HR

What are the roles and responsibilities of the HR Generalist?

The Human Resources department assists companies to hire and retain talent, empower them with new skills, and receive consistent payments commensurate to the job. Each role in the HR department might have different roles and responsibilities. In the HR hierarchy, if an HR professional performed a variety of duties, then he may be called a HR Generalist. In this article, we discuss the roles and responsibilities of an HR Generalist.

What is an HR Generalist?

The HR Generalist is a position in the HR department that is supportive of an HR manager and a few HR Specialists. It is an entry-level position that provides hands-on assistance for handling daily tasks.

The Role of an HR Generalist!

The HR Generalist works with the HR manager or HR Specialists to organize training programs for employees, and recruiting procedures including interviewing and shortlisting candidates, administering salary payments, and benefits, handling leave and attendance, and enforcing company policy and procedures.

The HR department relies on the HR Generalist to handle human resource operations on a day-to-day basis. This requires the generalist to have diverse abilities to handle administrative and strategic responsibilities in the HR department. The HR Generalist is the focal point of contact for employees’ queries and other HR-related activities. The job of the HR Generalist is to ensure that all HR operations run smoothly and effectively so that the entire organization gets maximum value.

This requires the HR Generalist to wear multiple hats in a day. At one period of time, they would be engaging with the employees clearing their doubts and misconceptions, and at other times they would be with the top management discussing strategies or with the HR Manager onboarding new employees into the organization.

Responsibilities of an HR Generalist

People Management

An HR Generalist has to support the top management in decision-making activities related to the employees. This would involve applying HR best practices and devising strategies in line with the company goals and objectives. These activities will ensure steady company growth and will also support employee well-being.

Managing HR-related processes

The HR Generalist has to manage the HR-related processes such as employee relations, performance, recruitment of new employees, fixing compensations and benefits, succession planning, and training and development. They are responsible to support the HR Specialists in the above-mentioned processes.

Handling employee grievances and discipline

Managing employee relationships is an important task of the HR Generalist. The HR Generalist has to manage employee grievances and maintain discipline. Providing advice on employment legislation and keeping the company up-to-date on all the employment rules and regulations. Furthermore, they are entrusted with the job of maintaining cordial relations with all stakeholders, both internal and external.

Leveraging employee-related analytics

An HR Generalist has to leverage employee-related analytics and reporting techniques to understand the indicators of employee management. With this data, they should be able to provide solutions to employee-related issues. Using these analytics they should be able to understand the right time to hire and identify employee attrition rates.

Support the Recruitment process

The HR Generalist should support in talent acquisition and recruitment process by identifying the required candidates, connecting them with the HR Manager, conducting interviews, and shortlisting the candidates. This activity is followed by conducting reference checks, issuing offer letters, and onboarding the selected candidates.

Arranging Training and Development processes

In consultation with the HR Manager and HR Specialists, they have to arrange and participate in training and development sessions to empower the employees and strengthen the employee management process.

Skills, Competencies, and Qualifications of an HR Generalist

An HR Generalist requires certain specific skills, competencies, and qualifications to succeed in the job. What are they?

Sound knowledge of business processes

An HR Generalist requires the ability to develop clear HR policies and procedures that are synchronous with the objectives and goals of the organization. They should be capable of identifying and interpreting business trends and practices and applying the same in their day-to-day activities. In addition to this, they should be able to devise strategies for the business with the needs of both internal and external customers in mind. This will enhance customer satisfaction and personalize the customer experience.

Ability to analyze data

Being able to critically analyze data is an important skill. An HR Generalist should be skillful in using HR metrics, scorecards, KPIs, and dashboards and be able to take informed decisions. They should be able to create business value through the effective use of this data.

Mentorship and support

An HR Generalist should possess the skill to make the employee feel at home. They should provide mentorship and support to the employees and help resolve issues that crop up from time to time. The goal is to develop an inclusive work culture that is aligned with the values of the organization.

Managing Labour Relations

Managing Labour relations is a much sought-after competence by the employer. A prospective HR Generalist candidate should possess a strong technical grasp of labour laws and regulations and be able to maintain a cordial relationship with the employee bodies such as trade unions. They should also be capable of adhering to the company’s labour policies, procedures, and programs and take insightful decisions.

Optimizing the workplace

An optimized workplace contributes to significant improvement in employee productivity and performance. An HR Generalist should be aware of the ways to improve workplace efficiency. They should also be able to identify and understand the needs of the employees at the workplace and enhance the employee experience.

Soft Skills

Apart from technical knowledge, an HR Generalist should also possess soft skills to ensure success. Communication skills, interpersonal skills, listening skills, teamwork, conflict management skills and the confidence and resilience to handle issues are key to success. These soft skills enable HR professionals to optimize their technical skills and deliver positive results. This will not only enhance productivity as an HR but will also make a positive impact on the employees.

Qualification

Most organizations require candidates who have at least a Bachelor’s degree in Human Resources Management or a related subject. However, candidates with Master’s degree are preferred in certain organizations. The HR Generalist post is not an entry-level role, and candidates are required to have relevant experience which normally is 2-5 years.

If a candidate needs to stand out in the crowd then an HR Generalist Certification is recommended.  However, any candidate with the required qualification, experience, skill, and competence mentioned here above will make a mark in the industry.

Conclusion

The HR Generalist role involves multiple abilities. On the one hand, they have to ensure the smooth running of the business operations and on the other, they have to manage employees and create a harmonious workplace. In other words, an HR Generalist is a professional with expertise in multiple areas of Human Resources.

GetifyHR, one of the premier outsourcers of Payroll processing and HR Management has been providing its services to a large number of clients across the country. With our highly innovative, cloud-based package we have been able to provide excellent services to our clients in preparing accurate payslips, maintaining employee leave and attendance, and keeping the company fully compliant with all the Statutory Compliance rules and regulations. We can be of real assistance to HR Generalist by providing the most accurate MIS reports through our highly sophisticated package.

Salary Structure

Understanding Salary Breakup, structure, and salary components

Salary is the fixed amount of money paid to an employee by the employer in return for services rendered by the employee. The employer and or his/her HR teams have to put in their minds and arrive at the salary to be paid to each employee. They need to have a clear grasp of the working conditions, their importance, and the contributions towards social welfare schemes, taxation, allowance, and such other components.

How is salary structure determined?

For the employer and his/her HR teams, deciding on the right salary can be a very tedious task. A lot of factors have to be considered to determine the right salary for an employee. These factors are:

1.  Educational Qualification and Experience

Educational Qualifications and Experience play an important role in not only the selection process but also in determining the salary structure for an employee. The higher the Educational qualification and experience the higher the pay.

2.  The Industry

The industry is also an important determinant in fixing the salary. Two individuals employed in two different industries but with the same designation may draw different salaries. The reason for this is that one industry is much larger than the other and the job function may be more critical to a particular industry.

3.  The Location of Employment

The location of employment is important because based on the location, the cost of living varies and this will naturally have an effect on the salary structure. The compensation in an urban location would be higher than the compensation in a rural location. However, due to the surge in work-from-home or remote work, the compensation may be more aligned with role-based rather than to location-based.

4.  Skill sets that are in demand

Skill sets that are in demand are a key determinant in deciding the compensation to an employee. Any skill set that has a wider role within an organization commands higher value and this translates to higher compensation.

What are the common components of the Salary Structure?

  1. Cost To Company (CTC)
  2. Gross Pay
  3. Net Pay

I.  What is Cost To Company (CTC)?

Cost to Company (CTC) is the annual expenditure that a company incurs on an employee. This would depend on the salary and other variable components. CTC is calculated by adding the components like Basic salary, and the additional statutory benefits that employees receive such as EPF, ESIC, HRA, Travel Allowance, Food allowance, Gratuity, Bonus, etc. In other words, CTC is the cost of hiring and sustaining an employee in the company. However, the CTC amount is not the actual amount that an employee takes home at the end of each month.

CTC = Gross salary + Benefits
Components of Benefits
  1. Employer EPF
  2. EPF Administrative Charges
  3. EPF EDLI Charges
  4. Employer ESI
  5. Gratuity
  6. Food Coupon
  7. Mediclaim Premium
1.  Employer EPF

The Employees’ Provident Fund is an employee welfare scheme administered by the Employees Provident Fund Organization (EPFO). Under the scheme, both the employees and the employers contribute towards the Fund every month. This is a platform that provides an opportunity for employees to save a part of their salary as a long-term investment. The employer contributes 12% of the basic salary every month towards the Fund. An equal contribution is made to the fund from the employees’ side also. From the employer contribution, 3.67% goes towards EPF, and a portion is contributed towards ESI and related funds.

2.  EPF Administrative Charges

The EPF Administrative charges are made from the contributions from the employer’s end towards EPF.  From the contribution of 12%, 0.50% is contributed towards EPF administrative charges with effect from June 2018.

