Module-6

Industrial Dispute Act 1947, Trade Union act 1926. Employee State Insurance Act
1948, Employee
Compensation Act 1923, Maternity Benefit Act 1961, Employee provident Fund and
Miscellaneous
Provisions Act 1952 , Gratuity Act 1972, Bonus Act 1965.
Industrial Dispute Act 1947,
• The Industrial Disputes Act, 1947 is a significant law in India that
aims to prevent and settle industrial disputes between workers and
employers. Here's a summary of its key aspects:
• Objectives:
• To promote harmonious relations between workers and employers.
• To prevent industrial disputes through negotiation and conciliation.
• To provide machinery for the settlement of industrial disputes that do
arise.
Industrial Dispute Act 1947, cont…
• Works Committee: Establishes the formation of Works Committees in
establishments with 100 or more employees, providing a platform for
communication and discussion between workers and management.
• Conciliation: Involves an impartial third party (Conciliation Officer)
attempting to resolve disputes amicably.
• Adjudication: If conciliation fails, the dispute may be referred
to adjudication by Industrial Tribunals or National Industrial
Tribunals for a binding decision.
• Prohibition of Strikes and Lockouts: Makes illegal strikes and
lockouts punishable offenses, promoting the use of peaceful means for
resolving disputes.
Trade Union act 1926
• Registration: Trade unions must
register with the Registrar of Trade
Unions to gain legal recognition and
access certain benefits.
• Rights of Registered Trade Unions: •
• Organize peaceful meetings and
demonstrations.
• Collect funds from members.
• Affiliate with other trade unions.
• Represent members in collective
bargaining with employers.
• Initiate and defend legal proceedings in
specific cases.
• Protection from
enjoy protection from lawsuits for
actions taken in furtherance of a trade
dispute, provided they operate within
the legal framework.
Regulation of Internal Affairs: The
Act prescribes rules for the internal
administration of trade unions,
covering elections, membership, and
finances.
• Limited Government Role: The
government's primary involvement
lies in registration and ensuring
adherence to the Act.
 Employee State Insurance Act 1948
• The Employees' State Insurance Act, 1948 (ESI Act, 1948) is a
significant piece of legislation in India that aims to provide social
security benefits to employees and their dependents in case of:
• Sickness: Covers medical expenses related to illness,
including hospitalization and outpatient care.
• Maternity: Provides monetary assistance and medical care
during pregnancy and childbirth.
• Employment Injury: Offers financial compensation and
medical care for injuries or disabilities sustained during
work.
• Dependent's Benefit: Extends certain benefits to
dependents of insured employees in case of the employee's
death due to employment injury.
• Key Provisions:
• Applicability: Applies to employees working in factories and
other establishments employing 10 or more workers. State
Governments can extend it to establishments with fewer
employees or specific non-industrial activities.
• Contributions: Both employers and employees contribute to the
ESI scheme. The contribution rates are defined in the Act and are
subject to periodic revisions.
• Benefits: Insured employees and their dependents are entitled to
various benefits, including:
• Medical care: Access to a network of hospitals,
dispensaries, and other medical facilities for treatment of
illness, injuries, and maternity.
• Cash benefits: Payments in case of sickness, maternity,
employment injury, and dependent's benefit.
• Other benefits: Rehabilitation services, funeral expenses in
certain cases, etc.
• Eligibility:
• Employees: The Act applies to employees working in factories
and other establishments employing 10 or more workers. State
Governments can extend it to establishments with fewer
employees or specific non-industrial activities.
• Dependents: Spouses and dependent children of the insured are
eligible for specific benefits.
• Contributions:
• Contribution Rates: Both employers and employees contribute
to the ESI scheme. The contribution rates are defined in the First
Schedule of the Act and are subject to periodic revisions.
• Current Rates (effective April 1, 2023):
• Employer: 4.75% of wages
• Employee: 0.75% of wages
• The maximum insurable wage capped at Rs. 21,000 per
month.
 Maternity Benefit Act 1961,
• Maternity benefit is a financial payment or
compensation provided to women employees during
pregnancy, childbirth, and the postpartum period. It aims
to financially support women employees while they are
away from work due to pregnancy and childbirth, and to
help cover the costs associated with childbirth and •
childcare.
• Applicability: Applies to factories, mines, plantations,
shops and establishments employing ten or more workers. •
State governments can extend it to other establishments.
• Leave Entitlement:
• Maternity Leave: 12 weeks (6 weeks before and 6 •
weeks after childbirth).
• Miscarriage Leave: 6 weeks leave with wages in
case of miscarriage.
• Adoption Leave: 12 weeks leave from the date of
child handover.
• Implementation and Grievances:
• Work from Home: Employers, with mutual
agreement, can allow work from home after availing
maternity benefit.
• Maternity Benefit:
• Payable at the rate of average daily wage for the
actual period of leave taken (including delivery
