CHAPTER 3

EMPLOYEE RELATIONS AND LEGISLATIONS

Labour Laws
 Labour legislation in India comprises both central and state
legislations.

 Most of the enactments that are in force today took shape in an

economy that was insulated from global forces.

 Although the industries that emerged in this insulated economy have

had to adapt to the provisions of the existing labour laws, there is a
clamour to usher in labour-law reforms

 This clamour may give an impression that the only way to

competitiveness is through reforming the “restrictive” labour laws.
The truth may be somewhere in between.

 At this juncture, before we debate the need and direction of reforms,

we need to develop a clear understanding of the relevant provisions.

Classification of Labour Laws - Bases

 The various labour legislations can be classified in a number of ways

depending upon the object of study eg
 On the basis of Purpose
 Regulation of working conditions

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  Social security
 Regulation of wages and bonus
 Industrial relations and conflict prevention
 Legislative Body
 Central or state or both
 Period of Enactment: Early days, pre-Independence, post-
Independence
Classification of Labour Laws – NCL2
 The National Labour Commission (Second), in its report (Chapter VI
A) has also discussed the labour laws under the following
classifications:
 Employment Relations
 Contract Labour
 Laws on Working Conditions and Welfare
 Laws Relating to Wages
 Laws Relating to Social Security
 Miscellaneous Matters
Classification of Labour Laws
The classification that we will follow is as under:
 The Regulation of Working Conditions e.g.
 The Factories Act, 1948
 The Shops and Establishments Act, 1953
 The Contract Labour (Regulation and Abolition) Act, 1970
 Other similar legislations include The Mines Act, 1952

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  The Employers’ Liability Act, 1938;
 Legislations Related to Social Security
 Employee State Insurance Act, 1948
 Workmen’s Compensation Act, 1923
 The Payment of Gratuity Act, 1972
 The Employee’s Provident Fund and Miscellaneous Provisions
Act, 1952
 Industrial Relations and Conflict Prevention
 The Industrial Disputes Act, 1947
 The Industrial Employment (Standing Orders) Act, 1946
 The Trade Unions Act, 1926
 Legislations Related to Wage and Bonus
 The Payment of Wages Act, 1936
 The Minimum Wages Act, 1948
 The Payment of Bonus Act, 1965
FACTORIES ACT, 1948
What is a factory?
• A premises whereon 10 or more persons are engaged if power is used,
or 20 or more persons are engaged if power is not used, in a
manufacturing process. [section 2 (m)]

Structure of Factories Act, 1948

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 Chapter 3
Chapter 1 Health
Objectives, Extent,
Definitions,
Chapter 4
Approval, Licensing,
Safety
Notice by Occupier
Chapter 4A
Chapter 2 Hazardous
Inspecting Staff Process
The
Factories Chapter 5
Chapter 9 Act, 1948 Welfare
Special Provisions
Chapter 6
Working Hours
Chapter 10
Penalties &
Procedures Chapter 7
Employment of
Chapter 11 Young Persons
Supplemental
Chapter 8
Annual Leave with
Wages

Chapter I

Rationale & Objectives

Social Legislation, to protect workmen employed in factories

against industrial and occupational hazards

Prevention of strain

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 Safe, healthy and sanitary conditions

Welfare of the workmen

Appropriate work culture for production and productivity

Government Control – Registers & Returns, Inspectors

A beneficent Act – Must receive liberal construction

Scope & Applicability

A ‘central’ legislation

Extends to whole of India

All Factories including factories belonging to Central and State

Governments (unless specifically excluded)

Available to all persons covered under the term ‘Worker’

Factory Means any premises including precincts thereof

Explanation 1: Number in Shifts/Relays

• 10 or more workers engaged

• manufacturing process being carried out

• With the aid of power

Explanation II (1987): EDP Unit

• 20 or more workers engaged

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 • manufacturing process being carried out

• Without the aid of power

Does not include a Mine, Mobile Units of Armed Forces, Railway

Running Shed, Hotel, Restaurant or eating place

Manufacturing Process (2k)

• Making, altering, repairing, ornamenting, finishing, packing, oiling,

washing, cleaning, breaking up, demolishing, or otherwise adapting
or treating or adapting any article or substance with a view to its use,
sale, Transport, Delivery or disposal or,

• Pumping oil, water, sewage or any other substance or,

• Generating, transforming or transmitting power or,

• Composing types of printing, printing by letter press, lithography,

book binding or,

• Constructing, reconstructing, repairing, refitting, finishing, breaking

up ships or vessels or

• Preserving or storing in cold storage

• Bidi Making

• Molding or transforming of raw cinematographical films into finished

products

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• Work done in salt works which consists of converting sea water into
water

• Preparation of food with the help of various electrical appliances

• Use of electric motor for the purpose of lifting or pumping water

• Pasteurization of milk for sale

• Process of transmitting energy through power lines

Precincts, Premises & Power

• Premises: Usually denotes building but…..liberal construction…not

necessarily building for the purpose of the Act

• Precincts: Usually understood as space enclosed by walls or fences

• Example: A concrete apron of an airfield adjoining a hangar used for

testing of planes was enclosed by a security fence. The airfield fell
within the meaning of precincts.

• Power: Electrical Energy or other form of energy which is

mechanically transmitted and not generated by human or animal
agency

Who is a Worker (2 (I), Factories Act)

A Worker means:

• Person employed

• Directly or through an agency

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 • With or without knowledge of Principal Employer (PE)

• He may be employed with or Without remuneration

A worker must be employed in:

• In Manufacturing Process, or

• In cleaning (of machinery or premises used for the manufacturing

process), or

• In some other kind of work incidental to or connected with or the

subject of manufacturing process

• DAY: means a period of 24 hours beginning at midnight

• WEEK: means a period of 7 days beginning at midnight on

Saturday night

• CALENDAR YEAR: means the period of 12 months beginning

with the first day of January in any year

• POWER: means electrical energy, or any other form of energy

which is mechanically transmitted and is not generated by human
or animal agency

• PRIME MOVER: means any engine, motor or other appliance

which generates or otherwise provides power;

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 Factory

Premises &
Precincts
10 With Power

Manufacturing Workers
Process

Making, Altering,
Repairing etc. Employed
Pumping Directly or Indirectly
Composing (Printing) With or W/O Knowledge of PE
etc. With or W/O Remuneration
Constructing etc Manufacturing Process
Preserving, Storing etc.

Main Provisions

• The Factories Act primarily aims at preserving the health, safety and
welfare of the workers working in a factory.

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• The Act also provides for regulating the working hours, weekly offs,
leave with wages and the employment of young persons and women.

• For the workers, being the "weaker section of the society, the State
has made elaborate provisions and institutional framework to ensure
that exploitation of labour by the employer does not take place
Chapters 3 to 8 contain all the main provisions relating to health,
safety, welfare and other working conditions of workers.

Approval, Licensing & Registration of Factories (Section 6)

• Details regarding the pro- posed factory along with schemes and
drawings have to be submitted to the Chief Inspector of Factories for
approval.

• The Chief Inspector of the appropriate government must respond

within a defined time period.

• In the event of no response within the specified period, approval will

deemed to have been granted.

• Making an application to the Government or Chief Inspector , along

with the duly certified plans and specifications required by the rules,

• Sent to the State Government or Chief Inspectors by registered post,

• And no order is communicated to the applicant within 3 months from

the date on which it is so sent, the permission deemed to be granted.

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• If the application is rejected appeal can be made to the government
within 30 days of the date of such rejection.

Notice by Occupier [sec.7]

• The occupier shall, at least 15 days before he begins to occupy or use

any premises as a factory, send a notice to the Chief Inspector
containing-

a. The name and situation of the factory;

b. The name and address of the occupier;

c. The name and address of the owner of the premises

d. The address to which communications relating to the factory may

be sent;

e. The nature of the manufacturing process;

f. The total rated horse power installed or to be installed in the

factory;

g. . The name of the manager of the factory for the purposes of

this Act;

h. g. The number of workers likely to be employed in the factory;

i. h. Such other particulars as may be prescribed

Occupier: General Duties (1987) S 7A

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• Occupier shall ensure, the health, safety and welfare of all workers
while they are at work in the factory.

• Every occupier shall prepare, a written statement of his general policy

with respect to the health and safety of the workers.

• Bring such statement and any revision thereof to the notice of all the
workers.

Chapter II

The Inspecting Staff [Sec.8]

• State government may appoint Chief Inspector, Additional Chief

Inspectors, Joint Chief Inspectors, Deputy Chief Inspectors, and
Inspectors.

• Prescribe their duties and qualifications

• Every District Magistrate shall be an Inspector for his district

• Every inspector is deemed to be a public servant within the meaning

of the Indian Penal Code

Powers of Inspectors [sec.9]

• Enter factory premises for investigation

• Examine the premises

• Inquire into any accident or dangerous occurrence

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• Require the production of any prescribed register or document

• Seize, or take copies of, any register, record or other document

• Take measurements and photographs and make such recordings

• Exercise such other powers as may be prescribed

• No person shall be compelled under this section to answer any

question or give any evidence tending to incriminate himself.

Certifying Surgeon[Sec.10]

State Government may appoint qualified medical practitioners to be

certifying surgeons

Duties of surgeons

a. the examination and certification of young persons under this Act;

b. the examination of persons engaged in factories in such dangerous

occupations or processes

c. supervising the factories where

i. cases of illness have occurred which are due to the nature of the
manufacturing process or

ii. due to manufacturing process there is a likelihood of injury to

the health of workers or

iii.young persons are employed in any work which is likely to

cause injury to their health.
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Chapter III

Cleanliness Over Crowding

Wastes & Effluents

Lighting

Ventilation & Temp Health

Drinking Water

Dust & Fumes Latrines & Urinals

Humidification Spittoons

1. Cleanliness (Section 11)

 The working condition should be clean and safe.
 Clean the floor at least once in a week by washing, or by some
effective method.
 Effective means of drainage shall be provided.
 White wash every 14 weeks.
 Paint / varnish every 5 years.

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  Every factory shall be kept clean and free from effluvia arising
from any drain, privy or other nuisance.
 The following precautions shall be taken in particular:
a) Accumulation of dirt and refuse shall be removed daily from the
floors and benches of workrooms and from staircases and passages,
by sweeping or by any other effective method, and disposed of in a
suitable manner
b) The floor of every workroom shall be cleaned at least once every
week by washing, using disinfectant, where necessary, or by some
other effective method
c) Where a floor is liable to become wet in the course of any
manufacturing process to such an extent as incapable of being
drained, effective means of drainages shall be provided and
maintained
d) All inside walls, partitions, all ceilings of tops of rooms and all walls,
sides and tops of passages and staircases shall
• be repainted or revarnished at least once in every period of five
years, where they are not painted with washable water paint or
varnish; where they are painted with washable water paint, they
shall be repainted with at least one coat of such paint at least once
in every period of three years and washed at least once in every
period of six months

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 • be cleaned at least once in every period of fourteen months by such
method as may be prescribed, where they are painted or varnished
or where they have smooth impervious surfaces
• be kept white-washed or colour-washed, and the white-washing or
colour washing shall be carried out at least once in every period of
fourteen months, in any other case
e) All doors and window frames and wooden or metallic framework and
shutters shall be kept painted or varnished and the painting or
varnishing shall be carried out at least once in every period of five
years

2. Disposal of wastes and effluents (Section 12)

• There should be proper arrangements or disposal of wastes and

effluents.

• Effective arrangements shall be made in every factory for the

treatment of wastes and effluents due to the manufacturing process
carried on thereon, so as to render them innocuous and disposable.

3. Ventilation and temperature (section 13)

• Effective and suitable provisions shall be made in every factory for

securing and maintaining in every workroom:

a. Adequate ventilation by the circulation of fresh air, and

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 b. Such a temperature as will secure to workers therein reasonable
conditions of comfort and prevent injury to any health hazard

4. Dust and fume (section 14)

• Every factory shall be kept clean and free from effluvia arising
from any drain, privy or other nuisance. The following precautions
shall be taken in particular.
• This section prescribes effective measures, which should be
adopted to keep the workrooms free from dust and fume.
• In every factory, which, due to the manufacturing process carried
on, gives off any form of dust or fume or other impurity of such a
nature and to such an extent as it is likely to be injurious or
offensive to the workers employed therein, effective measures
shall be taken to prevent its inhalation and accumulation in any
workroom.
• If any exhaust appliance is necessary for the above purposes, it
shall be applied as near as possible to the point of origin of dust,
fume or other impurity and such points shall be enclosed as far as
possible.

5. Artificial Humidification (Section 15)

• Factories in which humidity of the air is artificially increased like

in textile units, keep in limits.

• The water used for artificial humidification to be clean.

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 • All factories in which humidity of the air is artificially increased,
the state government may make rules:

a. Prescribing standards of humidification

b. Regulating the methods used for artificially increasing the

humidity of the air

c. Directing prescribed tests for determining the humidity of the air to

be correctly carried out and recorded

d. Prescribing methods to be adopted for securing adequate

ventilation and cooling of the air in the workroom

• Section 15(2) lays down that in any factory in which humidity of the
air is artificially increased, the water used for the purpose shall be
taken from a public supply or other source of drinking water, or shall
be effectively purified before it is so used.