3.  EPF EDLI Charges

The Employees Deposit Linked Insurance (EDLI) scheme is a part of the EPF and EPS schemes.  All employees who subscribe to the PF scheme are automatically enrolled in this scheme.  The employee contribution towards this fund is 0.50% (subject to a maximum of ₹ 75.

4.  Employer ESI

Employees State Insurance (ESI) is an insurance scheme administered by the Employees’ State Insurance Corporation (ESIC).  From the employers contribution of 12% of salary, 3.75 % is contributed towards the ESI Fund.  The scheme is applicable for all employees whose salary is ₹ 21,000 or less.

5.  Gratuity

Gratuity is a benefit received by the employee from the employer for the services rendered by the employee at the time of leaving the job or on retirement. To be eligible to receive gratuity, an employee has to be in service for 5 or more years. The amount is deducted by the employer every year and hence will get deducted from the CTC.

The Formula for calculating Gratuity is as follows:

Gratuity = n x b x 15/26

Where n = number of years of service, b = basic salary + DA,

When companies adopted CTC concept, every cost was converted into percentage.  Thus 15 days wages is approximately equal to 4.81% and this is indicated in the CTC sheet.  The ratio 15/26 is fixed and its value is 0.577 for the year and when calculated for a month is  0.577/12 x 100 which works out to 4.81.

6. Food Coupon

Food Coupons are food vouchers provided by companies to their employees to purchase food items and non-alcoholic beverages from designated shops.  The food coupons are tax-exempt vouchers up to a limit of ₹ 50 and are mostly used by salespeople and other employees who work in the field.

7.  Mediclaim Premium

Mediclaim is a basic type of health insurance designed to provide policyholders with financial support during medical emergencies for self and family.  They cover the cost of treatment when an employee is hospitalized.  In Mediclaim the coverage amount is limited and based on the plan that is opted for.  The Insurance company reimburses the expenses incurred by the policyholders for treatment.  The premium has to be regularly paid to avail the benefits of Mediclaim

II.  Gross Salary

Gross Salary is the amount calculated before the deduction of taxes or any other deductions. Gross salary includes the Basic salary, dividends or bonus, and overtime amounts.

Gross Salary = Fixed Earnings + Variable Earnings

Every allowance will be subject to taxation, which will have an impact on the company. The company would pay the tax out of the employee’s wage.

Components of Earnings
  1. Fixed Earnings
  2. Variable Earnings
I.  Fixed Earnings
  1. Basic Salary
  2. Dearness Allowance (DA)
  3. House Rent Allowance (HRA)
  4. Leave Travel Allowance (LTA)
  5. Conveyance Allowance (CA)
  6. Medical Allowance
1.  Basic Salary:

Basic Salary is the primary component of the salary structure and forms the largest component of the CTC. It is the fixed part of the salary package and constitutes between 40-50 percent of the CTC. As per the “New Code of Wages” that is to be implemented by the government, the minimum basic component should be 50% of the salary.

Basic salary is fully taxable, therefore, keeping it too high will not only increase the tax liability of your employee but will also increase the contribution towards EPF and ESI.

On the contrary, by keeping it too low, you may increase the risk of not following the Minimum Wages norms set by the respective state governments.

2.   Dearness Allowance (DA):

Dearness Allowance can be defined as the cost of living adjustment allowance which the government offers to public sector employees as well as pensioners in the public sector.

DA is the component of the salary applicable across India. Since DA is related to the cost of living, it has been linked to the Consumer Price Index.  Hence, the DA varies based on location implying that it is different for employees working in the urban sector, semi-urban sector, and rural sector.

3.   House Rent Allowance (HRA):

House Rent Allowance is a benefit for employees who live away from their place of work and need to live in rented accommodation. The HRA depends on the cost of living in that particular location. The amount that can be claimed as a tax deduction under HRA cannot be more than 50% of your Basic salary in a Metro or 40% of your Basic salary in a non-metro.

4.    Leave Travel Allowance (LTA):

Leave Travel Allowance is a benefit provided to employees to travel within the country. LTA is normally reimbursed to employees after they undertake their travel. An employee can claim tax benefits on the Fare expenses incurred by his-her family during the travel. The tax benefit applies to only Fare expenses and no stay or food expenses are covered.

Only travel within India is considered for the benefit. The benefit applies only to dependent family members of the employee.

5.   Conveyance Allowance:

An employee is liable to receive travel expenses for travel from residence to workplace and back. The to and fro expenses are reimbursed as conveyance allowance. With the introduction of standard deductions, the exemption on Conveyance Allowance has been removed effectively from April 2018.

6.   Medical Allowance:

Medical allowance is a fixed allowance that is paid to employees, regardless of whether they have submitted the bills to claim these expenses or not. These are offered every month with the view to promoting staff health and supporting their medical expenses incurred in a financial year. Similar to Conveyance Allowance, the exemption on Medical allowance has been removed with effect from April 2018.

The employee can also claim Medical Reimbursement, which is a tax-free component reimbursed by the employer as the employee’s portion of medical costs

II.  Variable Earnings
  1. Gratuity
  2. Bonus
  3. Incentives
  4. OT
  5. Extra Days
1.  Gratuity:

Gratuity is a part of the salary that is received by the employee from the employer for the services rendered by the employee at the time of leaving the job or on retirement.

To be eligible to receive gratuity, an employee has to be in service for 5 or more years. The amount is deducted by the employer every year and hence will get deducted from the CTC.

2.  Bonus:

A bonus is an amount provided to an employee as a lump sum once a year based on the individual performance of the employee or the overall performance of the company. The Bonus percentage ranges from 8.33% to 20% of the Basic salary and is based on the decision arrived at between the Unions and the management.

3.   Incentives:

An Incentive is a reward that an employer gives to employees for achieving better results for the company as a whole.  The incentives can be in the form of monetary compensation that is given in addition to salary.  Incentives can also be in the form of a gift, a free product, paid time off or an additional share of stock

4.   Over time (OT):

Overtime is the extra hours that an employee works beyond the scheduled hours of work.  It is also the pay that an employee receives for working those extra hours.

III.  Net Salary or Take-home-salary

Net salary or the actual salary that you take home is the salary after deduction of tax (TDS) and other deductions as per the company’s policy.

Net Salary = Gross Pay – Deductions

Deductions
  1. Employees Provident Fund
  2. Employees ESI
  3. Tax Deducted at Source (TDS)
  4. Professional Tax
  5. Labour Welfare Fund
  6. Loan or Salary Advance
1.  Employees’ Provident Fund (EPF)

The Employees’ Provident Fund Orgnization administers the Employees Provident Fund scheme. Under the scheme, both the employees and the employers contribute towards the Fund every month. This is a platform that provides an opportunity for employees to save a part of their salary as a long-term investment. The employee contributes 12% of the basic salary every month towards the Fund. The entire contribution goes towards EPF.  The amount accumulated in the fund can be withdrawn in an emergency or upon retirement.

2.  Employees’ ESI

Employees State Insurance (ESI) is an insurance scheme administered by the  Employees’ State Insurance Corporation (ESIC).  From the employees’ contribution of 12% of salary, 0.75 % is contributed towards the ESI Fund.  The scheme provides for during medical emergencies to the employee or his/her dependents. The scheme is applicable for all employees whose salary is ₹ 21,000 or less.

3.  Tax Deducted at Source (TDS)

For salaried employees Income tax is deducted and remitted to the IT Department. This is known as Tax Deducted at Source (TDS) and the same is deducted every month from the salaries of the employees. The employer deducts and remits the amount to the department.

4.  Professional Tax

Professional Tax is the tax levied by the state government on salaried employees and professionals like doctors, lawyers, and chartered accountants. The amount fixed for Professional Tax varies from state to state. The employer deducts this amount from the salaries and remits to the concerned department.

5.  Labour Welfare Fund

Labour Welfare Fund is a contribution made by salaried employees for the benefit of the labor class. The fund amount that is deducted varies from state to state where they are applicable. Both the employee and the employer make contributions toward the fund. The employer’s contribution is twice that of the contribution of the employee. The payments are normally made every 6 months.

6.  Loan or Salary Advance

Loan or Salary Advance is paying an employee a portion of his/her salary in advance to meet a medical emergency or other unforeseen emergencies.  A portion of the salary that is due is paid in advance and the same is recovered in installments from the salary dues of the subsequent months.  These loans are usually interest free.

Conclusion

For both the employee working in an organization and for the employer it is very important to clearly understand the salary structure. A proper understanding of the Salary Breakup and the Salary Structure will help you to clearly understand where your money is invested. This will help you to plan your financials better.

GetifyHR, one of the top-notch outsourcers of Payroll processing and HR management has established a name for itself as a company with excellent service and professionalism.

