HRECALL9.

Labour Laws
TABLE OF CONTENTS

INDUSTRIAL DISPUTES ACT, 1947....................................................................................................................... 2

FACTORIES ACT, 1948 ......................................................................................................................................... 7

MATERNITY BENEFIT ACT, 1961 ....................................................................................................................... 10

CONTRACT LABOUR ACT 1970 (REGULATION & .............................................................................................. 13

THE INDUSTRIAL EMPLOYMENT (STANDING ORDERS) .................................................................................... 15

TRADE UNION ACT, 1926.................................................................................................................................. 17

GRATUITY ACT, 1972 ........................................................................................................................................ 21

PAYMENT OF BONUS ACT, 1965 ...................................................................................................................... 24

PAYMENT OF WAGES ACT, 1936 ...................................................................................................................... 26

LABOUR CODES, AMENDMENTS & ANALYSIS .................................................................................................. 27

LINKS FOR FURTHER READING ......................................................................................................................... 42

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INDUSTRIAL DISPUTES ACT, 1947
OBJECTIVE:

• To make provisions for investigation and settlement of industrial disputes

• To reduce and resolve differences between employers and workmen to bring industrial peace
and increase industrial production
• To improve the working conditions of industrial workers
• To provides a legitimate process for “Collective Bargaining”

1) Industry means any business, trade, undertaking, manufacture or calling of employers and
includes, service, employment, handicraft or industrial occupation. For an activity to qualify as an
industry it must satisfy the Triple Test (Section 2(j) Bangalore Water Supply and Sewerage Board
vs. R. Rajappa.1978)
• Systematic and organized activity
• Carried out by co-operation between Employer and Employee
• For the production and/or distribution of goods and services calculated to satisfy human
wantsand wishes

1982 Amendment for Industry - any systematic activity carried on by co-operation between an
employer and his workmen

2) "industry" means any systematic activity carried on by co-operation between an employer and his
workmen
3) for the production, supply or distribution of goods or services with a view to satisfy human
wants or wishes, whether or not -

• any capital has been invested for the purpose of carrying on such activity; or
• such activity is carried on with a motive to make any gain or profit

The 1982 Amendment is yet to be notified and not yet effective. The existing definition of 1947
andprinciple of Bangalore Water Supply still stands as of today.

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DEFINITIONS:

1) Workman
Workman means any person (including an apprentice) employed in any industry to do any
manual,unskilled, skilled, technical, operational, clerical work;
But does not include:
• Any person who is employed in a supervisory capacity and earning more than 10,000.
• Any person who is employed mainly in a managerial or administrative capacity
• who is subject to the Air Force Act, or the Army Act or the Navy Act.
• who is employed in the police service or as an officer or other employee of a prison.

2) Industrial Dispute: any dispute or difference between

• employers and workmen or
• workmen and workmen, or
• employers and employers
which is connected with the employment or non-employment, or the terms of employment or
theconditions of labour.

3) Award:
Award means an interim or a final determination of any industrial dispute or of any question
relating thereto by any Labour Court, Industrial Tribunal or National Industrial Tribunal and
includes an arbitration award made under Section 10-A.

4) Settlement:
A settlement arrived at in the course of conciliation proceeding and includes a written
agreement between the employer and workmen arrived at otherwise than in the course of
conciliation proceeding where such agreement has been signed by the parties thereto in such
manner as may be prescribed and a copy thereof has been sent to an officer authorized in this
behalf by the appropriateGovernment and the conciliation officer.

5) Wages:
Any remuneration, capable of being expressed in terms of money. It is payable when the terms
of employment, whether expressed or implied, are fulfilled, and includes
• Allowances (including dearness allowance)
• The value of any house accommodation, or of supply of light, water, medical attendance or
other amenity or of any concession supply of food grains and other services

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• Any travelling concession
• Any commission which is payable on sales or business or both

Wages doesn’t include the following

• Bonus
• Contributions to pension or provident funds
• Gratuity

6) Strike
A cessation of work by a body of persons employed in any industry acting in combination, or a
concerted refusal, or a refusal under a common understanding, of any number of persons who
are employed to continue to work or to accept employment.

7) Lock-out
The temporary closing of a place of employment or the suspension of work, or the refusal by an
employer to continue to employ any number of persons employed.

8) Lay-off
The failure, or inability of an employer on account of shortage of coal, power or raw materials or
the accumulation of stocks or the break- down of machinery or natural calamity or for any other
connected reason to give employment to a workman employed in his industrial establishment.

9) Continuous Service:
• 190 days, below ground (In a mine);
• 240 days otherwise (1-year calendar ref.)

10) Closure
The permanent closing down of a place of employment or part thereof.
Procedure for closure:
• In case of a number of workmen less than 50, no permission required from the government.
• In case of a number of workmen greater than 50, the same procedure is followed as in case
of retrenchment.
• Closure compensation - Same as in case of retrenchment

11) Retrenchment
It refers to the termination by the employer of the service of a workman for any reason

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 whatsoever,EXCEPT -
• As a punishment inflicted by way of disciplinary action
• Voluntary resignation of the workman; or
• Retirement of the workman on reaching the age of superannuation or,
• Termination of the service of the workman as a result of the non-renewal of the contract of
employment on its expiry or on such contract being terminated under a specific stipulation
contained in the contract; or
• Termination of the service of a workman on the ground of continued ill-health

PROCEDURE FOR RETRENCHMENT – LIFO (Last in First Out)

1) Notice given to the government 90 days prior to seeking permission.
2) If no communication is granted within 60 days, permission is automatically granted.

CONDITIONS PRECEDENT TO RETRENCHMENT [S.25 F] -

No workman employed in any industry who has been in continuous service for not less than one year
shall be retrenched by that employer until -
1) The workman has been given one month's notice in writing indicating the reasons for
retrenchment and the period of notice has expired, or the workman has been paid wages in
lieu of such notice.
2) Compensation which shall be equivalent to fifteen days' average pay for every completed year
of continuous service or any part thereof in excess of six months ((15 x no. of years’ x Total
Allowance)/26)

RE-EMPLOYMENT OF RETRENCHED WORKMEN -

Where any workmen are retrenched, and the employer proposes to take into his employment any
persons, he shall, give an opportunity to the retrenched to offer themselves for re- employment, and
such retrenched workmen who offer themselves for re- employment shall have preference over other
persons.

LAY OFF COMPENSATION

1) Whenever a workman employed in an industrial establishment and who has completed not
less than one year of continuous service is laid off, he shall be paid by the employer for all days
during which he is laid off, except for such weekly holidays as may intervene, compensation
which shall be equal to fifty per cent of the total of his basic wages and dearness allowance.
2) If a workman comes for work and if he is not provided work within two hours, he will be
deemed to be laid off for the whole day.
3) If the workman is called in the second half of the shift by the employer and the workman

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 accordingly presents himself and if he is given work, he is deemed to be laid off for the first
half of the shift or for half day.
4) In case, the employer is not able to provide work in the second half of the shift then the
workman will be entitled to full basic wages and the Dearness Allowance for that part of the
day.

Provided that if during any period of twelve months, a workman is so laid-off for more than forty-five
days, no such compensation shall be payable, if there is an agreement to that effect between the
workman and the employer: and employer may retrench the workman by paying him retrenchment
compensation.

