UNIT 1

Syllabus: Employee Relations Management (ERM) & Industrial Relation: Introduction and
Importance of Employee Relations, Employee Relations Management Tools, Approaches to
Understand IR, the Trends of Industrial Relations in India, Factors Leading the Present State of
Industrial Relations, Impact of Globalization on the Liberalized Economy Emerging challenges of IR
in India, Linking Industrial Relations with economic growth of a country, Trade Unionism:
Development of trade unionism, functions, type and structure of trade union, Why Employees Join
Trade Unions , Trade Unions in the Eyes of the Management, Politics and Trade Unions, Outside
Leadership of Trade Unions problems & suggestive remedial measures of trade unions, The Trade
Unions Act 1926: Objective, Recognition and registration, Industrial Democracy & Participative
Management. Case Studies

Concept of Industrial Relations

Industrial Relations look at the relationship between management and workers, particularly groups of workers
represented by a union. It’s basically the interactions between employers, employees and the government, and
the institutions and associations through which such interactions are mediated. It has a broad as well as a narrow
outlook.
It also includes the processes through which these relationships are expressed (such as, collective bargaining,
workers participation in decision-making, and grievance and dispute settlement), and the management of
conflict between employers, workers and trade unions, when it arises.
Definition of IR
Dale Yoder defines industrial relations as ‘relationships between management and employees or among
employees and their organisations that characterise or grow out of employment.
According to the ILO, industrial relations comprise relationships between the state on the one hand and the
employers’ and employees, organisations on the other hand and the relationship among the occupational
organisations themselves.
So, Industrial Relation is concerned with the relationship between management and workers and the role of the
regulatory mechanism in resolving any industrial dispute.

IR covers following areas:

1. Collective Bargaining
2. Role of unions, management and government
3. Machinery for the resolution of industrial disputes.
4. Individual Grievance and disciplinary policy and practice
5. Labour Legislation
6. Industrial relations training

Role of IR:
1. It is the key to productivity increases in industrial establishments.
2. It protects the workers interests and improves their economic conditions.
3. It protects the right of managers too and regulates employee’s behaviour and prescribes punishments
for deviations from the agreed code of discipline and work norms.

Objectives of IR
The primary objective of industrial relations is to maintain congenial relations between employees and
employer. The other objectives are:
1. To promote and develop congenial labour management relations.
2. To enhance the economic status of the worker by improving wages, benefits and by helping the worker
in evolving sound budget.
3. To regulate the production by minimizing industrial conflicts through state control.
4. To socialize industries by making the government as an employer.
5. To provide an opportunity to the workers to have a say in the management and decision-making.
6. To maintain industrial democracy based on participation of labour in the management and gains of
industry.
7. To raise productivity by reducing tendency of high labour turnover and absenteeism.
8. To ensure workers’ participation in management of the company by giving them a fair say in
decision-making and framing policies.
9. To establish a proper channel of communication.
 10. To increase the morale and discipline of the employees.
11. To safeguard the interests of the labour as well as management by securing the highest level of mutual
understanding and goodwill between all sections in an industry.
12. To avoid all forms of industrial conflicts so as to ensure industrial peace by providing better living and
working standards for the workers.
13. To bring about government control over such industrial units which are running at a loss for protecting
the livelihood of the employees
14. To improve workers’ strength with a view to solve their problems through mutual negotiations and
consultation with the management.
15. To encourage and develop trade unions in order to improve the workers’ strength,
To avoid industrial conflict and their consequences and
16. To extend and maintain industrial democracy.

Major Participants in IR System and their Role

1. Employees
2. Employers
3. Government
Employees participate in the IR system through their associations, or say, trade unions. Past evidences indicate
that trade unions play a crucial role in making an IR system as effective or otherwise. Trade unions with their
strong political and emotional overtones are looked upon as a tool to wrest concessions from employers.
With regard to their role in relation to IR, they work to achieve the following objectives:
1. To redress the bargaining advantage on one-on-one basis, i.e., individual worker vis-a-vis individual employer
by way of joint or collective actions.
2. To secure better terms and conditions of employment for their members.
3. To obtain improved status for the worker in his/her work.
4. To increase democratic mode of decision making at various levels
However, various factors such as union membership, its attitude towards management, inter- union rivalry and
the strengths at the national or local level determine the role of trade unions in influencing the system of IR in an
organisation.

2. Employer: Employer is the second party to IR. In the corporate organisation, employer is represented by the
management. Hence, management becomes responsible to various stakeholders in an organisation including
employees.
According to Cole, management has to see IR in terms of the following employee-employer relationship:
1. Creating and sustaining employee motivation.
2. Ensuring commitment from employees.
3. Achieving higher levels of efficiency.
4. Negotiating terms and conditions of employment with the representatives of employees.
5. Sharing decision making with employees.
Like employees’ associations, employers also form their associations at the local, industry and national levels.
Examples of employers’ associations at all India level are Associated Chambers of Commerce’s and Industry
(ASSOCHAM), Confederation of Indian Industry (CII), Federation of Indian Chambers of Commerce and
Industry (FICCI), etc.

