13.04.06ispicourseindia

Employment and Social Security Law in India

Avv. Pierfrancesco C. FASANO

FASANO - AVVOCATI

Milano, 6 aprile 2013

ISPI - Istituto per gli Studi di Politica Internazionale

India Population: 1.2 billion [data of 2011] GDP (nominal): total USD 1.95 trillion

(10th), per capita USD 1,592 (140th) Government: federal parliamentary

constitutional republic Federation of 28 States and 7 union

territories Independence from the United Kingdom:

1947 (Dominion), 1950 (Republic) Judicial system: common law

Labour in India Labour force: 487.6 million workers - 2nd largest in

the world (1st – China: 795 million) 94% in unorganized sector/informal sector/own

account enterprises: unlicensed, self-employed or unregistered economic activity (owner manned stores, handicrafts and handloom workers, rural traders, farmers, etc.)

Unorganized sector has low productivity and offers lower wages: creates just 57% of national domestic product [data of 2006]

Agriculture, dairy and horticulture and related occupations alone employ 52% of labor and produces just 18.1% of the GDP

Labour in India

Organized sector/formal sector: employees of government, state-owned enterprises and private sector enterprises

27.5 million workers in organized sector, of which 17.3 million works for the government or government owned entities [data of 2008]

History and prefatory remarks Labour law or employment law (under the

broad term of industrial law): is the body of laws, rules, administrative rulings

and precedents which addresses the legal rights of, and restrictions on, working people and their organizations

governs many aspects of the relationship between trade unions, employers and employees

defines rights and obligations of workers, union members and employers in the workplace

History and prefatory remarks Labour law covers:

industrial relations (certification of unions, labour-management relations, collective bargaining and unfair labour practices)

workplace health and safety employment standards (general

holidays, annual leave, working hours, unfair dismissals, minimum wage, layoff procedures and severance pay)

History and prefatory remarks

Constitution of India (1950): cornerstone of all laws emphasis on dignity of human labour

and on protection of the workmen's interest

provides for fundamental rights and directive principles


Fundamental Rights:• Art. 16 – equality of opportunity in matters of

public employment• Art. 19(1)(g) – all citizens shall have the right to

practice any profession or to carry on any occupation, trade or business

• Art. 23 – prohibition of traffic in human beings and forced labour

• Art. 24 – prohibition of employment of children in factories


Directive Principles:• Art. 39 – certain principles of policy to be followed

by the State for securing adequate means of livelihood, distribution of wealth, etc.

• Art. 41 – right to work, to education and to public assistance in certain cases

• Art. 42 – provision for just and humane conditions of work and maternity relief

• Art. 43 – living wage for workers

• Art. 43-A – participation of workers in management of industries

History and prefatory remarks Under Constitution of India, labour is a subject in the

concurrent list = both Central and State Governments have powers to enact legislation on labour matters:

Parliament legislates on subjects which are of all India character and require uniformity throughout country

In most of the Acts States are given powers to prescribe rules to meet its own particular requirements

Rules framed under State Acts should not, of course, be derogatory or inconsistent with provisions of Parliament Act

History and prefatory remarks Labour laws derive their origin and inspiration

partly from British colonial times, views expressed by important nationalist leaders during the days of national freedom struggle, debates of the Constituent Assembly, provisions of the Constitution and the International Conventions and Recommendations (e.g. ILO)

Industrial expansion after independence resulted in considerable and increasing industrial regulation and labour legislation

Statues does not cover entire field - reference to case law is essential

History and prefatory remarks Employees fall under 3 main categories:

• Government employees – rules and regulations governing these employees stem from the Constitution and they have the benefit of protection of tenure, fixed salaries, annual increment, etc.