To maintain a cordial relation between the employer and the employee, the Act lays down settlement
mechanisms as well that can be of some help. The authorities on whom the Act confers authority to
carry out settlement and investigation purposes for an industrial dispute are mentioned below:

1. Conciliation officer under Section 4 of the Act,1947

2. Works committee under Section 3 of the Act,1947
3. Labour court under Section 7 of the Act,1947
4. Boards of conciliation under Section 5 of the Act, 1947
5. Labour Tribunal under Section 7A of the Act, 1947
6. National tribunal under Section 7B of the Act, 1947

LAYOFF RETRENCHMENT
Layoff refers back to the temporary suspension of the Retrenchment refers back to the permanent termination of an individual’s
employee, at the instance of the employer employment because of the closing of a branch or alternative of labor.
It is typically caused by a temporary downturn in
business or other economic issues. It is typically caused by a long-term restructuring, cost-cutting, or downsizing.
In the case of a layoff, employees may be rehired
once business improves. In this case, employees will not be rehired

It is temporary in nature. It is permanent in nature.

The notice period may or may not be required by the
law, in the case of layoff. The notice period is required here.

The operation may stop during the layoff period. In the case of retrenchment, the operation continues after the declaration.
In a layoff, the employer may provide severance pay In the case of retrenchment, the employer may not provide severance pay or
or benefits. benefits.

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FACTORIES ACT, 1948
OBJECTIVE:
1) To protect health, safety and welfare of the workmen
2) To regulate hours of work, weekly offs and annual leave
3) To regulate the employment of women and young persons

DEFINITIONS:
1) Factory
Factory means any premises including the precincts thereof -
• Whereon ten or more workers are working, or were working on any day of the preceding
twelve months, and in any part of which a manufacturing process is being carried on with
the aid of power,or is ordinarily so carried on, or
• Whereon twenty or more workers are working without the aid of power
• But does not include a mine subject to the operation of the Mines Act, 1952, or a mobile
unit belonging to the armed forces of the Union, a railway running shed or a hotel
restaurant or eating place

2) Worker
Worker refers to any person employed, directly, or by or through any agency (including a
contractor) with or without the knowledge of the principal employer, whether for remuneration
or not, in any manufacturing process, or in cleaning any part of the machinery or premises used
for a manufacturing process, or the subject of the manufacturing process but does not include
any member of the armedforces of the Union.

3) Occupier - The one who has ultimate control over the affairs of the factory.
4) Manager - A person responsible to the Occupier for the working of the Factory and for the
purposes of the Act.
5) Adult - a person who has completed his eighteenth year of age
6) Adolescent - a person who has completed his fifteenth year of age but has not his eighteenth
year Child - a person who has not completed his fifteenth year of age
7) Young Person - a person who is either a child or an adolescent

DUTIES OF EMPLOYER
1) Health
• To keep its premises in a clean state

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 • To dispose of wastes and effluents
• To maintain adequate ventilation and reasonable temperature
• To prevent accumulation of dust and fume
• To avoid overcrowding
• To provide sufficient lighting, drinking water, washrooms, and spittoons

2) Safety
• To fence certain machinery
• To protect workers repairing machinery in motion
• To protect young person working on dangerous machines
• To maintain hoists and lifts in good condition
• To protect workers from injury to their eyes, dangerous dust, gas, fumes and vapors
• To protect workers from fire to employ a Safety Officer in a factory employing 1000 or more
workers

3) Welfare
• Facilities for washing
• Facilities for sitting of workers while they are at work
• Facilities for storing clothing not worn during working hours and the drying of wet clothing
• First-Aid box under the charge of a trained first-aider (one for every 150 workers)
• Ambulance Room for factory employing more than 500 workers
• Canteen – more than 250 workers
• Crèche in factories employing more than 30 women workers

If the number of workers is 500 or more, there should be a welfare officer to look after the welfare
of the workers

WORKING HOURS FOR ADULTS

• A worker cannot be employed for more than 48 hours in a week
• Cannot be employed for more than 9 hours in a day
• Interval of rest at least ½ hour after every 5 hours work
• Total period of work inclusive of rest interval must not be spread over more than 10.5 hours in
a day
• Holiday for a whole day every week
• Overtime work at double the rate of his wages

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EMPLOYMENT OF YOUNG PERSON
• Employment of a child below the age of 14 years is totally prohibited
• Child more than 14 years of age and less than 15, can be employed for a maximum period of
4.5 hours in a day
• Cannot be employed during night time
• Must have a fitness granted by a Certifying Surgeon Child more than 15 years of age and less
than 18, can be employed as an adult if he has a certificate of fitness for a full day’s work

ANNUAL LEAVE WITH WAGES

• Condition: Entitled to leave with wages, (in the subsequent calendar year) if he has worked
for 240 days or more in a calendar year
• Adult worker – One leave for 20 days actual working
• Child worker- One leave for 15 days actual working
• Accumulation of leave:
Adult - Up to 30 days;
Child – Up to 40 days

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MATERNITY BENEFIT ACT, 1961
OBJECTIVE
To protect the dignity of motherhood and the dignity of a new person’s birth by providing for the full
and healthy maintenance of the woman and her child at this important time when she is not working.

APPLICABILITY
The Act extends to entire India, every factory, mine or plantation (including those belonging to
Government) and to every shop or establishment wherein 10 or more persons are employed on any
day preceding 12 months.

ELIGIBILITY
1) Must work in the establishment for 80 days in 12 months before her date of delivery
2) Women earning less than 15,000 may be offered the ESI scheme by her employer

WHO IS ENTITLED TO MATERNITY BENEFIT?

Every woman employee, whether employed directly or through a contractor, who has actually
worked in the establishment for a period of at least 80 days during the 12 months immediately
preceding the date of her expected delivery, is entitled to receive maternity benefit.

BENEFITS
Every woman shall be entitled to, and her employer shall be liable for, the payment of maternity
benefit, which is the amount payable to her at the rate of the average daily wage for the period of
her actual absence.

PERIOD FOR WHICH MATERNITY BENEFIT ALLOWED

The maximum period for which any woman shall be entitled to maternity benefit shall be 12 weeks
in all whether taken before or after childbirth. However, she cannot take more than six weeks before
her expected delivery.
1) In case a woman employee does not avail of six weeks’ leave preceding the date of her
delivery, she can avail of that leave following her delivery, provided the total leave period, i.e.
preceding and following the day of her delivery does not exceed 12 weeks.
2) There is neither a wage ceiling for coverage under the Act nor there is any restriction as
regards the type of work a woman is engaged in.
3) As per the new amendment, the total benefit period is extended to 26 weeks.

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RESTRICTION ON EMPLOYMENT OF PREGNANT WOMEN
1) No employer should knowingly employ a woman during the period of 6 weeks immediately
following the day of her delivery or miscarriage or medical termination of pregnancy. Besides,
no woman should work in any establishment during the said period of 6 weeks.
2) Further, the employer should not require a pregnant woman employee to do any arduous
work involving long hours of standing or any work which is likely to interfere with her
pregnancy or cause miscarriage or adversely affect her health, during the period of 1 month
preceding the period of 6 weeks before the date of her expected delivery, and any period
during the said period of 6 weeks for which she does not avail of the leave.

DISCHARGE OR DISMISSAL TO BE VOID

1) When a pregnant woman absents herself from work in accordance with the provisions of this
Act, it shall be unlawful for her employer to discharge or dismiss her during, or on account of,
such absence, or give notice of discharge or dismissal in such a day that the notice will expire
during such absence or to vary to her disadvantage any of the conditions of her services.
2) Dismissal or discharge of a pregnant woman shall not disentitle her to the maternity benefit
or medical bonus allowable under the Act except if it was on some other ground.

NOTICE FOR MATERNITY BENEFIT

A woman employee entitled to maternity benefit may give a notice in writing (in the
prescribed form) to her employer, stating as follows:
• That her maternity benefit may be paid to her or to her nominee (to be specified in
the notice);
• That she will not work in any establishment during the period for which she receives
maternity benefit; and that she will be absent from work from such date (to be
specified by her), which shall not be earlier than 6 weeks before the date of her
expected delivery.

