At the heart of any business is one thing which is people. These are the company's workers, who operate in various capacities to achieve the company's goals. A corporation must be structured and streamlined, with correct rules and regulations in place, in order to work well. These rules apply to every aspect of the business, including how it interacts with its workers and how it manages its cash.
The many labour and taxes rules that apply in India are referred to as statutory compliance. These rules vary on a state and national level, and firms are required to follow them. Non-compliance with these requirements can result in legal consequences such as penalties, fines, and even jail time. This is why businesses devote significant efforts to ensuring statutory compliance.
Let me brief you on what compounding under labour code implies. Compounding is a procedure in which a defaulting individual or entity submits an application to the informed compounding authority, admitting to committing an offence and begging for its forgiveness. After the defaulter pays a compounding charge, the compounding authority may compound the offence.
All first-time offences under the Wage Code are penalised simply by a fine according to Section 54. As a result, all offences under the Code of Wages are compoundable, as no offence is penalised only by jail or by imprisonment plus a fine.
Similarly, under the Industrial Relations Code, all offences are compoundable since they are punished by a fine, jail, or both [Section 86]. None of the offences are punished by a single sentence of jail or a single sentence of imprisonment with a fine.
Failure to pay an employee's contribution, which has been taken by the employer from the employee's earnings, is punished by a year or more in jail and a fine according to Section 133 under the Social Security Code. As a result, this is the sole offence that cannot be compounded. This is due to the employer's failure to pay the contribution that has already been deducted, which is a breach of fiduciary responsibility. All other offences carry a sentence of less than one year or a sentence of jail or a fine and are thus compoundable.