The major objectives of the employers’ associations in relation to IR are to:

1. Represent employers in collective bargaining at the national or industry level.
2. Develop machinery for avoiding disputes.
3. Provide feedback on employee relations.
4. Advise member organisations on the issues relating to IR.
3. Government:
The role of government in the matter of industrial relations has been changing along with changes in industrial
environment and management perspective. For example, till century, the governments everywhere in the world
adopted a policy of laissez faire. The IR matters were left to be settled by the employees and employers. But,
towards the end of the 19 century, the attitude of the government in the changed conditions of conflicts between
employees and employers, changed to some kind of intervention in the matter of IR.
In due course of realization, government intervention became a reality. As of day, government intervention has
become widespread in HR matters. In India, government tries to regulate the relationship of employees and
employers, and also keeps an eye on both groups to keep each in line. This relationship is enforced and
maintained through labour courts, industrial tribunals, wage boards, investigating and enquiry committees, etc.
Features of Industrial Relations:
1. Industrial relations are outcomes of employment relationships in an industrial enterprise. These
relations cannot exist without the two parties namely employers and employees.
2. Industrial relations system creates rules and regulations to maintain harmonious relations.
3. The government intervenes to shape the industrial relations through laws, rules, agreements, terms,
charters etc.
4. Several parties are involved in the Industrial relations system. The main parties are employers and their
associations, employees and their unions and the government. These three parties interact within
economic and social environment to shape the Industrial relations structure.
5. Industrial relations are a dynamic and developing concept, not a static one. They undergo changes with
changing structure and scenario of the industry as and when change occurs.
6. Industrial relations include both individual relations and collective relationships

Nature of IR
IR is concerned with the relationship between management and workers and the role of regulating mechanism in
resolving any industrial dispute.
1) IR covers the following areas: -
Collective bargaining - Role of management, unions and government
Machinery for resolution of industrial disputes.
Labour legislation
IR training
Grievance and disciplinary policy
2) IR is characteristics by both conflict and co-operation. This is the basis of adverse relationship. So the focus
of IR is on the study of the attitudes, relationship practices and procedures developed by the contending parties
to resolve or at least minimize conflicts.
3) IR is concerned by laws, rules and regulations aggrieved conditions, policy framework, government
transactions, co-operation between management and labour.
4.) To raise productivity to a higher level in an era of full employment by labour turn over and frequent
absenteeism.

Significance/Importance of Industrial Relations

The healthy industrial relations are key to the progress. Their significance may be discussed as under –
1. Uninterrupted production – The most important benefit of industrial relations is that this ensures continuity
of production. This means, continuous employment for all from manager to workers. The resources are fully
utilized, resulting in the maximum possible production. There is uninterrupted flow of income for all. Smooth
running of an industry is of vital importance for several other industries; to other industries if the products are
intermediaries or inputs; to exporters if these are export goods; to consumers and workers, if these are goods of
mass consumption.
2. Reduction in Industrial Disputes – Good industrial relation reduce the industrial disputes. Disputes are
reflections of the failure of basic human urges or motivations to secure adequate satisfaction or expression
which are fully cured by good industrial relations. Strikes, lockouts, go-slow tactics, gherao and grievances are
some of the reflections of industrial unrest which do not spring up in an atmosphere of industrial peace. It helps
promoting co-operation and increasing production.
3. High morale – Good industrial relations improve the morale of the employees. Employees work with great
zeal with the feeling in mind that the interest of employer and employees is one and the same, i.e. to increase
production. Every worker feels that he is a co-owner of the gains of industry. The employer in his turn must
realize that the gains of industry are not for him along but they should be shared equally and generously with his
workers. In other words, complete unity of thought and action is the main achievement of industrial peace. It
increases the place of workers in the society and their ego is satisfied. It naturally affects production because
mighty co-operative efforts alone can produce great results.
4. Mental Revolution – The main object of industrial relation is a complete mental revolution of workers and
employees. The industrial peace lies ultimately in a transformed outlook on the part of both. It is the business of
leadership in the ranks of workers, employees and Government to work out a new relationship in consonance
with a spirit of true democracy. Both should think themselves as partners of the industry and the role of workers
in such a partnership should be recognized. On the other hand, workers must recognize employer’s authority. It
will naturally have impact on production because they recognize the interest of each other.
5. New Programmes – New programmes for workers development are introduced in an atmosphere of peace
such as training facilities, labour welfare facilities etc. It increases the efficiency of workers resulting in higher
and better production at lower costs.
6. Reduced Wastage – Good industrial relations are maintained on the basis of cooperation and recognition of
each other. It will help increase production. Wastages of man, material and machines are reduced to the
minimum and thus national interest is protected.

Aspects of IR
There are two important aspects of the industrial relations scene in a modern industrial society:
1. Cooperation
Modern industrial production is based upon co-operation between labour and capital.
Goal - as a mean of :
● increasing productivity.
● promoting industrial democracy.
● avoiding conflict and friction
Different degrees and forms of labour Management Cooperation:
Information sharing
● Problem sharing
● Joint consultation
● workers' participation in management
Co-operation – Workers’ participation schemes
The main schemes are:
● Works Committees
● Joint Management Councils
● Board level participation
● unit and joint councils (public sector)
2. Conflict

Conflict like co-operation is inherent in the industrial relations set up of today. The prevailing industrial unrest,
the frequency of work stoppages resulting either from strikes or lock-outs, and the slowing down of production,
are the occasional expression of the ever present and latent conflict between workers and the management.