PENALTIES FOR CONTRAVENTION OF ACT BY EMPLOYER

1) For failure to pay maternity benefit as provided for under the Act, the penalty is imprisonment
up to one year and fine up to INR 5000. The minimum being 3 months and INR 2000
respectively.
2) For dismissal or discharge of a woman as provided for under the Act, the penalty is
imprisonment up to one year and a to make fine up to INR 5000.The minimum being
3 months and INR 2000 respectively

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OTHER BENEFITS

1) LEAVE FOR MISCARRIAGE ETC. AND ILLNESS

In case of miscarriage or medical termination of pregnancy, a woman shall, on production of the
prescribed proof, be entitled to leave with wages at the rate of maternity benefit, for a period of
6 weeks immediately following the day of her miscarriage or medical termination of pregnancy.

2) LEAVE FOR TUBECTOMY OPERATION

In case of tubectomy operation, a woman shall, on production of prescribed proof, be entitled
to leave with wages at the rate of maternity benefit for a period of two weeks immediately
following the day of operation.

3) LEAVE FOR ILLNESS

Leave for a maximum period of one month with wages at the rate of maternity benefit are
allowable in case of illness arising out of pregnancy, delivery, premature birth of child,
miscarriage or medical termination of pregnancy or tubectomy operation.

4) MEDICAL BONUS
Every woman entitled to maternity benefit shall also be allowed a medical bonus of INR 250, if no
pre-natal confinement and post-natal care is provided for by the employer free of charge.

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CONTRACT LABOUR ACT 1970
(REGULATION & ABOLITION)

OBJECTIVE
To regulate the employment of contract labour in certain establishments and to provide for its
abolition in certain circumstances and for matters connected therewith.

APPLICABILITY
1) Every establishment in which 20 or more workmen are employed or were employed on any
day of the preceding 12 months as contract labour.
2) Every contractor who employs or who employed 20 or more workmen on any day of the
preceding twelve months.

EXEMPTION
Establishment is exempted only if the nature of work is intermittent or casual by consulting the
central and state government. Work is not intermittent if:
1) Performed for more than 120 days if normal.
2) Performed for more than 60 days if seasonal

RESPONSIBILITY OF PRINCIPAL EMPLOYER

1) To provide facilities of welfare – canteen, first aid, rest rooms, drinking water etc., if the same are
not provided by the contractor. In such cases, the expenses can be recovered from the
contractor by deducting the amount payable or as debt payable.
2) Payment of wages within expiry of prescribed time if contractor fails to make payment.
Recovery can be done by deducting the amount payable or as debt payable.

PROHIBITION ON EMPLOYMENT OF CONTRACT LABOUR

Appropriate government may ban contract labour for an establishment by issuing a notification 2
months prior by considering the following factors:
1) Condition of work & benefits provided to contract labour.
2) If the work is incidental or necessary for the industry.
3) If the process/operation/work is done through regular or contract labor in another similar
establishment.

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REGISTRATION VS LICENSING

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THE INDUSTRIAL EMPLOYMENT (STANDING ORDERS)
ACT, 1946
APPLICABILITY
Every industrial establishment wherein 100 or more (in many States it is 50 or more) employees and;
Any industry covered by Bombay Industrial Relations Act, 1946. Industrial establishment covered by
M.P. Industrial Employment (Standing Orders)

PROCEDURE FOR CERTIFICATION

1) Establishment has to submit an application for certification 6 months from the date on which
the ACT applies enclosing 5 copies of draft standing orders proposed for certification.
2) The draft is represented before trade union representatives of workmen elected in the
meeting by certifying officer.
3) If there is any objection, it has to be reported by the trade unions within 15 days.
4) Based on hearing from both the parties, certifying officer makes sure if the order is confirmed
to MSO and writes for modifications/additions if required. The certifying officer then certifies
the standing order and forwards it to both parties.

MATTERS TO BE PROVIDED IN STANDING ORDERS

1) Classification of workmen, e.g., permanent, temporary, apprentices, probationers, or badlis.
2) Manner of intimating to workmen periods and hours of work, holidays, paydays and wage
rates.
3) Shift working.
4) Attendance and late coming.
5) Conditions of, procedure in applying for, and the authority which may grant,
6) Leave and holidays.
7) Requirement to enter premises by certain gates, and liability to search.
8) Closing and re-opening of sections of the industrial establishments, and temporary stoppages
of work and the rights and liabilities of the employer and workmen arising therefrom.
9) Termination of employment, and the notice thereof to be given by employer and workmen.
10) Suspension or dismissal for misconduct, and acts or omissions which constitute misconduct.
Means of redressal for workmen against unfair treatment or wrongful executions by the
employer or his agents or servants.

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ENQUIRY PROCEDURE

Complaint -> Preliminary enquiry -> charge sheet -> appointing enquiry officer -> suspension pending
enquiry-> Notice of enquiry -> employee’s hearing - > examination of witness -> Report of enquiry

SUBSISTENCE ALLOWANCE
Allowance payable to workmen who is suspended and having a pending enquiry into misconduct:
1) 50% of wages for the first 90 days
2) 75% till 180 days
3) Full wages post 180 days.

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TRADE UNION ACT, 1926

INTRODUCTION
Trade Unions Act, 1926 deals with the registration of trade unions, their rights, their liabilities and
responsibilities as well as ensures that their funds are utilized properly. It gives legal and corporate
status to the registered trade unions. It also seeks to protect them from civil or criminal prosecution
so that they could carry on their legitimate activities for the benefit of the working class. The Act is
applicable not only to the union of workers but also to the association of employers. It extends to
the whole of India.

DEFINITIONS (As per Section 2)

1) Executive
It means the body, by whatever name called, to which the management of the affairs of a trade
unionis entrusted. [Section 2 (a)]
2) Office-bearer
In the case of a trade union, includes any member of the executive thereof, but does not include
an auditor. [Section 2 (b)]
3) Registered office
It means that office of a trade union which is registered under this Act as the head office
thereof. [Section 2 (d)]
4) Registered trade union
It means a trade union registered under this Act. [ Section 2 (e)]
5) Trade dispute
It means any dispute between employers and workmen, or between workmen and workmen, or
between employers and employers which is connected with the employment or non-
employment, or the terms of employment or the conditions of labor, of any person, and
“workmen” means all persons employed in trade or industry whether or not in the employment
of the employer with whom the trade dispute arises. [ Section 2 (g)]
6) Trade union
It means any combination, whether temporary or permanent, formed primarily for the purpose
of regulating the relations between workmen and employers or between workmen and
workmen, or between employers and employers, or for imposing restrictive conditions on the
conduct of any trade or business, and includes any federation of two or more trade unions.
[Section 2 (h)]

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MODE OF REGISTRATION
Section 4 provides that any seven or more members of a Trade Union may by subscribing their names
to the rules of the Trade Union and by otherwise complying with the provisions of this Act with respect
to registration, apply for registration of the Trade Union. However, no Trade Union of workmen shall
be registered unless at least ten per cent. or one hundred of the workmen, whichever is less, engaged
or employed in the establishment or industry with which it is connected are the members of such
Trade Union on the date of making of application for registration.