6. Overcrowding (section 16)

• 14.2 cubic meters space per worker. While calculating this space,
space above the worker beyond 4.2 meters will not be taken into
account.

• Notice specifying the maximum number of workers, which can be

employed in any work room shall be displayed in the premises.

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7. Lighting (section 17)

• Sufficient and suitable lighting in every part of the factory.

• There should be natural lighting as far as possible.

• All gazed windows and skylights used for the lighting of the
workroom shall be kept clean.

• Formation of shadows to such an extent as to cause eye strain or

the risk of accident to any worker shall be prevented.

8. Drinking water (section 18)

• There should be drinking water (Wholesome water)

• Drinking points to be marked as drinking water.

• They should be at least 6 meters away from

washroom/urinal/latrines/spittoons.

• If >250 workers are working, then have cool water facility also.

9. Latrines and Urinals (Section 19)

• There should be separate – for male and female.

• Proper cleaning should be there.

• In every factory—

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 a. Sufficient latrine and urinal accommodation of prescribed type
shall be provided conveniently situated and accessible to workers
at all times while they are at the factory

b. Separate enclosed accommodation shall be provided for male and

female workers

c. Such accommodation shall be adequately lighted and ventilated,

and no latrine or urinal, shall, unless specially exempted in writing
by the Chief Inspector, communicate with any workroom except
through an intervening open space or ventilated passage

d. All such accommodation shall be maintained in a clean and

sanitary condition at all times

e. Sweepers shall be employed whose primary duty would be to keep

clean latrines, urinals and workplaces

• In every factory wherein more than 250 workers are ordinarily

employed—

a. All latrine and urinal accommodation shall be prescribed sanitary

types

b. The floors and internal walls up to a height of 90 cm of the latrines

and urinals and sanitary blocks shall be laid in glazed tiles or
otherwise finished to provide a smooth polished impervious
surface

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 c. The floors, portions of the walls and blocks so laid or finished and
the sanitary pans and urinals shall be thoroughly washed and
cleaned at least once every day with suitable detergents or
disinfectants or with both.

10. Spittoons (section 20)

• There should be sufficient number of spittoons.

• No person shall spit within the premises of a factory expect in the

spittoons provided for the purpose.

• Whoever spits in contravention shall be punishable with fine not

exceeding five rupees.

Chapter IV

Safety

Fencing of M/C (21) Pits, Sumps, Openings (33)

M/C in Motion (22) Excessive Weights (34)

Dangerous M/C (23) Protection of Eyes (35)

Striking Gear & Power Cut-Off (24) Dangerous Fumes (36)

Self Acting M/C (25) Portable Lights (36A)

Casing of M/C (26) Explosives, Gases (37)

Safety
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 1. Fencing of Machinery (Section 21)
In every factory the following, namely-
(i) every moving part of a prime-mover and every flywheel connected
to a prime-mover, whether the prime-mover or flywheel is in the
engine-house or not;
(ii) the headrace and tailrace of every water-wheel and water-turbine;
(iii) any part of a stock bar which projects beyond the head stock of a
lathe; and
(iv) unless they are in such position or of such construction as to be
safe to every person employed in the factory as they would be if
they were securely fenced, the following, namely:-

a. every part of an electric generator, a motor or rotary convertor;

b. every part of transmission machinery; and

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c. every dangerous part of any other machinery;

shall be securely fenced by safeguards of a substantial construction

which shall be constantly maintained and kept in position while the parts
of machinery they are fencing, are in motion or in use.

• Every dangerous parts must be securely fenced.

• The state government may by rules prescribe such further

precautions.

2. Machines in motions (Section 22)

• Examination of machinery in motion only by a specially trained adult

male worker wearing tight fitting clothing.
• No women or child should be allowed to work.
• Where in any factory it becomes necessary to examine any part of
machinery referred to in section 21, while the machinery is in motion,
or as a result of such examination, to carry out-
(a) lubrication or other adjusting operation; or
(b) any mounting or shipping of belts or lubrication or
other adjusting operation,
while the machinery is in motion, such examination or operation
shall be made or carried out only by a specially trained adult male
worker wearing tight fitting clothing, supplied by the occupier,
whose name has been recorded in the register prescribed in this
behalf a who has been certified and while he is so engaged:-

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 A. such worker shall not handle a belt at a moving pulley unless-
(i) the belt is not more than fifteen centimeters in width;
(ii) the pulley is normally for the purpose of drive and not merely a
fly- wheel or balance wheel;
(iii) the belt joint is either laced or flush with the belt;
(iv) the belt, including the joint and the pulley rim, are in good repair,
(v) Reasonable clearance between the pulley and fixed structure;
(vi) secure foothold and, secure handhold, are provided for the
operator;
(vii) any ladder in use for carrying out any examination or operation
aforesaid is securely fixed or lashed or is firmly held by a person
B. Without prejudice to any other provision, every set screw, bolt and
key on any revolving shaft, spindle, wheel or pinion, and all spur,
worm and other toothed or friction gearing in motion with which such
worker otherwise be liable to come into contact, shall be securely
fenced to prevent such contact.
2. No woman or young person shall be allowed to clean, lubricate or
adjust any part of a prime mover or of any transmission machinery
while they are in motion, or to clean, lubricate or adjust any part of
any machine if the cleaning, lubrication or adjustment thereof
would expose the woman or young person to risk of injury from
any moving part either of that machine or of any adjacent
machinery.

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 3. The State Government may, by notification in the Official Gazette,
prohibit, in any specified factory or class or description of
factories, the cleaning, lubricating or adjusting by any person of
specified parts of machinery when those parts are in motion.

3. Employment of young person dangerous machines (Section 23)

• No young person should be allowed to work on dangerous

machines, unless he has been trained, and is under supervision.
• Young person = 14 to 18.
• No young person [shall be required or allowed to work] at any
machine to which this section applies, unless he has been fully
instructed as to the dangers arising in connection with the machine
and the precautions to be observed and-
(a) has received sufficient training in work at the machine,
or
(b) is under supervision by a person having knowledge &
and experience of the machine.
• Above shall apply to such machines as may be prescribed by the
SG, being machines which in its opinion are of such a dangerous
character that young persons ought not to work at them unless the
for eg requirements are complied with.

4. Striking gears (Section 24)

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• There should be suitable gears etc. to switch off the power, so that if
there is any emergency, problem can be solved.

1. In every factory-

a. suitable striking gear or other efficient mechanical appliance shall

be provided and maintained and used to move driving belts to and
from fast and loose pulleys which form part of the transmission
machinery, and such gear or appliances shall be so constructed,
placed and maintained as to prevent the belt from creeping back on
to the fast pulley;

b. driving belts when not in use shall not be allowed to rest or ride
upon shafting in motion.

2. In every factory suitable devices for cutting off power in emergencies

from running machinery shall be provided and maintained in every
workroom
3. When a device, which can inadvertently shift from "off” to “on”
position, is provided in a factory to cut-off power, arrangements shall
be provided for locking the device in safe position to prevent
accidental starting of the transmission machinery or other machines to
which the device is fitted.

5. Self acting machines (Section 25)

• Make sure that no person should walk in a space within 45 cm

from any fixed structure which is not a part of machine
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 • No traversing part of a self-acting machine in any factory and no
material carried thereon shall, if the space over which it runs is a
space over which any person is liable to pass, whether in the
course of his employment or otherwise, be allowed to run on its
outward or inward traverse within a distance of forty-five
centimeters from any fixed structure which is not part of the
machine.

• Provided that the CI may permit the continued use of a machine

installed before the commencement of this Act, which does not
comply with the requirements of this section on such conditions for
ensued safety as he may think fit to impose.

6. Casing of new machines (Section 26)

• All machinery driven by power and installed should be so sunk,

encased or otherwise effectively guarded as to prevent danger.

1. In all machinery driven by power and installed in any factory after

the commencement of this Act,-

a. every set screw, bolt or key on any revolving shaft, spindle, wheel
or pinion shall be so sunk, encased or otherwise effectively
guarded as to prevent danger;

b. all spur, worm and other toothed or friction gearing which does not
require frequent adjustment while in motion shall be completely

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 encased, unless it is so situated as to be as safe as it would be if it
were completely encased.

2. Whoever sells or lets on hire or, as agent of a seller or hirer, causes

or procures to be sold or let or hire, for use in a factory any
machinery driven by power which does not comply with the above
provisions or any rules, shall be punishable with imprisonment for a
term which may extend to three months or with fine which may
extend to five hundred rupees or with both.
3. The State Government may make rules specifying further safeguards
to be provided in respect of any other dangerous part of any
particular machine or class or description of machines.

7. Cotton openers (section 27)

• No women and children are allowed to work on cotton openers.

8. Hoists and lifts (sec. 28)

• Every hoist and lift should be in good condition, and properly

checked.

• The maximum load it can carry – must be clearly mentioned.

• The gates should be locked by interlocking / safe method (it should

not open in between).

• To be properly examined in every 6 months.

1. In every factory-
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 a. every hoist and lift shall be-

(i) of good mechanical construction, sound material and adequate

strength;

(ii) properly maintained, and shall be thoroughly examined by a

competent person at least once in every period of six months and a
register shall be kept containing the prescribed particulars of every
such examination.

b. every hoist way and lift way shall be sufficiently protected by an

enclosure fitted with gates, and the hoist or lift and every such
enclosure shall be so constructed as to prevent any person or thing
from being trapped between any part of the hoist or lift and any
fixed structure or moving part;

c. the maximum safe working load shall be plainly marked on every

hoist or lift, and no load greater than such load shall be carried
thereon;

d. the cage of every hoist or lift used for carrying persons shall be
fitted with a gate on each side from which access is afforded to a
landing;

e. every gate shall be fitted with inter-locking or other efficient

device to secure that the gate cannot be opened except when the
cage is at the landing and that the cage cannot be moved unless the
gate is closed.
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2. The following additional requirements shall apply to hoists and lifts
used for carrying persons and installed or reconstructed in a factory
after the commencement of this Act, namely:-

a. where the cage is supported by rope or chain, there shall be at least

two ropes or chains separately connected with the cage and balance
weight, and each rope or chain with its attachments shall be
carrying the whole weight of the cage together with its maximum
load,

b. efficient devices shall be provided and maintained capable of

supporting the cage together with its maximum load in the event of
breakage of the ropes, chains or attachments;

c. an efficient automatic device shall be provided and maintained to

prevent the cage from over-running.

3. The CI may permit the continued use of a hoist or lift installed in a

factory before the commencement of this Act which does not fully
comply with the provisions upon such conditions for ensuring safety
as he may think fit to impose.

9. Lifting machines, chains, ropes, and lifting tackles (sec. 29)

• Cranes and lifting machines, etc to be of good construction and to

be examined once in every 12 months.

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 • Cranes and lifting machines not to be loaded beyond safe working
load.

• Cranes not to be approach within 6 meters of a place where any

person is employed or working.

10. Revolving machine (sec. 30)

• Maximum safe speed must be mentioned for each machine.

• Speed indicated in notices should not be exceeded.

11. Pressure plants (sec. 31)

• There should be safe working pressure or pressure plants.

• Effective measures should be taken to ensure that the safe working

pressure is not exceeded.

12. Floors, stairs, etc…(sec. 32)

• All floors, steps, stairs, passage and gangways should be of sound

construction and properly mentioned.

13. Pits, sumps, opening in floors etc… (sec. 33)

1. In every factory every fixed vessel, sump, tank, pit or opening in

the ground or in a floor which, by reason of its depth, situation,
construction or contents, is or may be a source of danger, shall be
either securely covered or securely fenced.

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 2. The State Government may, by order in writing, exempt, subject to
such conditions as may be prescribed, any factory or class or
description of factories in respect of any vessel, sump, tank, pit or
opening from compliance with the provisions of this section.

14. Excessive weights (sec. 34)

• No person shall be employed in any factory to lift, carry or move

any load so heavy as to be likely to cause him injury.

• The State Government may make rules prescribing the maximum

weights which may be lifted, carried or moved by adult men, adult
women, adolescents and children employed in factories or in any
class or description of factories or in carrying on any specified
process.

15. Protection of eyes (sec. 35)

• In respect of any such manufacturing process carried on in any

factory as may be prescribed, being a process which involves

(a) risk of injury to the eyes from particles or fragments thrown off in
the course of the process, or

(b) risk to the eyes by reason of exposure to excessive light, the

• State Government may by rules require that effective screens or

suitable goggles shall be provided for the protection of persons
employed on, or in the immediate vicinity of, the process.

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16. Precautions against dangerous fumes, gases, etc (sec.36)

• Prohibited to employ workers in place where dangerous gas /fume

is present.

• Practicable measure should be taken for removal of gas, fume

etc…

17. Precautions regarding the use of portable electric light (sec. 36A)

• No portable electric light or any other electric appliance of voltage

exceeding twenty-four volts shall be permitted for use inside any
chamber, tank, vat, pit, pipe, flue or other confined space.

• If any inflammable gas, fume or dust is likely to be present in such

chamber, tank, vat, pit, pipe, flue or other confined space, no lamp
or light other than that of flame-proof construction shall be
permitted to be used therein.

18. Explosive or inflammable dust, gas, etc (sec 37)

• Take all measures for safety and to prevent explosion of ignition of

gas, fume etc…

19. Precaution in case of fire (sec. 38)

• There should be separate exit for cases of fire.