Causes of poor Industrial Relations:

Economic causes:
Often poor wages and poor working conditions are the main causes for unhealthy relations between
management and labour. Unauthorised deductions from wages, lack of fringe benefits, absence of
promotion opportunities, faulty incentive schemes are other economic causes. Other causes for
Industrial conflicts are
inadequate infrastructure, worn-out plant and machinery, poor layout, unsatisfactory maintenance etc.
Organisational causes:
Faulty communications system, unfair practices, non-recognition of trade unions and labour laws are
also some other causes of poor relations in industry.
Social causes: Uninteresting nature of work is the main social cause of poor Industrial relations.
Dissatisfaction with job and personal life culminates into Industrial conflicts.
Psychological causes:
Lack of job security, non- recognition of merit and performance, poor interpersonal relations are the
psychological reasons for unsatisfactory employer-employee relations.
Political causes: Multiple unions, inter-union rivalry weaken the trade unions. Defective trade unions
system prevailing in the country has been one of the most responsible causes for Industrial disputes in
the country

Conditions Necessary For Healthy Industrial Climate

To ensure industrial peace and avoid laobur unrest like strikes, gheraos, etc.; healthy work
relationships must exist for the development and promotion of harmonious labour-management
relations which has become very important in the modern industrial society. To prevail healthy
industrial climate following conditions are necessary:
Strong Trade Unions: Strong and enlightened trade unions help to promote the status of labour
without jeopardising the interest of management. Trade unions maintain good relations with
management and avoid militancy and strikes situation.
Negotiating Skills of Management and Workers: Well experienced and skillful negotiations create a
bargaining environment conducive to the equitable collective agreements. The representatives of
management and workers must recognize the human element involved in collective bargaining
process.
Economic Factors: Economic satisfaction of workers is one of the important condition for ensuring
good industrial climate. Reasonable wages and benefits in commensurate with other industries must
be paid by the employer. Economic need is the basic survival need of the workers.
Social Factors: Social factors such as – social values, social groups and social status also influence
the industrial climate. The employment relationship is not just an economic contract. It is a joint
venture involving a climate of human and social relationships wherein each party (workers and
management) fulfills his needs and contributes to the needs of others. The supportive climate is
essentially built around social factors.
Psychological Factors: The psychological factors such as motivation, alienation and morale are
significant determinants of industrial relations. The relationship between workers and management
would be more stable and sure if the needs and expectations of the workers are integrated with the
goals of the enterprise.
Public Policy and Legislation: The regulation of employer- employee relationship by the
government is another important factor for the smooth industrial relations. Government intervenes the
relationships by enacting and enforcing labour laws. Government intervention checks and balances
upon the arbitrary management action.
Better Education: Industrial workers in Indian are generally illiterate. They can be easily misled by
the trade union leaders who have their self-interest. Workers must be properly educated to understand
the prevailing industrial environment. They must have a problem solving approach and a capability to
analyse the things in the right perspective. They must be aware of their responsibility towards the
organisation and the community at large.
Business Cycles: Industrial climate is good when there is boom and prosperity all round. Levels of
employment go up, wages rise and workers are happier in prosperity period. But during recession,
there is decline in wages and fall in employment level. Such recessionary conditions affect the good
industrial relations. Thus business cycles also influence the existence of healthy industrial relations.

Employee Relations Management Tools

Some of the key ingredients involved inthe development of a strong employee rela-tions strategy
include the following:
Communication.: Ongoing, frequent two- way communication is one of the most important
components of a comprehensive employee relations strategy. Interactive communication—both giving
a message and actively listening to what is being said in response—builds trust between employees
and their managers.
Trust: If employees do not trust their managers, the flow of upward communication will be
compromised or simply will not happen; likewise, if managers do not trust the employees who work
for them the downward flow of communication will be negatively affected.
Ethics: If employees do not perceive managers as having good business ethics, they will indirectly
question the managers ’motives which may cause stress and have an impact on their overall
performance.
Fairness: All employees should be treated in a consistent manner under the same circumstances. This
does not mean, however, that superior performance should not be singled out and rewarded.
Feelings: Managers need to be alert and sensitive to the feelings of their employees. Exhibiting
empathy and awareness is an important part of establishing a trusting relationship with employees.
Perceptions and Beliefs: In employee relations, perception is even more important than reality. If
employees believe the organization has fair policies and practices and tries to communicate truthfully,
they will respond better than if they believe the organization is untrustworthy and tends to shade the
truth. Frequent and honest communication will go a long way to ensure that employee beliefs and
perceptions are related to the actual reality of the workplace.
Clear Expectations: Employees need to know not only what to expect from their managers, but also
what their managers expect of them. No one likes to be sur- prised with new or conflicting
requirements. Knowing what to expect reduces stress and helps employees focus on the job at hand.

Conflict Resolution: Although conflicts arise in every organization, how they are handled varies
widely. Dealing with issues headon and resolving disputes fairly and quickly should be your
company’s ultimate goal.

Example Newgen Employee Grievances Management software can efficiently manage various cases
in the organisation. Being a grievance management software, Newgen Employee Grievances
Management can smartly find out case patterns which improve decision making. This software for
grievance management also makes sure that it does not falter when it comes to implementing
organization policies and procedures.