APPLICATION FOR REGISTRATION

Section 5 stipulates that every application for registration of a Trade Union shall be made to the
Registrar and shall be accompanied by a copy of the rules of the Trade Union and a statement of the
following particulars, namely:
1) The names, occupations and address of the members making application;
2) In the case of a Trade Union of workmen, the names, occupations and addresses of the place
of work of the members of the Trade Union making the application;
3) The name of the Trade Union and the address of its head office; and
4) The titles, names, ages, addresses and occupations of the office-bearers of the Trade Union

Where a Trade Union has been in existence for more than one year before the making of an
application for its registration, there shall be delivered to the Registrar, together with the application,
a general statement of the assets and liabilities of the Trade Union prepared in such form and
containing such particulars as may be prescribed

PROVISIONS CONTAINED IN THE RULES OF A TRADE UNION

A Trade Union shall not be entitled to registration under the Act, unless the executive thereof is
constituted in accordance with the provisions of the Act, and the rules thereof provide for the
following matters, namely
1) the name of the Trade Union;
2) the whole of the objects for which the Trade Union has been established;
3) the whole of the purposes for which the general funds of the Trade Union shall be applicable,
all of which purposes shall be purposes to which such funds are lawfully applicable under this
Act;
4) the maintenance of a list of the members of the Trade Union and adequate facilities for the
inspection thereof by the office-bearers and members of Trade Union;
5) the admission of ordinary members who shall be persons actually engaged or employed in an
industry with which the Trade Union is connected, and also the admission of the number of

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 honorary or temporary members as office-bearers required under section 22 to form the
executive of the Trade Union;
6) the payment of a minimum subscription by members of the Trade Union
7) the conditions under which any member shall be entitled to any benefit assured by the rules
and under which any fine or forfeiture may be imposed on the members;
8) the manner in which the rules shall be amended, varied or rescinded;
9) the manner in which the members of the executive and the other office-bearers of the Trade
Union shall be elected and removed;
10) the duration of period being not more than three years, for which the members of the
executive and other office-bearers of the Trade Union shall be elected;
11) the safe custody of the funds of the Trade Union, an annual audit, in such manner as may be
prescribed, of the accounts thereof, and adequate facilities for the inspection of the account
books by the office bearers and members of the Trade Union; and
12) the manner in which the Trade Union may be dissolved

CERTIFICATE OF REGISTRATION
The Registrar, on being satisfied that the Trade Union has complied with all the requirements of the
Act in regard to registration, shall register the Trade Union by entering in a register, to be maintained
in such form as may be prescribed, the particulars relating to the Trade Union contained in the
statement accompanying the application for registration. The Registrar, on registering a Trade Union
under section 8, shall issue a certificate of registration in the prescribed form which shall be conclusive
evidence that the Trade Union has been duly registered under the Act.

INCORPORATION OF REGISTERED TRADE UNION

Every registered Trade Union shall be a body corporate by the name under which it is registered, and
shall have perpetual succession and a common seal with power to acquire and hold both movable
and immovable property and to contract, and shall by the said name sue and be sued.

CANCELLATION OF REGISTRATION
A certificate of registration of a Trade Union may be withdrawn or cancelled by the Registrar on the
following grounds -
1) On the application of the Trade Union to be verified in such manner as may be prescribed;
2) If the Registrar is satisfied that the certificate has been obtained by fraud or mistake or that
the Trade Union has ceased to exist or has willfully and after notice from the Registrar
contravened any provision of this Act or allowed any rule to continue in force which is
inconsistent with any such provision or has rescinded any rule providing for any matter
provision for which is required by section 6;

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 3) If the Registrar is satisfied that a registered Trade Union of workmen ceases to have the
requisite number of members.

RETURNS
Section 28 of the Act provides that there shall be sent annually to the Registrar, on or before such
date as may be prescribed, a general statement, audited in the prescribed manner, of all receipts and
expenditure of every registered Trade Union during the year ending on the 31st day of December
next preceding such prescribed date, and of the assets and liabilities of the Trade Union existing on
such 31st day of December. The statement shall be prepared in such form and shall comprise such
particulars as may be prescribed.
Together with the general statement the trade union shall also attach a statement that lists any
changes in the people holding positions in the union during that year to which the general
statement refers to. Additionally, they should send an updated version of their rules to the
Registrar, showing any changes made up to the date of dispatch. A copy of every alteration made in
the rules of a registered Trade Union shall be sent to the Registrar within fifteen days of the making
of the alteration.
For the purpose of examining the above-mentioned documents the Registrar, or any officer
authorized by him by general or special order, may at all reasonable times inspect the certificate of
registration, account books, registers, and other documents, relating to a Trade Union, at its
registered office or may require their production at such place as he may specify in this behalf, but
no such place shall be at a distance of more than ten miles from the registered office of a Trade Union.

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GRATUITY ACT, 1972

INTRODUCTION
Gratuity is a lump sum payment made by the employer as a mark of recognition of the service
rendered by the employee when he retires or leaves service. The Payment of Gratuity Act provides
for the payment of gratuity to employees engaged in factories, mines, oilfields, plantations, ports,
railway companies, shops or other establishments. The Payment of Gratuity Act has been amended
from time to time to bring it in tune with the prevailing situation. The Act has been amended to
enhance the ceiling on amount of gratuity from INR10 lakhs to INR20 lakhs as well as to widen the
scope of the definition of ‘employee’ under section 2 (e) of the Act.

APPLICATION OF THE ACT

Application of the Act to an employed person depends on two factors. Firstly, he should be employed
in an establishment to which the Act applies. Secondly, he should be an ‘employee’ as defined in
Section 2(e). According to Section 1(3), the Act applies to:
1) Every factory, mine, oilfield, plantation, port and railway company;
2) Every shop or establishment within the meaning of any law for the time being in force in
relation to shops and establishments in a State, in which ten or more persons are employed,
or were employed, on any day of the preceding twelve months;
3) Such other establishments or class of establishments in which ten or more employees are
employed, or were employed, on any day of the preceding twelve months as the Central
Government may, by notification specify in this behalf.

In exercise of the powers conferred by clause (c), the Central Government has specified Motor
transport undertakings, Clubs, Chambers of Commerce and Industry, Inland Water Transport
establishments, Solicitors offices, Local bodies, Educational Institutions, Societies, Trusts and Circus
industry, in which 10 or more persons are employed or were employed on any day of the preceding
12 months, as classes of establishments to which the Act shall apply.
A shop or establishment to which the Act has become applicable once, continues to be governed by
it, even if the number of persons employed therein at any time after it has become so applicable falls
below ten. (Section 3A).

WHO IS AN EMPLOYEE?
The definition of ‘employee’ under section 2 (e) of the Act has been amended by the Payment of
Gratuity (Amendment) Act, 2009 to cover the teachers in educational institutions retrospectively with
effect from 3rd April, 1997. The amendment to the definition of “employee” has been introduced in

21
pursuance to the judgment of Supreme Court in Ahmedabad Private Primary Teachers’ Association
vs. Administrative Officer, AIR 2004 SC 1426. According to Section 2(e) as amended by the Payment
of Gratuity (Amendment) Act, 2009 “employee” means any person (other than an apprentice) who is
employed for wages, whether the terms of such employment are express or implied, in any kind of
work, manual or otherwise, in or in connection with the work of a factory, mine, oilfield, plantation,
port, railway company, shop or other establishment to which this Act applies, but does not include
any such person who holds a post under the Central Government or a State Government and is
governed by any other Act or by any rules providing for payment of gratuity.

WHEN IS GRATUITY PAYABLE?

