Indian labor laws are the laws that regulate employment. These are broadly divided into 5 categories: working conditions, industrial relations, wages, welfare and social securities. Under the Constitution of India, Labor is a subject in the Concurrent List where both the Central & State Governments are competent to enact legislation subject to certain matters being reserved for the Centre.
The Ministry of Labor and Employment has the responsibility of protecting and safeguarding the interests of workers in general and those of the poor deprived and disadvantaged sections of the society, in particular. It also has the responsibility of creating a healthy work environment for higher production and productivity and to develop and coordinate vocational skill training and employment services.
These objectives are sought to be achieved through enactment and implementation of various labor laws, which regulate the terms and conditions of service and employment of workers. HR began to play a significant role after the enactment of these employment or labor laws.
LEGAL ASPECTS OF COMPENSATION Here I have included all those acts which are slightly related to compensation, no matter which categories they are. Like Payment of Gratuity act is a social security act but as it is related to compensation later, I have included it. 1). Workers’ Compensation Act of 1923:
Employee and their dependants receive compensation for injury due to accident out of or in the course of employment and resulting in disablement or death. Employees covered under Employee’s State Insurance Act, 1948 cannot claim under Worker’s Compensation act. The amount of compensation depends on the age, wage and nature of injury. 2). Payment of Wages Act 1936:
This act ensures that wages will be paid to certain group of employees at regular intervals and with no unauthorized deductions. The intervals should not exceed one month and in the case of termination, wages should be paid within two days of the date of termination. 3). Minimum Wages Act 1948: This act ensures that a minimum rate of wages that vary from state to state will be paid to all those in wage employment. State and Union government periodically review the minimum wage rates.
The Act classified workers as unskilled, semi-skilled, skilled and highly skilled. 4). Payment of Bonus Act 1965: This Act guarantees that a bonus is paid to employees who have worked for at least 30 working days in the year and have salaries of at least Rs.3,500 per month. The payment of a bonus is applicable to every establishment where 20 or more workers are employed, but there are exceptions. Employees who work in insurance corporations, educational institutions, hospitals, chambers of commerce, federal banks and social welfare institutions are not entitled to a bonus under the Act.
Employers have to pay minimum bonus of 8.33% of the salary even if company is in losses. Bonuses do not have to be paid if the employee is dismissed from service for fraud or misconduct on the premises or for theft, misappropriation or like of the property of the organization. The law is quite controversial because employees want this bonus regardless of whether company is profitable or not; employers do not agree with this required entitlement. 5). Payment of Gratuity Act 1972:
This act is applied to companies with at least 10 employees for the past 12 months. Companies will pay 15 days wages for every completed year of service (or part thereof in excess of 6 months) to the employees who have completed 5 continuous years of employment. The maximum limit of gratuity is 350000 Rs. In case of death or disablement, 5 years requirement is not needed and also if employment contract is terminated due to serious misconduct then gratuity will not be paid. 6). Employees Provident Funds and Miscellaneous Provisions Act 1952:
This act is to provide financial support to employee when they or their families are in distress. Employees and Employers have to make equal contribution to the employee provident fund with minimum contribution of 10-12% of wages. Employee can withdraw full amount after retirement or can withdraw partly for specific purposes before retirement. It is applicable to factories and other establishments with more than 20 employees.
LEGAL ASPECTS OF INDUSTRIAL RELATIONS Industrial Relations involve interactions between employees and employers, among employees and among employers. One of the main objectives of industrial relations is to maintain good relations between management and labor. The laws under this are regulatory in nature and generally specify dos and don’ts.
1). Trade Union Act of 1926: This act regulates Trade unions which are a voluntary organization of workers and work for the interest and benefits of them. It allows freedom to any 7 employees to apply to register a trade union. A later amendment of 2001 increased the members’ requirement to 10% of unionizable employees or 100 employees, whichever is less. Unions may be registered or unregistered, although the Act grants rights to and impose liabilities on a registered trade union.