• Public sector undertaking employees – PSUs are government controlled bodies, but their employees are governed by their own regulations which either have statutory force or are based on statutory orders

• Private sector employees – management staff (no statutory regulations, are governed by terms and conditions of their own personal contracts) or workmen governed under the provisions of the Industrial Disputes Act, 1947


Indian labor law India is considered to be highly regulated and complex

Over 50 major Acts and numerous laws Detailed summary is impossible

Classification of labour and social security laws

Laws related to Industrial Relations:

Indian Trade Unions Act, 1926 (amended in 1947)

Industrial Employment (Standing Orders) Act, 1946

Industrial Disputes Act, 1947


Laws related to Wages: Payment of Wages Act, 1936 Minimum Wages Act, 1948 Payment of Bonus Act, 1965


Laws related to Working Hours, Conditions of Service and Employment:

Factories Act, 1948 Plantation Labour Act, 1951 Mines Act, 1952 Contract Labour (Regulation & Abolition) Act,

1970 Dangerous Machines (Regulation) Act, 1983 Etc.


Laws related to Equality and Empowerment of Women:

Maternity Benefit Act, 1961 Equal Remunaration Act, 1976 Sexual Harassment of Women at

Workplace (Prevention, Prohibition and Redressal) Act, 2013


Laws related to Deprived and Disadvantaged Sections of the Society:

Bonded Labour System (Abolition) Act, 1976

Child Labour (Prohibition and Regulation) Act, 1986

Children (Pledging of Labour) Act, 1933


Laws related to Social Security: Workmen's Compensation Act, 1923 Employees' State Insurance Act, 1948 Employees' Provident Fund and Miscellaneous

Provisions Act, 1952 Payment of Gratuity Act, 1972 Employers' Liability Act, 1938 Fatal Accidents Act, 1855 Personal Injuries (Compensation Insurance) Act,

1963 Personal Injuries (Emergency Provisions) Act, 1962 Unorganized Workers' Social Security Act, 2008

Important labour laws Industrial Disputes Act, 1947 Factories' Act, 1948 Industrial Employment (Standing Orders) Act, 1946 Payment of Wages Act, 1936 Minimum Wages Act, 1948 Indian Trade Unions Act, 1926 (amended 1947 and

2001) Payment of Bonus Act, 1965 Contract Labour (Prohibition and Regulation) Act,

1970

Industrial Disputes Act, 1947 This Act provides the machinery for regulating

the rights of the employers and employees for investigation and settlement of industrial disputes in a peaceful manne by providing scope for collective bargaining through negotiations and mediation and, failing that, through voluntary arbitration or compulsory adjudication by the authorities with the active participation of the trade unions

In operation in whole India, except State of Jammu and Kashmir


Industry to which the Act applies: “industry” = systematic activity carried out by cooperation between employer and his workmen (including agency and contract employment) for production, supply and distribution of goods and services with view to satisfy human needs whether or not any capital has been invested for purpose of carrying on such activity or such activity is carried on with motive to make any gain and profit and includes any activity relating to production of sales or business or both carried out by establishment


Agricultural operations, educational, scientific and research institutions, non commercial institutions owned/managed by charitable/social/philanthropic organizations, government activity of sovereign nature, domestic service and cooperative activities are not “industry”

Industrial Disputes Act, 1947 Works Committees: in any industrial establishment in which 100 or

more workmen are employed in last 12 months Government has right to pass order requiring employer to constitute Works Committee, consisting of representatives of employers and workmen engaged in establishment

duty: to promote measures for securing and preserving amity and good relations, to comment upon matters of common interest, to endeavour to compose any material difference of opinion in respect of such matters

Industrial Disputes Act, 1947 Machinery for settlement of disputes: any industrial establishment in which more than 50 are

employed in last 12 months shall provide for complaint settlement authority for settlement of industrial disputes of individual workman employed

Conciliation Officer: may be appointed by Government to mediate in and promote the settlement of disputes; no power to direct the parties to settle their dispute in any particular manner; may inspect any document; sends a report to Government

Labour Courts: may be constituted by the Government for adjudication of industrial disputes relating to matters specified in Schedule 2 of the Act

Industrial Disputes Act, 1947 Strikes and Lock-outs: “strike” = a cessation of work by a body of persons

employed in the industry acting in combination or a concerted refusal to work of any number of persons employed in the industry

“lock-out” = temporary closing down of place of employment or suspension of work by employer or refusal to continue employment of any employee already employed

prohibition of strikes or lock-outs: during the pendency of proceedings before the Tribunal or Arbitrator or 2 months after the conclusion of such proceedings; during any period in which settlement or award is in operation in respect of any matter covered by such settlement or award


Notice of change: no employer can affect any change in the

conditions of service of workmen in respect of wages, contribution to Provident Fund, compensatory or other allowance, hours of work and rest intervals, leave with wages and holidays, starting, alterations or discontinuance of shifts, classification of employees by grades, etc., without giving a notice