With a high-performance Payroll module developed on the Cloud, we have been helping clients across the country to run a flawless payroll process at the same time keeping the company fully compliant with all the statutory rules and regulations. Supported by an experienced professional team we will be able to guide our clients to design a salary structure that is perfect for the conditions available at the workplace, one that will keep both the employer and employee fully satisfied. Contact us today for a wholesome solution to all your payroll and statutory compliance needs.

Checklist to assist businesses to step into the New Financial Year

How to prepare a checklist to assist businesses to step into the New Financial Year?

The closing of the financial year and the opening of the new financial year are significant timelines for the growth of an organization. The financial year ending is a great opportunity to look within and to analyse and assess the performance of the business, a time to take stock and make your plans for the new financial year to come.

These activities, taking stock, analysing, and planning can be overwhelming tasks at times, but they are the key to running a successful business venture. This is also the time to re-assess your goals and to take corrective measures to enable the achievement of these goals in the forthcoming financial year. The best way to achieve this is by closely scrutinizing your finances and reassessing your financial practices. This is the time to prepare your checklist for the new financial year. This will help you to streamline your workflow and give you the head start to make the new financial year a successful one.

Financial year-end Checklist for businesses!

  • Prepare Key financial statements/documents
  • Conduct statutory Audit
  • Renew all the licenses and registrations
  • Reassess your goals and prepare for the future
  • Review your business and marketing plans
  • Consider financing options for expansion
  • Assess employee performance
  • Self-evaluate
1.  Prepare key Financial statements/documents

Apart from paying the Advance Tax, the key financial statements must be accurately prepared to ascertain the financial position of the company. The key financial statements are the Balance Sheet, the Profit and Loss A/c, and the Cash Flow statement. These financial statements provide the details of the Assets and Liabilities of the company, the Profit or Loss, and the Cash flow position of the company.

Overall they allow you to calculate the current ratios, debts, and profit ratios for that particular year.

2.  Conduct Statutory Audit

A statutory Audit is a must for any business that is registered as a Private Limited Company. All the Books of the Company have to be audited before the financial year-end. However, for businesses that are registered as a partnership firm or LLP having a turnover that is below 40 lakhs then, a Statutory audit is not required.

3.  Renewal of Licences and Registrations

Every business owner is required to keep track of all the licenses or Registrations that they have taken for the conduct of their business. Normally, these licenses/registrations are to be renewed every year, especially before the end of the financial year. This activity has to be taken care of by the end of the financial year.

4.  Reassess your Goals and prepare for the future

The goals that you have set for the business have to be first analysed. List out the goals and try to assess whether you have met those goals. If not, analyse and find out the reasons that you could not achieve your goals. Identify the areas that you have failed. Reassess the goals in light of your strengths and weaknesses. A SWOT (Strengths, Weaknesses, Opposition, and Threat) assessment will greatly assist you in providing better insights and allow you to make critical changes in your business goals and activities.  These insights will help you to plan for the year to come.

5.  Reassess your Business and Marketing plans

The end of the financial year is the ideal time to reassess your Business and marketing plans. This will enable you to review your short and long terms goals and make changes accordingly. It will enable you to review your sales and marketing budgets and get proper insights into better business strategies. This activity will also enable the business to review the market potential and the competition and would also throw light on new business opportunities.

6.  Consider additional finance option

If business expansion is one of the changes you envisage or if you need higher cash flow for the new financial year, then it would be worthwhile to consider additional finance options. The additional finance could be for development projects or adding to the company’s assets like purchasing a vehicle, machinery, or other types of equipment.

You can consult with your Bank for business loans, an overdraft, or a business credit card. The choice would depend on your circumstances. If there is an option to avail of a government grant you can proceed with that option. Crowd funding is also an option that you can explore as it is very commonly used nowadays to promote business, especially for start-ups.

7.  Assess Employee Performance

Employees are a vital cog in any business organization. Keeping the morale of the employees high is important and maintaining their loyalty is vital for growth. For this, you need to review your compensation and benefits structure and make sure they are in line with the industry and your business values. The compensation and the benefits that you offer have to be competitive enough if you are to hold on to your efficient employees and improve employee retention.

Companies that maintain such promotional paths reap significant gains in the loyalty and longevity of their employees. If you are looking to foster job satisfaction and loyalty among the employees you have to not only provide incentives but also be ready with a strong growth path that would empower the employees and boost their morale. This apart, planning a vacation with the employees, especially during the lean periods is another way to maintain job satisfaction among the employees.

8.  Self-evaluation and improving leadership

The earlier nine points in the checklist dealt with the performance of the company and its employees.

This checklist is incomplete if it does not have a point about evaluating the leadership and the leadership team. Every company should take time to reflect on its own leadership and the leadership team.

Objectively evaluate the performance during the year that is going to end. Find out the areas where there were shortcomings. Identify the areas that you think need improvement. This could be in the areas of time management, communication with employees, work culture, employee performance review, your understanding of business financials, business acumen, and your knowledge of the industry.

With this information, you will be able to implement a self-improvement plan for the new financial year. This will enable you to schedule time for yourself to not only learn and improve your business leadership skills but also encourage your leadership team to improve performance for their growth and the company’s growth.

Conclusion

Preparing a checklist for the new financial year is a must for any business. This will help you to objectively reassess the performance of the company and provide insights to make necessary changes wherever required to promote greater growth. This activity will help you to prepare better for the forthcoming financial year and guide you to improve your all-around performance.

This is also the time for certain companies, especially those that have challenges in preparing accurate payroll and handling all Statutory compliance issues, to introspect and decide whether they need to get expert assistance in handling their Payroll and HR management. GetifyHR has been a leader in outsourcing Payroll and HR management and has the expertise and technology to handle this critical task with a great degree of accuracy and sophistication. Well, we will be able to handle the financial year-end pressures and ensure a smooth transition to the new financial year with the least bit of stress. Stay 100% compliant with GetifyHR!

 

Higher Pension

The EPFO Higher Pension Scheme: Guidelines, Forms, Calculation, Formula, Eligibility, Benefits

The Employees Provident Fund Organization (EPFO) launched the Employees Pension Scheme (EPS) in the year 1995.  Through this scheme EPFO members are entitled to a pension after retirement.  The employee’s contribution of 12% of salary was fully utilised towards EPF, whereas from the employer’s contribution 8.33% goes to EPS and 3.67% to the EPF.

Initially, the pensionable salary was capped at ₹ 5000 and was subsequently raised to ₹ 6500.  In March 1996, a provision was added to para 11(3) of the EPS-95 act giving the option to the employee and employer to contribute at the actual salary (above the cap of ₹ 6,500) to the EPS.  However, the members were given 6 months to file a joint option form for higher pension contribution to the EPS.

On 01-09-2014, the Government amended the EPS-95 through the Employees Pension (Amendment) Scheme, 2014 in which the maximum pensionable salary was raised to ₹ 15,000.  However, the provision to para 11(3) that allowed the option of joint filing by the employee and employer for higher contribution to the EPS has been omitted.

Employees who joined the EPS after 01-09-2014 can only make the contribution at 8.33% of the maximum pensionable salary of ₹ 15,000, even though they drew a higher salary.  Employees who joined before 01-09-2014 could, however, contribute to EPS on the actual salary as against the cap of ₹ 15,000 if they filed a new joint option with the EPFO within 6 months, i.e., 28-02-2015.

Pension Contribution on Higher Salary under EPS

The Employees Pension (Amendment) Scheme 2014 regarding pension contribution on higher salary became contentious as many employees are not fully aware of these options.  EPFO also rejected the joint option filed by many employees and where the employers contributed 8.33% towards EPS on employees’ actual salaries without filing joint option, the pensionable salary was taken as ₹ 15,000 for pension calculation.

This prompted many employees to file cases in various High Courts and the matter was finally taken up by the Supreme Court.  The decision of the Supreme Court is briefly tabulated hereunder:

Employee Status Whether Joint option exercised Whether eligible to claim 8.33% pension contribution on higher salary Mode for claiming higher pension.
Employee in service as on 01-09-2014 Yes.  Joint option rejected by the EPFO YES By filing an application for higher pension

 
Employee who retired before 01-09-2014 No.  Contribution to EPS above its cap of  ₹ 5000 / 6500 YES By exercising the option before  03-05-2023
Employee who retired before 01-09-2014 Yes.  Joint option rejected by EPFO YES By filing both, a joint option and an application for higher pension
Employee who retired before 01-09-2014 No.  Did not exercise joint option. NO Not applicable

The Supreme Court ruled that employees who were part of the EPS but have not exercised the joint option can do so before 03-05-2023.  For such employees, the higher EPS contribution will be calculated from the date of joining.