• There should be facilities for extinguishing fire.

33
20. Power to require specification of defective part or test of stability
(sec. 39)

• The inspector of factories has been authorized wit powers to seek

drawings, specifications and other particulars as may be necessary
or to carry out such tests as prescribed in case any art of building,
machinery is in such condition that it may be dangerous.

21. Safety of buildings and machinery (sec. 40)

• In the event of the inspector finding any machinery or plant in a

factory to be in a state of disrepair as is likely to lead to conditions
detrimental to the health and welfare of workers. He may serve a
notice on the occupier specifying measures, which in his opinion
need to be taken within a specified date.

22. The maintenance of building (sec. 40A)

• In the event of the inspector finding any machinery or plant in a

factory to be in a state of disrepair as is likely to lead to conditions
determined to the health and welfare of workers, he may serve a
notice on the occupier specifying measures, which in his opinion
need to be taken within a specified date.

23. Safety officers (sec.40B)

• One thousand or more workers are ordinarily employed.

34
 • Any manufacturing process or operation is carried on, which in the
opinion of the state government involves any risk of bodily injury,
poisoning or diseases, or any hazard to health, to the persons
employed in the factory.

24. Grants rule-making power to state (sec. 41)

• While it may be necessary to know the detailed provision, it is

described that an overall understanding of safety provisions be
there.

Chapter 4 (A)

Hazardous Process (2cb)

• Industry Specified in 1st Schedule

• R/M( Raw Material) or Finished Product/Intermediate/Bye

Product:

– Cause impairment to health of the persons or

– Pollution of general environment

• Site Appraisal Committee: To advise the state government

(location, consider application for permission)

• Compulsory disclosure of information (dangers, hazards, measures

to overcome such hazards, - to the Chief Inspector and to the
workers)

35
 • Safety Policy

• On site emergency plan

• Measures for handling hazardous material to be spelt out

• Maintain accurate up to date health records

• Permissible limits of exposure (2nd Schedule)

• Workers participation in safety management

• Right of workers to warn about imminent danger

Chapter V

Welfare
Washing (42)
Welfare Officers Storing &
(49) Drying (43)

Crèche (48) Welfare Sitting

(44)

Shelters, Rest First Aid (45)

Rooms (47)
1. Washing facilities Canteen
(46)
• There should be washing facilities in every factory for the workers,
separate for males and female workers properly screened.

• Continently accessible and shall be kept clean.

2. Facilities for storing and drying of clothes

36
 • There should be facility so that worker can place their cloth not
worn during the manufacturing process.

• There should be facility so that worker can dry their wet cloth.

3. Facilities for sitting (sec 44)

• Suitable arrangements for sitting shall be provided and maintained

for all workers obliged to work in standing position.

• If the worker can do the work by sitting – there should be sitting

arrangements for the worker.

4. First aid appliances (Sec45)

• There should be at least one first aid box for every 150 workers.

• It should have the prescribed contents.

• A responsible person should hold a certificate on first aid

treatment.

• An ambulance room should be there if the number of worker is

more than 500

5. Canteens (sec. 46)

• If the number of workers is more than 250 the government may

make rules for canteen.
• The government may make rules regarding food stuff,
construction, furniture, equipment of the canteen.

37
6. Shelter, restroom. Lunch room (sec. 47)

• When 150 workers are working, there should be restrooms, lunch

room, etc…

• Such places should be having drinking water facility.

7. Crèches (sec.48)

• If the number of women workers is more than 30, there should be

the crèches.

• In every factory wherein more than [thirty women workers] are

ordinarily employed there shall be provided and maintained a
suitable room or rooms for the use of children under the age of six
years of such women.

• It should be sufficiently lighted, ventilated and to be under the

charge of trained women.

8. Welfare officer (sec 49)

• If the number of workers is 500 or more, there should be welfare

officer to look after the welfare of the officer.

Chapter VI

Working Hours

Weekly Hours (Section 51):

38
No adult worker shall be required or allowed to work in a factory for
more than forty-eight hours in a week.

Weekly Holidays (Section 52):

• No adult worker shall be required or allowed to work in a factory on

the first day of the week (Sunday) unless given a full day's holiday on
one of the three days immediately before or after the said day.

• This section also specifies that this substitution should not result in
any worker working for more than ten days consecutively without a
holiday for a whole day.

Thursday
Weekly Off Shifted 2 days before
Friday

Saturday
First Weekly Off
Sunday

Monday Sunday is the Normal Weekly Off. In lieu of this Normal

Weekly off, a worker can be given an off on previous Thursday
Tuesday (one of the three immediately preceding days). The next
39
normal weekly off is the next Sunday. He can be given an off
Wednesday
in lieu on the Wednesday following the second weekly off
Thursday (three days after). The worker will now have to work for more
Compensatory holidays (Section 53):

In case Section 52 is not applied on account of any exemption, a worker

deprived of any of the weekly holidays shall be allowed, within a month
in which holidays were due to him or within the two months
immediately following that month, compensatory holidays of equal
number to the holidays so lost.

Daily Hours (Section 54):

No adult worker shall be required or allowed to work in a factory for

more than nine hours in any day.

Intervals for Rest (Section 55):

40
• The periods of work of adult workers in a factory each day shall be so
fixed that no period shall exceed five hours and no worker shall work
for more than five hours before he has had an interval for rest of at
least half an hour.

• The state government, however, is empowered to exempt by a written

order any factory from this provision only to the extent that the total
number of hours worked by a worker without an interval does not
exceed six

Spread-over (Section 56):

• In simple terms, "spread-over" means the total duration of time (hours

of work plus rest intervals).

• The periods of work of an adult worker in a factory shall be so

arranged that inclusive of intervals for rest, they shall not spread over
more than ten and a half hours in any day. The Chief Inspector may,
however, increase the spread over up to twelve hours by a special
order in writing.

For example:

A worker is asked to work from 8 a.m. to 12 p.m. and then again from 3
p.m. to 7 p.m., i.e., a total of 8 working hours in a day. However, the
spread-over in this case is 11 hours (8 a.m. to 7p.m.). Even though the
working hour and rest interval adhere to the provisions of the Factories
Act, the total spread-over exceeds the stipulation of ten and half hours.
41
Night Shifts (Section 57):

• In case a worker in a factory works on a shift that extends beyond

midnight, a holiday for a whole day shall mean a period of 24
consecutive hours beginning when his shift ends. The following day
for him shall be deemed to be the period of 24 hours beginning when
such a shift ends, and the hours he has worked after midnight shall be
counted in the previous day.

• If a worker has worked in a night shift from 10 pm to 6 a.m., the

holiday for him will be 24 hours from 0600 hours and not from 0000
hours. There should be a clear 24-hour break (at least) between the
end of his shift and the beginning of the next shift after a holiday.

The Prohibition of Overlapping Shifts (Section 58):

Work shall not be carried on in any factory by means of a system of

shifts so arranged that more than one relay of workers is engaged in
work of the same kind at the same time.

Extra Wages for Overtime (Section 59):

• Where a worker works in a factory for more than nine hours in any
day or for more than forty-eight hours in any week, he shall in respect
of overtime work, be entitled to wages at the rate of twice his
ordinary rate of wages.

• Ordinary rate of wages means basic wages plus allowances.

42
• In case of piece-rated workers, the time rate shall be deemed to be
equivalent to the daily average of their full-time earnings.

Restriction on Double Employment (Section 60):

No adult worker shall be required or allowed to work in any factory on

any day on which he has already been working in any factory, save in
such circumstances as may be prescribed.

Notice of Periods of Work for Adults (Section 61):

• No worker shall be required or allowed to work in any factory other

than in accordance with the notice of periods of work for adults
displayed in the factory and the entries made before hand against his
name in the register for adult workers of the factory.

• Notice is to be dis played, regarding periods of work on a daily basis

and shift systems planned for the week

Chapter VII

Employment of Young Women

The Employment of Women and Young Persons:

• There are specific restrictions on employment of women and

young persons in a factory.

• Women: The employment of women in any factory is restricted to

timings between 6 a.m. and 7 p.m.

43
 • Women are not to be deployed on night shifts.

• The provision made in this section states that women cannot be

exempted from the requirement that the maximum working day for
adults is nine hours, and cannot work in factories between 7 p.m.
and 6 a.m. (unless the factory falls within a specific exemption, but
in any case, not between 10 p.m. and 5 a.m.).

• In relation to women, there must not be a change of shifts except

after a weekly or other holiday. Periods of absence on maternity
leave are included in calculating periods of service for the purposes
of annual leave.

• Prohibition of women workers at night shift.

• Women shall not be allowed to work in any factory except

between the hours of 6 A.M. and 7 P.M.

• The inspector may relax this norm but prohibited between 10 P.M.
and 5 A.M.

• Working hours not more than-weekly 48 hours & daily 9 hours.

The Prohibition of Employment of Young Children (Section 67):

• No child who has not completed his 14th year shall be required or
allowed to work in any factory.

Register of Young persons

44
 • The manager should maintain Register of Adult workers showing

- Name

- Nature of work

- The Group etc.

• Of each & every Adult Worker in the factory.

• The Register shall be available to the Inspector at all time during

working hours.

Power to require Medical Examination [Sec.73]

• Inspector has the power to direct manager to have medical

examination of young persons working in case

- Young Persons working without License.

- They no longer seem to be Fit.

Chapter VIII

Annual Leave with Wages

Annual Leave with Wages (Section 79):

• Every adult worker who has worked for a period of 240 days or more
in a factory during a calendar year shall be allowed during the
subsequent calendar year one day of leave entitlement for every 20
days of work.

45
At a Glance

ITEM PROVISION REMARKS

Working hours/day 9 hours maximum Adult worker. Total working
hours including overtime not
to exceed 60 hours in a
week.
Working 48 hours maximum Adult workers
hours/week
Overtime Payable if Either of the two conditions.
working hours > 9 Subject to a maximum of 60
hours/day Working hours in a week.
or 48 hours/week Total overtime not to exceed
Overtime rate Double 50 hours in a quarter.
the ordinary rate of
wages
Overtime rate Double the ordinary
rate of wages
Rest interval At least 30 minutes
rest after a maximum
of 5 hours’ work
Spread-over 10.5 hours Extendable to 12 hours
through approval in writing
Women workers’ Not to be deployed Unless there is an

46
timings between 7 p.m. and 6 exemption, but in no case
a.m. between 10 p.m. and 5 a.m.
Weekly off First day of the week Can be shifted to any of the
preceding or succeeding 3
days subject to condition
that there should not be more
than 10 working days
between 2 weekly offs
Annual leave with 1 day for every 20
wages (earned days ‘work subject to
leave) a qualifying240 days’
work in the qualifying
year

Chapter X

Penalties and Procedures

Penalties under the Act [Sec.92-106]

OFFENCES PENALTIES
Any contravention of the Imprisonment upto 2 years or fine
provision of this act by Occupier upto Rs 100,000 or both.
or manager of the factory.
Contravention is continued after Rs 10000 per day.

47
conviction.
Contravention of any of the Fine shall not be less than Rs 25000.
provision resulted in an accident
causing death.
Serious bodily injury Rs 5000.

Penalty for Obstructing inspector. Imprisonment 6month or fine 10,000

rupees or with both.
Penalty for wrongfully disclosing Imprisonment 6 month or with fine
results of analysis under section 10,000 rupees or with both.
91.
IV-Penalty for contravention of Imprisonment for 7 years & with fine
the provision of sections which may extend to 20,000 rupees
41B,41C,41H in case the failure additional fine 5000 rupees for
or contravention continues. everyday during which such failure or
contravention continues

Offences by workers contravenes 50000 Rupees

any provision of this act.
Penalty for using false certificate Imprisonment for 2 month or with fine
of fitness. to 1000 rupees or with both.

Penalty for permitting double 1000 Rs.

employment of Child.

48
Registers & Returns

Form 6 Humidity

Form 7 White Washing

Form 7A Tight Fitting Clothes Provided

Form 9 Compensatory Holidays

Form 10 Overtime

Form 12 Adult Workers

Form 14 Child Labor

Form 15 Leave with Wages

Forms 24 & 25 Muster Roll

Form 26 Accidents and Dangerous Occurrences

49
REGULATIONS OF EMPLOYEE RELATION
INDUSTRIAL DISPUTE ACT 1947
Definition
The industrial dispute means any dispute or difference between:-
(i) Employers and employers (ii) Employers and Workmen or
(iii)Workmen and workmen, which is connected with
– Industrial disputes may be said to be disagreement or controversy between
management and labor with respect to wages, working conditions, other
employment matters or union recognition.
Industry
As per section 2 (J) of industrial disputes act 1947, Industry mean any systematic
activity carried on by cooperation between an employ and his work man for the
production supply or distribution of goods and services with a view of satisfy
human wants or needs.
Objectives
 Promotion of measures of securing, preserving Industrial harmony
 Settlement of disputes between:
• Employer – Employer
• Employer - Workman

50
 • Workman - Workman
 Rights of Registered Trade Union
 Prevention of illegal- Strike; Lockout
 Promotion of collective bargaining

Types Of ID’s

Grievance disputes: may

Interest disputes: arising out of Pertain to discipline, wages, working
deadlocks in negotiation for time, promotion, rights of supervisors
collective bargaining etc. also sometimes called
interpretation disputes
Unfair labor practices: those
arising out of right to organize,
Recognition disputes: over the rights
acts of violence, failure to
of a TU to represent class or category
implement an award,
of workers
discriminatory treatment, illegal
strikes and lockouts
Authority

A workman includes Industry means any

any person(including business, trade,
Any person who is an apprentice) It excludes those
undertaking,
a workman employed in an employed in
manufacture and
employed in an industry to do managerial or includes any
industry can raise manual, unskilled, administrative service, employment
an industrial skilled, technical, capacity.
dispute. , handicraft, or
operational, clerical
industrial occupation
or supervisory work
or avocation
51 of
for hire or reward.
workmen.
STRIKESec. 2(q) defines a strike as follows:

i. The cessation of work by a body of persons employed in any industry acting

in combination or.
ii. A concerted refusal, or a refusal under a common understanding, of any
number of persons who are, or have been, so employed to continue to work
or accept employment.
LOCK-OUT
 A lock-out means [Sec.2(l)]
 the 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 by him.
 It means the closure of the place of business and not closure of business
itself.

