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TBI Blogs: Every Indian Employee Needs to Be Aware of These Important Labour Laws

Labour laws have been a point of strong contention in India since independence. With two new labour reform bills scheduled for the coming parliament session, here’s a look at five of the most important existing labour laws in India.

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With the largest youth population, according to the United Nations, India stands at a point where the dream of becoming a super economy is no longer a utopia but a sweet possibility. A major obstacle which stands between our dear Prime Minister’s ambitious projects and reality is labour laws. With mixed viewpoints, labour laws and reforms have always been a topic of controversy. In such a scenario, it becomes imperative for employees in both organized and unorganized sectors to be aware of the existing laws and rights, and the on-going reforms.

The Global Rights Index (2016), published annually by the International Trade Union Confederation (ITUC), ranked as India one of the 10 worst countries for working people. Violence, large-scale exclusions of workers from labour law, and arrests are the reasons for the country’s poor rank. India has been staunchly defending its position in the Index since 2014. There are eight core conventions of the International Labour Organization (ILO) against forced labour. India has ratified only four, and refuses to consent to the following four:

  • Freedom of Association and Protection of the Right to Organize Convention
  • Right to Organize and Collective Bargaining Convention
  • Minimum Age Convention
  • Worst Forms of Child Labour Convention

India has the golden opportunity to harness the large youth population and expedite economic growth.

Change in a country’s economy is marked by the growth of secondary and tertiary sectors. Currently, the share of employment in these sectors is less than 30 %, but their contribution to the GDP is almost double that. Since they are labour-intensive, creating job opportunities in these sectors becomes essential. However, this conjecture can happen only when one walks the path of labour reforms.

Several economists have ardently criticized the rigidity of labour laws in the country. They believe that these inflexible laws are the reason behind reduced employment opportunities, and can even be an obstacle to the Make in India campaign. They demand flexibility in hiring and firing of employees.

The Prime Minister, to fulfil his ambitious projects, is planning to resume labour reforms by introducing two new bills—The Industrial Relations Code Bill (2016) and the Wage Code Bill (2016)—in the second half of the budget session. Like the land reforms, even these bills are expected to be vehemently opposed by the opposition and labour unions.

Whatever might be the fate of these bills, let us draw our attention to the existing labour laws. These laws are complex, and the use and understanding of them depends on multiple factors. The best way to wrap your head around these laws is to get legal advice from an employment & labour law lawyer. The following are the five labour laws every employee should know:

Representational Image (Source: Pixabay)

1. The Factories Act, 1948

This act protects workers of a factory, and its provisions include health, safety, proper working hours, etc. It specifies not only the working hours, but also provides for overtime pay to workers who work beyond their shift. Night shifts have to be on a rotational basis, and the company is required to inform the employees of them beforehand. No woman worker is supposed to work between 10 PM and 5 AM, and in the case of a night shift, a notice has to be given 24 hours before the shift.

2. Payment of Gratuity Act, 1972

Gratuity is a retirement benefit paid as a token of thanks for the services offered. An organization with 10 or more employees is supposed to pay gratuity to workers who have worked for 12 months or more. Gratuity is the last drawn salary (sum of basic and dearness allowance) multiplied by the number of years of service. In case the employer fails to provide gratuity, he/ she faces prison for a term not less than six months and not more than two years.

3. Employees’ Provident Fund and Miscellaneous Provisions Act, 1952

The EPF Act provides social security benefits like pension and insurance cover to the employee of an establishment which has 20 or more employees. In 2014, the government amended the act and extended the wage ceiling from ₹6,500 per month to ₹15,000 per month. The pensionable salary is an average of the monthly salary for the contribution for the last 12 months before membership ends.

Representational Image (Source: Pixabay)

4. Payment of Bonus Act, 1965

An employee working in an establishment with 20 or more workers has rights to a bonus under this act. The bonus is 8.33 %, and shall not exceed 20 % of the employee’s salary. In 2015, the government amended this act to extend the threshold of wages from ₹10,000 to ₹25,000, thus covering a larger pool of employees.

5. Equal Remuneration Act, 1976

This act prevents discrimination among workers on the basis of gender. According to this act, employers can’t discriminate among genders in matters of wages, training, transfer, and promotion. The act provides for equal remuneration to both men and women workers for the same work done.

For legal advice and assistance, check out the Lawyered website.

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