Eligibility for EPS Higher Pension

The eligibility criteria and application process for claiming higher pension has been set out in the circular issued by EPFO in December 2022.  The following are the eligibility criteria:

  • All member employees who retired before 01-09-2014
  • All member employees who exercised the joint option under para 11(3) of EPS-95.
  • The employees and employers who contributed towards EPS on salaries exceeding the wage ceiling of ₹ 5000 or ₹ 6500
  • In case the EPFO has declined the exercise of such option.

However, the circular has not provision to provide a higher pension option for employees who were members of the EPF before 01-09-2014 but are still working or who retired after 2014.  The Supreme Court judgement however, ruled that such employees are eligible to claim a higher pension.

In response, the EPFO issued another circular in February 2023 providing higher pension eligibility or employees in service or who retired after 2014.  The eligibility criteria to file a joint option for getting a higher pension as per the new circular are given below:

  • All employees who were members before 01-09-2014 and continue to be members after that date.
  • The employees and employers who contributed to EPS on salaries exceeding the wage ceiling of ₹ 5000 or ₹ 6500
  • The employees and employers who were members of EPS-95 and did not exercise the joint option provided under the deleted para 11(3) of the EPS and the Amendment of 2014.

The employees who were members of EPS-95 and exercised the joint option under the deleted para 11(3) of the EPS but did not file new joint option after the amendment of 2014 are not eligible to claim a higher pension.  The EPS contribution of such employees will be 8.33% on the maximum amount of ₹ 15,000, irrespective of their actual salaries.

The Process of applying for Higher Pension in EPS

The application for joint option or claim for higher pension is specified by the concerned Regional Provident Fund Commissioner (RPFC).  The EPFO has released a URL for applying online.  Four steps are involved in this process.

Step 1:   The employee has to visit the EPFO Unified Member Portal.  The Universal Account Number (UAN) has to be used for this purpose.

Step 2:   Click on the application Form for “Joint Option” option.

Step 3:   This step is to validate your option.  If you retired before 2014 then click on “Validation of Joint Option for employees who retired before 01-09-2014 and exercised joint option”.

If you retired after 2014, then click on “Exercise of Joint Option for employees who were in service prior to 01-09-2014 and continued to be in service on 01-09-2014 but could not exercise the joint option”.

Step 4:   Fill in all the relevant details and submit the form.

The EPFO will digitally register each application and a receipt number will be allotted to the applicant.  The application is then forwarded to the respective employer for verification.  The verified files with the e-sign/digital signature will go for further processing.  The RPFC will convert all the applications received into e-files.

The application will be examined and forwarded to the section account officer/supervisor by the dealing assistant.  The concerned section account officer/supervisor will mark all discrepancies and forward to the Asst. Provident Fund Commissioner (APFC/RPFC-II).

The APFC/RPFC-II will examine the application and convey the decision regarding higher pension to the applicant via email, post or SMS.

Submission of Higher Pension Option Form

All eligible employees who become members of EPS-95 but are retired/working after 2014 can apply and submit the joint option forms online or with the concerned Regional Provident Fund Officer within 03-05-2023 to receive higher pension.

Guidelines for receiving Higher Pension through EPS

The following are the guidelines to be followed for receiving higher pension:

  • All joint option forms or higher pension claim applications should be accompanied by a disclaimer or declaration.
  • The employee has to give full consent in the joint option/application for a share adjustment from EPF to EPS and for a re-deposit of the amount.
  • The employee has to give an undertaking to the trustee for a share transfer of funds from exempted PF Trust to the EPS fund. The undertaking will be effective for the deposit of due contribution and interest thereon up to the payment date within the specified time.
  • The employees’ share of contribution will be deposited with interest at the rate declared under para 60 or the EPF scheme, 1952 for employees of unexempted establishments.
Documents to be submitted with Higher Pension claim application
  • Proof of joint option verified by the employer filed under para 26(6) of the EPF scheme.
  • Proof of joint option verified by the employer filed under para 11(3) of the Act.
  • Proof of remittance of EPS contribution in the PF Account exceeding the capped wage limit of ₹ 5,000 or ₹ 6,500.
  • The written refusal of APFC or EPFO to such remittance or request.
Documents to be submitted for joint option application
  • Proof of remittance of EPS contribution in the PF Account exceeding the capped wage limit of ₹ 5,000 or ₹ 6,500.
  • Proof of joint option verified by the employer filed under para 26(6) of the EPF scheme.
EPS Higher Pension Calculation

The formula for calculating the EPS higher pension is as follows:

Monthly Pension amount  =   Pensionable Salary  x  Pensionable Service/70

Pensionable Salary is the average salary drawn over the last 60 months.

Pensionable Service is the number of years contributions were made to the EPS account.

In case an employee renders more than 20 years of service before retirement at 58 years, then a weightage of 2 years is added to the service period.  However, the maximum pensionable service is limited to 35 years.

Calculation on cap of ₹ 15,000 for a pensionable service of 25 years:

Salary EPF Contribution EPS @ 8.33% of ₹ 15,000 EPF Contribution
50,000 6,000 1,250 4,750

Calculation on Actual salary for a Pensionable Service of 25 years:

Salary EPF Contribution EPS @ 8.33% of ₹ 50,000 EPF Contribution
50,000 6,000 4,165 1,835

Monthly Pension when you do not file a Joint Option:

Age when joined EPF Retirement Age Pensionable Salary Pensionable Service Pension Amount due
30 58 15,000 28 15,000 x 30 (28+2)/70 = 6428

Monthly Pension when you file a Joint Option:

Age when joined EPF Retirement Age Pensionable Salary Pensionable Service Pension Amount due
30 58 50,000 28 50,000 x 30 (28+2)/70 = 21,428
Employees' Pension Scheme

Employees’ Pension Scheme and the types of Pension available

The Employees’ Pension Scheme (EPS) is a social security scheme administered by the Employees’ Provident Fund Organization (EPFO). Launched in the year 1995, the scheme provides for employees working in the organized sector pension after their retirement at the age of 58 years. The benefits of the scheme can be availed by employees who have put in service for at least 10 years and this does not have to be continuous service. The scheme allows both existing and new EPF members to avail the benefit.

The pension fund is created from the contribution made by the employees and employers towards EPF.

Both the employees and the employer contribute 12 percent each of the basic salary towards the fund of which the entire share from the employees is contributed towards EPF, whereas, 8.33 percent of the employer share is contributed towards EPS, and the balance of 3.67 percent is contributed towards EPF every month. The government of India contributes 1.16% of your average salary (Basic Wages) towards this fund.

EPS eligibility criteria

To be eligible to avail of the benefits under the Employees’ Pension scheme, the employee should be a member of EPFO. Apart from this, the following conditions apply.

  • The employee should have completed 10 years of active service (need not be continuous service) along with an active contribution towards the pension fund for the same number of years. If an Employee is still in service and hasn’t completed 10 years, EPS amount cannot be withdrawn.
  • Should have reached the age of 58 years.
  • Should have attained 50 years of age to withdraw EPS pension at the lower rate.
  • Can delay the withdrawal of pension by 2 years i.e., till he reaches 60 years, to be eligible to get pension under EPS at the additional rate of 4% annually.
  • If a member becomes totally and permanently disabled he is entitled to a pension irrespective of whether the member has served the pensionable service period or not.
How to calculate Pension under EPS?

To calculate the pension we have to understand two terms, and they are Pensionable salary and Pensionable service.

Pensionable Salary

Pensionable salary is the average salary in the last 60 months before exiting the scheme. During the 60 months, if there are non-contributory periods, these periods will not be considered and the benefit of the days of non-contribution would be given to the employee.

Pensionable Service

The actual duration of employment is the pensionable service of the individual. Service periods under different employers are all added together at the time of calculating the pensionable service periods.

The minimum pensionable service period is 6 months and, therefore, the service period is considered on a 6-monthly basis. For an individual who has put in service of say, 9 years and 2 months, the pensionable service is considered as 9 years. Likewise, if the service duration is 9 years and 10 months then the pensionable service is considered 10 years.

The Calculation

The Pension amount due to an employee depends on the pensionable salary of the member and the pensionable service. The Pension amount is calculated on the following formula:

Monthly Pension due to a member = Pensionable Salary x Pensionable Service/70

The maximum pensionable salary as per EPS is limited to ₹ 15,000 per month. Considering that the employer contributes 8.33% of the salary in the employees’ EPS account, the amount deposited into the account every month is

₹ 15,000 x 8.33/100 = ₹ 1250

Monthly Pension due to a member = Pensionable Salary x Pensionable Service/70. For a person who has put in 20 years of service the pension will be:

₹ 15,000 x 20/70 = 4285

What are the Benefits of EPS?

