Applicability of Labour Laws in India for Companies By Devashish Bharti
Devashish Bharti
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04 Aug 2018
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Indian Labour Law & its implications:
In India; companies; particularly those in labour-intensive sectors like automobiles, construction and mining, usually refrain from hiring permanent workers for project-based requirements, as the termination requires issuing a notice, payment of compensation, and intimation to the government.
India’s temporary workforce is governed by the Contract Labour (Regulation & Abolition) Act, 1970. An establishment that employs 20 or more workmen on any day of the preceding 12 months can employ temporary workers upon obtaining a valid certificate of registration.
Necessity and Importance of Labour Law:
(1) Improves industrial relation i.e. employee-employer relations and minimizes industrial disputes;
(2) Prospective workers from exploitation by the employers or management;
(3) Helps workers in getting fair wages;
(4) Minimizes labour unrest i.e to make it operational;
(5) Reduces conflicts and strikes (to the extent possible);
(6) Ensures job security for workers as an important element;
(7) Promotes positive environment conditions in the industries;
(8) Fixes rest pauses and work hours to make the workings effective; and
(9) Provides compensation to workers (who are victims of accidents).
Indian labour law makes a distinction between people who work in "organized" sectors and people working in "unorganized sectors". The laws list the different industrial sectors to which various labour rights apply. People who do not fall within these sectors, the ordinary law of contract applies.
A person can be marked dies-non (unauthorized absence), if:
- Absent without proper permission; or
- When on duty left without proper permission; or
- While in office but refused to perform his duties.
According to fundamental rules (FR 17A) of the civil service of India, a period of unauthorised absence-
(i) In the case of employees working in the industrial establishments, during a strike, which has been declared illegal under the provisions of the Industrial Disputes Act, 1947, or any other law for the time being in force;
(ii) In the case of other employees as a result of action in combination or in the concerted manner, such as during a strike, without any authority from, or valid reason to the satisfaction of the competent authority;
Shall be deemed to cause an interruption or break in the service of the employee, unless otherwise decided by the competent authority for the purpose of leave travel concession, quasi-permanency and eligibility for appearing in departmental examinations, for which a minimum period of continuous service is required.
LEGISLATION:
List of Indian labour Laws – which includes laws enacted by the central government, further each Indian state has few additional laws.
(i) The Employees’ Provident Fund and Miscellaneous Provisions Act, 1952
Employees' Provident Fund Organisation of India is established under this Act. It functions as a pension fund for old age security for the organised workforce sector. For those workers, it creates the Provident Fund to which employees and employers contribute equally, and the minimum contributions are 10-12 per cent of wages. On retirement, employees may draw their pension. Besides, for Government Employees, there is Statutory Provident Fund, and for Self Employed Person there is Public Provident Fund with similar Tax advantages.
It provides for the compulsory contributory fund for the future of an employee after his/her retirement or for his/her dependents in case of employee's early death. It extends to the whole of India except the State of Jammu and Kashmir and is applicable to:
- Every factory engaged in any industry specified in Schedule 1 in which 20 or more persons are employed.
- Every other establishment employing 20 or more persons or class of such establishments as the Central Govt. may notify.
- Any other establishment so notified by the Central Government even if employing less than 20 persons.
(ii) The Employees’ State Insurance Act, 1948
It provides health and social security insurance. It was passed to provide for a scheme wherein the employer and the employee must contribute a certain percentage of the monthly wages to the Insurance Corporation.
(iii) Apprentices Act, 1961
The main objective of this Act is to meet the rising need for the proficient craftsman. Giving experimental training to the people who’re specialized in their crafts is the primary aim of the Apprentice Act. Candidates holding Diploma and Engineering Graduates can likewise benefit from this plan.
(iv) The Contract Labour (Regulation & Abolition) Act, 1970
It aims at regulating the employment of contract labour so as to place it at par with labour employed directly. Women are now permitted to work night shifts too (10 pm to 6 am).
(v) The Factories Act, 1948
It has consolidated existing factory safety laws. It was enforced to provide for the Health, Safety, Welfare, Working Hours and Leave of workers in factories (manufacturing units).
