What are different types of compliance?
What are the Different Types of Compliance?
Compliance means adhering to a rule. In the business environment, every company has to work following a set of policies and standards and follow specific rules and regulations to maintain decency or morality. The present article briefs the different types of Compliance.
Importance of Compliances
Timely Compliance with all the relevant laws and regulations can benefit the company by keeping things running smoothly, reducing fines and penalties, and maintaining its position in the industry. Giving importance to Compliance can help the organization with the following benefits:
- Maintain a clear standard on what you can and cannot do and how your business should operate.
- Avoid paying fines or facing potential lawsuits due to negligence.
- Become a trustworthy business.
- Make every employee feel that they work in a secure and professional environment.
Different types of Compliance
Compliance becomes increasingly essential as a business expands and is exposed to various challenges and audits. Several compliance regulations exist in health, security, data privacy, finance, environmental concerns, and more to avoid unfair or substandard business operations.
External Compliance refers to following the rules, laws, and standards set by the Government to avoid any negative impact on the organization’s goodwill. The state in which the firm is incorporated is concerned with defining these compliances. These laws help an organization build public relations and trust and bring transparency to its business. Complying with all the rules ensures any unnecessary duplication of efforts of resources.
Some of the compliances are submitting annual reports, filing tax requirements, and requirements under labor law. Registering your business name is an act of practicing external Compliance. External Compliances are further segmented into two types:
These are the laws and rules passed by the state or central Government. The list of Statutory Rules in India that a company must adhere to
- Shops and Commercial Establishments Act (S&E)
- The Employees Provident Funds and Miscellaneous Provision Act – 1952 (EPF)
- The Employees State Insurance Corporation Act – 1948 (ESIC)
- The Professional Tax Act (PT) 1975
- The Labour Welfare Fund Act (LWF) 1965
- The Contract Labour (Regulation & Abolition) Act – 1970 (CLRA)
- The Child Labour (Prohibition & Regulation Act), 1986
- The Minimum Wages Act-1948
- The Payment of Wages Act-1936
- The Payment of Bonus Act 1965
- The Maternity Benefit Act of 1961
- The Payment of Gratuity Act 1972
- The Equal Remuneration Act-1976
- The Industrial Establishment (N&FH) ACT 1963
- The Employment Exchange (Compulsory Notification of Vacancies) ACT-1959
- Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act 2013
- The Employees Compensation ACT-1923
- The Industrial Employment (Standing Orders) ACT 1946 Model Standing Order Only
- The Industrial Disputes ACT of 1947
- The Apprentice ACT, 1961
- The Interstate Migrant Workmen (Regulation of Employment and Conditions of Services) ACT, 1979
- The Factories ACT of 1948
- The Trade Unions Act of 1926
These are the laws and rules passed by some regulatory bodies set up by the state or central Government. Some of them are listed as follows.
Accounting & Payroll
- Employee Payroll
- Statutory Audit
- Tax Audit
- Internal Audit
- Corporate Tax
- Transfer Pricing
- Withholding Tax
- Expatriate Taxation
Businesses in India must comply with secretarial matters specified under the Indian Companies Act and report to the concerned ROC.
An employer needs to consider the impact of the Provident Fund, a government-regulated Pension Plan scheme.
- Specific state-specific regulations, e.g., Professional Tax and the Shop and Establishment Act, prevail in Indian states like Karnataka, Maharashtra, Tamil Nadu, etc.
- Board Meeting
- Annual General Meeting (‘AGM’) (adoption of financials)
- Annual Return with the ROC
- Corporate Tax Return
- Tax Audit Report
- Transfer Pricing Report
- TDS Returns (Tax Withholding)
- Individual tax return
- GST Return – Turnover > ` 50 million) – Turnover < ` 50 million)
- Deposit of TDS
- Deposit of GST – Turnover > ` 50 million) – Turnover < ` 50 million)
Internal Compliance refers to an internally designed set of rules and regulations that the owners, employees, traders, and customers follow to maintain the quality of the services or products provided by the organization. These are created and sanctioned by senior professionals and are followed by everyone in the company. Some internal compliance is setting up a Board of Directors, Conducting regular meetings, and distributing stocks to shareholders.
Other internal compliance rules you can include:
- Which employee activities you can monitor, and how.
- How to handle discrimination complaints.
- What forms of donations can you make on behalf of your business?
- The penalties for damaging a business resource or property.
- How to address conflicts of interest between employees.
An organization will comply with external requirements only when working in line with internal rules and regulations.
Post by Renu Suresh
Renu is experience content writer specialised in compliances and company rules.