In India, executive compensation, employee benefits, and share schemes are governed by various legislations. These include the Companies Act 2013, the Securities and Exchange Board of India (SEBI) guidelines, Income Tax Act 1961, and the Payment of Wages Act 1936.
The Companies Act 2013 has specific provisions in Sections 197 and 198 governing managerial remuneration. These define the maximum limits, need for shareholder approval, and penalties for non-compliance.
Employee benefits are mainly regulated by the Employees’ Provident Funds and Miscellaneous Provisions Act 1952, Payment of Bonus Act 1965, Maternity Benefit Act 1961, Gratuity Act 1972, Employee State Insurance Act 1948, and Workmen Compensation Act 1923. These acts cover social security and welfare benefits like provident fund, maternity leave, gratuity, leave encashment, bonus among others.
SEBI guidelines regulate share schemes in India. The SEBI (Share Based Employee Benefits) Regulations, 2014 provide a regulatory framework for share-based employee benefit schemes involving dealing in shares of the company directly or indirectly. These regulations cover schemes such as Employee Stock Option Plans (ESOPs), Employee Stock Purchase Schemes (ESPSs), Stock Appreciation Rights (SARs), and General Employee Benefits Scheme.
The Income Tax Act 1961 also affects executive compensation and share schemes as it governs the taxation aspects of these remunerations and benefits. For instance, perquisites provided to employees are taxable under this Act.
The Payment of Wages Act 1936 ensures timely payment of wages without any unauthorized deductions. It also stipulates employers to maintain registers with respect to wages and any deductions made.
In summary, a robust legal framework governs executive compensation, employee benefits, and share schemes in India to ensure fair practices, financial transparency, and the welfare of employees. Any violation or non-compliance of these regulations can lead to severe penalties and legal implications.