I. Primary strike:
Generally pointed against the employer with whom the dispute exist.
52
 • Stay away strike:
The workmen don't come to workplace during the prescribed working hour.
They rather organize rallies, demonstration etc.
• Stay-in strike:
Also called sit-down or pen down strike where employee remain at the place
of work but refuse to work. It is effective as the employer deprived of the use of
the plant.

• Go slow strike:
Workers intentionally reduce the speed of their work to reduce the
production or efficiency while pretending to be engaged it is considered as a
serious misconduct and for which the workers can be dismissed as well
• Token or protest strike:
A short duration strike where the employee try to inform the employer about
their feelings indirectly.
Work to Rule:
 Employees are not formally on strike and continue to work strictly as per the
rules prescribed.
 Strict adherence to rules in some businesses can have a retarding effect on
productivity and the quality of service. It is a form of slow-down movement.
• Lightning or cat call strike:
This strike announce suddenly without any prior intention to go on strike.
• Picketing and boycott:
Act of posting picket and imply marching and patrolling of the workmen in
front of the premises of the employers.
A peaceful approach to get their demand by workers.
• Hunger strike:

53
  It usually takes the form of fasting by a group of workmen after having
posted themselves near the place of work or at the residence of employer.
 The object being to coerce the employer to accept the worker’s demand.
 Fasting by itself is neither wrong nor punishable but if it undertaken to the
point of starvation and death, it amounts to offence.
 Gherao:
Is the physical blockade of a target either by encirclement intended to block
the regress and ingress from and to a particular office, workshop and factory. The
target may be place or person. It is illegal and unconditional
II. Secondary strike:
 These are strikes in which the pressure is applied not against the
primary employer with whom the primary workers have a dispute but
against some third person who has good trade relation with him.
 Mostly popular in USA.

 Sympathetic Strike:
When workers of one unit or industry go on strike in sympathy with workers of
another unit or industry who are already on strike, it is called a sympathetic strike.
III. Others:
 General strike:
It’s undertaken not by a particular body of workmen against a particular master but
by workmen in general, irrespective of masters, but against all masters.
E.g. Bandhs and Hartals. Such strike has economic demand or political support.
 Bandh:
 In Hindi, it means “closed”, and it is a form of protest used by political
activists in countries like India and Nepal.
 During a bandh, a large chunk of a community declares a general strike,
usually lasting one day.

54
  Often bandh means that the community or political party declaring a bandh
expect the general public to stay in their homes and strike work.
 Also, all the shopkeepers are expected to keep their shops closed and the
transport operators like buses and cabs are supposed to stay off the road and
not carry any passengers.
 All this is expected to be voluntary, but in many instances, people are
terrorized and coerced into participating in a bandh.
 There have been instances of large metropolitan cities coming to a standstill.
 Bandhs are powerful means for civil disobedience. Because of the huge
impact that a bandh has on the local community, it is much feared as a tool
of protest.
 Bandhs are powerful means for civil disobedience.
 Because of the huge impact that a bandh has on the local community, it is
much feared as a tool of protest.
 A bandh is not the same as a “hartal”, which simply means a strike—during
a bandh, any business activity (and sometimes even traffic) in the area
affected will be forcibly prevented by the strikers.
 In recent years, the courts have taken a very serious view towards bandh,
which is considered a tool that causes misery to the general public.

Prevention of strike!!!!
• Incidence and frequency of strikes should minimized through persistent
effort by management.
• It must require a well-defined, precise and clear personnel policies for
employees in the organization.
• Effective administration and timely implementation of these policies.
• And effective two way system of communication.

55
 • Provision of humane condition of work.
• Suitable and speedy grievance handling procedures.
Prohibition of strikes and lock-outs
• According to SEC 22 (1) No person employed with a public utility service
shall go on strike in breach of contract – Without giving the employer notice
of strike, within six weeks before the strike.
• Before the expiry of date of strike specified in such notice. According to
SEC 23; No employee of any industrial establishment shall go on strike
during the period when proceedings in any disputes case is going on or when
final judgment is awaited.

PROHIBITION OF STRIKES & LOCKOUTS

No person in a public utility service shall go on strike in breach of contract or
lock-out any of his workmen [Sec.22(1)(2)] :-
a) Without giving the notice and after 6 weeks of notice
b) Within 14days of giving such notice
c) Before the date specified in such notice
d) Conciliation going on before a Board of Conciliation & 7 days thereafter.
3) The notice shall not be necessary where there is already in existence a strike
or lock-out in the public utility service.
4) The notice shall be given in such manner as may be
prescribed.
5) The employer shall report to the appropriate govt. or any legal authority
regarding the no. of notices that he received or gave within 5 days
No workman or employer shall go on strike or declare a
lockout [Sec.23]

56
 a) During adjudication before a Board and 7days thereafter.
b) During adjudication before a labour Court, Tribunal & National Tribunal
and 2 months thereafter.
c) During arbitration beforean Arbitrator & 2months
thereafter.
d) A settlement or an award is in operation
ILLEGAL STRIKES/LOCKOUTS
In public Utility Services [Sec.22 (1) & (2),23,30,19]
• Without giving 14 days notice
• Commenced after 42 days of notice
• Prior to the date indicated in the notice.
• During the pendency of proceedings
• During the period when a settlement or award is in operation on same
matters.
In non-public utility services [Sec.23,20,19]
• In breach of contract
• During the pendency of proceedings
• During the settlement or award is in operation
 IN BOTH THE STRIKE/LOCKOUT WILL BE ILLIGAL IF CONTINUED
AFTER GOVT. BANNING. [Sec.10(4A),24]

PENALTY
• Penalty for illegal strikes (Sec 26): Imprisonment for term which may
extend to 1 month, or with fine which may extend
to Rs. 50, or with both.

57
 • Penalty for instigation of illegal strikes (sec. 27): Imprisonment for a term
up to 6 months. Or a fine up to Rs. 1000, or with both.
• Penalty for giving financial aid to illegal strikes (sec. 28): Imprisonment
for a term up to 6 months, or a fine up to Rs. 1000, or with both.
• Penalty for illegal lock-outs: Imprisonment for a term extending to 1 month
or with fine up to Rs. 1000 or with both.
LAY-OFF
• Definition [Sec.2 (kkk)]
“Lay-off” means the failure, refusal 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 whose name is borne on the muster rolls of his
industrial establishment and who has not been retrenched.
LAY OFF COMPENSATION
• 50% of basic + dearness allowance. [Sec. 25C]
• In case, permission is not obtain/refused, full wages. [Sec.
25M(8)]
• If the employee refuse to accept alternative employment under the same
employer within a radius of 5 miles, the worker is not eligible for any
compensation. [Sec. 25E(1)]
• If not reported for attendance, no compensation. [Sec.
25E(2)]
• If layoff is due to strike or go slow by another section of the unit, no
compensation. [Sec. 25E(3)]
PROCEDURE TO APPLY FOR LAYOFF PERMISSION
• Establishments covered under shall make application to appropriate Govt. in
Form 03 [Sec. 25M]
• Govt. may grant/refuse permission within 60 days. If no reply is received
within 60 days permission can be assumed. [Sec. 25M(5)]
58
RETRENCHMENT
Sec. 2 (oo) defines Retrenchment as the termination by the employer of the service
of the workman for any reason whatsoever, otherwise than a punishment inflicted
by way of disciplinary action.
Retrenchment does not include voluntary retirement superannuation or termination
of employment on grounds of ill health.
CONDITIONS PRECEDENT TO RETRENCHMENT OF WORKMEN
 No workmen [Chapter VA]who has been employed for not less than 1 year
can be retrenched until [Sec.25F]:
o 1month notice in written & reason for retrenchment.
o 15 days average pay for every completed year of service.
o Notice served to the appropriate government.
 No workmen [Chapter VB]who has been employed for not less than 1 year can
be retrenched until [Sec.25F]:
o Has been given 3 months’ notice in written, indicating the reasons for
retrenchment.
o Compensation shall be equivalent to 15 days average pay for every
completed years of continuous service or any part thereof in excess of 6
months
o Notice shall be given to appropriate government or such authority & the
permission of such government or authority is obtained.
o Government or authority after making inquiry may grant or refuse the
permission to the employer within 3 months of the date of service of the
notice.
o If it does not communicate within 3 months of such notice then the
retrenchment is legal.
o If it does refuse the permission then the retrenchment is illegal.
PENALTY FOR LAY-OFF &RETRENCHMENT
59
Any employer who contravenes the provisions of lay-off / retrenchment is
punishable with imprisonment for a term which may extend to one month, or with
fine which may extend to Rs.1000/- or both.
CLOSURE
“Closure" means the permanent closing down of a place of employment or part of
establishment [Sec. 2(cc)]
Prohibitions
• No permission is required, establishments [Sec. 25(k)]
• Where permission is required, application should be submitted (in the case
of factories, mines and plantations) to the Govt. with copy to the union at
least 90 days in advance. [Sec. 25O(1)]
• If no reply is received within 60 days permission can be assumed
[Sec.25O(3)]
PENALTY
• In case of not taking the prior permission or informing representative of
workmen, imprisonment for a term which may extend to 6 month, or with
fine which may extend to Rs. 5000, or with both.
• In case of contravene of order, imprisonment for a term which may extend to
1 year, or with fine which may extend to Rs. 5000, or with both.
UNFAIR LABOUR PRACTICES
 ON THE PART OF EMPLOYERS
• To interfere with, restrain from, or coerce, workmen in the exercise of their
right to organize, form, join or assist a trade union or to engage in concerted
activities for the purposes of collective bargaining or other mutual aid or
protection.
• To dominate, interfere with or contribute support, financial or otherwise, to
any trade union.
• To establish employer sponsored trade unions of workmen.

60
 • To encourage or discourage membership in any trade union by
discriminating against any workman.
• To discharge or dismiss workmen.
• To abolish the work of a regular nature being done by workmen, and to give
such work to contractors as a measure of breaking a strike.
• To transfer a workman mala fide from one place to another, under the guise
of following management policy.
• To insist upon individual workmen, who are on legal strike to sign a good
conduct bond, as a precondition to allowing them to resume work.
• To show favoritism or partiality to one set of workers regardless of merit.
• To employ workmen as "badlis", casuals or temporaries and to continue
them as such for years, with the object of depriving them of the status and
privileges of permanent workmen.
• To discharge or discriminate against any workman for filing charges or
testifying against an employer in any enquiry or proceeding relating to any
industrial dispute.
• To recruit workman during a strike which is not an
illegal strike.
• Failure to implement award, settlement or agreement.
• To indulge in acts of force or violence.
• To refuse to bargain collectively, in good faith with the recognized trade
unions.
• Proposing or continuing a lock-out deemed to be illegal under this Act.
 ON THE PART OF WORKMEN
• To advise or actively support or instigate any strike deemed to be illegal
under this Act.
• To coerce workmen in the exercise of their right to self-organization or to
join a trade union or refrain from, joining any trade union.

61
 • For a recognized union to refuse to bargain collectively in
good faith with the employer.
• To indulge in coercive activities against certification of a bargaining
representative.
• To stage, encourage or instigate such forms of coercive actions as willful,
"go-slow", squatting on the work premises after working hours or "gherao"
of any of the members of the managerial or other staff.
• To stage demonstrations at the residence of the employers or the managerial
staff members.
• To incite or indulge in willful damage to employer’s property connected
with the industry.
• To indulge in acts of force or violence or to hold out threats of intimidation
against any workman with a view to prevent him from attending work.

