It is obvious to understand that industrialisation and economic development go hand in hand. However, no economic development could be imagined without ensuring the health, safety and well-being of the workforce and a healthy employer-employee relationship is maintained. Therefore, with an objective to create an inclusive environment that assures health, safety and well-being of the employee/workers and making the employer accountable to create a healthy balance between all these factors, the Government of India has brought several legislations in force, which come in the form of Labour compliances.
Thus, labour compliances are essentially in the nature of certain rules and regulations that set the tone for the administration of the workforce in the workplace, ensure that there are adequate safety systems in place, they hold adequate financial security, safeguards from their exploitation and a proper system of governance in case of any mistreatment or any injustice done. Such labour compliances regulate the working and management of factories either seasonal or non-seasonal, business entities, trade unions, workers and staffs etc. While some of the rules and regulations are applicable on a state level, and labour laws applicable on a state level differ from state to state, while others are applicable on a central level.
Business organizations and especially employers are made accountable for complying with labour rules and regulations and intimate the government authorities regarding such compliances from time to time by way of registration, returns, maintenance of records and registers, and audits. Any failure to comply with the applicable rules and regulations could have serious consequences leading to penalties & prosecution, lawsuits in a court of law, loss of business goodwill and credibility, loss of contracts, and in serious cases, shutdown of the business operations of the concerned organisation.
Therefore, the labour law related compliances are not only restricted to filling returns and maintain labour compliances, but for any or all of the purposes provided below-
- To create a sense of responsibility of the business organizations and employer towards the workforce working in the organization and ensure their safety and welfare;
- To create a healthy professional relationship between employer-employee to keep industrial disputes at minimal;
- To provide a mechanism for the employees for prevention from exploitation and abuse;
- A fair policy for wages/salaries and incentives to encourage them to work better;
- Providing compensation to workers/staff in case of any accidents.
Therefore, provided below are some labour laws that ensure the welfare of the employees/workers and their well-being, whose applicability depends on person to person and the criteria of applicability and related compliances is different for each state and for each legislation. Let’s know a little about each of them-
PAYMENT OF WAGES ACT, 1936
Workers/Employees are an integral part of the business and should be rewarded timely for their work and efforts and they should be saved from unnecessary abuse and exploitation from unnecessary deductions by the employer and also provides for mechanism in case of any injustice done. Therefore, the Payment of Wages Act, 1936 is a comprehensive legislation that provides protection from infringement of the rights related to payment by employer by way of-
- Unnecessary and unauthorised deductions from payment of wages;
- Avoidance of unnecessary delay in the payment of wages;
- Fixation of wage period(not exceeding 10th of each month)
- Payment of wages in currency rather in kind.
The Payment of Wages Act 1936, is a state-level Act, accordingly, the rules and regulation of application of the provisions including appropriate authority varies from state to state. In general, the Act is applicable to every employed person, whether directly or through contractors, in a factory or certain specified industries or other establishments. On the other hand, the Central Government is responsible for the enforcement of the Act under Railways, Mines, Oilfields and Air Transport.
However, the State Government may have the power to extend the provisions of the Act to any class of establishment in the State.
Wages here means all payments that are earned by an employee during working hours or on leave in accordance of the terms and conditions of his employment excluding any bonus, commission, house rent allowance and overtime wages, but including dearness allowance paid to the employee.
- Annual Certificate to the effect that the wages were paid in accordance with the provisions of the Act.
- Submission of Annual Return in prescribed Form-IV;
- Fixation and payment of wages to employees/workers which should not exceed more than one month;
- Every establishment holding employees lesser than 1000 shall pay wages by 7th of each month and in all other cases employers shall make wage payments before 10th of each month.
- Employers shall mandatorily maintain following registers such as –
- Register of wages paid or payable each month;
- Register of fines made by employers towards employees/wages;
- Register of deduction for any damages or loss;
- Register of advances made if any.
- Such register should include the following particulars.
- Details of employees employed in the establishment;
- Work performed by the employee each month;
- Wages paid to employees each month;
- Authorized deduction made from their wages;
- Receipts given by them.
- Other particulars in relation to employment
- Entries made in the registers and records should be maintained at least for a period of three years after the date of the last entries recorded.
Process of Registration
As Payment of Wages Act, 1936 is a State level Act, the process of registration varies from State to State and includes downloading form from state website portal and submit the same along with all the necessary documents. On receipt of application, the appropriate authority will verify the application and issue certificate of registration in prescribed form.
