Labour law, which is also in general parlance referred to as human resource law, is an assortment and body of laws which addresses the legitimate privileges of, and limitations on, working individuals and their associations. All things considered, it intercedes and mediates the connection between the employees, workers, unions, managers and representatives of the workplace. As such, labour law characterizes the rights and commitments as workers and businesses in the working environment. It plays a vital role in governing the rights and obligations of workers and employees, working and employed in an organization. This article focuses on the various legal compliances under the labour laws in India by an employer.
B. LABOUR LAW COMPLIANCES IN INDIA
The various labour laws enactments in India, along with the compliances to be made by the employer have been detailed below.
- The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013: This enactment is applicable to all workplaces and organizations. It is a central legislation and is applicable to whole of India. The most important aspect under this legislation is that every employer shall formulate a sexual harassment policy to address the concerns with regard to sexual harassment at a workplace of women and the employer shall communicate the policy to all the employees. Every workplace/organization, which employees 10 or more employees shall constitute an internal complaints committee, as per the provisions as laid down under this act. It is the duty of every employer to file an annual report detailing the number of cases filed if any, with the District Officer every year. However, if there are no cases which have been registered, the same shall also be intimated to the District Officer, through the annual report.
- Equal Remuneration Act, 1976: The Equal Remuneration Act, 1976 is a central legislation and provides for equality in the payment of remuneration to men and women. The legislation prevents discrimination, with regard to the payment of remuneration to workers on the grounds of sex and the employment of women. Every employer shall, in accordance with the provisions of this act pay equally to men and women for the work done which is of similar nature and shall in no manner pay at rates which are less favourable. The employer shall not discriminate against women, with respect to their employment, recruitment, promotion, training and transfers, unless restricted by law. It shall be the duty of every employer to maintain a register in Form D, mentioning the details of the workers employed by the employer.
- The Rights of Persons with Disabilities Act, 2016: The Rights of Persons with Disabilities Act, 2016 (“Disabilities Act”) has replaced the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995. India is a signatory to the United National Convention on the Rights of Persons with Disabilities (“UNCRPD”) and this legislation fulfills the obligations as specified under the UNCRPD. The Disabilities Act enlists the various kinds of disabilities and has casted a responsibility on the government to ensure that persons with disabilities are provided with equal opportunities same as the opportunities provided to the others and that there is no discrimination on the basis of disability. The Disabilities Act applies to both government as well as private establishments, as defined under the Disabilities Act. Every employer shall formulate and notify an equal opportunity policy so as to ensure that there shall be no discrimination against persons with underlying disabilities. The policy shall be published and the same shall be displayed on the establishment’s website and the conspicuous places of the premises. The policy shall provide the facilities and amenities, the posts for employment of disabled persons, manner of selection for such posts, provision of assistive devices and other details. Pursuant to the provisions of the Disabilities Act, every establishment shall maintain relevant registers, in the manner prescribed by the Disabilities Act.
- The Maternity Benefits Act, 1961: The Maternity Benefits Act, 1961 (“MB Act”) provides for the benefits to pregnant women and lays down provisions for the protection of employed pregnant women. The MB Act applies to every establishment and factory. Every employer shall grant maternity benefit to every woman employee who has been working in the establishment for a period of not less than 160 days in 12 months which would be immediately preceding her date of delivery. Upon delivery or miscarriage, a woman shall not work for a period of 6 weeks immediately. A woman shall be entitled to maternity benefit for a maximum period of 26 weeks. Maternity benefit for a further period of 8 weeks cannot be claimed by a woman. An advance shall be given by the employer to the woman for a period preceding the date of delivery and such balance amount shall be payable after the delivery of the child. For claiming such amounts from the employer, the woman shall give a notice to the employer, in accordance with the provisions as laid down under the MB Act. The woman shall be entitled to two nursing breaks until the child attains the age of 15 months in addition to the interval of rest provided to her. Crèche facility shall be provided in case the number of employees exceeds 50 or more in an establishment. Every employer shall maintain a muster roll and shall file relevant forms and records with the Competent Authority every year as per the state-specific rules.