day).
• Medical Bonus: An additional ₹25 (subject to
revision) if the employer doesn't provide free pre-
and post-natal care.
Prohibition on Employment: Employers cannot require
a pregnant woman to work during the period of 6 weeks
immediately preceding her expected delivery date.
Notice and Claim for Benefit: Women need to inform
their employers about their pregnancy and expected
delivery date at least 2 months beforehand.
Payment of Benefit:
• Employers are responsible for timely payment of
maternity benefit.
• In case of the woman's death, the benefit is payable
to her legal heir.
• Enforced by the Central Government and State
Governments.
• In case of violation, women can file complaints with
the designated authorities.
Compensation Act 1923
• Applicability: The Act primarily applies to • Medical Expenses: Employers are also
employees working responsible for the medical expenses of the
in factories, mines, plantations, and other employee arising from the work-related injury
establishments notified by the Government. or disease.
• Employer Liability: Employers are liable to • Reporting Requirements: Employers are
pay compensation to their employees or their obligated to report occupational accidents and
dependents in case of: deaths to the authorities as per the Act's
• Accident: If an employee suffers an “accident stipulations.
arising out of and in the course of employment,” •
which includes occupational diseases listed in
Significance:
Schedule III of the Act. • Provides crucial financial support to workers
• Occupational Disease: If an employee contracts and their families during challenging times
an occupational disease listed in Schedule III of caused by work-related injuries or disabilities.
the Act.
• Promotes the creation of safer work
• Amount of Compensation: The environments by encouraging employers to
compensation amount is calculated based on prioritize safety measures.
the employee's wages and the extent of the
disability or death, as per the formulas defined • Contributes to a social security framework for
in the Act and its Schedules. workers in specific sectors.
 Employee provident Fund and Miscellaneous
Provisions Act 1952
• Applicability:
• Applies to factories and other establishments employing 20 or
more persons.
• State governments can extend it to establishments employing
fewer people.
• Provident Fund:
• Both employers and employees contribute a specified percentage of the
employee's basic salary and dearness allowance (if applicable) to the • Significance:
provident fund.
• The current contribution rate for both employer and employee is 12%
of the basic salary, with certain exceptions.
• Employees can withdraw a portion of their provident fund under
specific circumstances, such as marriage, medical emergencies, or
purchasing a house.
• Upon retirement, the employee receives the entire accumulated corpus
along with accrued interest.
• Pension Scheme:
• Introduced in 1995, the Employees' Pension Scheme (EPS) is
available for employees earning up to ₹15,000 monthly basic salary.
• Employers contribute 8.33% of the employee's basic salary (capped
at ₹15,000) to the EPS.
• Employees do not contribute to the EPS.
• Upon retirement, eligible employees receive a monthly pension based
on their salary and years of service.
• Deposit-Linked Insurance (DLIS):
• This scheme provides financial assistance to the family of the deceased
employee.
• In case of an employee's death while in service, their nominee or legal
heir receives a benefit amount calculated based on the employee's
salary and service.
• The EPF Act plays a crucial role by:
• Promoting savings and financial security for employees in the organized
sector.
• Providing a source of income for employees after retirement.
• Offering financial support to employees' families in case of death.
• Current Discussions and Debates:
• Raising the coverage limit: There are ongoing discussions about raising
the coverage limit of 20 employees to expand the scheme's reach.
• Increasing the pension contribution: Debates exist regarding increasing
the employer's contribution to the EPS for better pension benefits.
• Streamlining compliance: Efforts are underway to simplify compliance
procedures for both employers and employees.
Gratuity Act 1972
• Eligibility:
• An employee becomes eligible for gratuity upon:
• Retirement: Superannuation or voluntary retirement after the age of 55 years.
• Resignation: After completing 5 years of continuous service.
• Death: Death confirmed by a medical certificate while in service.
• Termination: Due to closure of the establishment or reduction in the workforce if the employee has completed 1
year of continuous service.
• Calculation of Gratuity:
• The gratuity amount is calculated as follows:
• 15 days' wages for each completed year of service for employees who have completed less than 10 years of
service.
• Half month's wages (basic salary + dearness allowance) for each completed year of service for employees who
have completed 10 years or more of service.
• The maximum gratuity amount is capped at Rs. 10 lakh.
• Important Points:
• Continuous service: Includes breaks in service up to a maximum of a month.
• Wages: Refers to the basic wages, dearness allowance, and retainer allowance (if applicable).
• Nomination: Employees can nominate beneficiaries to receive the gratuity amount in case of their
death.
 Bonus Act 1965.
• Eligibility: investments or other sources.