SHOP & ESTABLISHMENTS ACT
Shops and Establishment Act is a beneficial legislation established for the purpose of ensuring proper functioning and conduct of shops and business establishments registered under the Act from the Labour Department of the State. Similarly, it prescribes certain rules and regulation for mandatinghealth and safety facilities for the employees regardless of the size or the category of establishment. It also regulates the terms of wages, work hours, work conditions, wages & overtime work, maternity leaves, rules of employment of children etc. at the workplace concerned.
Shops & Establishment Act is a state-level Act. Thus, every State & Union Territory have their own separate Acts and Rules, and the rules and regulations applicable on each state or Union territory might slightly differ from each other.
Registration under Shops & Establishment Act is also beneficial in the sense that the Small Scale Businesses (SSI) or Medium & Small Scale Businesses (MSME) may opt for registration under the Act to facilitate a proof of existence of the business.
The Shops and Establishments Act defines a “shop” as the places where goods are offered to customers through sale which includes both retail and wholesale, or a place where services are offered to customers including an office, store-room, warehouse, or any place of work.
.Whereas “Establishments are defined as a shop which is either a commercial establishment or residential hotel, eating house or similar places, a public theatre or any other places of public amusement. However, factories have been kept out of the definition of shops and establishments and are regulated by the Factories Act 1948.
- Mandatory registration of shops and establishments under the Act within a period of 90 days (60 and 30 days in some states) from the date of commencement of business.
- Strict adherence to the health, cleanliness and safety of the work premises so registered under the Shops & Establishment Act.
- Maintenance of a Register of fines, deductions, display of notices by the business entity so registered under the Shops & Establishment Act.
Process of Registration
Shops & Establishments Act is a state-level legislation and thus, the rules and regulations providing for registration and administration of the Act differ from state to state including the provision for fees, document requirements, validity and time taken for completion of registration process.
Following is the step-by-step process of registration-
- Every shop or establishment covered under the definition of Shops & Establishments needs to apply for registration within such timeline as prescribed under the concerned state Act.
- An application for registration must be downloaded from the web portal of the state or UT government and shall be submitted to the Chief Inspector with such details and attachments as required as per the state regulations including details such as-
- Employer details
- Details of the establishment
- Number of employees working in such establishment
- Other details as required
- On receipt of the application with documents and prescribed fee, the Chief Inspector of the concerned area authorized for registration purposes will verify the documents and put the name of the establishment in the Register of Establishment in the prescribed form and format, and shall issue a registration certificate under the Act.
- Such registration certificate shall be issued subject to certain rules and regulations and also shall be subject to renewal within such periods as prescribed under the state regulations made in this behalf.
Professional Tax is another important state level tax levied on all salaried persons and even professionals and self-employed persons in the state of applicability. It is based on the principal that the salaried employees and professionals should make smaller but active contributions in the development of the state.Therefore, the employers of the organization (in case of salaried persons) and professionals themselves in case of self-employed have been made responsible for making deductions and payment of professional tax, for which they need to make an application and obtain a “Certificate of Enrolment” from the respective authority for administration of professional tax.
Under the provisions of the Act, the Commercial Tax Department of each State/UT is the nodal authority responsible for professional tax collection on the basis of applicable rates of tax in each state or union territory.
Professional tax is generally assessed on the annual income of the individual, but could be submitted either in a form of monthly deductions or annual deductions. However, persons making deductions from salaries or self-employed persons are allowed to avail tax exemptions for the amount of professional tax paid up to a maximum limit of Rs. 2500/- per year.
As Professional Taxes are a matter listed in the State List under Article 246 of the Indian Constitution, States/Union territories may/may not opt for levy of professional taxes. Therefore, the applicability of professional taxes and the rate of taxation differs from state to state. At present, professional taxes are applicable in states like Madhya Pradesh, Maharashtra, Chhattisgarh, Gujarat, Tamil Nadu, Karnataka, West Bengal, Andhra Pradesh, Kerala, Bihar, Jharkhand, Tripura, and Assam in India.
Whereas, the professional tax is not levied by the concerned State/UT governments in the following states and UTs-
- Uttar Pradesh
- Himachal Pradesh
- Arunachal Pradesh
Deduction, Collection & Payment of Professional tax to Government
In case there are more than 20 employees in a business organization, the employer hasan obligation to make deductions and submit taxes within 15 days from the end of each month. On the other hand, in case an employer has less than 20 employees, such employer shall deduct and submit taxes quarterly (i.e. by the 15th of next month from the end of each quarter).
MandatoryRegistration under Act
Every employer and every self-employed individual has to compulsorily obtain registration under the Act within 30 days of employing staff in a business(for employers) or,30 days from the start of the practice (for professionals or self-employed).