- Payment of Gratuity Act, 1972: This legislation provides for a monetary retirement benefit which is payable to an employee upon his or her retirement. The Payment of Gratuity Act, 1972 (“Gratuity Act”) applies to all the establishments wherein 10 or more persons are employed or were employed in the preceding 12 months. Gratuity becomes payable to employees who have rendered continuous service of 5 years in the establishment in accordance with the provisions of the Gratuity Act. However, the completion of a continuous period of 5 years is not necessary, if termination of employment is due to death or disablement for the payment of gratuity. It is payable upon the resignation, death, retirement or termination on account of death or disablement due to an accident or disease. Amount of gratuity payable shall be paid at the rate of 15 days wages for every year of service based on the rate of wages last drawn by the employee. A notice shall be submitted by the employer to the Controlling Authority (Labour Officer) of a particular area in a form as prescribed under state rules and the same shall be displayed in the conspicuous part of the establishment in English and vernacular language, displaying the name of the person who is authorized to receive communications under the Gratuity Act and its rules.
- The Employee Provident Funds & Miscellaneous Provisions Act, 1952: This act is a central legislation, which applies to every establishment which has 20 or more employees and to every employee drawing wages below Rs.15000/- per month. The act provides for the constitution of provident fund, deposit linked insurance fund and pension fund for employees. An employee under this act is any person who has been employed either directly or through a contractor. Every employer shall get the establishments registered with the appropriate authority under the act. Both the employer and employee contribute towards the provident fund at the rate of 12% of the basic wage, retaining allowance, dearness allowance and other allowances which are payable to the employee. An employer shall be required to pay the employee provident fund contribution within 15 days of the next month. Every employer who has registered the establishment shall file a return in the form as prescribed by the act on a monthly basis.
- The Employee State Insurance Act, 1948: This act is a central legislation and is applicable to factories employing 10 or more persons. It provides for sickness, maternity, employment injury and other related benefits to the employees. Both the employer and employee are required to make contributions to the Employees State Insurance Corporation in accordance with the act. An employer shall contribute for its employees drawing wages up to Rs. 21000/- per month. An employer shall contribute at the rate of 4.75% of the wages of the employer and employee shall contribute 1.75% of his or her wages. Such contributions shall be made by the employer before 21st of the following month. Every employer shall at every 6 months interval file half-yearly returns with the branch office in Form 5. Every employer shall register itself by logging into esic.in. A code is sent to the employer along with the registration form and login credentials. All mandatory information shall be filled up by the employer using the credentials provided on the website. The employer shall maintain attendance register, Form 6 register which deals with the data relating to the payment of contributions made by the employee, an accident register, files containing the monthly challans and returns.
- The Payment of Bonus Act, 1965: The Payment of Bonus Act, 1965 (“PB Act”) ensures the provision of annual bonus to the employees who draw a salary or wage which shall not exceed Rs. 20,000/- per mensum. The PB Act is applicable to every establishment which employees 20 or more persons on any day during a particular accounting year. Bonus is payable irrespective of whether an employer has made a profit or a loss. A new establishment which has not made a profit in the first five years shall not be required to pay bonus to its employees. Every employee is eligible for a bonus, if he has worked in an establishment for not less than 30 days in that particular year. However, an employee who has been involved in fraud, theft, misappropriation, riotous behaviour shall not be entitled to bonus. A minimum bonus of 8.33% of the salary of the employee shall be payable as a bonus to an employee. The employer shall have the right to deduct the bonus of an employee if the employee’s misconduct has caused financial loss to the employer. An employer shall be entitled to pay the bonus to an employee within 8 months from the close of the accounting year and in the event of any dispute with regard to bonus, within 1 month from the date on which the decision becomes enforceable. Every employer shall maintain a registers and submit annual returns in accordance with the state-specific rules.