(vi) The Industrial Disputes Act, 1947
Section 3 of the Act created a right of participation in joint work councils to "provide measures for securing amity and good relations between the employer and workmen and, to that end to comment upon matters of their common interest or concern and endeavor to compose any material difference of opinion in respect of such matters". However, trade unions had not taken up these options on a large scale. It regulates how employers may address industrial disputes such as lockouts, layoffs, retrenchment etc. It controls the lawful processes for reconciliation, adjudication of labour disputes.
(vii) The Industrial Employment (Standing Order) Act, 1946
It requires that employers have terms including working hours, leaves, productivity goals, dismissal procedures or worker classifications, approved by a government body.
(viii) The Maternity Benefit Act, 1961
It creates rights to payments of maternity benefits for any woman employee who worked in any establishment for a period of at least 80 days during the 12 months immediately preceding the date of her expected delivery.
An amendment to this Act was passed on March 30, 2017, as Maternity Benefit (Amendment) Act, 2017 which provides for 26-weeks paid maternity leave for women employees.
(ix) Minimum Wages Act, 1948
It sets wages for the different economic sectors that it states it will cover. It leaves a large number of workers unregulated. Central and state governments have the discretion to set wages according to the kind of work and location, and they range about as much as 143 to 1120 per day for work in the so-called central sphere. State governments have their own minimum wage schedules.
(x) The Payment of Bonus Act, 1965
It applies only to enterprises with over 20 people, requires bonuses are paid out of profits based on productivity. The minimum bonus is currently 8.33 percent of salary and up to the maximum of 20 percent.
(xi) The Payment of Gratuity Act, 1972
It applies to establishments with 10 or more workers. Gratuity is payable to the employee if he or she resigns or retires. The Indian government mandates that this payment be at the rate of 15 days salary of the employee for each completed year of service subject to a maximum of Rs. 20 Lakhs.
(xii) The Payment of Wages Act, 1936
It requires that employees receive wages, on time, and without any unauthorised deductions. Section 6 requires that people be paid in money rather than in kind. The law also provides the tax withholdings the employer must deduct and pay to the central or state government before distributing the wages.
(xiii) The Workmen Compensation Act, 1923
It requires that compensation is paid if workers are injured in the course of employment for injuries, or benefits to dependents. The rates are low.
(xiv) Shops & Establishment Acts (State-wise)
An Act to amend and consolidate the law relating to the regulation of hours of work, payment of wages, leave, holidays, terms of service and other conditions of work of persons employed in shops, commercial establishments, establishments for public entertainment or amusement and other establishments and to provide for certain matters connected therewith.
(xv) Building & Other Construction Workers (Regulation of Employment & Conditions of Service) Act, 1996
An Act to regulate the employment and conditions of service of building and other construction workers and to provide for their safety, health and welfare measures and for other matters connected therewith or incidental thereto.
(xvi) Trade Unions Act, 1926
As amended in 2001, An Act to provide for the registration of Trade Unions and in certain respects to define the law relating to registered Trade Unions. It contains rules on governance and general rights of trade unions. Article 19(1)(c) of the Constitution of India gives everyone an enforceable right "to form associations or unions".
(xvii) Equal Remuneration Act, 1976
Its objective is to implement the provisions of Article 39(d) of the Constitution, which provides that men and women should receive equal pay for equal work.
(xviii) The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013
The primary objective of this Act is to assure the security of women at the workplace and to implement its’ provisions on the private sector. It seeks to protect and provides a mechanism for women to report incidents of sexual harassment at their place of work.
(xix) Unorganised Workers' Social Security Act 2008
It extends the coverage of life and disability benefits, health and maternity benefits, and old age protection for unorganised workers. "Unorganised" is defined as home-based workers, self-employed workers or daily-wage workers. It is supported by rules produced by the National Social Security Board.
(xx) Caste Disabilities Removal Act, 1850
It was passed in British India under East India Company rule that abolished all laws affecting the rights of persons converting to another religion or caste. The new Act allowed Indians who converted from one religion to another religion equal right under no law, especially in the case of inheritance.