Also, in case there are more than one branches of a business organization, the employer is obligated to obtain registration separately for each respective place of work within the applicable state.
Every employer who has obtained registration under the provisions of professional tax from the commercial department of the applicable state shall submit a monthly return in Form V providing details regarding wages paid by him and the amount of tax deductions made every month.
Such return shall be submitted along with a treasury challan/DD/Cheque/e-payment providing proof of payment for the amount of tax due on or before 10th day of each month for which the return to be submitted either online or offline before the assessing authority of the concerned state/UT.
Process of Registration
Though the rules and regulations regarding professional tax registration varies from state to state, provided below is general process of professional tax registration-
Log on to the commercial tax department online portal of the concerned state/UT created for professional tax registration purposes and create a user id & password.
Once logged in, Click “New registration” and fill details such as name of the business entity or identity proof, proof of the registered address of the business, proof of identification of the partners/ directors or officers of a business enterprise or self-employed professional in case of professional in the applicable state;
Fill details related to number of employees and their income details in the form provided under “Employee application form” and upload signatures of such employees and submit the registration form.
Once the application is submitted, the form shall be thoroughly checked and verified regarding the satisfaction of requirements as per the rules and regulations. On being satisfied of the same, the appropriate officer of the commerce tax department will issue a registration certificate within a period of 15 days.
FACTORIES ACT 1948
The Factories Act, 1948 is a legislation primarily aimed towards ensuring health & safety and well-being of workers at workplace, prevention against exploitation and providing a mechanism in case of any abuse, or any accident or dangerous event during their course of employment. It also provides for the terms of payments, annual & compensatory leaves for workers, regulations for health & safety of the workers and ensuring adequate facilities for children and women working in the factory. Therefore, the employer of the factory/business establishment or any person nominated by employer for such purposes have been obligated to comply with the above-mentioned provisions under the Act.
Following have been mandated in the purview of the Act and needs to be followed upon-
- Fixation of working Hours: As per the provisions of the Act, no worker shall be required to work in the factory for more than 48 hours a week and there must be at least one holiday in a week for the workers.
- Adequate Health Facilities– For ensuring there are enough protective measures adopted for the health and well-being of workers, it is required under the Act that the factory must have adequate facilities for toilets, proper cleanliness, drainage systems, lightings, ventilation, artificial humidification, safe drinking water etc.
- Safety Conditions: For the purpose of ensuring safe working environment to the workers, it is necessary that there should be adequate facilities for proper fencing around the machinery, presence of adequate manholes for escape or any emergency in case of any accident etc.
- Welfare: For ensuring welfare of the workers under the Act, there must be adequate washing facilities for use by the workers. Further, if there are more than 150 workers in a factory, the employer shall construct and maintain shelters for workers including rest-rooms and lunch rooms for the workers employed.
FactoriesAct is applicable in case of every factory where-
- With the Aid of power- In a factoryor establishment being carried on with the aid of power, ten or more workers engaged and working on any day or previously working on any day in the previous twelve months and/or any manufacturing process is being carried on.
- Without the aid of power-In a factory or establishment being carried on without the aid of power, twenty or more workers engaged and working on any day or previously working on any day in the previous twelve months and/or any manufacturing process is being carried on or is ordinarily carried on.
- Employer needs to file a return to the Chief Inspector in Form -21, a half-yearly return and Form-22, an annual return to be sent to Chief Inspector of the area.
- A Notice of accident/ dangerous occurrence to Inspector/ Director of Factories within 4 hours of occurrence.
- Registers required to be maintained by the employer-
- Register of workers (including child labourers and adults)
- Health Register
- Register of Accidents & Dangerous Occurrences
- Register of Leave with wages and Compensatory holidays.
Process of registration
Factories Act 1948 is a state-level legislation, therefore the rules and regulations for its administration and the manner of registration may slightly differ from each other. Still, provided below is the general process of registration-
- The applicant needs to log on to the online portal of the State or Union territory, where the factory is either located or is proposed to be established and meets the eligibility criteria.
- Apply online at the above-mentioned portal of the state/UT for the approval of factory plan in prescribed Form by theDirector of Factories either online or by filling the same manually in the address provided in the State/UT portal. Most of the states have their dedicated single window clearances systems for factory plan approval under “Ease of doing business”.
- On receipt of the same, the factory plan shall be checked thoroughly and verified by the Deputy Director of Factories of the respective districts, where the factory is proposed to be constructed in which the factory is to be constructed. Once verified, the application of factory plan shall be forwarded to the Director of Factories.
- On being satisfied by the requirements of the Act, the Director of Factories will approve the plan in conformity with the recommendations made by the Deputy Director of Factories as per the applicable rules and regulations.