All eligible members of EPF can avail of pension benefits in accordance with their age from when they decide to withdraw their pension. The pension amount will vary in different cases.

  • Pension at the time of Retirement.

    An employee becomes eligible for pension benefits once he/she retires at the age of 58 years. During this period of service the member should have been in service for 10 years (this need not be continuous). A certificate is generated that can be used to withdraw monthly pensions by filling out Form 10D.

  • Pension on leaving service prior to becoming eligible for monthly pension

This benefit is available to an individual who has not put in 10 years of service before attaining the age of 58 years. The member can withdraw the entire sum on attaining 58 years by filling out Form 10C.

  • Total Disability Pension

A member who suffers total and permanent disability is entitled to receive a monthly pension irrespective of the fact that he has not fulfilled the pensionable service period. The employer has to contribute to his EPS account for at least one month to be eligible for the pension.

The pension has to be paid from the date of permanent disability and is payable for a lifetime. The member has to undergo a thorough medical examination to identify whether he is unfit for the job that he was performing before becoming disabled.

  • Pension for the Family after the death of the member

The family of the member becomes eligible for pension benefits in the following cases

– In case of the death of the member while in service and the employer has deposited    funds into the EPS account for at least one month

– In case the member dies before attaining 58 years but has put in 10 years of service.

– In case of the death of a member after the commencement of the monthly pension.

Different Types of Pensions under EPS

EPS offers different types of pensions. They include pensions for women, children, and orphans and these provide additional income to the family member of the subscriber.

  • Widow Pension

Widow Pension or Vridha Pension as it is also known is applicable to the widow of the member eligible for pension. The pension amount will be payable until the death of the widow or until her remarriage. In cases where there is more than one widow, the pension amount will be payable to the eldest widow. The minimum pension amount is ₹ 1,000 and the ceiling for the pensionable salary has been increased to ₹ 15,000 from the earlier ₹ 6,500. Hence higher pensions will now be available.

  • Child Pension

In the event of the death of a member, a monthly child pension is applicable for the surviving children in the family in addition to the monthly widow pension. Child pension will be paid till the child attains the age of 25 years. The amount payable is 25% of the widow’s pension and will be paid to a maximum of two children.

  • Orphan Pension

In case the member dies and does not have a surviving widow, then the children are entitled to receive a pension under the scheme. The benefit will be available to two surviving children and they will get 75% of the value of the monthly widow pension.

  • Reduced Pension

Under the EPS scheme, a member can withdraw early pension if he or she has not attained 58 years but has reached 50 years on condition that they have actively contributed towards EPF for 10 years or more. The value of the pension is slashed by 4% for every year the age is less than 58 years. On attaining 58 years the pension will be paid at the actual rate.

Pension Forms that are to be submitted to avail of benefits

A member or family member eligible to receive the pension has to submit the following forms to avail of the pension benefits.

FORM 10C

Form 10C is for claiming a withdrawal/Scheme Certificate. The form can be used by:

  • Any member who has left the employment before completion of 10 years of service.
  • Any member who has attained 58 years before completion of 10 years of service irrespective of whether the member is in service or has left service.
  • A member who has completed 10 years of service on leaving service but has not attained the age of 50 years on the date of applying or
  • If a member has attained the age of 50 years or more but less than 58 years and is not willing for a reduced pension.
  • The family members or legal heirs or nominee of a deceased member who had died after attaining 58 years of age but had not completed the eligibility criteria of 10 years of service.
FORM 10D

Form 10D is the normal form that a member needs to fill to withdraw pension under the following conditions:

  • Retirement Pension by a member on attaining 58 years of age, whether in service or not.
  • By a member who leaves service after the age of 50 years but below 58 years and opts for a Reduced Pension.
  • To claim Disablement Pension by a member on leaving service due to total and permanent disablement.
  • For claiming widow and child pension by the family (spouse and children) on the death of the member.
  • For claiming Orphan Pension by surviving son/daughter on the death or remarriage of the spouse of the deceased member.
  • For claiming Nominee Pension by nominee declared by the member through his/her Form 2(R) in case the member had no family (spouse and children).
  • For claiming Dependent Pension by the dependent father or mother of the deceased member who died without a family (spouse and children) and failed to nominate a person for claiming the pension.
Points to remember about EPS
  • The employee does not contribute towards the fund. The employer makes all contributions towards EPF.
  • From the 12% contributed by the employer, 8.33% goes towards EPS.
  • The employees’ pay is made of Basic wages, retaining allowance, and admissible cash value of food concessions.
  • The employer has to contribute within 15 days of the close of every month.
  • The employer should meet all the applicable costs involved.
  • The principal employer is responsible for making contributions for all employees working for him directly or under a contractor.
  • The minimum service period to be eligible for availing pension benefits is 10 years.
  • In case an employee has completed less than 10 years of service but has served for more than 6 months, you can withdraw the EPS amount on being unemployed for more than two months.
  • The scheme has fixed 58 years as the age for retirement.
  • On reaching the age of 58 a member ceases to be a member of the Pension Fund.
  • An employee who starts availing reduced pension at the age of 50 ceases to be a member of the Pension Fund.
Conclusion

The Employees Pension Scheme has been a great boon for employees especially post-retirement. Like all other social security schemes, it has provided a lifeline to employees who have retired or who have opted for pension before reaching the retirement age of 58 years. Where the EPS member has died during service or post-retirement it has extended this benefit to the family members, namely the spouse, and children.

Overall, the scheme has brought cheer to a great many families whose bread-winner had either retired or had become fully disabled due to an accident or disease.

GetifyHR, one of the leading Payroll and HR management outsourcers in the region have assisted numerous clients spread across the country in handling not only the Payroll and HR activities but also have supported the employees to get their due benefits from the various government agencies that are promoting schemes to support them. An association with GetifyHR will not only ease the pressures in the workplace and promote growth but will also provide support to the employees in multiple ways.

 

 

Budget 2023

Budget 2023 and the effect on salaried employees

Smt. Nirmala Sitharaman, the honorable Finance Minister, presented the Union Budget 2023 in Parliament on 1st February 2023. This is the last full-year budget to be presented by this government before the national elections in 2024. The Budget has been widely welcomed by all sections of society and has been hailed as growth-oriented, forward-looking, and one that will support inclusive growth. In this article, we shall analyze how the 2023 budget would affect the salaried class.

The Budget has several proposals for the benefit of taxpayers in the lowest and highest tax bracket.

The proposals also include several proposals for the benefit of salaried individuals, senior citizens, and pensioners. In her budget speech, the Finance Minister has some important announcements for hardworking middle-class citizens who pay taxes. This tax regime called the new income tax slabs is set to be the default regime in the future.

However, the old tax regime has not been abolished and taxpayers now have the option to choose between these two regimes when paying taxes.

Major changes in Income Tax slabs & rates as proposed in budget 2023.

The first change made in the budget 2023 relates to the rebate on Income tax. Rebate limit of Personal Income Tax to be increased to ₹ 7.0 lakh from the current ₹ 5.0 lakh in the new tax regime.  Thus, persons in the new tax regime with income up to ₹ 7.0 lakh need not pay any tax.

The tax structure in the new personal income tax regime, introduced in 2020 with six income slabs to change by reducing the number of slabs to five and increasing the tax exemption limit to ₹ 3.0 lakh.

The tax rates as per the Old and New regimes are given hereunder.

Old Income tax regime: (Existing & Continuing)
Old Income tax slab Income tax rates
Income slab of 2.5 lakh Nil
Income slab of 2.5 to 5.0 lakh 5%
Income slab of 5.0 to 10.0 lakh 20%
Income slab of 10.0 lakh and above 30%
New Income tax regime (Existing and applicable for FY 22-23)
New Income tax slab ( Previous) Income tax rates
Income slab of 2.5 lakh Nil
Income slab of 2.5 to 5.0 lakh 5%
Income slab of 5.0 to 7.5 lakh 10%
Income slab of 7.5 to 10.0 lakh 15%
Income slab of 10.0 to 12.5 lakh 20%
Income slab of 12.5 to 15.0 lakh 25%
Income slab of 15.0 lakh and above 30%
New Income tax regime (Revised in Budget 2023)(For FY 23-24)
New Income tax slab (Revised) Income tax rates
Income slab of 3.0 lakh Nil
Income slab of 3.0 to 6.0 lakh 5%
Income slab of 6.0 to 9.0 lakh 10%
Income slab of 9.0 to 12.0 lakh 15%
Income slab of 12.0 to 15.0 lakh 20%
Income slab of 15.0 and above 30%

The tax payers still have the option to choose between these two regimes when paying taxes.

In addition to the above, there is a reduction in surcharge on the rate of the highest tax rate in the country of 42.74%, which is the highest in the world, from 37% to 25%. With this reduction, the maximum rate would be 39%.