- The Payment of Wages Act, 1936: The Payment of Wages Act, 1936 (“PW Act”) deals with the payment of wages to persons employed in a factory, industry or any other establishment and is applicable to an employee earning wages up to Rs. 24,000/- per month. An employer shall pay wages to all his employees for a wage period of one month. Wages shall be paid to the employees before the lapse of 10th day of each month. Upon termination or closure of the establishment, the employer shall pay wages to the employees within 2 working days. The employer shall ensure that payment of wages to an employee is done on a weekday. The employer shall have the right to make authorized deductions from the wages of the employees. However, the deductions made shall not exceed 50% of the wages payable to the employees. For the omission of an act, the employer shall have the right to impose fines. The employee shall be provided with an opportunity of being heard, as laid down by the principles of natural justice. Fines imposed on an employee shall not exceed 3% of the wages of the employee in a wage period. A register of fines shall be maintained recording the details fines and all the realizations and these realizations shall be credited to a common fund. This fund shall be used only for purposes as may be approved by the prescribed authority. Registers and records shall be maintained by the employer mentioning details of the persons employed, work performed by the employees, the amount of wages paid, fines, deductions etc. Every state in India has formulated and enforced rules under the PW Act prescribing the manner in which all the employers shall maintain a register for fines, deductions for damages or loss and advances, register of wages and shall file an annual return in at the end of each calendar year in accordance with the state-specific rules.
- The Labour Welfare Fund Act: The labour welfare fund acts are state-specific legislations and labour welfare fund is a fund which is managed by state authorities. Contributions are made by the employer and the employee to the welfare fund. This welfare fund acts as an aid for the betterment of the working conditions of employees and ensures social security to the employees. The state-specific acts lay down the applicability of the acts in various states and the compliances of the employers. The state-specific acts also lay down the provisions as to the relevant registers to be maintained by the employers.
- The Minimum Wages Act, 1948: The Minimum Wages Act, 1948 (“MW Act”) is a legislation empowering the government to fix minimum rates of wages for employees working in various scheduled employments. The MW Act applies to every employer employing one or more employees. This MW Act makes it mandatory on the part of every employer to pay the minimum rates of wages which are fixed by the State Governments. As per the MW Act, the employers are obligated to pay wages to the employees at rates which shall not be below the minimum wage rate which has been fixed by the State Governments. The wage rates are usually fixed and modified by way of a notification issued by the State Governments every six (6) months. The MW Act mandates the payment of wages during the wage periods as specified by the state legislations. The rules in general mandates the employer to display a notice on a conspicuous place of the premises showcasing the dates on which wages will be paid to the employees in English and vernacular language which is understood by a majority of persons. The employer shall have the right to make authorized deductions from the wages of the employees as per the provisions as laid down under the MW Act. The employer shall pay wages to an employee for the overtime work done. The employee should have worked for a period of 6 days a week. Hours of work shall be 9 hours each day and an interval of half an hour after 5 hours work shall be provided. The employer shall maintain registers in the forms as prescribed under the state-specific rules.
- The Industrial Establishments (National and Festival Holidays) Law: Every State in India has enforced an enactment to regulate national and festival holidays. This act is applicable to all industrial establishments and ensures the provision of grant of festival holidays to the persons employed in the aforesaid establishments. All employees shall be provided with a holiday on 26th January, 15th August, 2nd October, national holidays and 5 other holidays for the festivals as may be specified by the employer, after consulting the employees or trade unions as the case may be. Every employee shall be provided with a holiday on the polling day for the purpose of voting. A statement showing the holidays shall be displayed in the industrial establishment and the same shall be sent to the inspector having jurisdiction over the particular area. Wages shall be payable to the employees for these holidays. However, if an employee (monthly wage earner and piece-rate earner) works on these holidays, such employee shall be paid twice of wages and avail wages for a substitute holiday for any other day.
- The Shops & Commercial Establishments Act (“S&E Act”): Every establishment shall be registered under the S&E Act and shall submit an application for registration within the number of days as prescribed by the state-specific laws and the certificate of registration shall be displayed in the premises, in a conspicuous place. Any change shall be intimated by the employer to the registration authority within the number of days after such a change as prescribed by the state-specific laws. Upon closure, the registration certificate shall be surrendered. The employees shall be provided with the appointment letters and shall be allowed to work for 48 hours a week. In case of overtime, the employees shall be paid wages for such overtime work. The employer shall ensure that all the provisions of the S&E Act with respect to leaves with wages have been complied with. The employer shall ensure that the employees have been provided with an appropriate interval of one hour after such hours of work each day as may be prescribed by the state-specific laws. The employer shall also pursuant to the provisions of the S&E Act, formulate a leave policy. The employer shall further ensure that payment of wages has been made to the employees who have been terminated within the timelines as may be prescribed by the state-specific acts. The employer shall also be obligated to maintain relevant registers as required under the state laws and legislations.