Various Integrated Compliance Management platform tools helps organisations collect, review, and monitor
conflicts of interest (COI) declarations with ease and precision eg GAN

LBi Software, HR Case Management Software has been developed for grievance and conflict resolution

Emerging challenges of IR

Minimum Wages
In countries that have a legal minimum wage three employer concerns are evident.
The first is that minimum wage levels sometimes tend to be fixed on extraneous considerations (e.g. political),
or on inadequate data needed to define the level of wages.
The second concern is that such instances have an adverse effect on competitiveness in the global market and on
employment creation where the minimum wage is fixed above a certain level (much of the controversy relates to
what that level is). Therefore many employers prefer to see the minimum wage, if there is to be one at all, as a
'safety net' measure to uplift those living below the poverty line.
The third concern relates to increases in minimum wages not being matched by productivity gains that would
help to offset increased labour costs.
Flexible/Performance Pay
Many employers, and even some governments, wish to review traditional criteria to determine pay levels such
as the cost of living and seniority. Pay system which are flexible (i.e. based on profitability and productivity) so
as to be able to absorb business downturns and also reward performance, are receiving considerable attention.
One major problem in this regard is how employees and their organizations can be persuaded to negotiate on
pay reform. The objectives of pay reform will not be achieved unless reforms are the result of consensual
agreements and are a part of a larger human resource management strategy and change in human resource
management systems.
Industrialized countries have built their competitive advantage not around low wages, but around clusters of
competitive industries in which high earnings and standards of living have been sustained through improved
technology, productivity and quality. Many Asian countries now recognize that high technology, productivity
and low earnings cannot be combined and sustained over a long period of time. Many Asian employers are now
seeking to sustain their competitiveness through pay increases which are more related to performance measures
as a way of absorbing increased labour costs, while at the same time rewarding and motivating employees.
Cross-Cultural Management
Asia is a heterogeneous region, characterized by ethnic, cultural, linguistic and religious diversity. Due to
substantial increases in investment in Asia by both Asian and Western investors, many employers and unions are
dealing with workers and employers from backgrounds and cultures different to their own. Some of the resulting
problems and issues (reflected, for instance, in the proliferation of disputes due to cross-cultural
'mismanagement') fall within cross-cultural management. The problems arise due to differences in IR systems,
attitudes to and of unions, work ethics, motivational systems and leadership styles, negotiating techniques,
inappropriate communication, consultation and participation procedures and mechanisms, values (the basic
beliefs that underpin the way we think, feel and respond), expectations of workers and interpersonal
relationships.
Dispute Prevention
Most countries including India have long-standing dispute settlement procedures at the national level (e.g.
conciliation, arbitration, industrial or labour courts). Essential as these are, they operate only when a dispute
arises. Equally important are dispute prevention through communication, consultation and negotiation
procedures and mechanisms operating at the enterprise level. These are not particularly common in many Asian
enterprises. A more positive movement from personnel management to strategic human resource management is
called for.
Industrial Relations/Human Resource Management Training
Not many developing countries in the region have facilities for training in labour law and IR - negotiation, wage
determination, dispute prevention and settlement, the several aspects of the contract of employment, and other
related subjects such as safety and health. More facilities are probably available in human resource management.
Since IR has assumed a particularly important role in the context of globalization, structural adjustment and in
the transition to a market economy, employers in each country would need to identify what aspects of IR and
HRM should be accorded priority, how training in them could be delivered, and what concrete role is expected
from an employers' organization.
Balancing Efficiency With Equity and Labour Market Flexibility
During this century IR and the law in industrialized countries have paid considerable attention to the means
through which the unequal bargaining position between employees and management can be rectified. The
imbalance in their respective positions has been corrected primarily through the freedom of association and
collective bargaining. Thereafter the focus in some countries has been more on the relationship between
management and labour and their organization rather than on their relationships with the state. This has been due
to the fact that the State has adopted a less interventionist role than in developing countries, based on the
premise that regulation of the labour market should, to a large extent, be left to the employers, workers and their
organizations. However, in some Western European countries, Australia and most Asian countries attention has
focused on relationships with the State because of the role governments have played in regulating the labour
market (through laws and also through labour courts or tribunals), or in directing economic development and
industrialization.
Freedom of Association, Labour Rights and Changing Patterns of Work
With the disappearance of major ideological differences with the end of the cold war, unions are likely to move
towards a greater concentration on their core IR functions and issues. In some countries freedom of association,
including labour rights in special economic zones, has rise as an issue. The need for employees and their
representatives to be involved in change and in transition, and the willingness of employers to involve them, is
an emerging issue in many Asian countries. Changing patterns of work (e.g. more homework, part-time work
sub-contracting) have created concerns for unions in particular. Job security, social security and minimum
conditions of work are some of them. Traditional IR systems based on the concept of a full-time employee
working within an enterprise is increasingly inapplicable to the many categories of people working outside the
enterprise. In some countries in terms of numbers they are likely in the future to exceed those working within an
enterprise. IR in the public sector - especially in the public service - where negotiation rights, for instance, are
less than in the private sector is also likely to be an issue in the future.
Women
The increasing influx of women into workforces has raised issues relating to gender discrimination, better
opportunities for them in relation to training and higher-income jobs and welfare facilities.
Migration
There is a large migration of labour from labour surplus to labour shortage countries .Among the issues that
have arisen are their legal or illegal status (which may affect their rights), trade union rights and their access to
the same level of pay and other conditions enjoyed by nationals. Social security for migrant workers is one of
the major problems, as many receiving countries do not extend social security benefits to them.
Human Resource Management
With increasing reliance by employers on HRM as a means of enhancing enterprise performance and
competitiveness, important consequences will arise for IR and for unions. What part unions can and will play in
HRM and whether IR and HRM will operate as parallel systems (if so what their respective roles will be), or
become integrated (especially since the distinction between IR and HRM is becoming blurred), are some of the
issues which will have to be addressed.
Transition Economies
In countries in transition to a market economy major challenges and issues have arisen. Principally because they
are seeking to adapt to an IR system in which, for instance, employers' organizations and union pluralism have
hitherto been unknown. Unions in such economies may play a welfare role, and sometimes a supervisory role,
rather than a negotiating tool. Managements and unions in such a system participate not so much in deciding
terms and conditions of employment, but in applying decisions that are largely made outside the enterprise.
There is less scope in a centrally planned economy for tripartite dialogue between government on the one hand
and independent organizations of workers and employers on the other.
Changing Nature of Work In terms of work itself: The term „workers‟ seems increasingly inappropriate. “In
the more modern and technologically sophisticated industries, the workers watch panels, push buttons, pull
levers and turn a valve or two. Process industry pays them to exercise discretion, not to flex muscle. Their work
is becoming increasingly difficult to distinguish from that of supervisors and lower managers. It is no wonder
that process industry does not employ workers any longer. It employs operators and technicians.”
Changing Profile of Workers: A social wave is sweeping across our country. The declining power of trade
unions, improving pay packets, the willingness of management to accommodate conflicting growing stature of
workers in society, their increased levels of education and the emergence of process industries which has
changed the very definition of work, have together caused a revolution of perception and aspiration. The social
profile of industrial workers is changing rapidly. Unlike in the early years of our independence, not many come
from a background of hardship and deprivation. Workers in the organized sector earn well and like to live well.
Their aspirations for their children are no different from those of the middle class. Their eyes are set on upward
mobility. Within industry itself, workers are pushing towards status equality. With a changing social profile,
workers are becoming more assertive with their union bosses. They are also demanding more egalitarian
treatment at the work place.