AUTHORITIES UNDER THIS ACT

1. Works committee
2. Conciliation officers
3. Board of conciliation
4. Courts of inquiry
5. Labour courts
6. Tribunals
7. National tribunals
1. WORKS COMMITTEE
• Where? : establishments with 100 or more workers
[Sec.3(1) &(2)]
• Members : Equal number of representatives of the Employer and
Employees [Sec.3(1) & Rule 40]

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 • Objective : promotion of good relationship between employer and
employee(s)
2. CONCILIATION OFFICERS
• Appointed by appropriate Government
• Nature: appointed for a specified area or for specified industries in a
specified area or for one or more specified industries and either permanently
or for a limited period.
• Duties: When a strike/lockout notice is issued in a public utility service, he
is bound to convene immediate conciliation meeting. [Sec.12(1) and Rule
9(1)]
• If he succeeds in bringing out an understanding he gets the parties to sign a
settlement in Form H (Rule 58(1)] and make necessary entries in the
register in Form O and sent a copy to the Govt. [Sec.12(3) and Rules 58(1)
(3) & 75]
• If he fails to brings about a settlement, he has to bring the fact to the
attention of the Govt. [Sec.12(4)]
 Powers of conciliation officer:
• Enter and inspect [Sec 11(1)]
• Summon any person as witness or compel the production of document
[Sec.11(4) and Rule 17]
• Grant/refuse to petition filed by employer on disciplinary matters during
pendency of conciliation before him.
3. BOARDS OF CONCILIATION
• Appointed by the appropriate Govt. as occasion arises for
settlement of disputes.
• Board shall consist of an independent chairman and two or four members in
equal numbers to represent the parties to the dispute.
• The board can't work in the absence of the Chairmen or
any member.
4. COURTS OF INQUIRY
• Appointed by the appropriate Govt. as occasion arises for
settlement of disputes.
• Board shall consist of an independent person or
independent persons as the appropriate fit. Where court

63
 consists of two or more members, one of them shall be appointed as the
Chairman.
• The board can't work in the absence of the Chairmen or
any member.
Adjudication in India

3 types of adjudication
authorities for the
adjudication of industrial
disputes:

Labor Court Tribunal National Tribunal

5. LABOUR COURT
• Constituted by the appropriate government for the adjudication of industrial
disputes relating to any matter specified in the Second Schedule and for
performing such other functions as may be assigned to them under this Act.
• Consist of one person only with the required qualification to be appointed
by the appropriate government.
THE SECOND SCHEDULE: Matters within the Jurisdiction of labour
Courts (Section 7)
• The propriety or legality of an order passed by
an employer under the standing orders
• The application and interpretation of standing orders.
• Discharge or dismissal of workmen including reinstatement of or grant of
relief to, workmen wrongfully dismissed.
• Withdrawal of any customary concession or privilege
• Illegality or otherwise of a strike or lock-out; and

64
 • All matters other than those specified in the Third
Schedule.
6. TRIBUNALS
• Constituted by the appropriate government for the adjudication of industrial
disputes relating to any matter specified in the Second Schedule or third
schedule and for performing such other functions as may be assigned to
them under this Act.
• Consist of one person with the required qualification to be appointed by the
appropriate government. If required, Govt. may appoint 2 persons as
assessors to advice in Tribunal.

THE THIRD SCHEDULE: Matters within The Jurisdiction of Industrial

Tribunals (Section 7A)
• Wages, including the periodand mode of payment
• Compensatory and other allowances
• Hours of work and rest intervals
• Leave with wages and holidays
• Bonus, profit sharing, provident fund and gratuity
• Shift working otherwise than in accordance with standing
orders
• Classification by grades
• Rules of discipline
• Rationalization
• Retrenchment of workmen and closure of establishment
• Any other matter that may be prescribed.
7. NATIONAL TRIBUNAL
• Constitute by the Central Govt. for the adjudication of industrial disputes
which involve questions of national importance or are of such a nature that

65
 industrial establishments situated in more than one State are likely to be
interested in.
• Consist of one person with the required qualification to be appointed by the
appropriate government. If required, Govt may appoint 2 persons as
assessors to advice in Tribunal.
ARBITRATION
• When conciliation fails, and if the parties wish to refer the issue for
arbitration, both the sides shall sign an arbitration agreement in Form C
under Rule 7 and send it to Govt. The Govt. will then appoint an arbitrator
[Sec.10(2), 10A]
• Arbitration award is implemented like an adjudication award.
DUTIES OF ADJUDICATION MACHINERY
• To complete the adjudication proceedings and submit the report within the
time [Sec.15, 10(2)(a)]
• To restrict the scope of their judgment to the point
referred to them [Sec.10(4)]
POWER OF ADJUDICATORS
• They can enter any establishment for fact finding [Sec.11(2)
and Rule 23]
• Can enforce attendance of any person and production of documents
[sec.11(3), rules 10A &10B]
• Empowers to administer oath and issue summons to parties and witnesses
[Rule 16,17,18]
• Can appoint assessors to assistance [Sec.11(5), Rule 25]
• Can pass orders awarding cost to the aggrieved party [sec.11(7)]
• Review punishment and can reduce/substitute punishments [Sec.
11 (A)]
• Can pass orders on money claim petitions filled by workmen against
employers [Sec. 33(C)(2)]
66
 • Take decision on petitions filed under Sec.33.
PENDENCY OF ADJUDICATION [Sec.20 (2)(c),20(3) and 17]
• Adjudication proceeding are deemed to commence on the date when the
Govt. refers the dispute to the authorities under Sec. 10 or 10(A)
• Adjudication proceeding are deemed to have concluded on the date on which
their awards become enforceable.
REPRESENTATION OF PARTIES
• Advocates are prohibited from appearance [Sec.36(3)]
• However advocates can be permitted on mutual consent. [Sec.36(4)]
• A co-worker, any union official can represent a workman [Sec.36(1)(a),(b),
(c)]
• Officer of an association of Employers. [Sec.36(2)(a),(b),(c)]

THE CONTRACT LABOUR (REGULATION

AND ABOLITION) ACT, 1970

• The government has been concerned about the exploitation of

workers under the contract labor system.

• With a view to removing the difficulties of contract labor and bearing

in mind the recommendations of various commissions and
committees and the decisions of the Supreme Court, the Contract
Labour (Regulation and Abolition) Act was enacted in 1970.

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• This Act seeks to regulate the employment of contract labour in
certain establishments and to provide for its abolition under certain
circumstances.

• Contract labour, by and large, is neither borne on pay roll or muster

roll, nor is paid wages directly.

• The establishments, which farm out work to contractors, do not own

any direct responsibility in regard to their labourers.

• Generally, the wage rates to be paid and the observance of working

conditions are stipulated in agreements, but in practice, they are not
strictly adhered to.

OBJECTIVES

i. Abolish the system of contract labor wherever possible and

practicable

ii. Improve service conditions of contract labor where abolition of the

contract labour was not possible

iii. Regulate the working conditions of the contract labour so as to

place it at par with labour employed directly

iv. Ensure timely payment of wages and provision of essential

amenities

SCOPE AND COVERAGE

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• The Act applies to every establishment/contractor in which 20 or
more workmen are employed

- or were employed on any day in the preceding 12 months as

contract labour and to every contractor who employs

- or who employed on any day of the preceding 12 months, 20 or

more workmen

• It does not apply to establishments where the work performed is of

intermittent or seasonal nature.

• An establishment, wherein work is of intermittent and seasonal

nature, will be covered by the Act if the work performed is more than
120 days and 60 days in a year respectively.

• The Act also applies to establishments of the government and local

authorities as well.

DEFINITIONS

Principal Employer [Section 2(1) (g)].:

The manager or occupier of a factory or head of the department of a

government/local authority.

Contract Labour[Section 2(1) (b)]:

A workman is deemed to be employed as “contract labour” in or in

relation to work of the establishment, if he/she is hired for such work by

69
 or through a contractor, with or without knowledge of the principal
employer.

Appropriate Government:

• The jurisdiction of the central and state government has been laid
down by the definition of the “appropriate government” in Section
2(1)(a) of the Act, as amended in 1986.

• The appropriate government, in respect of an establishment under the

Contract Labour (Regulation and Abolition) Act, 1970 is the same as
that in the Industrial Disputes Act, 1947.

Establishment:

i. Any office or department of the government or a local authority or

ii. Any place where any industry, trade, business, manufacture or

occupation is carried on

Registration and Licensing

• The establishments covered under the Act are required to be

registered as principal employers with the appropriate authorities.

• Every contractor is required to obtain a license and not to undertake

or execute any work through contract labor, except under and in
accordance with the license issued in that behalf by the licensing
officer.

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• The license granted is subject to conditions relating to hours of work,
fixation of wages and other essential amenities in respect of contract
as prescribed in the rules.

Duties of Contractors

• The Act applies to every contractor who employs 20 or more

workmen

• The contractor shall be licensed (Section 12).

• Th e contractor is required to maintain muster roll and register of

wages

• He is required to follow other provisions as may be contained in rules

made by the appropriate government.

• The contractor is required to pay wages to workmen on time, in the

presence of an authorized representative of the principal employer

• He should issue wage slips to a workman and obtain signature or

thumb impression on the wage register.

• If the contractor fails to make payment of wages, the principal

employer is liable to make payment of wages to the contract labour.

• He can recover this amount from the contractor

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• The contractor is required to provide canteen facilities, first-aid, rest
rooms, drinking water, latrines and washing facilities, as per rules
made by the state government

obligations of a contrator

a. Grievance handling of contract labour must be done by the contractor

only.

b. If the contractor has similar types of contracts in different concerns,

then he should try to transfer the employees from one establishment
to another establishment.

c. The contractor shall select and appoint the workmen without any
interference of the principal employer.

d. The contractor shall determine the mode, method and manner of

working.

e. The principal employer shall not interfere in regard to the same.

f. The contractor shall employ the workforce, according to his

requirement, but he shall not in any case exceed the number of
workmen shown in the licence.

Duties of the Principal Employer

• The principal employer shall make an application to the registration

officer of the area where the establishment is situated.

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• Every contractor to whom the Act applies is required to obtain a
licence.

• An application will be made in Form IV to the licensing officer of the

area where the establishment is located.

• The application will be accompanied by a certificate of the principal

employer to the effect that the applicant has been employed by him as
a contractor in relation to the establishment.

• The licence will be granted in Form VI and has validity of one year
from the date it is granted or renewed.

• Please note that for each “contract”, a separate application has to be

made even if the principal employer is the same.

Obligation of The Principal Employer

• The employer has to ensure that the contractor is paying wages to his
workmen before expiry of the seventh day of every month if the
number of workers employed in the company does not exceed a
thousand, or before the expiry of the tenth day of every month if the
number of workers employed in such Company are more than one
thousand.

• Also, the employer has to ensure that minimum wages are paid to
contract labour.

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• The principal employer shall pay wages in full to the contract
workmen in case the contractor fails to pay the same.

• The principal employer has a statutory obligation for the payment of

wages to contract labourers including arrears, in case the contractor
commits default, which he can recover from the contractor by
deducting from any amount payable to him or as debt payable to him
or as debt payable by him.

• The Act stipulates the obligation of the principal employer and the
contractor employing contract labour to provide canteens facilities. In
case of failure on the part of the contractor to provide such facilities,
the principal employer is made liable to provide the amenities.

• The principal employer shall ensure while making payment to the

contractor that the contractor has paid the employees’ provident fund
and ESI contributions deductions both of the contractor and
employees on time.

• The Act enjoins obligation on every principal employer and every

contractor to maintain the registers and records.

• The principal employer shall send the return annually so that it

reaches the registering officer not later than 15th of February
following the end of the year to which it relates.

The Engagement of Contract Labour

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Contract labour may be engaged for the following reasons:

a. For seasonal/occasional requirement/temporary increase of work

b. Need of expertise in a particular job

c. Economic and financial feasibility

The Prohibition of Employment of Contract Labour

• All such jobs as notified by the appropriate government

• All processes, operations and other work incidental to, or necessary

for, the industry, trade, business, manufacture, or occupation are
carried on in the establishment for jobs of perennial nature, that is to
say, of sufficient duration

• Jobs done ordinarily through regular workmen in the establishment

The Prohibition of Employment of Contract Labour

• All such jobs as notified by the appropriate government

• All processes, operations and other work incidental to, or necessary

for, the industry, trade, business, manufacture, or occupation are
carried on in the establishment for jobs of perennial nature, that is to
say, of sufficient duration

• Jobs done ordinarily through regular workmen in the establishment

Guidelines for the Prohibition/Abolition of Contract Labour

Deployment
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• Work is of “perennial” nature

• Work is incidental to or necessary for the work of the establishment

• There is sufficient work to employ sufficient number of whole-time

workers

• Where a particular work is ordinarily being done through regular

workmen

• Where conditions of work and benefits for the

• contract labour are not alright

Facilities for Contract Labour

• The Act has laid down certain amenities to be provided by the

contractor to the contract labor for the establishment of canteens and
rest rooms, latrines and urinals, washing facilities and first-aid
facilities and arrangements for sufficient supply of wholesome
drinking water have been made obligatory.

• In case of failure on the part of the contractor to provide these

facilities, the principal employer is liable to provide the same.

Payment of Wages

• The contractor is required to pay wages and a duty is cast on him to

ensure disbursement of wages in the presence of the authorized
representative of the principal employer.

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• In case of failure on the part of the contractor to pay wages either in
part or in full, the principal employer is liable to pay the same.

Other Laws Applicable to Contract Labour

• Besides the Contract Labour (Regulation and Abolition) Act, various

other Acts are applicable to contract labour—

a) the Factories Act: The Act makes no distinction between persons

directly employed and employed through a contractor;

b) Employees’ Provident Funds Act;

c) ESIC;

d) the Payment of Wages Act;

e) the Minimum Wages Act;

f) the Industrial Disputes Act; and

g) the Workmen’s Compensation Act.