According to Section 4(1) of the Payment of Gratuity Act, 1972, gratuity shall be payable to an
employee on the termination of his employment after he has rendered continuous service for not less
than five years: (a) on his superannuation, or (b) on his retirement or resignation, or (c) on his death
or disablement due to accident or disease. Note: The completion of continuous service of five years
is not necessary where the termination of the employment of any employee is due to death or
disablement. Further, the period of continuous service is to be reckoned from the date of
employment and not from the date of commencement of this Act (CLA-1996-III-13 Mad.). Mere
absence from duty without leave cannot be said to result in breach of continuity of service for the
purpose of this Act. [Kothari Industrial Corporation vs. Appellate Authority, 1998 Lab IC, 1149 (AP)

TO WHOM IS GRATUITY PAYABLE?

It is payable normally to the employee himself. However, in the case of death of the employee, it shall
be paid to his nominee and if no nomination has been made, to his heirs and where any such
nominees or heirs is a minor, the share of such minor, shall be deposited with the controlling authority
who shall invest the same for the benefit of such minor in such bank or other financial institution, as
may be prescribed, until such minor attains majority.

FORFEITURE OF GRATUITY
The Act deals with this issue in two parts. Section 4(6)(a) provides that the gratuity of an employee
whose services have been terminated for any act of willful omission or negligence causing any damage
or loss to, or destruction of, property belonging to the employer, gratuity shall be forfeited to the
extent of the damage or loss or caused. The right of forfeiture is limited to the extent of damage. In
absence of proof of the extent of damage, the right of forfeiture is not available.

CALCULATION OF GRATUITY
The gratuity rules say that there are two main categories to determine the calculation- one for the
Employees covered under the Act and the second for the Employees who are not covered under the
Gratuity Act.
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1) For Employees covered under the Act:

The Gratuity calculation formula that you can use to calculate the Gratuity amount is:

Gratuity = n*b*15/26
• n denotes the tenure of service an employee has completed in the organisation.
• b denotes the last drawn salary plus dearness allowance.
• 15 being wages for 15 days and 26 being the days of the month.

For instance, you have worked with an XYZ organisation for a total of 15 years. Consider your last basic
salary,including the dearness allowance, was INR 40,000. So, therefore:

The amount of Gratuity = 15 × 40,000 × 15 / 26 = 3,46,153Two points are must be noted that:

• According to the Gratuity Act, the Gratuity amount cannot be more than INR 20 Lakhs. The
excess Gratuity amount will be considered as ex-gratia.

• While calculating the tenure of service, if you have completed more than six months from your
previous date of joining, then it is considered a completed year for the calculation of Gratuity.
So, for example, if you have worked for 15 years and seven months, you will receive the
gratuity amount for 16 years. But if you have worked for 15 years and five months, then the
Gratuity will only be countedfor 15 years.

2) For Employees not covered under the Gratuity Act:

Even if the organisation is not covered under the Gratuity Act, the employees would still receive the
Gratuityamount. But the number of days will be changed from 26 to 30 days.

The Gratuity calculation formula is:

Gratuity = (15 × last drawn salary × working tenure)/30.
For instance, if you have worked for a company for seven years, the organisation is not covered
under theGratuity Act. And your basic salary was INR 35,000.
Gratuity Amount = (15 × 35,000 × 7) / 30 = 1,22,500.

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PAYMENT OF BONUS ACT, 1965

INTRODUCTION
The Payment of Bonus Act, 1965 applies to every factory as defined under the Factories Act, 1948;
and every other establishment in which twenty or more persons are employed on any day during an
accounting year. However, the Government may, after giving two months’ notification in the Official
Gazette, make the Act applicable to any factory or establishment employing less than twenty but not
less than ten persons. An employee is entitled to be paid by his employer a bonus in an accounting
year subjected to the condition that he/she has worked for not less than 30 working days of that year.
An employer shall pay a minimum bonus at the rate of 8.33% of the salary or wages earned by an
employee in a year or one hundred rupees, whichever is higher.

APPLICATION OF THE ACT

According to Section 1(2), the Act extends to the whole of India, and as per Section 1(3) the Act shall
apply to
1) every factory; and
2) every other establishment in which twenty or more persons are employed on any day during
an accounting year.

CALCULATION OF AMOUNT PAYABLE AS BONUS

The method for calculation of the annual bonus is as follows:
1) Calculate the Available Surplus.
2) Calculate allocable surplus i.e. 60% of the available surplus and 67% in the case of foreign
companies.
3) Make adjustments for ‘Set-on’ and ‘Setoff’. For calculating the amount of bonus in respect of
an accounting year, the allocable surplus is computed after considering the amount of set on
and set off from the previous years, as illustrated in the Fourth Schedule.

SET ON
Where for any accounting year, the allocable surplus exceeds the amount of maximum bonus payable
to the employees, then, the excess shall, subject to a limit of twenty per cent of the total salary or
wages of the employees employed in the establishment in that accounting year, be carried forward
for being set on in the succeeding accounting year and so on up to and inclusive of the fourth
accounting year to be utilized for the purpose of payment of bonus.

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SET OFF
Where for any accounting year, there is no available surplus or the allocable surplus in respect of that
year falls short of the amount of minimum bonus payable to the employees, and there is no amount
or sufficient amount carried forward and set on which could be utilized for the purpose of payment
of the minimum bonus, then such minimum amount or the deficiency, as the case may be, shall be
carried forward for being set off in the succeeding accounting year and so on up to and inclusive of
the fourth accounting year.

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PAYMENT OF WAGES ACT, 1936

OBJECTIVE AND SCOPE

The main objective of the Act is to eliminate all malpractices by laying down the time and mode of
payment of wages as well as securing that the workers are paid their wages at regular intervals,
without any unauthorized deductions. In order to enlarge its scope and provide for more effective
enforcement the Act empowering the Government to enhance the ceiling by notification in future.
The Act extends to the whole of India.

DEDUCTIONS ALLOWED
1) Bonus that is not a part of remuneration
2) Fines
3) Value of any house accommodation or supply of light, water, medical attendance
4) Contribution paid by the employer to any pension or PF
5) Absence of duty
6) Travelling Allowance
7) Any gratuity payable
8) Deduction for damage or loss of goods, in case the damage is not attributable to beneglected

26
LABOUR CODES, AMENDMENTS & ANALYSIS

The central government has replaced the 29 existing labor laws with four Codes. The objective is to
simplify and modernize labor regulation. The four codes have been passed by Parliament. But for
implementation of these codes, rules under these must be notified by central as well as state
governments for enforcing those in respective jurisdictions.
The major challenge in labor reforms is to facilitate employment growth while protecting workers’
rights. Key debates relate to the coverage of small firms, deciding thresholds for prior permission for
retrenchment, strengthening labour enforcement, allowing flexible forms of labour, and promoting
collective bargaining.
Further, with the passage of time, labour laws needed an overhaul to ensure simplification and
updating, along with provisions that can capture the needs of emerging forms of labour. In 2019, the
Ministry of Labour and Employment introduced four Bills on labour codes to consolidate 29 central
laws. These Codes regulate:
1) Wages
2) Industrial Relations,
3) Social Security, and
4) Occupational Safety, Health and Working Conditions.

The new law on Social Security brings together the provident fund (PF), the employees’ state
insurance (ESI), maternity benefits, gratuity and other entitlements under a simplified single law. The
second law on Occupational Safety similarly brings together all laws relating to health and
hazardous working conditions. It pins liability on the employer and the contractor and makes PDS
benefits transferable for migrant workers. It also stipulates toll-free numbers and assistance cells to
help free bonded labour.

The third law, which is the Industrial Relations Code of 2020, has redefined the terms ‘employer’,
‘employee’ and ‘worker’. It has also given a new definition for ‘strike’ that now includes mass casual
leave by 50% of the workforce employed by any firm.