Industrial Disputes Act, 1947 Layoff and retrenchment: “layoff” = failure, refusal or inability of an employer on account of

shortage of coal, power or raw materials or accumulation of stocks or breakdown of machinery

compensation for layoff: 50% of wage or dearness allowance for all days during layoff (maximum 45 days per year) to workman who has completed not less than one years' continous service

“retrenchment” = termination by an employer of the service of a workman for any reason whatsoever otherwise than as a punishment by way of disciplinary action

conditions: a) 1 month of notice is given or workman is paid in lieu of such notice wages for period of notice; b) workman is paid compensation equivalent to 15 days average pay for every completed year of service; c) notice is served on Government and approval to be obtained

principle: “First come last go, last come first go.”

Factories Act, 1948 This Act regulates health, safety and welfare of

labour in factories and makes provisions for hours of work, holidays, lighting and ventilation, meal time and overtime

“factory” = premises whereon 10 or more workers are working on any day of last 12 months and in any part of which manufacturing process is being carried on with aid of power, and where manufacturing process is carried on without aid of power number of workers should be 20 or more

approval of plans by Central/State Government is to be obtained before setting up factories

Factories Act, 1948 Working hours: adults (completed 18th year of age) maximum 9

hours per day, 48 hours per week, this bar is absolute, no payment of overtime wages can get over this bar

Weekly holidays: 1 day of rest in 7 (any day) Overtime payment: in case of excess of the hours prescribed the

workman is entitled to wages at the rate of twice his ordinay rate of wages

Employment of young persons: child under the age of 14 yrs cannot work in any factory; 14-18 yrs maximum 4 and 1/2 hours, not during the night

Leave and holidays: leave: minimum 7 days, maximum 12 days, holidays: 1 day of holiday with wages for every 20 days work performed (at least 240 days of work in a calendar yr): minimum 12 days, maximum 30 days; child: 1 day for every 15 days work performed

Industrial Employment (Standing Orders) Act, 1946

This Act requires employers in industrial establishments employing 100 or more workmen to clearly define the conditions of employment to their workers

“standing orders” = set of rules governing conditions of recruitment, discharge, disciplinary action, holidays, leave, etc. to be posted on special boards or near entrance

matters concerned: classification of workmen (permanent, temporary), hours of work, holidays, pay days and wages rates, termination of employment and the notice to be given by either party, suspension or dismissal for misconduct, means of redress of workmen against unfair treatment

Payment of Wages Act, 1936 This Act regulates payment of wages, fixation of wage

period, time and mode of payment to certain classes of workmen

Aim: to ensure the payment of wages on time and without any deduction, except for those provided in the Act

The wages of every person employed in a factory or industrial establishment in which less than 1,000 persons are employed must be paid before the expiry of the 7th day after the last date of wage period (cannot exceed 1 month). In any other establishment wages must be paid before the expiry of the 10th day

Minimum Wages Act, 1948

This Act provides for fixing minimum wages in certain employments and for doing social justice to the workers employed in the scheduled employments by prescribing minimum rates of wages

Aim: to prevent exploitation of labour Fixed by the Government for different scheduled

employments, different classes of work in the same type of industry and for different areas or locations

Employer has to pay to the employee not less than the minimum rate of wages fixed, for the overtime the double of the ordinary rate of wages

Indian Trade Unions Act, 1926 This Act provides for the registration of trade unions and defines

the law relating to registered trade unions “trade union” = any combination whether temporary or permanent

formed primarily for the purpose of regulating the relations between workmem 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

Registration: any 7 or more persons can apply for the registration to the Registrar appointed under the Act

Registration confers legal and corporate status Amended in 2001 To promote the civil and political interest of its members, unions

are now authorized to set up separate political funds

Payment of Bonus Act, 1948

This Act governs the cash payment made in addition to wages on the basis of profits or on the basis of production or productivity = “bonus”

Every employer in private sector and certain employers in public sector must pay bonus to every employee who worked at least 30 working days in that accounting year

Minimum rate of bonus is 8.33% of salary or Rs. 100 per year

Maximum bonus payable is 20% of wages

Contract Labour (Prohibition and Regulation) Act, 1970

This Act provides mechanism for regulation of engaging contractors and contract labour

