Navigating Compliance Conflicts: How Should I Handle Payroll and Statutory Issues?

Hi everyone, I'm new here. I work in a private company with around 500 employees. It's a platform for medical students preparing for their entrance exams. The company is expanding its services, and I currently hold the position of a payroll and statutory compliance executive. Previously, I worked as a mathematics teacher. My knowledge of compliance has been provided by a consultant hired by the company. Initially outsourced, compliance and payroll duties are now handled in-house.

Currently, both the consultant and the compliance manager have conflicting statements regarding compliance matters. I need to present the observations made by the payroll and compliance manager on behalf of the team.

Specific Questions on Compliance Issues

I seek your help to enhance my understanding of compliance issues. Here are some specific questions:

1. Our payroll manager suggests incorporating the statutory bonus as a pay head in the gross salary instead of paying it separately. Is this a recommended practice?

2. Our HR head proposes replacing monetary overtime payments with compensatory offs. Is this legal, considering the statutory regulations on overtime pay?

3. Regarding maternity leave, should an employee be eligible for leave encashment? Is it paid annually or at the time of full and final settlement?

4. Are ESI contributions calculated on referral bonuses?

5. What registers are necessary to maintain compliance with statutory requirements?

6. The Maternity Benefit Act mandates creche facilities for establishments with 50 or more employees. Does this count include all employees or only female employees? Is having a creche facility mandatory, and what are the consequences of non-compliance?

I would appreciate it if your responses include relevant laws and sections for reference.

Statutory Bonus and Salary

Statutory bonus cannot be made a part of the regular salary. First of all, a bonus is payable not in the current financial year but in the succeeding year, depending on the surplus earned in the previous year. The amount has to be paid by November of the succeeding year. So technically, there cannot be a spread over for 12 months.

Compensatory Off Against Overtime

Compensatory off against overtime (OT) done is against statute. Section 59 of the Factories Act 1948 is breached if you are in the manufacturing sector. So it will have serious legal implications, although this practice exists clandestinely. As long as it does not get the attention of legal authorities, it will work fine. Here also, you cannot limit OT at double wages to certain sections and exclude certain other areas from the liability, as all the workers are entitled to it. If caught, you will not have any valid defense.

Leave Encashment During Maternity Leave

An employee on maternity leave will be eligible for leave encashment. Yes, you are required to give leave encashment at the time of full and final settlement, but there is no statutory necessity to pay it during the service period. Many PSU/Govt organizations allow encashment of earned/privilege leave once a year.

ESI Contribution on Referral Bonus

ESI contribution is not required on a referral bonus as it is not a regular payment and is only paid once in a while.

Core Activity and Statutory Coverage

It will depend on the nature of your core activity and coverage under various statutes.

Maternity Benefit Act and Creche Facility

In the Maternity Benefit Act, an establishment that has 50 or more employees in all shall mandatorily have the facility of a creche.

Penal Provisions for Non-compliance

The penal provisions under the respective statutes will have both imprisonment and fines as well as both if the law is not complied with.