- On approval, the Director of Factories will sign and return one copy of factory plan to the applicant along with an approval letter signifying such approval. Such received plan and approval plan shall be required to be preserved safely and to be produced on demand by the Director of Factories.
- Next, such employer shall be required to make an application for factory license to the Office of Director of Factories by downloading the same from the State/UT portal.
- On receipt of application, the Deputy Director of Factories will go through the application and will communicate in case any error in the application is noticed. And, if he is satisfied that all the requirements have been complied with, shall forward the application.
- The Deputy Director of Factories of the concerned area will scrutinise the application, and in case any defect is noticed, the defect will be communicated to the applicant through a letter, pointing out the defects.
- Once the application is found to be completed in all respects, the factory premises will be inspected by the Assistant /Deputy or Director of factories, to physically assess whether the factory is suitable enough to be granted license. If the proposed factory is found to be suitable as per the rules and regulations, the Director of Factories will grant a “Factory license” in the prescribed form to the applicant.
REGISTRATIONS UNDER SHRAM SUVIDHA PORTAL
For the facilitation of a simple, efficient and easier process of obtaining registration under various Labour laws, the Government of India launched the Shram Suvidha portal on 16th October 2014 under the “Ease of Doing Business” scheme through a unified portal. Under the Shram Suvidha Portal, the employers have been provided to obtain registrations, filling and submission of annual returns, and receiving inspection reports prepared by various applicable authorities.Each registered applicant shall be allotted a Unique Labour Identification Number (LIN) (also called the Shram Pehchan Sankhya) for each registered organization.
All of the arrangements have been here covered with an aim to create an encouraging business environment for businesses by reducing filling costs, time-saving and hassle-free smooth process of registration.
At present, following Central Acts have been covered under the Shram Suvidha portal for ease of doing business initiative of the Government of India-
- Employee Provident Funds & Miscellaneous Provisions Act (EPF), 1952.
- Employees State Insurance Act (ESI) Act, 1948.
Contract Labour (Regulation and Abolition) Act, 1970.
- Building and Other Construction Workers (BOCW) Act, 1996.
- Inter-State Migrant Workmen (ISMW) Act,1979.
Further, Shram Suvidha Portal also allows facilitation of licenses under the-
- Contract Labour (Regulation & Abolition Act)
- . Inter-State Migrant Workmen Act
|Name of Act||Eligibility||Ineligible for registration|
|1. Employee Provident Funds & Miscellaneous Provisions Act (EPF)
|Compulsory registration for employer-If theEstablishment has more than 20 employees working in the establishment.
1. If Salary lesser than15000/- per month-Compulsory Registration
2. If salary is more than 15000 per month- Voluntary registration
|2. Employees State Insurance Act (ESI) Act||For every factory/business establishment holding more than 10 employees (20 employees in exceptional cases) and earning wages/salaries either equal to or lesser than Rs. 21000/-(Rs. 25000/- per month in case of persons with disability)||Such employees who receive a daily wage of Rs. 137 per day or lesser are exempted from the requirement of making deductions from their wages towards ESI scheme
(Employers still need to make contribution)
|3. Contract Labour (Regulation and Abolition) Act, 1970.
|Any establishment holding 20 or more workers working on any day of the respective accounting year as a “contract labour”.
Any contractor who hires or employs at least twenty or more workers on any day of the respective accounting year.
|· Where the work performed is of intermittent nature.
· Where work is not undertaken for a total period more than twenty-one days in a year.
· Where establishmentsare located in the special economic zone (SEZ).
· Where any workperformed is in the nature of seasonal work for more than sixty days in a year.
|4. Building and Other Construction Workers (BOCW) Act, 1996.||Every establishment engaging construction workers in anyconstruction work including any establishmentowned by a contractor who hires, or employs either ten or more workers in the previous twelve months in any building or any other construction.
|An individual who employs such workers in any construction in relation to his residence, where the total cost of such construction does not exceed more than Rs. 10 lakhs.|
|5. Inter-State Migrant Workmen (ISMW) Act||Each establishment and the concerned contractor who has employed at least five or more inter-state migrant workmen.|
|i. Employee Provident Funds & Miscellaneous Provisions Act (EPF)||· Reporting of cases where proceedings under the Act have been initiated against the Directors for recovery of dues.
· Filling of annual returns providing details about the monthly contributions made by the employer and employee towards PF and an annual consolidated annual return in form 3A and form 6A respectively to be filed by 30th April every year.
| ii. Employees State Insurance Act (ESI) Act, 1948.
|· Submission of ESI contribution by 21st of the next month by the employer.