- The Contract Labour (Regulation and Abolition) Act, 1970: This legislation has been enforced with the main object of regulation of employment of contract labour. It is applicable to every establishment in which and every contractor who employees, 20 or more workmen are employed or were employed in the preceding 12 months. It is not applicable to establishments in which work of casual and intermittent nature is performed. Work performed in an establishment shall not be deemed to be of an intermittent nature if it was, performed for more than one hundred and twenty days in the preceding twelve months. Every principal employer shall make an application to the registering officer for the registration of the establishment in the prescribed form and pay applicable fees as specified under the state-specific enactments and rules. The principal employer shall nominate a representative who shall be present at the time of disbursement of wages by the contractor and the amounts paid to the contract labour shall be certified by the representative.
- The Child and Adolescent (Prohibition & Regulation) Act, 1986: This act applies to every establishment and establishment for the purpose of this act includes a shop, a commercial establishment, workshop, farm, residential hotel, restaurant, eating house, theatre or place of public amusement or entertainment. This act prohibits adolescents and children from working in hazardous occupations and processes. An adolescent shall work for 6 hours each day and shall be provided with a 1-hour interval after 3 hours of work and shall not be permitted to work from 7 pm to 8 am. A weekly holiday of one whole day shall be provided by the employer. Every occupier of the establishment shall send a notice to the inspector providing all the relevant details of the establishment within 30 days from the date of employment of adolescents. Pursuant to the provisions of the act, the occupier shall maintain all the relevant registers.
- The Apprentices Act, 1961: This legislation provides for the training and regulation of the apprentices. Pursuant to the provisions of the act, an apprentice is any person undergoing apprenticeship training in pursuance of a contract of apprenticeship. An apprentice shall not be below the age of 14 years and shall satisfy the education qualification and the standards of physical fitness as per the act. Employers employing 4 or more workers shall only be eligible for the appointment of apprentices and an establishment employing 30 or more workers shall mandatorily appoint apprentices. The employers shall ensure that there are reservations for the backward classes for the purpose of training of the apprentices in each designated trade. A contract of apprenticeship shall be entered into between the employer and the apprentice and training is deemed to have been commenced on the date of the contract. The employers shall within 30 days from the date of commencement of apprenticeship, send the contract to the apprenticeship advisor until the development of the portal site. Upon the development of the portal site by the Central Government, the details of the contract shall be entered on the site within 7 days, for its verification and registration. Employers shall make suitable arrangements for the training of the apprentice in their particular trades and put them under the training of persons qualified in their trades. The employer shall pay a stipend to the apprentice, as per the terms of the contract. Weekly holidays shall be provided, no overtime work shall be done by an apprentice. An apprentice shall be allowed to work for 42 to 48 hours a week and shall be entitled to leaves and holidays as observed by the establishment.
The labour department in an organization is the soul of an organization as it plays a major role in dealing with the personnel employed in the organization. Its main objective is directing the personnel towards the achievement of organizational goals. There is a subordination of organizational interests over the individual interests, indirectly creating a balance between both the organizational interests and the interests of the personnel working in the organization. The success or failure of an organization is largely dependent on the calibre of the people working in the organization. Labour laws have been enacted for the sole purpose of safeguarding and promoting the interests of the workers and employees by covering the various legal aspects with respect to wages, equal opportunity, safety, health, holidays, conditions of work, the welfare of labours etc. and hence, is considered as a backbone of every organization.
However, as laid down under this article, it is observed that there are numerous laws pertaining to labour/human resource laws. Therefore, in order to simplify the compliances under certain laws, the Government of India has introduced "The Code on Wages, 2019 (“Code”)”. The Code basically seeks to regulate wage and bonus payments in all employments where any industry, trade, business, or manufacture is carried out. The Code has, as on this date, received the assent of the President of India on 8th August 2019, but its date of enforcement is yet to be notified in the Official Gazette. Upon being notified, the Code shall replace the following four laws:
- The Payment of Wages Act, 1936,
- The Minimum Wages Act, 1948,
- The Payment of Bonus Act, 1965, and
- The Equal Remuneration Act, 1976.
The provisions as laid down in the Code shall be applicable to the organizations upon being notified through the Official Gazette.
Authors: Prashant Jain, Co-Founder & Partner; Abhishek Gupta, Associate; Kriti Sanghi, Associate
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Updated as on April 01, 2020
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