Linking Industrial Relations with Economic Growth of A Country

The influence of industrial relations institutions on economic outcomes has been a key feature of the study of
the global workplace.
Studies like Nickell and Layard (1999) as well as Botero et al (2003) have examined the influence of labour
market institutions on some economic performance measures such as increase in GDP, direct foreign
investment, technology transfer, infrastructural development, enhancement of living standards etc. There are
trade-offs between higher levels of economic outcomes and greater equity and employee voice associated with
more and deeper labour market institutions
In fact, there is a multiple equilibrium level of the industrial relations system with FDI.
Industrial development has had an important role in the economic growth of many countries, and along with the
accelerated growth came a decline in poverty rates.
A key feature of industrial relations is the existence of actors who by design work to protect and enhance the
social and economic welfare of their members, and therein lay the challenge. It is believed that while labour
works to squeeze out better welfare and improved conditions of work regardless of the cost implications for the
management, on the other hand management seeks to keep costs low by controlling labour demands and having
some way round labour legislations.
The fact that Gross Domestic Product (GDP) has been an index of national development is also indicated by that
Foreign Direct Investment (FDI) is related to industrial relations. For instance, Foreign Direct Investment (FDI)
provides a great incentive for national development in terms of higher export earnings and creation of more jobs
in the third world. To account for this positive trend we know the fact that FDI has tremendous impact on
national development in the third world countries. It can also be deduced that with increase in Gross Domestic
Product and the inflow of Direct Foreign Investment which have positive relationship on employment
opportunities, the living standard of the citizens of the country is also buttressed.
The above indicators which are interwoven are veritable determinants of economic stability and development in
a country. It is obvious that the absence of industrial peace and harmony between the parties in industrial
relations could jeopardize the realization of these inputs facilitating the path to national development.

TRADE UNION
Dale Yoder defines Trade Union as, “A union is a continuing long-term association of employee, formed and
maintained for the specific purpose of advancing and protecting the interest of member in their working
relationships.
Sidney & Beatrice Web defines Trade Union as “A trade union is a continuous association of wage earners for
the purpose of maintaining or improve the conditions of their working lives.”
The Trade Union Act 1926 defines a trade union as a combination, whether temporary or permanent, formed
primarily for the purpose of regulating the relations between workmen and employers or between workmen and
workmen, or between employers and employers, or for imposing restrictive condition on the conduct of any
trade or business, and includes any federation of two or more trade unions.

Salient feature or characterstics of trade union

(1)Trade- unions are essentially voluntary organizations: The membership in trade union is voluntary in
nature. One cannot be compelled or forced to be its member. In any industry or trade, the workers are the liberty
to subscribe to trade union activities or to stay to subscribe to trade union activities or to stay out of it at their
sweet-will. That is because, if workers are forced to be its member, the very purpose of trade of trade unionism
is defeated.
(2) Trade-unions are democratic institutions: It is a corollary to the statement given above. The point given
above safely indicates that trade unions are democratic in nature.
(3)Trade union is an association of workers & wage earners only: It is essentially ‘a cooperative labour
marketing association’. Its purpose is to secure control of the supply of labour in one or more market and to
maintain that control as a mean of fixing the price of labour as well as the condition under which it works. It
may also try to advance the social, political and cultural interests of its members.
(4) Labour union is continuous and relatively permanent combination of workers and not temporary or
casual: It is not as one a one day affair; they persist through the year and conceive of their purpose as one which
is not merely immediate but continuous.
(5)The character of trade unions keeps on changing: Trade union changes their method and their working to
adjust themselves to changing circumstances as a production. Therefore there has been no finality about unions,
their working and their methods.
(6) It achieves its objectives through collective action and group effort. Negotiations and collective bargaining
are the tools for accomplishing objectives.