(xxi) Interstate Migrant Workmen Act, 1979
An Act of the Parliament of India enacted to regulate the condition of service of inter-state labourers in Indian labour law and to provide for their conditions of service and for matters connected therewith.
(xxii) Bonded Labour System (Abolition) Act, 1976
It abolishes bonded labour, but estimates suggest that between 2 million and 5 million workers still remain in debt bondage in India.
(xxiii) Child Labour (Prohibition and Abolition) Act, 1986
An amendment to this act comes into force as Child Labour (Prohibition and Regulation) Amendment Act, 2016 to regulate the Child labour practices in India. Child labour in India is prohibited by the Constitution; article 24, in factories, mines and hazardous employment, and that under article 21, the state should provide free and compulsory education to every child up to age 14. However, in practice, the laws are absolutely not enforced.
(xxiv) Juvenile Justice (Care and Protection) of Children Act, 2000
An amendment to this act is, Juvenile Justice (Care and Protection of Children) Act, 2015 has been passed by Parliament of India amidst intense controversy, debate and protest on many of its provisions by Child Rights fraternity. Its objective is to consolidate and amend the law relating to children alleged and found to be in conflict with law and children in need of care and protection by catering to their basic needs through proper care, protection, development, treatment, social re-integration, by adopting a child-friendly approach in the adjudication.
(xxv) Industries (Regulation and Development) Act, 1951
It has declared that manufacturing industries under its First Schedule were under common central government regulations in addition to whatever laws state government enacts. It reserved over 600 products that can only be manufactured in small-scale enterprises, thereby regulating who can enter in these businesses, and above all placing a limit on the number of employees per company for the listed products.
(xxvi) National Rural Employment Guarantee Act, 2005
The Mahatma Gandhi National Rural Employment Guarantee Act, 2005 (MGNREGA) aims to reduce rural poverty through 100 days of guaranteed employment per year, offering a unique rights-based guarantee of employment to reduce income and food insecurity in rural areas. It is an Indian labour law and social security measure that aims to guarantee the 'right to work'.
SOCIAL SECURITY BENEFITS:
There are two major social security plans in India, the Employees’ Provident Fund Organization (EPFO) and the Employees’ State Insurance Corporation (ESIC). The EPFO runs a provident fund, also known as a pension scheme, and an insurance scheme. All of these are supposed to grant EPFO members and their families, benefits for old age, disability, and support in case the primary breadwinner dies.
INDUSTRIAL RELATIONS:
The nature of IR is Dynamic, and it can be seen as an outcome of the complex set of transactions among the major players such as the employers, the employees, the trade union, and the state in a given socio-economic context. In a sense, change in the nature of IR has become sine quo non (a necessary condition without which something is not possible) with the change in the socio-economic context of a country.
In 1990, it was decided to implement three measures to reform Industrial Relations in India:
(i) To constitute a bipartite committee of employers and unions to formulate proposals for a comprehensive legislation;
(ii) To withdraw the Trade Union and the Industrial Disputes (Amendment) Bill, 1988; and
(iii) To consider the possibility of formulating a bill on workers’ participation in management, 1990.
REMUNERATION:
As per the Factories Act 1948, every adult (a person who has completed 18 years of age) cannot work for more than 48 hours in a week and not more than 9 hours in a day. According to Section 51 of the Act, the spread over should not exceed 10-1/2 hours.
The Minimum Wages Act, 1948 also specifies the working hours under the rules 20 to 25 that the number of work hours in a day should not exceed 9 hours for an adult. It also provides for fixing of minimum rates of wages in certain employments. The minimum wages are prescribed by States through notifications in the State's Gazette under the Minimum Wages Rules of the specific State.
The Payment of Wages Act, 1936 is an Act to regulate the payment of wages to certain classes of employed persons. It seeks to ensure that the employers make a timely payment of wages to the employees working in the establishments and to prevent unauthorized deductions from the wages. According to the Payment of Wages Act, all wages shall be in current coin or currency notes or in both. It is, however, provided that the employer may, after obtaining the written authorisation of the employed person, pay him the wages either by cheque or by crediting the wages in his bank account.
