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Different Labour Law Compliances for Startups in India

Introduction: Labour Law Compliance

Labour law compliance is basically some mandatory rules & regulations which are a must for a company to follow. The purpose of this compliance is for the ethical conduct of affairs part of wealth management. It includes employee benefits & termination, the rules & regulations set for employees, etc. The ministry of labour & employment, with the aim to support & promote startups & thus encouraging young entrepreneurs in setting up a new start-up venture hence creating multiple employment opportunities.

As per the government, startups shall be allowed to self-certify with 9 labour & environmental laws. Also, these exemptions will provide new entrepreneurs get accustomed to the labour laws & their implementing authorities. The policy goes on to say that for a period of 3 years, inspections will be conducted. However, in the subject to a written complaint of violations filed startups can also be subject to inspection.

The startups according to the new policy may self-certify compliance with respect to the following labour laws:

  1. The Inter-State Migrant Workmen (Regulation of Employment & Conditions of Service) Act, 1979
  2. The Payment of Gratuity Act, 1972
  3. CLRA or The Contract Labour Regulation & Abolition Act, 1970
  4. The Employees Provident Funds & Misc. Provisions Act, 1952
  5. The Employees State Insurance Act, 1948
  6. Industrial Employment (Standing Orders) Act, 1946
  7. Trade Unions Act, 1926
  8. Industrial Disputes Act, 1947
In the case of environmental Laws, startups falling under the white category as defined by The central pollution control board would be able to self-certify compliance.

Statutory Compliance for HR & Labour laws 2019

Statutory Compliance in HR refers to the legal framework basically all the legal proceedings that an organization should adhere to in dealing with all of its employees Statutory Compliance for Hr provides for 8 statues & regulations which every Hr must follow as per the labour laws:
  1. ESI or Employees state insurance as guided under The Employees State Insurance Act, 1948 which says that all the employees working in the factories & industries shall be insured under this act
  2. Provident fund or the payment to an employee after his/her employment as is guided under the Employees Provident Fund Act & Misc. Provisions Act, 1952.
  3. Professional Tax or the employment Tax which is basically a state-based tax which each & every employee receiving the pay from the revenue of the central government has to pay. The professional tax also applies to any organization which is controlled or owned by the central government.
  4. Gratuity as governed under the Payment of Gratuity Act, 1972 which is basically an amount given to the employees after they leave a job after completing 5 years or more
  5. Wages of the workers as governed under the Minimum Wages Act, 1948. The provisions of this act provide for the fixing of the minimum rates of wages to the employees.
  6. The Maternity Benefit Act, 1961 which provides for the payment of maternity benefit to all the women workers.
  7. The Payment of Bonus Act, 1965 imposes a liability on the employers to pay bonuses to their employees. The act provides for the payment of minimum & maximum bonus as per the work of the employees. This act applies to every factory where 10 or more workers are working.
  8. Payment of wages to the workers as guided under the Payment of Wages Act, 1936. The act provides the remedy to the workers who were either paid wages not in time or unauthorized deductions have been from their wages

Compliance under labour laws

As per se, labour law compliances are a must to be followed by all the companies & industries this new policy helps the new entrepreneurs avoid harassment by restricting the discretion & arbitrariness. All the acts mentioned below are statutory compliance under the labour laws which have to be followed but were exempted for a period of 3 years so that the startups get motivated.
  • Other Construction Workers Regulation of Employment & Conditions Act, 1966

    An act which regulates the employment & condition of service of building & other construction workers. This act also provides for the safety of the workers including their health & welfare measures as well.
  • Inter-State Migrant Workmen Act, 1979

    An Act which was enacted in order to regulate the condition of service of the interstate Labourers. The sole purpose of this act is to protect the workers whose services are outside their native states. This act was created to protect the rights of the workers as well as to provide the employer with workers outside the state whenever he/she faces a shortage of skills among the locally available workers.
  • The Payment of Gratuity Act, 1972

    Gratuity is basically the payment that is to be made to an employee or the worker upon the termination of his/ her service. The act provides the employer to pay the amount of gratuity at the rate of 15 days per year of service of the last salary. The acts specifically say that gratuity should be payable within 30 days of last employment of that worker & is payable to the employee only after the termination.
  • CLRA or Contract Labour Regulation & Abolition Act, 1970

    The provisions under this act help to regulate the employment of contract labour in all the factories & industries & this act also provides for its abolition in certain circumstances. This act also provides a responsibility to with the principal employer to provide the workers with canteens, restrooms, first aid facilities, payment of wages, etc
  • The Employees Provident Funds & Misc. Provisions Act, 1952

    This act basically provides for the compulsory contribution of a fund for the future of that employee post his/her retirement. However, as per the Act, the employees� provident fund is mandatory for all those employees earning less than 15,000 per month. Provident Fund is contributed from both sides at 12% of the basic salary.
  • The Employees State Insurance Act, 1948

    The provisions under this Act provide for certain benefits which the employees enjoy in the cases of sickness, maternity & employment injury. This act is applicable to any factory which has employed 10 or more workers at any point in time. This insurance fund comprises of the contributions made by the employer & employee. As per law Employer�s contribution is 4.75% & the employees� contribution is 1.75% of the total wages. However, there is some exception in this act which are that this act is only for the employees whose monthly wages are less than 15,000 INR or lesser. Another exception is that if the wages of any employer is less than 100 INR, he/she will be exempted from making the contribution & only the employer will be liable to make the contribution.
  • Industrial Employment (Standing Orders) Act, 1946

    The sole purpose of this act is to provide the workers with sufficient knowledge of their work environment. The act basically requires the employers to define with sufficient precision all the conditions of the employment the workers would be facing after the employees under them.
  • Trade Unions Act, 1926

    This act provides for the registration of trade unions & govern all the laws related to the registered trade union. The sole purpose of this act is to protect & promote the interest of the workers.
  • Industrial Disputes Act, 1947

    Provisions of this act provide for the investigation & settlement of all industrial disputes. The provisions of this act are to secure the industrial peace & harmony by providing the machinery & procedure for the investigation & settlement of industrial disputes by negotiations. This act also lays down the provisions for the payment of compensation to the workmen for the unfair labour practices on the part of the employer or a trade union.
CLRA Compliance
CLRA compliance or the Contract Labour Regulation & Abolition Act which was passed to raise the standard of working conditions & prevent exploitation of Employees & is applicable to all the organizations employing 20 or more people. This act ensures to provide the workers with all the basic amenities such as access to the canteen, drinking water, restrooms, etc. A landmark Case of Standard Vacuum Refining Company Vs its Workmen, AIR 1961 SC 895 laid to the foundation of CLRA Act. In this case, the court issued guidelines & laid down specific regulations which every company should adhere to now.

Labour Law Compliance is a must for all the factories & industries to follow but it is harassment for the new entrepreneurs. So, the government with the sole aim to support & promote the startup came up with a policy to self-certify 9 labour laws & environmental laws for a period of 3 years so that the new entrepreneurs may have to face some fewer problems & will get accustomed to all the labour law compliances during the 3 year period. This is a good decision taken by the government to promote startups in India which will actually boost the startup sector thus giving a way to employment opportunities as well.
Written By: Kunal Jain of Symbiosis Law School, Noida & this article deals with the different labour law compliances for the startups in India.

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