The Finance Minister has also proposed to extend the benefit of standard deductions to the new tax regime. Each salaried person with an income of ₹15.5 lakhs or more will thus benefit by ₹ 50,000.

Under the old tax regime, these are some of the income tax deductions that you can claim:
  • Standard deductions
  • HRA and Leave Travel Allowance
  • Interest on Home loans
  • Medical Insurance Premium
  • Interest on Education loan
The new tax regime is different in two aspects:
  • The government has reduced the income slabs accompanied by lower tax rates.
  • All tax exemptions and deductions claimed under the old regime will not be available under the new regime.

The advantage here is that the taxpayer has the liberty to decide where and how to save/invest their money. This means you no longer have to rush to tax-saving schemes or investments that may not be in line with your financial needs.

PAN is to be used as a common identifier!

The Finance Minister has announced that the Permanent Account Number (PAN) will be used as common identifier for all digital systems of specified government agencies. PAN is the 10-digit alphanumeric number allotted by the Income-tax Department to a person, firm, or entity. This move would assist in further promoting ease of doing business in the country.

KYC process to be simplified

The Finance Minister has announced that a system of unified filing process will be set up to enable agencies to get all data from a common portal as per the choice of those filing returns.

For individuals Digilocker and Aadhar will serve as a “foundational identity” and with this facility changes in address or identity will be reflected across other platforms. This means that the government is working to synchronize citizens’ data across multiple portals when just Aadhar is updated. As of now when you update your Aadhar it does not update the changes say in the Income Tax portal. This is now set to change.

The Digital India program by the Government of India has introduced the Digilocker initiative where citizens can get authentic documents/certificates in digital format from the original issuers of these certificates. The aim is to eliminate or minimize the use of physical documents to enhance the effectiveness of service delivery paving the way for hassle-free and friendly service to the citizens.

Conclusion

These announcements made in the Union Budget 2023 will benefit the salaried employees and leave more disposable income in the hands of individuals thus enabling higher investments. We at GetifyHR are fully prepared to handle these changes and support our clients in seamlessly running their statutory compliance requirements and keeping them fully compliant always.

late commers

How to avoid/reduce latecomers in the industry/establishment?

Employers expect employees to be punctual in their work. Being punctual goes a long way in establishing greater workplace harmony and paves the way for establishing a better employer-employee relationship. Factors like excessive traffic, late running of trains or buses, or some unexpected family issues can sometimes make employees come late to work.

When these are not regular it is a non-issue but when coming late to work is habitual, then it becomes a serious issue and has to be nipped in the bud. Chronic lateness affects the workplace atmosphere and will contribute to significant time and cost implications that will have a negative effect on the company’s growth.

Being late regularly costs the company in payroll and has a negative effect on productivity. If this late coming remains unchecked it will set a bad example for other employees who may also be encouraged to start coming late for work. In this article, we offer tips to deal with habitual latecomers.

1. Frame proper ground rules

Establish a set of rules on coming late to work and communicate this to all the employees.

The policy should include:

• Employer expectations on the working time and the importance of starting work at the scheduled time.
• Avoid un-informed or non-approved late arrivals during work as this will disrupt the work atmosphere.
• Clearly define the consequences of arriving late to work.
• Decide on how to compensate for the time missed out by working extra during later working hours?
• The procedure for reporting late to work should include the details of the higher-ups who should be notified about coming late to work and when.

2. Take action immediately

When you identify a pattern of habitual late coming, don’t postpone speaking to the employee. The earlier you begin a dialogue with the habitual offender the better.

3. Talk to the employee and make your expectations clear

Sit with the employee and clearly explain what your expectations are and the consequences of coming late to work habitually. Present the facts and try to identify the reasons for the habitual late coming.

4. Set self-improvement goals

Once the discussion is over and you have explained your expectations and the consequences encourage the employee to set self-improvement goals. This should help the employee to break the habit and be on time or on the contrary you can suggest a reduced lunch break to compensate for the lost time.

5. Check for changes and show appreciation

Follow up on the discussion by encouraging the employee to overcome this habit of tardiness. Show that you care for his well-being and be appreciative of improvement in their habit. Appreciation sets the path for greater improvement and this may help to solve the problem.

6. Maintain a record of all discussions and interactions

Maintaining a record of the interactions with the employee will ensure that there are no miscommunications and leaves no room for any misunderstanding at a later date. Documenting the discussions and the steps taken to identify and correct the issues and the changes in the employee’s performance can be pinned to the employee’s HR file.

7. Enable automatic shutdown of the swiping machine after a particular period.

This is a very strict method used in some establishments. Activate automatic closure of the Swiping machine after the normal login time plus the grace time given for logging in has to be. If an employee reaches the workplace after the grace time, he has to get approval from the Manager/Supervisor and will be then allowed inside the premises using their password. This strict measure will ensure discipline.

8. Implement a ‘Send Home’ policy

Here the habitual latecomer is sent home when he or she arrives late for work. Warnings about earlier tardiness should precede this action. This will enable the employee to make a serious effort to reach on time as there is the fear that he or she would be sent home and would be marked absent.

Normally a grace period, say 15 minutes is given to every employee. If the employee doesn’t arrive within this grace period then he/she will be asked to go home. This ‘go home’ policy is a very effective tool in curbing the issue of coming late to the office.

9. Link punctuality with performance reviews.

Linking punctuality with performance reviews can also address the issue of habitual late coming. Performance reviews are important as it sets the tone for climbing up the ladder. Therefore, if your performance review is positive then the chances of moving up the ladder are greater. If you are a habitual latecomer it will reflect in your performance review and this in turn will negatively impact growth within the establishment.

10. Have a policy with a flexible work schedule.

Having a company policy that allows for a flexible work schedule is another option to handle the issue of habitual latecomers. For example, you can have a policy in place where the habitual latecomer is allowed to come late with the condition that this time is compensated during the day’s work schedule. This will help to avoid loss of working hours due to late coming. However, the problem with this policy is that when you allow it to one employee you should be prepared to allow it to others also.

Conclusion

Habitual latecomers harm the workplace and they may adversely affect the growth of the establishment. Therefore, it is in the interest of the employer to find ways to reduce this activity so that there is greater harmony in the workplace. The measures explained above will go a long way in reducing the issue of habitual late coming and set the tone for better employer-employee relationships.

GetifyHR, one of the leading outsourcers of payroll and HR management in this region has been able to guide our clients in successfully handling the issue of latecomers. Our solutions have enabled a large section of our clients to focus on core business activity thus enhancing growth. We are here to reduce the stress attributed to payroll and HR management.

January 23 is the right time to outsource your Payroll to GetifyHR!

January 2023 is the right time to outsource your Payroll to GetifyHR!

When is the right time to outsource your Payroll? Well, this is the question that has put business owners in a real dilemma. On the one hand, they have to be right with the timing and on the other hand, they have to be right with the choice of the perfect outsourcer. A difficult task indeed for any establishment whether big or small.

Payroll processing is one of the most important non-core activities and will remain so in the future. Its importance has manifested in companies opting to outsource the process with the view to not only bring greater accuracy but also to keep the company fully compliant with all the Statutory Compliance rules and regulations. By doing so establishments have been able to create greater harmony in the workplace and have been on the right side of all tax and compliance laws.

The goal of every establishment is to achieve greater growth and as it grows the greater the need to have a perfectly working system to handle all compliance issues. This is not an easy task and one way to keep things moving smoothly is by outsourcing this process to a service provider. By outsourcing payroll, companies will be able to prioritize core business processes and strategies to guide the business toward its goal.

In this article, we will discuss the ideal time to outsource the payroll process to an external service provider and why GetifyHR would be the best choice to undertake the process.

When to Outsource your Payroll?

The beginning of the year is the ideal time to go live with your payroll processing. While this may not be the beginning of the financial year followed in India, which is from 1st April onwards, we at GetifyHR would recommend the month of January to go live with payroll processing through a service provider.

This is the time when employees normally resign and move on to greener pastures. Hiring new hands and retraining them is a task that most establishments shun and the sensible solution is to perfect the payroll processing activity so that you can avoid hiring employees for both the core activity and to exclusively handle the payroll process.

When you start your payroll process through an outsourcer during the month of January, you have a clear 3 months to complete the parallel runs and perfect the system. This allows the time to verify and correct all employee records and reports and streamline the demands of statutory compliance.

This will enable you to start the new financial year on a clean slate and give you adequate time to straighten all loose ends and see that you are starting the process perfectly.

The benefits of outsourcing the payroll!

Let’s briefly delve into the benefits of outsourcing your payroll processing to an external service provider. Payroll processing remains the most popular area among the non-core processes that organizations tend to outsource and their benefits are many.