Functions of Trade Unions

Trade unions perform a number of functions in order to achieve the objectives. These functions can be broadly
classified into three categories:
1. Militant Functions
2. Fraternal Functions
3. Social functions
1. Militant Functions: One set of activities performed by trade unions leads to the betterment of the position of
their members in relation to their employment. The aim of such activities is to ensure adequate wages, secure
better conditions of work and employment, get better treatment from employers, etc. When the unions fail to
accomplish these aims by the method of collective bargaining and negotiations, they adopt an approach and put
up a fight with the management in the form of go-slow tactics, strike, boycott, gherao, etc. Hence, these
functions of the trade unions are known as militant or fighting functions. Thus, the militant functions of trade
unions can be summed up as:

● To achieve higher wages and better working conditions

● To raise the status of workers as a part of industry
● To protect labours against victimization and injustice
2. Fraternal Functions: Another set of activities performed by trade unions aims at rendering help to its members
in times of need, and improving their efficiency. Trade unions try to foster a spirit of cooperation and promote
friendly industrial relations and diffuse education and culture among their members. They take up welfare
measures for improving the morale of workers and generate self confidence among them. They also arrange for
legal assistance to its members, if necessary. Besides, these, they undertake many welfare measures for their
members, e.g., school for the education of children, library, reading-rooms, in-door and out-door games, and
other recreational facilities. Some trade unions even undertake publication of some magazine or journal.
These activities, which may be called fraternal functions, depend on the availability of funds, which the unions
raise by subscription from members and donations from outsiders, and also on their competent and enlightened
leadership. Thus, the fraternal functions of trade unions can be summed up as:
● To take up welfare measures for improving the morale of workers
● To generate self confidence among workers
● To encourage sincerity and discipline among workers
● To provide opportunities for promotion and growth
● To protect women workers against discrimination

3. Social Functions : Besides the main economic functions consisting basically of organising unions and
improving their terms and conditions of employment to enable workers to meet their physical needs, some
unions have now started undertaking and organising welfare activities and also providing variety of services to
their members and sometimes to the community of which they are a part, which may be grouped under
following heads:
1) Welfare activities provided to improve the quality of work life including organisation of mutual fund,
cooperative credit societies for providing housing, cooperative stores, cultural programmes, banking and
medical facilities and training for women in various crafts to help them to supplement their family income.
2) Education: Education of members in all aspects of their working life including improving their civic life,
awareness in the environment around them, enhancement of their knowledge particularly in regard to issues that
concern them, their statutory and other rights and responsibilities, workers’ participation in management.
3) Involved in making schemes, and procedure for redressing their grievances. Some central union organisations
are also assisting the Government in implementing the Workers’ Education Scheme.
4) Publication of periodicals, newsletters or magazines for establishing communication with their members,
making the latter aware of union policy and stand on certain principal issues and personnel matters concerning
members, such as births, deaths, marriages, promotion and achievements.
5) Research: Of late, this is gaining importance and is intended mainly to provide updated information to union
negotiators at the bargaining table. Such research is to be more practical than academic, concerning problems
relating to day-today affairs of the union and its activities and union and management relations. Some of the
research activities are :
(i) collection and analysis of wage data including fringe benefits, and other benefits and services
through surveys of comparative practices, data on working conditions and welfare activities
(ii) preparation of background notes for court cases and also position papers for union officials
(iii) collection and analysis of macro data relating to the economy, industry sectors etc. All the above
mentioned activities and services are considered normal activities of unions in the Trade Unions
Act which stipulates the objectives on which general funds of the union can be spent.
[Link] functions: These functions include affiliating the union with a political party, helping the political
party in enrolling members, collecting donations, seeking the help of political parties during the periods of
strikes and lockouts.