· Submission of half yearly returns to be sent to the concerned branch office under Form 5.
· Maintenance of records and registers for inspection purposes-
Register of wages and attendance of the employees;
Register of payment of contribution made by employer.
| iii. Contract Labour (Regulation and Abolition) Act, 1970.
|· Filling of a Return/Notice of commencement or completion of contract within a period of 15 days from such commencement/completion by the Principal employer to the inspector of the location in Form VI-B with respect to each contract.
· Filling of a Return/Notice of commencement or completion of contract within a period of 15 days from such commencement/completion by the contractor to the inspector of the location in Form VI-A with respect to each contract.
· Submission of half-yearly return by contractor to the respective licensing authority by 30th of January each year in Form XXIV.
· Submission of annual return by principal employer to the respective licensing authority by 15th February in Form XXV to the concerned Registering Officer.
|iv. Building and Other Construction Workers (BOCW) Act, 1996.||· Filing and submission of Annual Return to the Registering authority by 15th February following the end of each calendar year to the Registering authority in Form XXV.
· Notice of commencement and completion of the work atleast 30 days before commencement of such work to the Concerned Inspector in form IV.
· Submission of return providing details about the levy and collection of cess to the concerned authority in Form I.
|v. Inter-State Migrant Workmen (ISMW) Act,1979||· Timely application and obtaining registration certificate at least before such time-period as prescribe in the applicable state law in Form 1.
· Maintenance of registers by the principal employer including register of –
Register of Contractors;
Register of employed persons;
Register of wages;
Outward journey and return journey allowance register;
· Submission of half-yearly return to licensing officer within 30 days from the close of half-yearly and Annul return before 15th of February each year.
Process of Registration (for EPF & ESI)
- Log on to the Unified Shram Suvidha portal and create a user id and password by registering email id and mobile number.
- Fill details regarding the establishment such as Name, Country& State of location, District, and Premises name etc. for getting a Unique LabourIdentificationNumber (LIN)
- Click “New Registration” for PF/ESI;
- If the applicant wishes to register under any one act, there are separate procedures for each of them. However, if the applicant is eligible to obtain registration under both, then click “Common registration”.
- Fill details related to name & address of the workplace, PAN number of the business, factory details(if any), Start-up recognition number and/or MSME number (if obtained registration);
- Next, fill details such asnumber of employees employed and theirparticulars, business activities, branches (if any), if license obtained under Factories Act , chief contact persons in the establishment etc.
- Upload attachments and verify the details filled in the form once.
- Select ESIC/EPFO branch office and inspection division for registration purposes and submit the form by uploading digital signature on the portal.
- On submission, the applicant will receive an acknowledgment email from the USSP portal providing for the LIN as well as PF and ESI registration number of the entity.
Note- Similarly, the applicant can download user manual and follow the procedure for BOCW and ISMW Act registration for the establishment on the portal. On getting registration, the applicant shall have the option to file a unified annual return for all the above-mentioned acts in the manner provided under the portal.
Therefore, the importance of LabourLaw compliances could not be undermined in any way as it serves multiple purposes such as ensuring proper wage structure, health, safety and well-being of the employees/workers, financial security in the event of death or disability, protection against exploitation by the employers. Usually a business establishment is generally subject to compliance under various laws and there are separate provisions for applicability and administration of the Act, making it difficult for businesses and employers to comply with each of them.
Thus, the “Ease of Doing Scheme” is a great scheme introduced by the Government of India for providing assistance to the business establishments to reduce costs and compliances to the minimum and ensure strict adherences with the labour law compliances. However, for ensuring better compliances with the introduced provisions, it shall be necessary for the states to adopt such mechanisms as soon as possible.
Since its introduction “Ease of Doing Business” has simplifiedlabour law procedures and made compliances easier on various establishments so that no establishment could afford non-compliance of the applicable laws. Further, on Sep 28, 2020, the Government of India has introduced the Code on Occupational Safety, Health and Working Conditions (OSHW), 2020, proposing an integrated process of registration, one license and one return for all Indian business establishment functioning in India.
The Code on Occupational Safety, Health and Working Conditions aims to amalgamate as many as 100 state laws and 40 central laws including Building and Other Construction Workers Act 1996, Contract Labour (Regulation & Abolition Act) 1970, Factories Act 1948, the Mines Act 1952 etc. providing regulation of various aspects of labour laws such as resolution of industrial disputes, health & safety conditions, working conditions, social security and regulation of wages. However, its applicability has been extended to such date as shall be notified Ministry of Labour and Employment in the Official Gazette.