’s time-consuming, and most of the company’s money goes into safeguarding compliance to tackle these statutory.

Here are some non-compliance effects on the company or employer: 

  • Hefty fines, penalties, or even shutdown in extreme cases.
  • Civil or criminal charges 
  • Reduction in the company’s integrity 
  • Cancellation and suspension of operational licenses
  • Distrust amongst stakeholders.
  • Abolition of fiscal benefits

In this blog, we’ll take charge of your payroll compliance worries. So read on; you’ll find it helpful for your business. 

Companies dealing with payroll compliances need to be well-versed with the different labor laws or labor regulations in India— And the following Labour Acts in India require statutory compliance:

  1. The Child Labour (Prohibition & Regulation Act), 1986
  2. Inter-State Migrant Workmen(Regulation Of Employment & Conditions Of Service) Act, 1979
  3. The Equal Remuneration Act, of 1976
  4. The Payment Of Gratuity Act, 1972
  5. The Contract Labour (Regulation & Abolition) Act, 1970
  6. The Payment Of Bonus Act, 1965
  7. The Apprentices Act, of 1961
  8. The Employment Exchanges(Compulsory Notification Of Vacancies) Act, 1959
  9. The Employees Provident Fund & Miscellaneous Provisions Act, 1952
  10. The Factories Act, of 1948
  11. The Minimum Wages Act, of 1948
  12. The Employees’ State Insurance Act, 1948
  13. The Industrial Disputes Act, of 1946
  14. The Industrial Employment Standing Orders Act, of 1946
  15. The Payment Of Wages Act, 1936
  16. The Trade Unions Act, of 1926
  17. The Workmen’s Compensation Act, of 1923

Payroll compliance checklist

1. Keep a record of employees’ data.

It might be surprising to you, but most companies lack here- because they cannot gather new updates regarding their employees and fail to comply with the compliance requirements. 

But you can save yourself from this turmoil after gauging records with these data sources. 

  • Employees – income tax declaration, facilities benefited, and more.
  • HR team – Salary system, eligibility for benefits, etc.
  • Finance team – Deduction form recoveries, etc. 
  • Leave and attendance reports – Data from attendance systems, current work shifts, etc.
  • General service provider – Transport service provider, canteen vendor, and more.

Lastly, check if that data adheres to the company policy. This also takes us to the next point. 

2. Set Policies 

It’s a must if you’re looking forward to accountability against statutory activities. 

Policies for Pay reviews, Maternity leave, Promotions, Overtime, etc., must lay down to streamline monitoring for employees, employers, or third parties. 

Once you do that, endorse them with your management and personalize them according to business needs. 

When all information is gathered, you need to verify its validity because a small mistake can ruin the entire payroll process.

3. Look into audit trails.

Here you need to validate the inputs so you can double-check their authentication.

This saves you from direct answering authorities for vague transactions if they occur in scenarios due to wrong inputs. 

Mainly the payroll process divides into three stages:

  • Pre-payroll activities- data acquisition from departments and teams. 
  • Actual Payroll process- payroll calculation by a professional, software, or both.
  • Post-payroll activities – payout to employees and reporting for internalities and externalities.

To save time, go through each step one by one. This way, you can easily detect where you need to work and whom you can hold responsible for false or altered accounting. 

4. Make sure you hit deadlines.

Deadlines are a must-follow; otherwise, your business will toil in penalties and fines, and you probably won’t feel good about it! 

Many times it just came out that one missed the date or was unaware of it!

So it’s crucial to keep note of imperative dates and be well-versed in Tax compliance requirements or timelines. 

One way to save yourself from such scenarios is to use automation tools and software that you can rely on as a reminder for crucial due diligence with such compliances. 

5. Keep up to date with new legislation.

Payroll compliance constantly has been subjected to regular changes according to emerging needs. 

If you don’t keep up with them. Chances you’re again going to face a frequency of non-compliance with legislation. 

Hence, make conscious efforts to stay updated with new authorities’ announcements and changes, thus upgrading your process. 

We know it’s time-confusing but worth it all! 

How we can help! 

We at FinAccountants, with our consulting, help firms streamline compliance-related workflows and processes. Along with expertise alliances, collaborate with automation to reduce error and cost.

We also avail our services directly to the UK and US-based subsidiaries in India besides the parent company and turn them compliance-proof in another economy. 

Book a call!

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