In terms of the provisions of the Minimum Wages Act,
An employee means:
(i) Any person who is employed for hire or reward to do any work, skilled or unskilled manual or clerical, in a scheduled employment in respect of which minimum rates of wages have been fixed;
(i) Any person who is employed for hire or reward to do any work, skilled or unskilled manual or clerical, in a scheduled employment in respect of which minimum rates of wages have been fixed;
(ii) An outworker, to whom any articles or materials are given out by another person to be made up, cleaned, washed, altered, ornamented, finished, repaired, adapted or otherwise processed for sale for the purposes of the trade or business of that other person; and
(iii) An employee declared to be an employee by the appropriate Government.
Wages mean all remuneration capable of being expressed in terms of money which would, if the terms of the contract of employment express or implied were fulfilled, be payable to a person employed in respect of his employment or work done in such an employment and includes house rent allowance subject to certain exclusions like value of accommodation and amenities, contribution to provident fund, travelling allowance, gratuity and special expenses.
CONSTITUTIONAL RIGHTS TO AN EMPLOYEE:
In the Constitution of India from 1950, articles 14-16, 19(1)(c), 23-24, 38, and 41-43A directly concern labour rights.
Article 14 states everyone should be equal before the law; article 15 specifically says the state should not discriminate against citizens, and article 16 extends a right of "equality of opportunity" for employment or appointment under the state.
Article 19(1)(c) gives everyone a specific right "to form associations or unions". Article 23 prohibits all trafficking and forced labour, while article 24 prohibits child labour under 14 years old in a factory, mine or "any other hazardous employment".
Article 14 states everyone should be equal before the law; article 15 specifically says the state should not discriminate against citizens, and article 16 extends a right of "equality of opportunity" for employment or appointment under the state.
Article 19(1)(c) gives everyone a specific right "to form associations or unions". Article 23 prohibits all trafficking and forced labour, while article 24 prohibits child labour under 14 years old in a factory, mine or "any other hazardous employment".
Articles 38-39, and 41-43A, however, like all rights listed in Part IV of the Constitution are not enforceable by courts, rather than creating an aspirational "duty of the State to apply these principles in making laws".
Article 38(1) says that in general, the state should "strive to promote the welfare of the people" with a "social order in which justice, social, economic and political, shall inform all the institutions of national life. In article 38(2) it goes on to say the state should "minimize the inequalities in income" and based on all other statuses.
Article 41 creates a "right to work", which the National Rural Employment Guarantee Act 2005 attempts to put into practice.
Article 42 requires the state to "make provision for securing just and human conditions of work and for maternity relief".
Article 43 says workers should have the right to a living wage and "conditions of work ensuring a decent standard of life".
Article 43A, inserted by the Forty-second Amendment of the Constitution of India in 1976, creates a constitutional right to codetermination by requiring the state to legislate to "secure the participation of workers in the management of undertakings".
Referred Source: Wikipedia
Article 41 creates a "right to work", which the National Rural Employment Guarantee Act 2005 attempts to put into practice.
Article 42 requires the state to "make provision for securing just and human conditions of work and for maternity relief".
Article 43 says workers should have the right to a living wage and "conditions of work ensuring a decent standard of life".
Article 43A, inserted by the Forty-second Amendment of the Constitution of India in 1976, creates a constitutional right to codetermination by requiring the state to legislate to "secure the participation of workers in the management of undertakings".
Referred Source: Wikipedia
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Dear Panel,
We are an NGO with 92 employees . Please help me with making HR policies for our NGo or you can guide me to the page where I could find them .
Thanks
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The author has covered almost all the applicable labour laws except Labour Welfare Fund Act.Further,Industries (Regulation and Development) Act, 1951 does not fall under Labour Laws.
Subject to above,article is well written.
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Good Presentation and written in very Well manner with lucid way to understand the facts.