Table of Contents
What is HR Compliance?
HR compliance is the process of ensuring that workplace policies align with labour laws and regulations of the land. The HR department is responsible for creating and enforcing these policies.
Compliance is one of the most important functions of the HR department because any non-compliance with laws and regulations can lead to business shutdown and increased costs due to high employee turnover rates.
Managing HR compliance can be tricky, since it requires HR teams to keep up with ever-changing labour laws, following several layers of rules and regulations, translating legal requirements into enforceable company policy.
Bigger companies typically have a compliance department that work with the HR department to ensure HR compliance.
Types of Compliance within HR
Here are the key types of compliance that HR and compliance teams need to keep in mind when creating company policy.
Statutory Compliance
Statutory compliance includes following local, state and national law surrounding employment and labour. Non-compliance with these laws may lead to criminal charges like imprisonment or fines. Some examples of statutory compliances needed to be followed are minimum working age, minimum wage, equal pay, etc.
For example, all employees in India must undergo POSH training. TDS and PF are also legally enforced deductions.
Here’s how RazorpayX Payroll handles automated tax compliances.
Regulatory Compliance
Regulatory compliance refers to laws put in place by specific regulatory bodies. For example, the Employee’s Provident Fund Organisation (EPFO) has rules regarding the deduction of PF and VPF from salaries.
There could be some overlap between statutory law and regulatory law, but the rules to be followed largely remain the same.
Contractual Compliance
Contractual compliance refers to the legal obligation to adhere to the terms of a contract or agreement between a business and a third party. Contracts with full-time employees, freelancers or even part-time employees need to be honoured and abided.
If a business does not follow the terms of a contract, legal action can be taken against them, leading to hefty fines, legal fees and more.
International Compliance
International compliance refers to following international labour law as set and regulated by international bodies like the International Labour Organisation (ILO). International regulations often form the foundation for national or local laws, so following the guidelines set by these international bodies is always good practice.
Ethical Compliance
While other compliances are set in stone by regulatory or government bodies, ethical compliance is more subjective and differs based on interpretation. At the core, ethical compliance refers to the moral principles and values that guide how a company treats its employees.
This includes promoting diversity, preventing discrimination, ensuring fair wages, and creating a safe, inclusive work environment—often going beyond what is legally required to meet higher ethical standards.
HR Compliance Best Practices
Here are some of the best practices to ensure HR compliance:
Consistent enforcement
After establishing HR policies, it’s important to enforce these policies consistently to ensure they are enforced consistently across all departments, functions and for all employees equally.
Ensure accountability
It’s also important to ensure that complying with HR policies is not the sole duty of the HR department, but a shared duty by all. The responsibility must be adopted and shared by leadership, managers and all employees.
Automate HR processes
Automating HR processes can help improve accuracy and efficiency, and can free up HR staff to focus on other important tasks. Software like RazorpayX Payroll help businesses streamline and simplify HR processes like employee onboarding, compliance payments, payroll calculation, disbursal and more.
Regular trainings
All managers should be trained on how to identify and mitigate compliance risks. This training should be ongoing and should cover all aspects of HR compliance, including recruitment, hiring, onboarding, performance management, compensation and benefits, and termination of employment.
Challenges in HR Compliance
Compliance is not an easy function – it is constantly changing and must be done with perfect accuracy. Not doing so can result in huge losses for the organisation. Here are some of the challenges that HR teams face while ensuring compliance.
Lack of Automation
Manual compliance is a tedious, error-prone process. Most businesses in India still file taxes and returns manually, which can lead to missed deadlines or incorrect filings. Today, the only payroll software on the Indian market with automated compliance is RazorpayX Payroll.
Automated software calculates your taxes, automatically files them with the various government portals and allows instant access to all challans in one place. Most importantly, automation keeps up with changes in regulation without any manual intervention.
Complex Regulatory Environment
India has a complex and fragmented regulatory environment for HR compliance. There are over 100 laws and regulations that employers must comply with, and these laws vary from state to state. This can make it difficult for employers to keep up with the latest requirements.
For example, the Minimum Wages Act, 1948 sets the minimum wages that employers must pay their employees. However, the minimum wages vary from state to state. For example, the minimum wage for unskilled workers in Delhi is ₹17,384 per month, while the minimum wage for unskilled workers in Bihar is ₹11,791 per month.
Lack of Awareness
Employee laws are constantly changing, and employers need to be aware of every single update. This can be challenging without a big HR team and expertise.
For example, in 2021, the Maternity Benefit Act, 1961 was amended to increase the paid maternity leave period from 12 weeks to 26 weeks. Employers who were not aware of this amendment may have failed to comply with the new law, which could have resulted in penalties and fines.
Here’s how RazorpayX Payroll helps businesses stay up-to-date on employee laws in India.
Workplace Safety
Workplace safety in India is governed by many laws, like the Factories Act, the Workmen’s Compensation Act and other compliance requirements like POSH. These Acts define the basic infrastructure and policies that businesses have to put in place for the welfare and wellbeing of their employees.
Read more: Statutory Payroll Compliance
How to Automate HR Compliance?
Today, most businesses choose to automate their HR compliance. With software like RazorpayX Payroll, you can have your entire payroll process automated, integrated and compliant in under an hour.
- Automated HR compliance such as TDS, ESI, PF, etc.
- 45+ integrations with top HR platforms like DarwinBox and Oracle HRM
- Periodic return filing.
- Compliance reports.
- High accuracy.
- Updated at regular intervals.
FAQs
What is an HR audit checklist?
It is the list of all the compliances that the company needs to follow. This checklist helps the HR department keep a track of all the compliances that have been followed and what more needs to be done.
What is an HR Compliance Audit?
An HR compliance audit is a process of checking the HR compliance policies of the organisation against the statutory requirements. It involves talking to important business people and getting more information about the business laws and regulations, and checking whether all of them are being followed or not.
Why is HR compliance important?
HR managers should stay updated about the changes in labour and business laws. HR compliance is important because it helps the organisation avoid the risk of penalties, fines, and legal troubles.