The Employee’s State Insurance Act, 1948

The ESI Scheme is an integrated measure of "Social Insurance" come to

the life through the Employees' State Insurance Act 1948, and is
designed to complete the task of protecting "Employees" as defined in
the ESI Act - 1948, against the hazards of Sickness, Maternity,

77
Disablement or Death due to Employment injury and to provide full
Medical care to insured persons and their families.

Mission Statement:

To provide for certain benefits to Employees in case of Sickness,

Maternity and Employment Injury and to make provisions for Related
Matters.

• The Employees’ State Insurance Act, (ESIC) 1948, is a piece of

social-welfare legislation enacted primarily with the object of
providing certain benefits to employees in case of sickness,
maternity and employment injury and also to make provision for
certain others matters.

• The Act is an effort at achieving the goal of socio-economic justice

mentioned in the Directive Principles of State Policy under Part 4
of Constitution, in particular, Articles 41, 42 and 43, which enjoin
the State to make effective provisions for securing the right to
work, to education and public assistance in cases of
unemployment, old age, sickness and disablement.

Applicability of the ESIC Act

• Under Section 2(12) The Act is applicable to the "Factories"

employing 10 (Ten) or more persons irrespective of whether power
is used in the process of manufacturing or not.

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 • Under Section 1(5) of the Act, the Scheme has been extended to
Shops, Hotels, Restaurants, Cinemas including preview Theatre,
Road motor transport undertakings and Newspaper establishment
employing 20 (Twenty) or more persons.

• Further, u/s 1(5) of the Act, the Scheme has been extended to
Private Medical Institution and Educational Institutions employing
20 (Twenty) or more persons in certain States.

• The existing wage-limit for coverage under the Act, is Rs. 21,000/-
per month (excluding remuneration for overtime) w. e. f:- May 01,
2010.

• AREAS COVERED: The ESI Act is applicable across the length

and breadth of the India.

Not applicable to

• Seasonal Factories

• Defense

• Those with wages > Rs 21K

• Mines subject to Mines Act

• Railway Running Sheds

Six Benefits

• Sickness Benefit

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 • Maternity Benefit

• Disablement Benefit

• Dependent’s Benefit

• Medical Benefit

• Funeral Expenses

Object of the Act

Introduce Social Insurance

Insurance against sickness, disablement, maternity, other

Contributions from employers and employees to an Insurance

Scheme

Exempted Employee:

An employee who is not liable under this Act to pay the employees’
contribution

Definitions

Family:

All or any of the following relatives of an insured person:

i. A spouse

ii. A minor, legitimate or adopted child, dependent upon the insured

person

80
 iii. A child who is wholly dependent on the earnings of the insured
person and who is

(a) Receiving education, till he or she attains the age of 21 years

(b) An unmarried daughter

iv. A child who is infirm by reason of any physical or mental

abnormality or injury and is wholly dependent on the earnings of
the insured person, so long as the infirmity continues

v. Dependent parents

vi. Insurable Employment: An employment in a factory or

establishment to which this Act applies

vii. Insured Person: A person who is or was an employee in respect

of whom contributions are or were payable under this Act and who
is entitled to any benefit under the ESIC Scheme

viii. Sickness: A condition that requires medical treatment and

attendance and necessitates abstention from work on medical
grounds

Contribution:

The sum of money payable to the “Corporation” by the principal

employer in respect of an employee and includes any amount payable by
or on behalf of the employee in accordance with the provisions of this
Act
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Employment Injury:

 Personal Injury or Occupational Disease arising ‘out of and in

course of’ (insurable) employment

 Personal Injury includes ‘Occupational Disease’

 Interpretation of Employment Injury very liberal

 Disablement classification same as WC Act

 Schedules same as WC Act

Employee’s ESI
Contribution
(1.75% Of Gross Salary)

Ttotal ESI
Contribution
(6.5% Of Gross Salary)
Employer’s ESI
Contribution
(4.75% Of Gross Salary)

Administration

ESIC Corporation

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 ESI Corporation has ESIC is a Statutory Body
been set up by the under the ESI Act
Central Government to (Section 3). It is a body
administer the ESI Corporate and a Legal
Scheme Entity

ESI Corporation
Structure, Standing
Committee, Medical
Benefit Council

• This social-security programme is administered by a corporate body

called the Employee State Insurance Corporation.

• It comprises members representing interest groups that include

employee, employers, the central and state government, besides
representatives of parliament and the medical profession.

• The corporation is headed by the Union Minister of Labour as its

chairman, where as the Director General, appointed by the central
government, functions as its CEO.

• A standing committee constituted from amongst the members of the

corporation, acts as an executive body.

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• The medical benefit council, constituted by the central government, is
yet another statutory body that advises the corporation on matters
related to effective delivery of services to the beneficiary population.

ESIC Corporation Standing Committee

DG, FC, Inspectors, Other Medical Benefit Council

Permanent Staff

ESI Corporation Standing Committee

 Chairman + VC + 5 Members  Chairman + 3Members (Central
(Central Government) Government)
 1 Person each from States where  3 Members from State (CG)
ESI applicable  8 Members appointed by ESIC
 1 Person each representing Uts (3+3+1+1)
 10 persons representing  DG of ESIC, ex officio
employers (CG - ICW)
 10 persons representing
employees (CG – ICW)
 2 Persons representing Medical
Profession (CG – ICW)
 3 MPs (2LS + 1 RS)
 DG of ESIC, ex officio
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The Corporation is vested with the following powers:

• To promote measures for the improvement of health and welfare of

the insured employees and for the rehabilitation and re-
employment of those who have been disabled or injured

• To appoint inspectors for purposes of the Act

• To determine the amount of contribution payable in respect of

employees of a factory or establishment that has not furnished or
maintained any particulars, registers or records

Contribution Periods And Benefit Period

• Workers, covered under the ESI Act, are required to pay

contribution towards the scheme on a monthly basis.

• Contribution period means a six-month time span from 1 April to

30 September and 1 October to 31 March.

• Thus, in a financial year, there are two contribution periods of six

months’ duration.

• Cash benefits under the scheme are generally linked with the
contribution paid.

• The benefit period starts three months after the closure of a

contribution period

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 Contribution Period Benefit Period

1st Oct to 31st 1st Jan of following year to

March 30th June
1 July to 31st December of the
st
1st April to 30th
year following
September
A period corresponding to
A period not exceeding 6
Contribution Period, not exceeding
consecutive months
6 consecutive months

• Employer’s Contribution = 4.75 % of the total wage bill

• Employee’s Contribution = 1.75% of total wage during a

Example

Employee Monthly Employee’s

Wage Contribution
(1.75%)

A 9000 158

B 8000 140

C 7000 123

D 6000 105

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 E 5000 88

F 4000 70

G 3000 53

H 2000 35

I 1500 26

J 1000* Nil

Total 46,500 798

The following benefits are provided under section 46.

 Medical benefit
 Sickness benefit
 Maternity benefit
 Disablement benefit
 Dependents benefit
 Funeral expenses
 Others Benefits
Medical Benefits

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The ESI Scheme provides full range of Medical Care to all Insured
person and their family, through a network of ESI Dispensaries,
Hospitals & Panel Clinics, Diagnostic Centers & Super Speciality.

Super-Speciality treatment such as:- Open Heart Surgery, Neuro

Surgery, Bone Marrow Transplant, Kidney Transplant or specialized
investigations like CAT scan, MRI, Angiography etc.

Eligibility for MB:- An employee who is covered under the Scheme for
the first time is eligible for medical care for a period of three months. If
employee contributes atleast for 78 days in a contribution period the
eligibility is there upto the end of the corresponding benefit period.

Claim form under ESI Act:- Form – 09

• In areas having a concentration of 1000 or more employees family

units, service dispensaries are established with full time medical
and paramedical personnel.

• In areas were the employees are less than 750, part time ESIC
dispensaries are established
• The scheme provides full range of medical care to insured person
and family, through a network of ESIC dispensaries and panel
clinics, diagnostic centers and ESI Hospitals etc…
• All insured persons and members of their family are entitled to
free, full and comprehensive medical care such as:

88
  Out patient treatment
 Super specialty treatment
 Domiciliary treatment
 Specialist consultation and diagnostic facilities
 In-patient treatment
 Free supply of drugs and dressings
 X-ray and laboratory investigations
 Vaccinations and preventive inoculations
 Ambulance service and conveyance charges for going to hospitals
diagnostic centers etc. wherever admissible.
 Free diet during admission in hospitals.
 Free supply of artificial limbs, aids and appliances for physical
rehabilitation.
 Family welfare services and other national health programmed
services.
 Medical certification.
Sickness Benefits

Sickness Benefits represents periodical cash payments made to an IP

during the period of certified sickness occurring in a benefit period when
IP requires medical treatment and attendance with abstention from work
on medical grounds.

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Eligibility for SB:- Minimum 78 days contribution in one contribution
period. The daily rate of Sickness Benefit is 50% of the daily wages.

Max. Duration:- Maximum period of 91 days in any two consecutive

benefit periods.

Claim form under ESI Act:- Form - 09

Extended Sickness Benefit: Extended Sickness Benefit is a Cash

Benefit paid for prolonged illness due to any of the 34 specified
diseases as per (Annexure – A).

Eligibility for Extended SB:- Continuous employment for a period of 2

years and should have contributed for atleast 156 days in 4 preceding
contribution periods. The daily rate of Extended Sickness Benefit is
40% more than SB rate.

Maximum Duration of ESB:- Including Sickness Benefit payable for

91 days the ESB is payable upto a further period of 124/309 days that
can be extended upto 2 years in special circumstances on
recommendation of competent authority.

There are three types under Sickness Benefit:

i. General Sickness

ii. Extended Sickness

iii. Enhanced Sickness

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 i. General sickness:

• Represents periodical cash payments made to an Insured Person

(IP) during the period of certified sickness.

• And when Insured Person requires medical treatment and

attendance with abstention from work on medical grounds.

• Sickness benefit is roughly 60% of the average daily wages and is

payable for 91 days during 2 consecutive benefits periods.

ii. Extended Sickness Benefit (ESB):

• An IP suffering from certain long term disease is entitled to (ESB).

• ESB includes 34 diseases which are grouped in 11 groups as per

international Classification of diseases.

• To be entitled to the extended Sickness Benefit an Insured Persons

should have been in continuous employment for 2 years or more at
the beginning of a spell of sickness.

• ESB shall payable for a period of 124 day initially and may be
extended up to 309 days in chronic suitable cases.

iii. Enhanced Sickness Benefit:

• IP for undergoing sterilization operations for family welfare are

paid of enhanced sickness benefit.

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 • Leave up to 7 days in case of IP’s (male) and up to 14 days in case
of the females from the date of operation or from the date of
admission in the hospital.

• Insured persons eligible to ordinary sickness benefit are paid

enhanced sickness benefit at double the rate of sickness benefit that
is about full average daily wages.

Maternity Benefits

Maternity Benefit consists of periodical cash payments in case of

confinement or miscarriage or sickness arising out of pregnancy,
confinement, premature birth of child or miscarriage, to an insured
woman as certified by a duly appointed medical officer or mid wife.

Eligibility for MB:- The contribution condition is the same as for

Sickness Benefit. The daily benefit rate is double the Sickness Benefit
rate and is thus roughly equivalent to the full wages. Benefit is paid for
Sundays also.

The Benefit is paid as follows:-

(a) For Child Delivery:- For a total period of 12 weeks beginning

not more than 6 weeks before the expected date of child birth.

(b) For Miscarriage:- For a period of 6 weeks following the date

of miscarriage.

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 (c) For Sickness arising out of pregnancy, confinement, premature
birth of child or miscarriage:- For an additional period of upto 04
weeks.

Claim form under ESI Act:- Form – 09 & 19 (Notice of Work)

Medical Bonus:- Medical Bonus is lump sum payment made to an

insured woman or the wife of an insured person in case she does not
avail medical facility from an ESI hospital at the time of delivery. The
amount of Bonus is Rs. 2500/-.

• For entitlement to maternity benefit, the insured woman should

have compulsorily work for 55 days with in 9 months from the
date of employment.

• Maternity benefit is payable for a period of 12 weeks that is 84

days to an Insured Person.

• Miscarriage or medical termination of Pregnancy – payable for 6

weeks (42 days) from the date following miscarriage.

• Sickness arising out of pregnancy, confinement, premature birth –

payable for a period not exceeding one month.

• In the event of the death of the Insured woman during confinement

leaving being a child, maternity benefit is payable to her nominee.

• maternity benefit rate is double the standard benefit rate or

roughly equal to the average daily wage.

93
Disablement Benefit

• Disablement Benefit is admissible for disablement caused by

employment injury. At the first instance, temporary disablement
benefit is payable as long as the temporary disability lasts. If the
employment injury results in partial or total/permanent disability,
permanent disablement benefit is payable till the death of the
insured person.

• The Daily benefit rate for Permanent and Temporary Disablement

is roughly equivalent to about 100% of the wage rate. For
permanent partial disablement, the rate of benefit is proportionate
to the percentage of loss of earning capacity. The benefit is paid
for Sundays also.

• Claim form under ESI Act:

For Temporary Disablement:- Form – 09

For Permanent Disablement:- Form – 14

Disablement benefit is the personal injury to an employee caused by an

accident or by an occupational disease arising out of the employee in a
covered factory or establishment.