A total of 44 extant laws have now been rolled into four. While the Code on Wages, 2019 has been
passed by Parliament, Bills on the other three areas were referred to the Standing Committee on
Labour. The Standing Committee submitted its reports on all three Bills. The government has replaced
these Bills with new onesin September 2020.

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CODE ON WAGES, 2019

APPLICABILITY -
1) The Code seeks to regulate wage and bonus payments in all public and private enterprises
belonging to the organized or unorganized sector.
2) The term 'Wages' includes salary, allowance, or any other component capable of being
expressed in monetary terms.
3) The Central Government will make wage-related decisions for establishments operating under
its authority, and for establishments in industries such as aviation, telecom, banking and
insurance among others (State governments will make decisions for all other classes of
establishments). The Code will have an overriding effect, notwithstanding any other law in
force, award, agreement, settlement, or contract of service to the contrary.

FLOOR WAGE
1) The Central Government will fix a floor wage, taking into account living standards ofworkers.
2) Floor wages can vary with geographical areas.
3) Minimum wages fixed by the Central or State governments for establishments falling under
their jurisdiction must not be lower than such floor wage.

FIXING THE MINIMUM WAGE

1) In line with the Minimum Wages Act, 1948, this Code prohibits employers from paying wages
less than the fixed minimum wage to its employees.
2) The appropriate government, while fixing minimum wages, may take into account factors
such as skill of workers and difficulty of work.
3) Employees would be entitled to 'overtime wages' which will be at least twice the normal
rate of wages.

PAYMENT OF WAGES
1) Wages can be paid in multiple modes such as coins, currency notes, cheque, bankaccount credit
or electronic modes.
2) The employer must set a wage period as either daily, weekly, fortnightly or monthly.

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DEDUCTIONS
1) Deductions (not exceeding 50% of total wage) from an employee's wages may be made on
grounds including fines, absence from duty, accommodation provided by employer or recovery of
advances given to employees, among others.

DETERMINATION OF BONUS
1) Employees will be entitled to an annual bonus in case their wages do not exceed a specified
monthly amount. Currently, under the Payment of Bonus Act, 1965, this amount is INR 21,000.
2) The annual minimum bonus will be at least 8.33% of the wages, or INR 100, whicheveris higher.
3) If the allocable surplus exceeds the total minimum bonus payable to employees, a part of the
gross profit must be distributed between the employees in proportion to their annual wages.
An employee can receive a maximum bonus of 20% of their annual wages.

GENDER DISCRIMINATION
In matters pertaining to wages and recruitment of employees for same or similar work, the Code on
Wages prohibits gender discrimination.

OFFENCES
1) The Code lays down penalties for offences committed by an employer in contravention of any
provisions of the Code.
2) Such penalties depend on the nature and gravity of such offence. The highest penalty
prescribed is imprisonment for 3 months and/or a fine up to INR 1 lakh.
3) The Inspector-cum-Facilitator is required to give employers who are first-time offenders an
opportunity to comply with provisions of Code before initiating prosecution.

THE CODE ON SOCIAL SECURITY

1) Employee Provident Fund (EPF)

• Provident fund and pension scheme will apply to all establishments employing 10 or 20
employees, and to any other establishments as may be notified by the government.

29
 2) Employees State Insurance (ESI)
• ESI Scheme will apply to establishments employing 10 or more employees.
• In case of a pandemic, epidemic or a national disaster, the Central Government can make
changes to the employer's or the employee's contribution under ESI for up to three months.
• If the employer fails to pay ESI contributions, the ESIC may pay the benefits to the
employee and recover it from the employer the capitalized value of the benefit, including
the contribution amount, interest and damages, as an arrear of land revenue or otherwise.

REGISTRATION
1) Every new establishment to which the Code applies is required to register.
2) Establishments already registered under any other Central Law would not be required to
register again.
3) Aadhaar-based registration is mandated for all categories of workers.

GRATUITY
1) Fixed-term employees (i.e. employed for a fixed duration) will be entitled to pro-rated gratuity
based on the term of their contract.
2) The threshold period of such an employment will also be a continuous working period of 5
years, as is the case for other categories of employees.

MATERNITY BENEFIT
In addition to maternity benefit in terms of paid leaves, every woman is entitled to medical bonus of
up to INR 3,500 (if pre-natal confinement and post-natal care is not provided by the employer).

UNORGANIZED WORKERS
1) The Code makes an attempt at bringing within its fold the unorganized sector of the economy.
For instance, the Code allows schemes for unorganized workers to be fundedby a company's CSR
fund.
2) The Code empowers the Central Government to frame social security schemes for unorganized
workers, gig workers (workers outside the traditional employer-employee relationship) and
online platform workers (those who access organizations or individuals through an online
platform and provide services or solve specific problems.)

30
OFFENCES AND PENALTIES
The Code prescribes a five-year limitation period for initiating inquiries for payment of dues under EPF
and ESI schemes.

INDUSTRIAL RELATIONS CODE, 2020

DEFINITIONS
The definition of 'worker' under the code is similar to (but not same as) the definition of
'workman' under Industrial Disputes Act, 1947, with minor changes such as exclusion of apprentices
from scope of definition. A worker means 'any person employed in any industry to do any manual,
unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward, whether terms
of employment be expressed or implied, and includes working journalists'.

The term 'Industry' has been given a broader definition, including within its scope all systematic
activities carried on by co-operation between employers and workers. Notable exclusions are
charitable organizations, sovereign functions of the government, domestic service and other activities
that may be notified by the Central Government.

A situation where 50% of more workers are on casual leave simultaneously, is said to fall within the
scope of term 'strike'.

IR Code retains the definition of 'retrenchment', however, termination due to continuedill-health is no

longer considered retrenchment.

A new concept of 'fixed-term employment' has been introduced. It refers to workers that are hired for
a fixed period but will enjoy the same benefits and entitlements as are available to permanent
workers.

NEGOTIATING UNION/COUNCIL
1) A Trade Union with at least 51% of the workers as members will be the sole negotiating union.
2) In case no Trade Union has at least 51% of workers as members, a negotiating council will be
formed consisting of representatives of Trade Unions that contain at least 20% of workers as
members.
3) For every 20% of total workers as members, one representative will be included.

31
PRIOR PERMISSION OF APPROPRIATE GOVERNMENT
Prior permission of government before closure, lay-off, or retrenchment now needs to be sought only
by establishments with at least 300 workers, instead of 100 workers.

WORKER RE-SKILLING FUND

1) This is a new concept introduced under IR Code, where a fund shall be created forcontribution
by employer of an amount equal to fifteen days’ wages last drawn by the worker immediately
before retrenchment, and contributions from other sources prescribed by the appropriate
government.
2) The fund shall be utilized within 45 days of retrenchment, or as may be prescribed.

MODEL STANDING ORDERS

1) This provision will apply to establishments employing 300 or more workers Central
Government will be drafting Model Standing Orders basis which employers must prepare their
own draft standing orders from the date of commencement of the IR Code.
2) Employers must consult trade unions or negotiating unions before submitting standingorders to
certifying officers.

DISPUTE RESOLUTION MECHANISM

1) The Code provides for Industrial Tribunals consisting of an administrative member and a judicial
member.
2) Either party to a dispute can approach Industrial Tribunal. However, only Central Government
can make a reference to National Industrial Tribunal.

OCCUPATIONAL SAFETY, HEALTH AND WORKING CONDITIONS CODE, 2020 DEFINITIONS

The definition 'Factory' has been expanded to 20 workers for premises where the
process uses power and 40 workers where the process uses no power.
Provisions of Code pertaining to contract labour would only apply to establishments involving 50 or
more contract laborers.

