Employment and social security Indian Law

1. Employment and Social Security Law in India
Avv. Pierfrancesco C. FASANO Milano, 6 aprile 2013
FASANO - AVVOCATI
ISPI - Istituto per gli Studi di
Politica Internazionale

2. 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

3. 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

4. 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]

5. 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

6. 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)

7. 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

8. History and prefatory remarks

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

9. History and prefatory remarks

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

10. 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

11. 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

12. 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

13. History and prefatory remarks

Indian labor law India is considered to be
highly regulated and complex

Over 50 major Acts and numerous laws

Detailed summary is impossible

14. 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

15. Classification of labour and social
security laws

Laws related to Wages:

Payment of Wages Act, 1936

Minimum Wages Act, 1948

Payment of Bonus Act, 1965

16. Classification of labour and social
security laws

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.

17. Classification of labour and social
security laws

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

18. Classification of labour and social
security laws

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

19. Classification of labour and social
security laws

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

20. 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

21. 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

22. Industrial Disputes Act, 1947

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

23. Industrial Disputes Act, 1947

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”

24. 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

25. 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

26. 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

27. Industrial Disputes Act, 1947

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

28. 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.”

29. 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

30. 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

31. 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

32. 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

33. 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

34. 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

35. 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

36. 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

37. 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

38. 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)

39. 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

40. 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

41. 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

42. 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)

43. 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.

44. 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%

45. 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.

46. 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

47. Avv. Pierfrancesco C. FASANO
FASANO – AVVOCATI
Piazza Bottini, 1 – 20133 Milano
T: +39 0245506621 – F: +39 0240708747
fasano@fasano.pro - www.fasano.pro
Special thanks for the collaboration of:
Applied Law Services (ALS) – New Delhi
Dua Associates Advocates & Solicitors – New Delhi