1.  Leads to lower Upfront Investment

One of the most important benefits of outsourcing Payroll is that it leads to lowering the investments upfront.  Outsourcing helps in reducing the investment on costly hardware and accessories as the package relies on high-end cloud technology; therefore you can do away with costly hardware onsite.

2.  Maintain accurate records

Having a perfectly running payroll that generates highly accurate payslips and all related records remains the top requirement of every organization. Payroll generated with errors can create great disharmony in the workplace and throw all activities out of gear. This will inevitably affect the growth of the organization. Outsourcing assures you of a perfectly running payroll process that will help you to maintain highly accurate records, and this will go a long way in promoting workplace harmony and enhancing growth.

3.  Comprehensive Payroll Support

Outsourcing the Payroll ensures comprehensive payroll support. This means that all requirements of payroll and HR management are seamlessly handled so that your month-end stress is drastically reduced.  The high level of integration that these packages achieve enables smooth and comprehensive payroll operations. All the modules are perfectly integrated thus reducing the need for frequent key-ins.

For the management the biggest need is to have access to an array of highly useful MIS reports as and when required, and this is what you get when you outsource. Armed with these reports, the management will be in a position to take timely decisions that would ultimately lead to greater growth.

Data security is a vital factor when you are handling sensitive employee data. In-house payroll processing may not be secure enough and the leak of sensitive data is always a possibility. When you outsource the process to a service provider, you can greatly reduce the possibility of a leak of sensitive data. Outsourcers have a robust security system in place with proper backup and multiple server locations to ensure a high level of data security.

4.  Leveraging expertise to ensure compliance

Experts with deep knowledge of all payroll and compliance norms man outsourcing service agencies. By outsourcing you are shifting the onus of keeping the organization compliant to a team of highly efficient individuals. Outsourcing the payroll and HR process will enable companies to minimize compliance and regulatory risks. This will ensure that the company is compliant at all times.

There are a few more reasons why you should outsource your payroll to an external service provider. However, we shall take a detour from that topic and focus on why you should outsource to GetifyHR.

Why GetifyHR?

GetifyHR is one of the leading Payroll and HRMS outsourcing companies based out of Coimbatore. With a vast clientele spread across the country, we have been providing excellent service across states and platforms.

Our vision is to make GetifyHR one of the leading outsourcers in the industry. Simplifying the rather complex Payroll and HR operations has been our goal and this we have achieved through our commitment and dedication to providing the very best to our clients.

Ours is a highly efficient and fully functional module that can manage these complex operations in any organization. This is a high-end module using the latest cloud-based technology. The module fully automates the payroll and HR processes and empowers employees with a highly efficient self-service module. The important features of our module are briefly described hereunder.

Payroll Module

This is a module that simplifies the rather cumbersome and complex payroll process. The module is highly customizable and is fully integrated to maintain all the requirements of Payroll processing and HR management.

This includes generating highly accurate Payslips and the relevant reports, handling all statutory compliance requirements, and maintaining employee Leave & Attendance, and Recruitment. The module ensures the generation of accurate payslips and on-time disbursement of salaries every month. All reports required to keep the company compliant are readily available and it is only a matter of remitting the deductions to the authorities.

These activities can be performed without a hitch every month seamlessly and smoothly.

The module ensures accurate calculation of salaries and timely disbursement every month. This will pave the way for greater harmony within the workplace.

  • Salaries can be disbursed by cash, or cheque or can be directly transferred to the employees’ bank accounts
  • The payments can be released either Batch wise or Bank wise
  • Track the status of all cash and cheque payments.

Statutory Compliance Module

This module helps you to save precious time that you would have spent keeping yourself updated of the changes in compliance rules. The changes in EPF, ESI, and other labour laws are immediately updated in the system.

Similarly, changes in tax slabs are updated as and when announced so that the employees do not lose the benefit.

In other words, GetifyHR frees you from the burden of updating the changes in statutory rules and regulations and creates a stress-free month-end operation.

GetifyHR’s outsourcing module allows you to perform the following tasks:

  • Calculate PF deductions and generate ECR
  • Compute ESI
  • Calculate state-specific Professional Tax component
  • Calculate TDS and generate the returns
  • Generate Form 24Q, Form 16 and Form 12BA
  • LWF calculations and deductions
  • Bonus calculations.

Excellent Reporting

Our Payroll module provides access to more than 150 MIS reports. You can customize the reports for your specific needs. Additionally, payroll analytics provide insightful details that help you to take the right decisions at the appropriate time. The reports include…

  • A large array of MIS Reports
  • Reports and Forms for Statutory Compliance requirements
  • Reconciliation and other reports specific to the Accounts department.

Conclusion

The right time to outsource the Payroll and HR operations and make your choice of the right outsourcer is an onerous task for any business owner. Choosing the right time is best left to the management as they know their situation better than anyone else. However, we have suggested January to be the ideal time purely taking into consideration the beginning of the financial year. Taking such a decision would enable the user to be ready to go live beginning in April when the new financial year begins. But again the choice is best left to the management.

Choosing GetifyHR to outsource the Payroll process is again the ideal choice considering that we enjoy a sound reputation in the industry. We rank among the top outsourcers in the country with a large number of satisfied customers spread across the country. The user-friendly interface and varied functionalities incorporated in this package will not only provide accurate payslips and insightful reports but will also enable immediate updation of changes effected in compliance rules and regulations. We are here to simplify the task and amplify your vision towards greater growth.

Holidays list to labour office

When do we need to declare the Holiday List to the Labour Officer?

Introduction

We are closing in on the last few days of an eventful year. The excitement of celebrating Christmas and welcoming the New Year has never diminished and never will. But one set of people is busy formulating the New Holiday List for the forthcoming year.

Yes, HR managers in companies, both large and small are engrossed in preparing the holiday list for filing with the concerned Labour Officer at the end of the year.

Holidays are declared under the Negotiable Instruments Act, 1981. Though they apply to all government departments and more particularly Banks, all establishments in the public and private sectors irrespective of the laws under which they are formed have to adopt these holidays. It is mandatory to adopt a pattern of national and festival holidays in the country. In addition to these, there is the option of granting restricted holidays to employees.

National Holidays

The three National Holidays observed in India are Republic Day (Jan. 26), Independence Day (Aug. 15), and Gandhi Jayanthi (Oct. 2), however, in some states, May 1 (Workers Day) is also declared as a National Holiday. On these days all establishments irrespective of what law they come under should necessarily remain closed. If for some reason the establishment needs to function on these days, they need to get prior approval from the concerned authority. In case employees work on national holidays, then they are entitled to get double wages for the day. The laws regarding national holidays are subject to Central legislation, and some states have made provisions to claim compensatory leave or pay double wages for working on those days.

Festival Holidays

Festival Holidays are based on local festivals and, therefore, may differ from state to state and also could depend on the company policies. The number of holidays would differ from state to state based on the festivals celebrated in that particular state.

Restricted Holidays

A restricted holiday is an optional public holiday that can be availed by a particular set of employees celebrating a special occasion. On a National or Festival holiday, the entire establishment is closed, whereas; on a Restricted Holiday only a particular group of employees avail of the holiday.

A Restricted Holiday enables the organization to serve its customers with a fewer number of employees.

Employees on the other hand get the benefit of claiming paid leave of absence on 2 or 3 restricted holidays during the year. These restricted holidays are marked as optional in the holiday list and are valid only for the specific days mentioned therein.

Declaring the Holiday List

The employer has to submit the finalized Holiday List to the concerned authority for approval in the form as stipulated in each state. In Tamil Nadu, one has to get approval from the Asst. Inspector of Labour/Labour Inspector/Labour Officer.  The details of the forms required for submission/acceptance given hereunder pertain to the state of TamilNadu.

The List Festival Holidays has to be submitted to the Labour Officer in Form No: I.

A notice in Form No: II has to be exhibited in the establishment and a copy has to be submitted to the Labour Officer.  The form should specify the period within which objections or suggestions of the employees referred to in sub-rule (3) will be received.

Where the employer or a majority of employees or any trade union representing a vast number of employees desires a change in the festivals, they may apply to the Labour Officer in Form IV, in duplicate indicating the changes.  The Labour Officer will communicate these changes to the employer in Form III in duplicate. The employer has to display a copy of this communication on the notice board within 7 days of receipt.

The employer should submit a statement under sub-rule (1) of rule 5 in Form V to the Labour Officer indicating the National and Festival Holidays allowed for that calendar year.  The last date for submission of this form is 31st of December every year.  The employer has to display a copy of this statement in a prominent location on the premises.

In all 9 holidays have to be declared in a year (3/4 national holidays and 4/5 festival holidays). The number of holidays would vary from state to state as each state has its festivals and policies on approving holidays. The employer should submit the finalized Holiday List in the stipulated form to the authorities before 31st December of each year for approval.

