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Payroll outsourcing means entrusting the company's payroll execution to an outside or third-party agency. Many companies that do not have dedicated personnel for payroll management opt for outsourcing. Based on the company's payroll cycle, they provide the outsourced agency with salary information and other data such as leaves, attendance, reimbursement details, etc., of their employees every month. The outsourced agency calculates dues and is also responsible for complying with statutory compliances.
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In India, companies have to follow the legal regulations in their payroll management while disbursing salaries to their employees. There are many statutory requirements that Indian companies must adhere to, and they must ensure compliance with these legal regulations. If companies fail to adhere to these statutory compliances, they will have to face heavy penalties and/or prosecutions.
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Thus, detailed knowledge of legal expertise and compliance is required to minimise the risk associated with the non-compliance of statutory requirements. The general statutory compliances that every company has to follow for their payroll management in India are:
- ESI fund and PF funds
- Professional tax
- TDS (Tax Deducted at Source)
- Gratuity
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