There are two types under disablement benefit:

i. Temporary Disablement Benefits (TDB)

ii. Permanent Disablement Benefits (PDB)

94
 i. Temporary Disablement Benefits (TDB):

• TDB is payable to an employee who suffers employment injury

(EI) or occupational disease and is certified to be temporarily
incapable to work.

• This benefit is not subject to any contributory conditions. An IP is

eligible from the day he joins the insurable employment.

• There is no prescribed limit for the duration of TDB. This is

payable as long as temporary disablement lasts and significant
improvement by treatment is possible.

ii. Permanent Disablement Benefits (PDB):

• PDB is paid to an insured person who suffers from permanent

disability as a result of an employment injury- including
occupational disease, which results in loss of earning capacity.

• if the employment injury results in partial or total permanent

disability, the PDB is payable till the death of the insured person.

• No contributory conditions are prescribed for this benefit. While

the rate of the temporary disablement is 70% or a little more of the
wages and that of permanent disablement benefit is proportionate
to the loss of earning capacity caused by the injury.

Dependent Benefit

95
Dependents benefit is paid as family pension to the dependants of a
deceased insured person in the event of death due to employment injury
or occupational disease and is equivalent to about 70% of the wages.

Eligible Members:

• A widow can receive this benefit on monthly basis for life or till
her Re-Marriage.

• A son or daughter can receive this benefit till (25) twenty five
years of age.

• Other dependants like parents including a widowed mother etc. can

also receive this benefit under certain conditions.

• The first installment is payable within a maximum of three

months following

• the death of an insured person and therefore, on a regular monthly

basis.

• Claim form under ESI Act:- Form – 15 & 16

Funeral Expenses

Funeral expenses are in the nature of a lump sum payment of Rs.

10000/- (revised from @ 5000/- w.e.f:- April 2011) made to defray the
expenditure on the funeral of deceased insured person. The amount is
paid either to the eldest surviving member of the family or, in his

96
absence, to the person who actually incurs the expenditure on the
funeral.

Claim form under ESI Act:- Form – 22

Others Benefits:-

Rehabilitation Allowance:- Rehabilitation in case of disabled insured

persons under 45 years of age with 40 percent or more disablement.

Free Supply:- Free Supply of physical aids and appliances such as

crutches, wheelchairs, dentures, spectacles and other such physical aids.

Old Age Medical Care:- Old age Medical care for self and spouse at a
nominal contribution of

Rs. 120/- per annum.

Rajiv Gandhi Shramik Kalyan Yojana:- Unemployment Allowance is

payable to those workers facing involuntary unemployment due to
closure of factory or non-employment injury. Benefit rate which is just
above 50% of the daily wages for max 01 year.

i. Physical Rehabilitation:

• Disabled insured persons who remain admitted in an artificial limb

center for fixation or repair or replacement of the artificial limb are
entitled to rehabilitation allowance for each day on which they
remain admitted at artificial limb center at double the standard
sickness benefit rate.
97
 • This is not subject to any contributory condition.

Vocational rehabilitation:

• This scheme is been designed to provide financial assistance to the

insured persons who are referred to vocational rehabilitation centre
for training.

• Insured person who satisfy following conditions are entitled to

avail benefits of the vocational rehabilitation scheme:

• Whose permanent loss of earning capacity has been determined as

40% or more.

• Who is in receipt of permanent disablement benefit under the ESIC

Act, 1948.

• Who is not in any gainful employment, and

• Who is not more than 45 years of age on the date of his

application.

Obligation of the Employers

Complete the Registration process with in 15 days after the Act

becomes applicable. Submit Form - 01 to the Regional office or apply
through Online to get the unique Registration No. under this Act.

Following Responsibility are:-

 Generated the TIC & handover to employee for Smart Card.

98
  Maintain an Accident Book in Form - 11 (under Regulation 66)

 Submit an Accident Report in Form – 16 within 24 hours of

Accident.

 Grant leave to insured employees on the basis of sickness

certificates.

Records Maintenance:-

 Register of Employees in Form -6 (under Regulation 32)

 Accident Book in Form - 11 (under Regulation 66)
 Inspection Book (under Regulation 102A)
 File for copies of return of declaration forms.
 File for copies of Return of Contribution, Challans, etc.
 File for general correspondence & copies of Accident Reports.
Benefits to the Employers

• Exemption from the applicability of Worker’s Compensation Act,

1923.

• Exemption from Maternity Benefit Act, 1961.

• Exemption from payment of medical allowance to employees and

their dependent's or arranging for their medical care.

• Rebate under the Income Tax Act on contribution deposited in the

ESI Account.

99
 • Healthy work-force.

Safeguards for Insured Employees

• Right to receive Payment of any benefit under the Act that shall
not be

• “Transferable or Assignable”.

• Cash Benefits payable under the Act are not liable to attachment
or sale in execution of any decree or order of any court.

• Employer shall not dismiss, discharge or reduce the wages or

otherwise punish a covered employee during the period he / she is
in receipt of Sickness Benefit or Maternity Benefit etc.

• By reason of his liability to pay his share of contribution under the

ESI Act, no employer shall directly or indirectly reduce the wages
of a covered employee.

• Right to register their grievances / complaints at any level for

immediate

• Redressal & Judgement.

• Right to approach EI Court against any action/ decision of the

medical Board etc.

Benefits of Smart Card

100
  Medical treatment is available in any ESI Dispensary,
Centre & ESI Hospital all over of India.
 As per rule, Smart card (know as Pahachan card) will
be accepted (valid) for life long.
 No need to take New card, when employee is changing the Job or
office.
 It is comfortable to carry always by the insured persons & their
families.
 Employee’s & their family members details can change or update
with out any objection.
 Insured person health record will be available
online for any future treatment required to the person in
all ESIC centers.
 Any one can find the details easily of insured
persons & his family members by login with IP No. on
esic.in (via- IP’s login).
 Temporary and permanent workers can use this facility of Smart
Card to avail all the above benefits easily.
Interest and Damages as Penalty

Under Section 39(5)(a) of the ESI act, read with Regulation 31(A) of the
ESI (General) Regulations 1950, the employer is liable to pay simple
interest @ 15 percent per annum in respect of each day of default or

101
 delay in payment contributions. In addition, under the Provision of
Regulation 31-C of ESI (General) Regulations, 1950, read with section
85 (B)(i) of the ESI Act, the Corporation is empowered to recover
damage as under:

i. Up to less than 2 months 5%

ii. 2 months and above but less than 4 10%
months
15%
iii. 4 months and above but less than 6
months 25%
iv. 6 months and above
Enrollment Process for Smart card

102
 Benefit Contributory Duration Rate
Conditions

Sickness benefit Payment of 91 days in any 1.2 SBR(not less

contribution for two consecutive than 50% of daily
at least 78 days benefit periods wages)
in the relevant
contribution
period

Extended Continuous up to 2 years in 1.4 SBR (not less

Sickness benefit employment for a deserving cases than 70% of
period of 2 years daily wages)
and payment of
contribution for
at least 156 days
in 4 contribution
periods.

Enhanced Payment for 7 days for 2 SBR

Sickness Benefit atleast 78 days in vasectomy and
the relevant 14 days for
contribution tubectomy
period extendable in
case of post
operative
103
 complication etc.
Temporary No condition. Till the 1.4 SBR (not less
Disablement incapacity lasts than 70% of daily
Benefit wages)

Permanent No condition. For life 1.4 SBR (Not

disablement less than 70% of
benefit daily wages)

Dependant's No condition. To dependants 1.4 SBR(not less

benefit than 70% of
daily wages to be
divided among
the dependants in
the prescribed
ratio)
Maternity benefit Payment of 12 weeks of 2 SBR (Not less
contribution for which not more than full wages)
70 days in than six can
immediately precede the
preceding two expected date of
consecutive confinement;
periods. 6 weeks for mis-
carriage and
additional one
month for
sickness arising
out of
confinement,
premature birth
104
 of child or
miscarriage

Medical Benefit No condition. IP To start with for Full medical

and his family is a period of 3 care. Facilities
eligible from the months or till the including
day one of his spell of treatment hospitalization
insurable lasts whichever is for insured
employment. later. person and
family.

Funeral Expenses No condition . One time Actual

Diseased IP payment expenditure on
should be an IP funeral not
on the date of exceeding Rs.
death. 10,000/-

Regulations of Wage
Major Wage-related Legislations
• The Payment of Wages Act, 1936
• The Minimum Wages Act, 1948
• The Payment of Bonus Act, 1965
THE PAYMENT OF WAGES ACT, 1936

• The Payment of Wages Act, 1936 was enacted to

Regulate the payment of wages.

105
 To ensure a speedy and effective remedy against illegal deductions
and/or unjustified delay in the payment of wages.

Applicability

• The act is applicable to persons employed in factories, industries

and other establishments.

• It covers every person who is employed in any of the

establishments and drawing an average wage of up to INR 6,500
per month.

Wages

• The term wages means all remuneration (whether by way of

salary, allowances or otherwise) expressed in terms of money or
capable of being so expressed.
Pay Day

• Wages must be paid on a working day, and not on a holiday.

• When there are less than 1,000 persons employed, the wages shall
be paid before the expiry of the seventh day of the following
month.

• When there are more than 1,000 workers, the wages are to be paid
before the expiry of the 10th day of the following month.

Wage Period

106
The period to be fixed for paying wages to an employed person must not
exceed one month.

Terminal Wage

• When the employment of any person is terminated, the wages

earned by him must be paid before the expiry of the second
working day from the day of termination.

Mode of Payment

• Wages must be paid in current coin or currency notes, or in both

and not in kind.

• It is however, permissible for an employer to pay wages by

cheque, or by crediting them in the bank account if so authorized
in writing by the employed person.

Deduction from Wages

• The Act prohibits all kinds of deductions except those that are
authorized by or under the Act (Section 7).

Absence Without Reasonable Cause

• Absence for whole or any part of the day – if ten or more persons
are absent without reasonable cause, there should be deduction of
wages up to eight days.

THE MINIMUM WAGES ACT, 1948

107
 • The Minimum Wages Act aims at establishing a mechanism for
fixing minimum wage rates in various kinds of employments.

• Wages are remuneration which the workers are entitled for the
work performed by them.

• The employees always think of how to decrease the

employee/production costs, while the workers see wages in terms
of their preoccupation, better housing, children education, medical
requirements, minimum recreations, provisions for old age,
marriage etc.

• The government also joins in regulating the wages in the country

through Minimum Wages Act to protect the interest of the
workers.

Employee

• Any person who is employed for hire or reward to do any work,

skilled or unskilled, manual or clerical, in a scheduled employment
in respect of which minimum rates of wage have been fixed.

Objective

• To provide minimum wages to the workers working in the

organization.

• To stop exploitation of the workers.

108
 • To empower the government to take steps for fixing minimum
wages and to revise the wages every two years.

• To apply this law on most of the sectors in organization sector.

• To provide protection to workers in employments in which they

are vulnerable to where sweated labor is most prevalent

Applicability

• The Act extends to the whole of India

• The contract labor, falling within the purview of the contract labor
Act, 1970, has to be paid minimum wages under the minimum
wages Act.

• In short, those who are,

i. Permanent employees

ii. Contract employees

iii. Casual workers

iv. People on probation get fixed pay instead of minimum wages.

v. Trainees get stipend and not minimum wages.

Minimum Wages Determined by the Government

• Time work

• Piece work at piece rate

109
 • Piece work for the purpose determining equivalence on a time rate
basis

• Overtime work done by employees for piece work or time-rate

workers.

Components

• Any minimum rate of wages fixed or revised by the appropriate

government may consist of:

A basic rate of wages + A special allowance (e.g., cost-of-living

allowance)

A basic rate of wages + Cash value of concessions for the supply

of essential-commodities allowance

An all-inclusive rate, i.e., Basic wage + Cost-of-living allowance +

Cash value of concessions on essential commodities.

• There are two basic procedures for the determination of wages.

Committee Procedure

• A tripartite committee comprising employers’ and employees’

representatives and independent members.

Notification Procedure

• Notification of proposed changes by the government.

110
 • The final version based on consideration of objectives by affected
parties.

Payment of minimum rates of wages (section 12)

• The section provides that where minimum wages have been in

force in any scheduled employment, the employer shall pay wages
to every employee engaged in such employment at a rate not less
than the minimum rate of wages fixed under (section 5 ).

• The wages shall be paid to him without deduction of any kind.

• Wages for overtime (section 14)

When workers works for more then nine hours or for 48 hours in a
week .

• Wages for less than the normal working day (section 15)

Where his failure of work is caused by him unwillingness to work

or not by omission of the employer.

• Wages for two or more classes of work (sec 16)

Where do each employee a different minimum rate of wages is

applicable.

• Minimum time rate wage for piece work (sec 17)

Employer shall pay to such an employee wages not less than the
minimum time rate

111
 • Maintenance of registers and records (sec 18)

 Registers shall give particulars of employees by him

 Work performed by them

 Overtime worked

 Gross wage, deductions made etc.

Records to be maintained (sec 18)

• Employer should maintain a register of employees containing the

details such as name, address, father’s name, age, gender, the work
performed, the wage paid to them.