Registered trade unions receive protection from certain civil and criminal actions. This Act is applicable to not only the union of workers but also to the association of employers. The Act is administered by the Ministry of Labor through its Industrial Relations Division. 2). Industrial Employment (Standing orders) Act 1946:
The act formally define conditions of employment like recruitment, working hours, holidays, leaves, shift, payment of wages, termination etc. It is regulatory in nature and applicable to firms under State and Central Government which have more than 100 employees. The formal conditions make sure that conflicts will be reduced and also there will be better communication between management and labor. Employers will have to issue standing orders duly certified for the formal conditions.
Certification will be done by designated certifying officer after considering all the objections of trade unions or workmen. In case there is no certified standing order, then model standing order of Act will be applied automatically except in Maharashtra and Gujarat. Under this Act, workers are generally classified as Trainee, Casual, Temporary, Substitute, Probationer, Permanent and Fixed Period employees. 3). Industrial Disputes Act of 1947:
Industrial disputes may take various forms such as protests, strikes, lock-outs, dismissal of workers, etc and this Act is the main legislation in India to investigate and settle industrial disputes. The Act regulates the system for negotiation, conciliation, arbitration and settlement of disputes, involving some specific bodies, such as work committees (comprised of both employer and employee representatives), conciliation officers, boards of conciliation, and courts of enquiry.
The labor courts, industrial tribunals and national tribunals adjudicate industrial disputes. Where parties in collective bargaining cannot resolve a dispute, either party or the government may commence conciliation proceedings before a government-appointed conciliation officer and the settlement is then registered in the labor department and becomes binding on all parties (usually for a period of three years).
If conciliation fails, the parties may invoke arbitration or the appropriate government may refer the dispute to adjudication before a labor court or a tribunal. The Act lays down the conditions to be complied before the termination of a workman who has been in continuous service for more than 1 year. Workman should be given a one month’s notice in writing, indicating the reasons for termination and also the wages for the period of the notice. The notice has to be given to the appropriate government too.
For each completed year of service, workman should be paid 15 days of salary. The Act also requires organization to give an advance notice of 21 days of change of work place if it will affect the workers. The firms can be exempted for public interest. The Act also places restrictions on employees who work in public utilities firms to give notice before going on a strike. A lot of amendments have been made to this Act.
Some Laws relating to Specific Industries 4). The Factories Act, 1948: It is one of the most important legislations covering manufacturing sector. All Industrial establishments employing 10 or more persons and carrying manufacturing activities with the aid of power come within the definition of Factory. Also all industrial establishments employing 20 or more persons and carrying manufacturing without the aid of power also come under this Act. This Act safeguards the health, safety, welfare, working conditions and leaves of workers in factories.
The Act also restricts the hours of work, provides for overtime, spread of working hours, employment of young people and places restrictions on employment of women during the night hours. Factories are approved, licensed and registered under this Act and authorities like Chief Inspector of factories, Inspectors, Certifying Surgeons are appointed by the Government to ensure implementation of the Act. Factory workers have to abide by the rules set in the interests of health, safety and welfare and in case they violate, they are liable to be punished.
The Act is administered by the Ministry of Labor and Employment through its Directorate General Factory Advice Service & Labor Institutes (DGFASLI) and by the State Governments through their factory inspectorates. 5). The Shops and Establishments Act, 1953:
It is a State Legislation Act and each State has framed its own rules for this Act. The Act was enacted to provide statutory obligation and rights to employees and employers in the unorganized sector of employment, i.e. shops and establishments. It is applicable to all persons employed in an establishment with or without wages, except the members of the employer's family.
The Act provides for compulsory registration of shop/ establishment within thirty days of commencement of work and all communications of closure of an establishment within 15 days from its closing. It also lays down the hours of work per day and week as well as the guidelines for spread-over, rest interval, opening and closing hours, closed days, national and religious holidays, overtime work, etc.