LICENSES AND REGISTRATION

New Establishments covered by Code must register themselves (within 60 days of commencement of
Code) with registering officers, appointed by the appropriate government. Establishments already
registered under any other Central Law would not be required toregister again.
32
DUTIES OF EMPLOYERS
1) Issuing appointment letters to employees
2) Ensuring a workplace that is free from hazards that may cause injury or disease
3) Providing periodical health examination to employees in notified establishments
4) Informing relevant authorities in case an accident at workplace leads to either death or serious
bodily injury to an employee
5) There are other duties prescribed for employers in respect of mines, docks, factories,
plantations and construction work which include instructing employees about safety protocols
and provisioning for a risk-free work environment.

SAFETY AND WELFARE PROVISIONS

1) The employer is mandated to provide a hygienic work environment along with adequate
ventilation, sufficient space to avoid overcrowding, potable drinking water, arrangements for
separate washrooms for male, female, and transgender workers, etc.
2) The Code also provides for a uniform threshold of welfare provisions for all establishments
such as a canteen, crèche, first aid, welfare officer, etc.

WORKING HOURS
1) Appropriate government is empowered to notify working hours for various classes of
establishments and employees. For overtime, prior consent of workers is required along with
overtime wage.
2) Female workers may work past 7 pm and before 6 am only with their consent, as
prescribed by the appropriate government.
RELEVANT AUTHORITIES
1) Inspectors-cum-Facilitators appointed by the appropriate government can inquire intoaccidents
and conduct inspections. They have been given special powers in respect of factories, mines,
dock-works and buildings or other construction works, prohibiting work in hazardous
environment.
2) Safety committees may also be formed in certain establishments, and for certain classes of
workers, by the appropriate government. These committees will aim to function as a liaison
between employers and employees.
LEAVES
1) No worker in an establishment will be allowed to work for more than six days a week, except as
provided for by Code.

33
2) Every worker shall be entitled to one day of leave for every 20 days of work per calendar year.

34
ACTS SUBSUMED UNDER THE NEW LABOUR CODES

LABOUR CODES ACTS BEING SUBSUMED

• Payment of Wages Act, 1936;

Code on Wages, 2019 • Minimum Wages Act, 1948;
• Payment of Bonus Act, 1965; and
• Equal Remuneration Act, 1976

Occupational Safety, • Factories Act, 1948;

Health and Working • Mines Act, 1952;
Conditions Code, • Dock Workers (Safety, Health and Welfare) Act, 1986;
2019 • Building and Other Construction Workers (Regulation of
Employment and Conditions of Service) Act, 1996;
• Plantations Labour Act, 1951;
• Contract Labour (Regulation and Abolition) Act, 1970;
• Inter-State Migrant Workmen (Regulation of Employment and
Conditions of Service) Act, 1979;
• Working Journalist and other Newspaper Employees
(Conditions of Service and Miscellaneous Provision) Act, 1955)
• Working Journalist (Fixation of Rates of Wages) Act, 1958;
• Motor Transport Workers Act, 1961;
• Sales Promotion Employees (Condition of Service) Act, 1976;
• Beedi and Cigar Workers (Conditions of Employment) Act,
1966; and
• Cine-Workers and Cinema Theatre Workers (Regulation of
Employment) Act, 1981

Industrial • Trade Unions Act, 1926;

RelationsCode, • Industrial Employment (Standing Orders) Act, 1946,
2019 • Industrial Disputes Act, 1947

35
 Code on Social • Employees’ Provident Funds and Miscellaneous Provisions
Security,2019 Act, 1952;
• Employees’ State Insurance Act, 1948;
• Employees’ Compensation Act, 1923;
• Employment Exchanges (Compulsory Notification of
Vacancies) Act, 1959;
• Maternity Benefit Act, 1961;
• Payment of Gratuity Act, 1972;
• Cine-workers Welfare Fund Act, 1981;
• Building and Other Construction Workers’ Welfare Cess Act,
1996; and
• Unorganized Workers Social Security Act, 2008

WHY ARE LABOUR CODES NOT IMPLEMENTED YET?

The Ministry of Labour is ready with the rules under the four labour codes. But the states have been
slow in drafting and finalizing those under new codes. Besides, the government was not keen to
implement the four codes due to political reasons.

The ministry had even finalized the rules under the four codes. But these could not be implemented
because many states were not in a position to notify rules under these codes in their jurisdictions.
Labour is a concurrent subject under the Constitution of India and therefore both the Centre and
states have to notify rules under these four codes to make them the laws of the land in their
respective jurisdictions. The four codes have been passed by Parliament. But for implementation of
these codes, rules under these must be notified by central as well as state governments for enforcing
those in respective jurisdictions.

Some states have not yet established the necessary rules to enforce the codes, negotiations
between the Union labor ministry and labor unions have stalled, and the government is keen on
obtaining agreement from all stakeholders to prevent industrial strikes that could disrupt the
economy.

One of the significant changes introduced by these codes is the ability for more companies to
terminate workers without government approval. Additionally, new norms on strike procedures and
the elimination of restrictions on women working night shifts are included. The codes also introduce
a new social security regime.

While some labor unions support these codes, others, like the Bharatiya Mazdoor Sangh (BMS), are
demanding changes, especially regarding the Industrial Relations Code and The Occupational Safety,
36
Health, and Working Conditions Code. These changes include conditions on the right to strike,
requiring 60 days' notice, and prohibiting flash strikes.

Several states have made progress in publishing draft rules related to these codes, but not all have
completed the necessary steps for implementation. Overall, the implementation of these labor
codes in India faces delays and ongoing negotiations between stakeholders.

To date, the provisions of Section 142 of the Code on Social Security, 2020 and the provisions
related to the Central Advisory Board as specified under Section 42 and 67 of the Code on Wages,
2019 have come into effect. The President has given his assent to the Central Government for all the
four Codes, but the Central Government has not yet announced an 'Effective date' for their
implementation. However, since legislation concerning 'welfare of labour including conditions of
work, provident funds, employers' liability, workmen's compensation, invalidity and old-age
pensions and maternity benefits is in the concurrent list, rules are required to be framed by the
Central Government as well as by the State Governments.

As a step towards implementation of the four Labour Codes out of the 30 States and 8 Union
Territories (UTs), the following number of States/ UTs have pre-published draft Rules for the Codes:
31 States/UTs under the Code on Wages, 2019;
26 States/UTs under the Industrial Relations Code, 2020;
25 States/UTs under the Code on Social Security, 2020; and
24 States/UTs under the Occupational Safety, Health and Working Conditions Code, 2020.

Implementation of the new labour codes in India appears to have been delayed. A press release issued
by the (Indian) Ministry of Labour and Employment on March 21, 2022, provides an update on the
progress of the new labour codes but does not contain information regarding their 'Effective date.

The delayed implementation may be viewed as 'preparatory time' for the industry to:
1. Bring about an attitudinal shift toward employee welfare
2. Re-work their human resource policies
3. Plan the consequential impact on operating costs.

ANALYSIS FOR IMPLEMENTATION OF NEW LABOUR CODES

HISTORY
Many provisions of Labour Laws trace their origin to the time of the British Raj. However, with
changing times, many of them either became ineffective or did not have any contemporary relevance.

37
Rather than protecting the interests of workers, these provisions became difficulties for them. The
web of legislations was such that workers had to fill four forms to claim a single benefit. Therefore,
the present Government has repealed the non-useful Labour Laws. Now 29 Labour Laws have been
codified into 4 Labour Codes.
There are more than 50 crore workers in the organized and unorganized sector of the country. A
majority of these workers i.e. around 90 percent, are in the unorganized sector. Through these four
Labour Codes, it has been ensured that all these workers will get the benefit of Labour Laws. Now all
workers in the organized and unorganized sectors will get the minimum wages and a large section of
workers in the unorganized sector would also get social security.