 Every employee who has worked in the establishment for not less• Deductible Expenses:
than 30 working days in the accounting year is eligible for a
bonus.  Income tax: The amount of income tax payable by the employer
for the accounting year.
• Minimum and Maximum Bonus:
 Depreciation: The reasonable depreciation allowed on the
 The Act prescribes a minimum bonus of 8.33% of the salary or buildings, machinery, plant, and furniture of the establishment.
wage earned by the employee during the accounting year or Rs.
100, whichever is higher. • Calculating the Bonus Amount:

 The maximum bonus amount cannot exceed 20% of the salary or Available Surplus Percentage: Divide the available surplus by
wage earned by the employee during the accounting year. the total salary/wage paid to all employees during the accounting
year.
• Calculation of Available Surplus:
 Bonus Payable: For each eligible employee:
• Before calculating the bonus amount, the available surplus needs
o If the available surplus percentage is positive, multiply it by
to be determined. This is the gross profit of the establishment
minus certain deductible expenses. the employee's salary/wage for the year.
o If the available surplus percentage is negative, the employee
• Gross Profit:
is not entitled to a bonus.
 Includes the profit earned from the sale of goods or
services during the accounting year, excluding income from
Case Study
• XYZ Pvt. Ltd. is a manufacturing company employing over 200 workers. The company has been facing
complaints from its employees regarding irregular payment of wages and unauthorized deductions from
their salaries. Several workers have approached the labor department seeking redressal for their grievances.

1. What are the obligations of employers under the Payment of Wages Act, 1936?

2. What steps can XYZ Pvt. Ltd. take to ensure compliance with the Payment of Wages Act, 1936?
 What are the obligations of employers under the Payment of
Wages Act, 1936?
1. Payment of Wages:
1. Employers are required to pay wages to their employees on
time, i.e., before the expiry of the 7th or 10th day of the
following wage period, depending on the number of
employees.
2. Wages must be paid in legal tender, unless authorized by the 5. Payment of Bonus:
appropriate government to pay in cheque or through electronic
transfer.
2. Deductions:
1. Employers can make deductions from wages only under
specific circumstances allowed by the Act, such as those
required by law (such as income tax), deductions for absence
from duty, deductions for damages or loss of goods, and
deductions for housing accommodation provided by the
employer.
2. Deductions cannot exceed the limit specified under the Act,
which is typically 75% of the total wages.
3. Maintenance of Records:
1. Employers are required to maintain accurate records of wages,
deductions, and other details prescribed under the Act.
2. Records must be kept readily available for inspection by labor
inspectors or other authorized officials.
4. Display of Notices:
1. Employers must display notices in the workplace indicating
the wage period, the dates of payment, and other relevant
information regarding wages, deductions, and other terms of
employment.
1. Employers covered under the Act must also comply with
provisions related to the payment of bonus to eligible
employees, as specified under the Payment of Bonus Act,
1965.
6. Prohibition of Unjustified Deductions:
1. Employers are prohibited from making unauthorized
deductions or withholding wages without lawful authority.
Any such deductions not permitted under the Act are
considered unlawful.
7. Prohibition of Delayed Payments:
1. Employers cannot delay the payment of wages beyond the
specified time limits prescribed under the Act. Failure to pay
wages on time constitutes a violation of the Act.
 What steps can XYZ Pvt. Ltd. take to ensure compliance with the
Payment of Wages Act, 1936?
1. Establish Clear Policies and Procedures: the Act.

 Develop and implement clear policies and procedures for wage payment, deductions,  Clearly communicate to employees the reasons for any deductions and obtain their
and record-keeping in accordance with the requirements of the Act. consent when required.

 Clearly communicate these policies to all employees to ensure transparency and avoid 5. Provide Regular Training:
misunderstandings.
 Provide regular training sessions to HR personnel, managers, and supervisors on the
2. Maintain Accurate Records: provisions of the Payment of Wages Act, 1936, and the company's policies and
procedures for wage payment and deductions.
 Maintain accurate records of wages, deductions, and other relevant information as
mandated by the Act.  Ensure that employees responsible for payroll processing are aware of their
responsibilities and understand the importance of compliance.
 Use appropriate payroll software or systems to streamline record-keeping processes and
ensure accuracy. 6. Monitor and Audit Compliance:

3. Timely Payment of Wages:  Conduct regular internal audits and reviews of wage payment processes and records to
ensure compliance with the Act.
 Ensure that wages are paid to employees within the stipulated time period specified
under the Act, i.e., before the expiry of the 7th or 10th day of the following wage  Monitor adherence to timelines for wage payment and review deductions to ensure
period. they are lawful and justified.

 Establish efficient payroll processing mechanisms to facilitate timely payments. •

4. Authorize Only Lawful Deductions:

 Review and authorize only lawful deductions from employee wages as permitted under