• Every employer should display the above particulars in the

premises where the employee works:

• The other Register to be maintained are :

i. Register of fines

ii. Register of deductions for damage / loss caused to the employer,

by the neglect / default of the employed persons.

iii. Overtime register for workers

iv. Muster – Roll

• The register shall be preserved for a period of 3 years after the date
of last entry made.

112
Every employer is required to

• Put up a notice containing the minimum rates of wages fixed and

keep it clean and legible condition.

• Exhibit an extract of the act, the rules made there under with the
name and address of the inspector shall be displayed in English
and in a language understood by the majority of the workers.

• Give annual returns in to the labor commissioner, and exhibit a

notice in the public motor vehicles in case of employment in public
motor transport.

Enforcements (Sec 19)

• The appropriate government appoint inspectors to enforce Act.

• All the officers of labor department notified.

• The inspector have right

 To enter the premises of employers at all reasonable hours.

 To verify all the records as required to be maintained by law

 To examine any persons they find in the premises

 To enquire about the work given to the workers and

 To get the information from the employers about the payment of

wages, etc.

 To cease or take copies of registers

113
  The inspector shall be deemed to be a public servant.

PAYMENT OF BONUS ACT, 1965

Definition

• A boon or gift over and above what is normally due as

remuneration to the receiver and which is, holy to the good.

An act to provide for the payment of bonus to persons employed in

certain establishments on the basis of profits or on the basis of
productivity and for matters connected therewith.

 It is an outcome of the recommendation of the Bonus Commission

set up by the government of India in 1961.

 It came into force on May 29. 1965 through an ordinance.

 The ordinance was replaced by this Act which came into force on
September 25, 1965.

Aims

• The Payment of Bonus Act, 1965 aims at providing for the

payment of bonus to the employees of certain establishments, on
the basis of profits or production or productivity and for maters
connected therewith.

Objectives of the Act:

114
 Impose statutory liability upon employer to pay bonus to
employees.

Define the principles of bonus payment.

Provide limits for maximum and minimum bonus payable.

Provide machinery for enforcement of the liability of the employer.

• Once the Act is applicable, it continues to apply even if the number

of employees falls below 20.

• Bonus is to be paid within eight months from the expiry of the

accounting year.

Applicability of Payment of Bonus Act, 1965

• Whole of India.

• Every factory and to every establishment wherein 20 or more

workers are employed.

• Every employee, not drawing more than INR 10,000 per month,
who has worked less than 30 days in an accounting year shall be
eligible for bonus.

• Government companies and corporations owned by the

government, which produces goods or renders services in
competition with the private sector.

Not Applicable to

115
 • Government employees.

• Employees of local bodies, universities, public-sector insurance

employees, employees of RBI and public sector financial
institutions, charitable hospitals, social-welfare organizations and
defense employees.

• Any not-for-profit institution.

Eligibility for Bonus (Section 8)

• Every employee receiving salary or wages up to Rs. 10,000 per

month.

• He has worked for at least 30 working days in that year.

Disqualification for Bonus (Section 9).

• In case of:

 Fraud,

 Violent behavior while on the premises of the establishment,

 Theft, sabotage of any property of establishment

Computation of number of working days

• An employee shall be deemed to have worked in an establishment

in any accounting year also on the days on which :

(a)he has been laid off under an agreement or as permitted by

standing orders under the Industrial Employment (Standing
116
 Orders) Act, 1946, or under the Industrial Disputes Act, 1947, or
under any other law applicable to the establishment;

(b) he has been on leave with salary or wages;

(c)he has been absent due to temporary disablement caused by

accident arising out of and in the course of his employment, and

(d) the employee has been on maternity leave with salary or

wages, during the accounting year.

Minimum And Maximum bonus Payable

Minimum Bonus

• The minimum bonus which an employer is required to pay even if

he suffers losses during the accounting year or there is no allocable
surplus is 8.33 % of the salary during the accounting year,

• Or Rs. 100 in case of employees above 15 years and Rs 60 in case

of employees below 15 whichever is higher years,

Maximum Bonus

• If in an accounting year, the allocable surplus, calculated after

taking into account the amount 'set on' or the amount 'set of'
exceeds the minimum bonus, the employer should pay bonus in
proportion to the salary or wages earned by the employee in that
accounting year subject to a maximum of 20% of such salary or
wages.
117
Calculation Of Bonus

The method for calculation of annual bonus is as follows:

1) Calculate the Available Surplus.

Available Surplus

• Available Surplus = Gross Profit - ( deduct) the following:

• Depreciation admissible u/s 32 of the Income tax Act

• Development allowance

Available Surplus (Deductions)

• Direct taxes payable for the accounting year (calculated as per

Sec.7) - Sums specified in the Third Schedule.

• Direct Taxes (calculated as per Sec. 7) in respect of gross profits

for the immediately preceding accounting year.

Calculate Allocable Surplus

• Allocable Surplus = 60% of Available Surplus, 67% in case of

foreign companies.

• Make adjustment for 'Set-on' and 'Set-off'. For calculating the

amount of bonus in respect of an accounting year, allocable surplus
is computed after considering the amount of set on and set off from
the previous years.

SET ON
118
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 percent 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.

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 setoff in the succeeding accounting year and so on up to and
inclusive of the fourth accounting year.

Set & Set Off

• Where in any accounting year any amount has been carried

forward and set on or set off under this section, then, in
calculating bonus for the succeeding accounting year, the amount
of set on or set off carried forward from the earliest accounting
year shall first be taken into account.

119
 • The allocable surplus so computed is distributed amongst the
employees in proportion to salary or wages received by them
during the relevant accounting year.

Duties of the Employer

• To calculate and pay the annual bonus as required under the Act.

• To maintain the following registers:

- Register showing the computation of allocate surplus in Form A

- Register showing the amount of bonus due to the employees,

- To co-operate with the Inspector, produce before him the

registers/records maintained, and such other information as may be
required by them.

Rights of Employers

• Right to refer any disputes relating to application or interpretation

of any provision of the Act, to the Labor Court or Labor Tribunal.

• Right to make permissible deduction from the bonus payable to an

employee, such as, festival bonus paid and financial loss caused by
them is conduct of the employee.

• Right to forfeit bonus of an employee, who has been dismissed

from service for fraud, riotous or violent behavior, or theft,
misappropriation or sabotage of any property of the establishment.

120
Rights of Employees

• Right to claim bonus payable under the Act and to make an

application to the Government, for the recovery of bonus due and
unpaid, within one year of its becoming due.

• Right to refer any dispute to the Labor Court/Tribunal.

• Employees, to whom the Payment of Bonus Act does not apply,

cannot raise a dispute regarding bonus under the Industrial
Disputes Act.

• Right to seek clarification and obtain information, on any item in

the accounts of the establishment.
Offences and Penalties

Offences:

• Contravention of the provisions of the Act or

• Failure to comply with the directions or requisitions made.

Penalties:

• Imprisonment up to 6 months or fine up to Rs1000 or both.

THE PAYMENT OF GRATUITY ACT, 1972

Applicability

Every factory, mine, oil plantation, port and railway company

121
 Every shop or establishment – if it employed 10 or more persons in
the preceding 1 year.

To any other establishment – employing 10 or more persons.

Payment of Gratuity

Gratuity is payable :-

– Continuous service of 5yrs (not necessary in case of death

or disablement)

– On termination due to superannuation or retirement

– Resignation, death or disablement due to accident or disease

– In case of death, the amount will be paid to nominee or legal

heir

Calculation of Gratuity

Monthly rate of wage last drawn (Salary = Basic +

Dearness Allowances X 15 X Number of Years

26

Mode of payment of Gratuity

• In cash or DD or bank cheque

• Payment by postal money order if amount is less than Rs.1000 if

employee desires

122
Dattatreya Bakshi joined the National Bank as a teller on 22 August
1975. On attaining the age of superannuation on 31 December 2008, he
was released from the services of the bank. On the date of his
superannuation, his basic pay, as an accountant, was INR 11,500 and his
dearness allowance was INR 3,700. His gratuity was calculated as
follows:

Monthly wage = INR 11,500 + INR 3,700 = INR 15,200

Completed years of service = 33

Gratuity = 15 days of wage for every completed year of service

Gratuity payable = INR 15,200 × 15/26 × 33 = INR 2,89,385

Note:

i) The factor 15/26 means 15 days’ wage in a month comprising 26

working days (i.e. 30 days less 4 weekly off days).

ii) Maximum gratuity payable as per the Act is INR 3,50,000. However,
if the employer so desires, the maximum limit can be raised by him.

Obligations of the Employer

a. The employer is usually required to submit a notice of opening of

an establishment to the controlling authority of the area in Form A
containing names and addresses of the establishment, employer,
number of persons employed, nature of business, etc.

123
 b. The employer shall display conspicuously a notice at or near the
main entrance of the establishment in bold letters in English and in
a language understood by the majority of employees.

c. It is the duty of the employer to determine the amount of gratuity

as soon as it becomes payable. Failure to do so shall render him
liable to pay the interest at the prevailing rate from the time taken.

d. The employer should obtain insurance in the prescribed manner for

his liability for the payment of gratuity under the Act or establish
approved gratuity fund in the prescribed manner.

The Process for Receiving Payment

• A person who is eligible for payment of gratuity under this Act or

any person authorized, in writing, to act on his behalf shall send a
written application to the employer, for the payment of gratuity.

• As soon as gratuity becomes payable, the employer shall, whether

an application has been made or not, determine the amount of
gratuity and give notice in writing to the person to whom the
gratuity is payable and also to the controlling authority specifying
the amount of gratuity so determined.

• The employer shall arrange to pay the amount of gratuity within 30

days from the date it becomes payable to the person to whom the
gratuity is payable.

124
 • If the amount of gratuity payable under Sub-section (3) is not paid
by the employer within the period specified in Sub-section (3), the
employer shall pay, from the date on which the gratuity becomes
payable to the date on which it is paid, simple interest at a rate not
exceeding the rate notified by the central government from time to
time for repayment of long-term deposits.

• No such interest shall be payable if the delay in the payment is due

to the fault of the employee and the employer has obtained
permission in writing from the controlling authority for the delayed
payment on this ground.

Gratuity Disputes

• In case of any dispute wrt gratuity, the amount must be deposited

with controlling authority and application must be made to
authority for direction within 90 days of occurrence.

• Controlling Authority shall make due inquiries and if claim is

found admissible, direct payment is made to person entitled.

• Such issue of direct payment must be made to employer within

30 days from date of receipt of the same by employer.

Gratuity Disputes

Appeal

125
 • The appeal is made by the person aggrieved by order of
Controlling Authority.

• Limitation – 60 days from the date of receipt of order which is

further extended to 60 days more on sufficient cause.

• Appeal is not main table if certificate of claimed gratuity amount

issued by Controlling Authority is not produced

Dispute as to Gratuity
Appeal Procedure

Necessary entry is made in the record on

receipt of decision of appellate authority.

Notice is issued to employer to direct him to

make payment of gratuity to the applicant
within 15 days of receipt of notice.
Forfeiture of Gratuity

• If service is terminated by any act, willful omission, negligence

causing damage or destruction of property, forfeiture is to the
extent of damage.

• Wholly or partially forfeited

126
 – If termination is due to riotous or disorderly conduct or
violence on employees part.

– For offence involving moral turpitude in course of

employment.

Recovery of Gratuity

• If the amount of gratuity payable under this Act is not paid by the
employer, within the prescribed time, to the person entitled thereto,

– the controlling authority shall, on application made to it,

issue a certificate for that amount to the Collector, who shall
recover the same, together with compound interest thereon at
such rate as the Central Government may specify, from the
date of expiry of the prescribed time, as arrears of land
revenue and pay the same to the person entitled thereto.

• Provided that the controlling authority shall, before issuing a

certificate under this section, give the employer a reasonable
opportunity of showing cause against the issue of such certificate
• The amount of interest payable shall, in no case exceed the
amount of gratuity payable under this Act.
Exemption of Gratuity

Appropriate Govt. may grant exemption

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 To Whom: to Establishment, factory, etc and employee or class of
employees employed in any establishment, factory, etc…

When: if they are in receipt of gratuity or pensionary benefits not less

favorable than the Act.

Nominations

• To be made after completion of 1 year’s service.

• An employee may in his nomination, distribute the amount of

gratuity payable to him, under this Act amongst more than one
nominee.

• If an employee has a family at the time of nomination, the

nomination shall be made in favor of one or more members of his
family, and any nomination made by such employee in favor of a
person who is not a member of his family, shall be void.

• If at the time of making a nomination the employee has no family,

the nomination may be made in favor of any person but if the
employee subsequently acquires a family, such nomination shall
become invalid.

• A nomination may, be modified by an employee at any time,

after giving to his employer a written notice in such form and in
such manner as may be prescribed, of his intention to do so.

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 • Every nomination, fresh nomination or alteration of nomination, as
the case may be, shall be sent by the employee to his employer,
who shall keep the same in his safe custody.

Penalties

OFFENCE PENALTY

False statements to 6mts imprisonment

avoid payment or Rs.10,000 or both

Default in complying 3mts – 1yr

with Act imprisonment or
Rs.20,000 or both

Non-payment of 6mts – 2yr

Gratuity imprisonment

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