ANALYSIS

1) Employer-centric approach under labour code

• Single registration and licensing provision

• Legality of engaging contract workers in core activities in certain cases
• Increasing the threshold for applicability of certain laws for factories and engaging
contract workers
• Increasing worker threshold for applicability of standing orders and government
approval for retrenchment (termination) of workers
• Allowing maintenance of registers in electronic form
• Providing limitation period for provident fund non-compliances.
• Transferring labour courts into industrial tribunals and introducing inspector-cum
facilitator concept.
• It is expected that it will have long-term positive impact on the industry and should
contribute towards ease of doing business.

2) Employee-centric approach under labour code

• Revised definition of wages leading to higher minimum wages, statutory bonus,

provident fund, retrenchment compensation and gratuity.
• Reduction in daily working hour limit in certain cases.
• Grant of general permission for engaging women with employee consent between
7 p.m.-6 a.m.
• Need for consent to work overtime.
• Provision for leave encashment on annual basis.
• Mandatory provision of same employee benefits and pro-rata gratuity payments to
fixed-term employees.
• Payment of wages by the end of the next day in case of employee resignation.
38
These Labour Reforms will enhance the Ease of Doing Business in the country. Employment creation
and output of workers will also get enhanced. The benefits of these four Labour Codes will be
available to workers of both organized and unorganized sectors. Now, Employees’ Provident Fund
(EPF), Employees’ Pension Scheme (EPS) and coverage of all types of medical benefit under
Employees’ Insurance will be available to all workers.

Labour Codes will facilitate the implementation and also remove the multiplicity of definitions and
authorities without compromising on the basic concepts of welfare and benefits to workers. The Code
would bring the use of technology in its enforcement. All these measures would bring transparency
and accountability which would lead to more effective enforcement. Widening the scope of minimum
wages to all workers would be a big step for equity. The facilitation for ease of compliance with labour
laws will promote in setting up of more enterprises thus catalyzing the creation of employment
opportunities.

IMPACT OF NEW LABOR CODE ON TAKE-HOME SALARY

Your provident fund (PF) component and gratuity pay-out are set to increase once the new code of
wages gets implemented. This is because the definition of ‘wages,’ based on which employers deduct
provident fund contributions, will now be standardized as per the new Code of Wages, 2019.

The Code of Wages is a part of four labour codes that resulted from the merging 29 out of the 44
central government labour laws. The erstwhile acts that governed the employees’ provident fund
(EPF) and gratuity will now be part of the Code of Social Security. But the calculation of the provident
fund (your retirement kitty) will depend on the new definition of wages as per the new Code of Wages,
2019.

1) IMPACT ON PF UNDER NEW CODE

An employer is required to contribute 12 percent of at least INR 15,000 as provident fund

contribution, where the salary is more than INR 15,000 under the Employees’ Provident Fund
Scheme, 1952. This scheme will continue to apply for a year after the Social Security Code comes
into force. So, if your salary is over INR 15,000, the new Code of Wages may not materially impact
your salary, unless this threshold is changed by new schemes framed under the said Code. But for
those whose salaries are INR 15,000 or less, the new definition of wages will ensure a higher
provident fund contribution and savings where the excluded allowances are more than half of their
total salary.

Assuming that the threshold of INR 15,000 for mandatory EPF deduction goes up, then your
retirement kitty can increase significantly, too. Your take-home pay, however, might decline by a bit,
but the benefits will outweigh the hardship. The EPF enjoys the maximum tax concession (EEE-
Exempt at the time of contribution, exempt at the time of accrual and Exempt at the time of
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withdrawal), will also get larger contribution from employers.

The intent of having a uniform definition of wages across all legislations as well as to minimize
litigation, the definition of “wages” has been unified. The definition of wages now has three parts to
it: an inclusion part, specified exclusions and conditions that limit the quantum of exclusions. This is
aimed at ensuring that companies do not adopt compensation structures which result in wages being
reduced below 50 per cent of the total remuneration so as to reduce their contributions to social
security schemes.

2) IMPACT ON GRATUITY UNDER NEW CODE

The pay restructuring will also lead to an increase in the gratuity payment of the employees. However,
the formula for calculating gratuity remains the same under the Code of Social security, 2020. “The
formulae for calculation of gratuity remains similar to the one provided for under the Payment of
Gratuity Act,1972, that is, 15 days’ wages (or such number of days as may be notified by the central
government) for every completed year of service, based on the rate of wages last drawn by the
employee concerned, subject to a ceiling to be prescribed by the central government.
In the case of gratuity, for each year of service, the organization has to pay an amount equaling 15
days of last-drawn salary. Salary here is considered basic wages plus dearness allowance. Moreover,
if a person works for over 6 months in the last year of service, it will be considered as a complete year
for gratuity calculation. For instance, if a person completes seven years and six months of
continuousservice, gratuity paid will be for eight years.

For gratuity calculation, a month of work is calculated as 26 days. So, the 15-day salary will be
calculated as (monthly salary x 15)/26. This number multiplied by the number of years in service will
be the gratuity amount payable. As the basic wages go up, the payment of gratuity will also go up.

The change proposed in the social security code is the extension of gratuity benefits to fixed-term
employees as well. The proposed code on social security, 2020, has extended the benefit of gratuity
to fixed-term employees, irrespective of the duration of their employment, making it mandatory for
employers to disburse gratuity amounts to fixed-term employees even if they are employed for less
than five years.

ILLUSTRATION

Particulars Under Present Under proposed definition

definition

Monthly CTC 1,00,000 1,00,000

Basic Salary 15,000 50,000

Employer contribution to PF @ 12% of basic 1,800 6,000

salary

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Other Allowances 83,200 44,000

Employee contribution to PF @ 12% of 1,800 6,000

basic salary

In hand salary 96,400 88,000

Salary for tax purpose 98,200 94,000

Annual Salary for tax purpose 11,78,400 11,28,000

Deduction under VIA A 1,50,000 1,50,000

Standard Deductions 50,000 50,000

Taxable Salary 9,78,400 9,28,000

Tax payable 1,08,180 98,100

Annual Tax Saving under new labour code 10,080

Additional Contribution towards 1,00,800

retirement benefits

Gratuity payable after 5 years (Assuming 37,500 1,25,000

constant Salary)

Difference in gratuity 87,500

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From the above working it becomes apparent that with the same CTC his take home salary will be
lower but will be entitled to higher gratuity in case he leaves the organization after 5 years. It also
becomes clear that he will be able to save more income tax every year because of higher component
of employer’s contribution to provident fund which does not form part of employee’s salary. Since
employer and employee both are contributing higher amounts to EPF part of which goes to EPS, he
will get a bigger amount as retirement corpus from EPF as well as a higher pension from EPFO.

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LINKS FOR FURTHER READING
A contemporary overview of the labour laws in India:
https://www.lexology.com/library/detail.aspx?g=fa2fb547-5828-419a-bd3b-4ef01b612643

You can find a lot of basic labour law questions answered here:
https://iclg.com/practice-areas/employment-and-labour-laws-and-regulations/india/amp

A brief overview of each of the new labour codes:

https://www.mondaq.com/india/employee-benefits-compensation/1208322/india39s-new-labour-
codes-by-far-the-biggest-change-to-labour-laws-in-indian-history

Important cases of 2022 so far:

https://www.lexology.com/library/detail.aspx?g=9b80025d-631b-4972-843b-97a2a1ed8762

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