Registration of contractors if more than 20 workers are engaged is required

Appointment of a Tripartite Advisory Board that investigates particular forms of contract labour

Social security laws Social security legislations derive their strength and

spirit from the Directive Principles of the State Policy as contained in the Constitution

Constitution does not recognize the concept of social security as a fundamental right, but Government is required to actively strive to promote welfare of people by securing a social order which ensures social, economic and political justice for all

Initially, the social security schemes covered only a small segment of the organized workforce

2008: Unorganized Workers' Social Security Act was brought into force for the welfare of unorganized workers

Social security laws

Social security laws can be divided into 2 categories: Contributory – those laws which provide for

financing of the social security schemes through contributions from both workers and employers (Employees' State Insurance Act, 1948, Employees' Provident Fund and Miscellaneous Provisions Act, 1948)

Non-contributory – those laws which puts the onus of providing social security on the employer (Workmen's Compensation Act, 1923, Maternity Benefit Act, 1961 and Payment of Gratuity Act, 1972)

Important social security laws

Workmen's Compensation Act, 1923 Maternity Benefit Act, 1961 Payment of Gratuity Act, 1972 Employees' State Insurance Act, 1948 Employees' Provident Fund and

Miscellaneous Provisions Act, 1952 Unorganized Workers' Social Security

Act, 2008

Workmen's Compensation Act, 1923

The Act provides for compensation of certain classes of workmen by their employers for injury which may be suffered by them due to an accident during the course of their employment

In case of fatal injury, the workmen's dependants are compensated

The compensation payable is provided in a schedule to the Act

Maternity Benefit Act, 1961

The Act is applicable to every establishment being factory, plantation or mine and to every shop or establishment in which 10 or more persons are employed

Women workers are entitled for paid holidays not exceeding 12 weeks in case of maternity and they should receive full wages

Payment of Gratuity Act, 1972 The Act is applicable to factories, mines, oil fields,

palntations, ports, railway companies and to shops and establishment employing 10 ore more persons

“gratuity” = lump sum payable to employees upon superannuation, retirement, resignation, death or disablement due to accident or disease

Payment of gratuity is subject to completion of 5 yrs continous service

Calculation of gratuity: last monthly salary x 15/26 x number of completed yrs of service

Maximum: Rs. 10.00.000 (= € 14.000)

Employees' State Insurance Act, 1948 The Act is applicable to non-seasonal power

using factories employing 10 or more persons and non-power using factories and certain other specified establishments employing 20 or more persons for wages

The scheme is financed from contribution from employers (4,75% of the wages) and employees (1,75% of the wages)

The sheme also provides sickness/medical care, maternity benefits, disablement benefit, etc.

Employees' Provident Fund and Miscellaneous Provisions Act, 1952

Under the Act, the employee of factories and other establishments and/or employer make certain contributions to various schemes and funds established under the Act

The schemes are meant for the security of workers after their retirement

Employees' Provident Fund Scheme, 1952: employee 12%, employer 3.67%

Empolyees' Pension Scheme, 1995: employer 8.33%, Government 1.16%

Employees' Deposit Linked Insurance Scheme, 1976: employer 0.5%

Unorganized Workers' Social Security Act, 2008

The Act provides for social security to unorganized workers

Various schemes for the unorganized wokers relating to life and disability cover, health and maternity benefits, old age protection, etc.

Women labour Certain specialized legislations for the benefit and

protection of women and the prevention of discrimination on the ground of sex

Maternity Benefit Act, 1961 Equal Remuneration Act, 1976 Sexual Harassment of Women at Workplace

(Prevention, Prohibition and Redressal) Act, 2013: Internal Committees to be set up for the examination of complaint of woman employee, adjudicating authorities to be set up to address such issues

Avv. Pierfrancesco C. FASANO

FASANO – AVVOCATI

Piazza Bottini, 1 – 20133 Milano

T: +39 0245506621 – F: +39 0240708747

[email protected] - www.fasano.pro

Special thanks for the collaboration of:

Applied Law Services (ALS) – New Delhi

Dua Associates Advocates & Solicitors – New Delhi

mailto:[email protected]

http://www.fasano.pro/

13.04.06ispicourseindia

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