Conclusion

Preparing the Holiday List and Leave entitlement of employees is a complex task that needs a lot of thought and effort. A lot of effort goes into framing the company’s leave policy and the HR team would be hard-pressed to achieve this task. GetifyHR has years of experience in framing such leave policies for organizations spread across the country and is also adept in formulating National Holiday and Festival Holiday lists across multiple states. Our Payroll and HR management module facilitates simplifying this task and makes it easier for handling the Holidays and Leave eligibility of employees. Associate with us now for seamless handling of all Payroll Processing, Statutory Compliance issues and Leave and Attendance management.

contract labour

The Contract Labour (Regulation and Abolition) Act, 1970

Introduction

A contract labourer is one who is assigned to work in an establishment for a specific period through a contract by a contractor with or without the knowledge of the principal employer. They are indirect employees who are either paid daily wages or paid the accumulated daily wage at the end of the month. The contractor is responsible to hire, supervise and remunerate the contract labourers.

The practice of employing workers on a contract has been widely used in India for a very long time. Before and after independence the issue of contract labour has been a seriously analyzed topic and innumerable commissions, committees and even the Ministry of Labour have tried to identify the working conditions of such workers.

Studies have shown that contract labourers live in poor economic conditions and since their job is casual in nature they lack job security. Since there were no regulations and controls, the contract labourers were exploited for the gain of the employer and contractor. To regulate the employment of contract labour and free them from exploitation the government enacted a legislation called the Contract Labour (Regulation and Abolition) Act, 1970. On 10th February 1971, the Act came into force and will be applicable throughout the country.

Objectives and scope of this Act

The main objectives and scope of the Act are:

  • To prevent the exploitation of contract labour
  • To provide proper working conditions
  • To lay down the rules and regulations regarding the registration process of the establishments employing contract labour.
  • To state the requirements and the procedures of licensing contracts.
Who does the Act apply to?

The Act will apply to establishments under the following conditions:

  • Any establishment where 20 or more workmen are employed or were contracted as contract labour on any day during the preceding 12 months.
  • Any Contractor who employs or has employed 20 or more workmen on contract labour on any day of the preceding 12 months.
Establishments to which the Act does not apply

The Act does not apply to establishments that perform works of casual or intermittent nature

  • Seasonal work that is performed for less than 60 days
  • The work is considered intermittent if the work is performed for less than 120 days in the preceding 12 months.

Main Definitions

Principal Employer

The Principal Employer includes the head of any government or local authority, the owner or occupier, or the Manager of a factory (Under the Factories Act). The Owner, Agent, or Manager of a mine or any person responsible for the supervision and control of the establishment is also included.

Contractor

The Contractor refers to any person who supplies contract labour for any work to any establishment. This could also include the sub-contractor. A contractor to whom the Act applies has to take a license under the Act.

Establishment and Composition of the Advisory Boards

The Contract Labour (Regulation and Abolition) Act, 1970 provides for the establishment of Central and State Advisory Boards. The Boards are established to advise the Central and State governments respectively on matters concerning the administration of the Act and to carry out the functions assigned under the Act.

The Central Advisory Board

The Central Government constitutes the Central Advisory Board with representation from the Government, the Railways, the coal industry, the mining sector, the contractors, the workmen, and any other sector that is deemed fit by the government. The Central Government may nominate eleven to seventeen members to the Advisory Board.  The Number of members nominated from the workmen’s side should not be less that the number of members representing the principal employer and contractors. Apart from these members, the Board consists of a Chairman appointed by the Central Government and the Chief Labour Commissioner.

The State Advisory Board

The State Advisory Board is constituted by the respective State Governments and consists of a Chairman appointed by the government, the Labour Commissioner of that State and in their absence the State Government will appoint any other officer.

Apart from these members, the State government may nominate nine to eleven members to represent the government, industry, contractors, workmen, and other members from any other sector that the State government decides. The number of members nominated to represent the workmen shall not be less than the members nominated to represent the principal employer and the contractors.

The Central and State Advisory Boards have the power to form committees under the Act as they deem fit. The committee will discharge their duties and responsibilities in accordance with the provisions of the Act.

Registrations of Establishments hiring contract labour

Every establishment that proposes to hire contract labour is required to obtain a certificate of registration from the respective government. The registration procedure is as follows:

  • The Establishment should submit the application in Form No.1 to the Registration Authority along with the receipt of payment of the prescribed registration fee.
  • If the application is found correct in all respects, the Registering authority can register the establishment and issue a copy of the registration certificate in Form II.
  • The Certificate of Registration will contain the name and address of the establishment, the maximum number of workers to be hired as contract labour, the type of business, and any other important particulars.
The Responsibilities of the Employer

The employer has to fulfill the following responsibilities:

  • Register the Establishment.
  • Engage contract labour only through licensed contractors.
  • Display a notice showing the name and address of the Inspector in English and the local language along with details of wages and date of payment of wages.
  • Should ensure that the contractor pays the wages as per the wages fixed by the government or as fixed by the Commissioner of Labour or in their absence pay fair wages.
Licensing of Contractors

Every Contractor who wishes to undertake or execute any work through contract labour is required to obtain a license from the Licensing Authority. This condition applies to a contractor who has employed twenty or more workers during any day of the month.

The Procedure for obtaining a License

The licensing authority issues the license under Sec.12 of the Act.

  • The contractor has to make an official request to the Licensing Authority along with the application form.
  • Deposit the appropriate security deposit.
  • The license will include such conditions as the hours of work, fixation of wages, and other amenities due to contract labour.
  • The application in the prescribed form should contain the particulars regarding the location of the establishment, the nature of the process, operation, or work for which contract labour is to be employed, and such other details.
  • The license is valid for the period mentioned therein and may be renewed from time to time for such a period. The relevant fee has to be paid.

Provide the following facilities:

  • A canteen to the contract labour when they employ 100 or more workers and the work is performed for 6 months or more.
  • Provide adequate urinals for men and women separately.
  • Provide drinking water, washing facility, first aid, crèche, etc.
  • Properly maintain the various registers and records
  • Maintain a separate register of Contractors in Form XII
  • File the required returns (Annual) to the licensing authority by 15th February of the year.

Responsibilities of the Contractor

The Contractor has the following responsibilities:

  • Has to get approval from the Principal Employer.
  • Has to obtain a license from the Licensing Authority.
  • Raise monthly Bills for payment to the contract labour.
  • Maintain all relevant Registers likeMuster Roll, Wage register, etc.
  • Has to pay the wages on or before the 7th of each month.
  • Disburse the wages in the presence of the representative of the employer.
  • Have to distribute employment cards to all the workers three days before the commencement of work.
  • Have to file the half-yearly return in Form XXIV after 30 days from the close of the half-year, i.e. June and December.

Penalties

Anyone who violates any clause of the Act or any of the rules under the Act will be liable to imprisonment to the extent of 3 months or with a penalty of One thousand rupees or both. If the violation continues then an additional fine of one hundred rupees per day for every day of contravention will be imposed.

Shortcomings in the Act that need change

The Contract Labour (Regulation and Abolition) Act, 1970 has several drawbacks that need to be addressed by the legislature for better implementation.

  • The Act does not differentiate between core and peripheral activities and this has led to non-implementation.
  • The Act applies to establishments employing 20 or more contract labourers. Establishments and contractors avoid this responsibility by employing less than 20 labourers.
  • Establishments misuse the provision by taking licenses under different names, a single-window system should be adopted for issuing the registration and there should be a licensing authority to handle the issue in every state.
  • The penal provisions of the Act are not deterrent enough and, therefore, principal employers prefer to pay the penalty rather than follow the provisions of the Act.
  • There is a need to extend the education scheme to contract labour as most of them are unskilled, illiterate, and ignorant of their rights.
  • As there are no direct or independent provisions under the Act to file for claims etc., these claims are filed under the Payment of Wages Act or Minimum Wages Act. This has to be included in the Act itself.

Conclusion

The Central Government enacted the Contract Labour (Regulation and Abolition) Act, 1970 to prevent exploitation of the contract labour by both employers and contractors. The Act provides them with certain rights as contract labour and gives them a legal provision to demand their just dues. However, the shortcomings have to be addressed and must be legislated so that necessary changes can be made to strengthen the provisions. There is also a need to make the Act less complicated for the principal employers and contractors and with provisions for better safeguards and amenities to contract labourers.

GetifyHR, with its years of experience in handlingPayroll and all Statutory Compliance rules and regulations, have assisted clients in handling their requirements of contract labour. We expertly handle all issues pertaining to the employment of contract labour, and establishments have gained from our expertise in the eficient handling of contract labour.  Our high-end, cloud based Payroll module is capable of handling these issues in a seamless manner, making it easier for organizations to have the relevant details at the click of a button, as and when they require it.