Role of Trade Union

Trade union performs various roles towards various bodies:
1. Role towards the trade union member:
1. To safeguard workers against all sorts of exploitation by the employers, by union leaders and by
political parties.
2. To protect workers from the atrocities and unfair practices of the management.
3. To ensure healthy, safe and conducive working conditions, and adequate conditions of work.
4. To exert pressure for enhancement of rewards associated with the work only after making a realistic
assessment of its practical implications.
5. To ensure a desirable standard to living by providing various types of social service – health, housing,
educational, recreational, cooperative, etc. and by widening and consolidating the social security
measures.
6. To guarantee a fair and square deal and social security measures.
7. To remove the dissatisfaction and redress the grievances and complaints of workers.
8. To encourage worker’s participation in the management of industrial organization and trade union, and
to foster labour-management cooperation.
9. To make the workers conscious of their rights and duties.
10. To impress upon works the need to exercise restraint in the use of rights and to enforce them after
realistically ascertaining their practical implications.
11. To stress the significance of settling disputes through negotiation, joint consultation and voluntary
arbitration.
12. The raise the status of trade union members in the industrial organization and in the society at large.
2. Role toward the Industrial organization.
1. To highlight industrial organization as a joint enterprise between workers and management and to
promote identity of interests.
2. To increase production quantitatively and qualitatively, by laying down the norms or production and
ensuring their adequate observance.
3. To help in the maintenance of discipline.
4. To create opportunities for worker’s participation in management and to strengthen labour-management
cooperation.
5. To help in the removal of dissatisfaction and redressal of grievances and complaints.
6. To promote cordial and amicable relations between the workers and management by settling disputes
through negotiation, joint consultation and voluntary arbitration, and by avoiding litigation.
7. To create favourable opinion of the management towards trade unions and improve their status in
industrial organization.
8. To exert pressure on the employer to enforce legislative provision beneficial to the workers, to share
the profits equitably, and to keep away from various types of unfair labour practices.
9. To facilitate communication with the management.
10. To impress upon the management the need to adopt reformative and not punitive, approach towards
workers’ faults.
 3. Role towards the Trade Union organization.
1. To formulate policies and plans consistent with those of the industrial organization and society at large.
2. To improve financial position by fixing higher subscription, by realizing the union dues and by
organizing special fund-raising campaigns.
3. To preserve and strengthen trade union democracy.
4. To train members to assume leadership position.
5. To improve the network of communication between trade union and its members.
6. To curb inter-union rivalry and thereby help in the creating of unified trade union movement.
7. To resolve the problem of factionalism and promote unity and solidarity within the union.
8. To eradicate casteism, regionalism and linguism within the trade union movement.
9. To keep away from unfair labour practices.
10. To save the union organization from the exploitation by vested interests –personal and political.
11. To continuously review the relevance of union objectives in the context of social change, and to change
them accordingly.
12. To prepare and maintain the necessary records.
13. To manage the trade union organization on scientific lines.
14. To publicise the trade union objectives and functions, to know people’s reaction towards them, and to
make necessary modifications.
4. Role toward society.
1. To render all sorts of constructive cooperation in the formulation and implementation of plans and
policies relating to national development.
2. To actively participate in the development of programmes of national development, e.g., family
planning, afforestation, national integration, etc.
3. To launch special campaigns against the social evils of corporation, nepotism, communalism, casteism,
regionalism, linguism, price rise, hoarding, black marketing, smuggling, sex, inequality, dowry,
untouchability, illiteracy, dirt and disease.
4. To create public opinion favourable to government’s policies and plans, and to mobilize people’s
participation for their effective implementation.
5. To create public opinion favourable to trade unions and thereby to raise their status.
6. To exert pressure, after realistically ascertaining its practical implications, on the government to enact
legislation conducive to the development of trade unions and their members.

Registration of Trade union

The four procedure involved in registration of trade unions are as follows:
1. Appointment of Registrar 2. Mode of Registration 3. Rights and Duties of Registrar 4. Legal Status of
Registered Trade Union.
1. Appointment of Registrar: Section 3 of the Trade Union Act, 1926 empowers the appropriate Government
to appoint a person to be registrar of Trade Unions. The appropriate Government be it State or Central, as the
case may be is also empowered to appoint additional and Deputy Registrars as it thinks fit for the purpose of
exercising and discharging the powers and duties of the Registrar. However, such person will work under the
superintendence and direction of the Registrar. He may exercise such powers and functions of Registrar with
local limit as may be specified for this purpose.
2. Mode of Registration: Any seven or more persons who want to form trade union, can apply for its
registration to the Registration of Trade Unions under Section 4 (1) of the Trade Unions Act, 1926. These
applicants must be members of a trade union.
In order to check the multiplicity of trade unions, one school of thought has proposed the number of persons
farming a trade union for the purposes of registration be reasonably increased to 10 per cent of employees of the
unit, subject to minimum of seven persons employed therein This is expected to strengthen the trade union
movement.
3. Application for Registration (Section 5)
The application for registration must be sent to the Registrar of Trade Unions in Form “A” as required by the
Trade Union Act, 1926 under Section 5.
Every application must be accompanied with the following particulars:
1. The names, occupations and addresses of the members making application.
2. The name of the trade union and the address of its head office.
3. The titles, names, ages, addresses and occupations of the office bearers of the trade union.
4 If a trade union has been in existence for more than one year prior to application of its registration, a financial
statement showing its assets and liabilities prepared in the prescribed form has also to be submitted to the
Registrar along with the applica­tion for registration.
5. Besides, every application must be accompanied with a copy of Rules of Trade union complying with the
items as specified under Section 6 of the Trade Unions Act, 1926.

Rules of a Trade Union:

A trade union can be registered only when its constitution fulfils the following rules:
1. Name of the trade union;
2. The whole of the objects for which the trade union has been established;
3. The whole of the purposes for which the general funds of a trade union shall be applicable.
4. The maintenance of a list of the members of the trade union and adequate facilities for the
inspection thereof by the office-bearers and members of trade union;
5. The payment of a subscription by members of the trade union which shall be not less than
i) one rupee per annum for rural workers;
(ii) three rupees per annum for workers in other unorganised sectors; and
(iii) twenty five rupees per annum for workers in any other case;
6. The manner in which rules will be amended varied and/or rescinded;
7. The manner in which the members of the executive and the other office-bearers of the
trade union shall be appointed and removed;
8. The manner in which the funds of the trade union shall be kept and audited and inspection
of the books of accounts by the office bearers and members of the trade union be made;
9. The conditions under which any member shall be entitled to have benefits under the rules
and under which fine or forfeiture shall be imposed on the members; and The manner in
which the trade union shall be dissolved.
4. Rights and Duties of Registrar: Section 7 of the Act empowers the Registrar of Trade Union to make, if
required so, further enquiries on receipt of an application for registration to fully satisfy himself that the
application complies with the provisions of section 5. However, such enquiries can be made only from the
application and not from any other source.
The duties of the Registrar of Trade Unions in matters of registration of trade union are laid down under Section
8 of the Act. On having being satisfied with the requirements for the registration of the union, the Registrar shall
register the trade union by entering in a register. The letter to this effect will be issued to the Trade Union. In
case of non-satisfaction of registrar with the compliance of require­ments, the refusal for registration will be
issued to the trade union.
No time limit for the grant or refusal of registration has been prescribed in the Trade Union Act, 1926. However,
there are legal directives issued by the Court to the Registrar of Trade Unions to perform me statutory duty
imposed upon under sections 7 and 8 to deal with the application of the Trade Union according to law at an
early date
The National Commission on Labour has suggested 30 days excluding the time which the Union takes in
answering queries from the Registrar for the grant or refusal of registration by the Registrar. The Trade Unions
(Amendment) Bill, 1982 has provided for insertion of the words “within a period of 60 days from the date of
such compliance” after the words “Register the Trade Unions” in Section 8 of the Trade Unions Act, 1926.
Where, however, Registrar refuses to grant registration to a trade union, he is under an obligation to state
reasons for refusing to grant registration.
The Societies of Registration Act, 1860, Co-operative Societies Act, 1912 and the Companies Act, 1956 do not
apply to trade unions and registration thereof under any of these Acts is void ab initio.
5. Legal Status of Registered Trade Union: Upon the registration, a trade union assumes to a corporate body
by the name under which it is registered. A registered trade union shall have perpetual succession and its
common seal. A regis­tered trade union is an entity distinct from the members of which, the trade union is
composed of It enjoys power to contract and to hold property both moveable and immoveable and to sue and be
sued by the name in which it is registered.

Reasons for Joining Trade Unions

The important forces that make the employees join a union are as follows:
1. Greater Bargaining Power: The individual employee possesses very little bargaining power as
compared to that of his employer. If he is not satisfied with the wage and other conditions of
employment, he can leave the job. It is not practicable to continually resign from one job after another
when he is dissatisfied. This imposes a great financial and emotional burden upon the worker. The
better course for him is to join a union that can take concerted action against the employer. The threat
or actuality of a strike by a union is a powerful tool that often causes the employer to accept the
demands of the workers for better conditions of employment.
 2. Minimize Discrimination: The decisions regarding pay, work, transfer, promotion, etc. are highly
subjective in nature. The personal relationships existing between the supervisor and each of his
subordinates may influence the management. Thus, there are chances of favoritisms and
discriminations. A trade union can compel the management to formulate personnel policies that press
for equality of treatment to the workers. All the labor decisions of the management are under close
scrutiny of the labor union. This has the effect of minimizing favoritism and discrimination.
3. Sense of Security The employees may join the unions because of their belief that it is an effective way
to secure adequate protection from various types of hazards and income insecurity such as accident,
injury, illness, unemployment, etc. The trade union secure retirement benefits of the workers and
compel the management to invest in welfare services for the benefit of the workers.
4. Sense of Participation The employees can participate in management of matters affecting their
interests only if they join trade unions. They can influence the decisions that are taken as a result of
collective bargaining between the union and the management.
5. Sense of Belongingness: Many employees join a union because their co-workers are the members of
the union. At times, an employee joins a union under group pressure; if he does not, he often has a very
difficult time at work. On the other hand, those who are members of a union feel that they gain respect
in the eyes of their fellow workers. They can also discuss their problem with’ the trade union leaders.
6. Platform for self expression The desire for self-expression is a fundamental human drive for most
people. All of us wish to share our feelings, ideas and opinions with others. Similarly the workers also
want the management to listen to them. A trade union provides such a forum where the feelings, ideas
and opinions of the workers could be discussed. It can also transmit the feelings, ideas, opinions and
complaints of the workers to the management. The collective voice of the workers is heard by the
management and give due consideration while taking policy decisions by the management.
7. Betterment of relationships Another reason for employees joining unions is that employees feel that
unions can fulfill the important need for adequate machinery for proper maintenance of
employer-employee relations. Unions help in betterment of industrial relations among management and
workers by solving the problems peacefully.
To sum up we can say:
Workers join unions because they are constrained by circumstances to do so, and because they want:
1. To get economic security through steady employment and adequate income.
2. To restrain the management from taking any action that is irrational, illogical, discriminatory or
prejudicial in the interests of labours. Workers desire that the assignment of jobs, transfers, promotions,
maintenance of discipline, lay off, retirement, rewards and punishment should be on the basis of a
pre-determined policy and on the basis of what is fair and just.
3. For better communication of their news, aims, ideas, feelings and frustrations to the management and
to have an effective voice in discussion about their welfare.
4. To secure protection from economic hazards beyond their control for example, illness, accident, death,
disability, unemployment and old age.
5. To get along with their fellow workers in a better way and to gain respect in the eyes of their peers.
6. To get a job through the good offices of a trade union

Origin & Growth of Trade Unions

The origin of Trade Union movement can be traced back to a very early date to the time when villages had
Panchayats and guilds for settlings disputes between the masters and their members. The Panchayats prescribed
the code of conduct, which was rigidly followed by its members. Trade Unions, however, originated in the first
quarter of the present century although the groundwork was laid during the last quarter of the 19th century.
The trade unionism in India developed quite slowly as compared to the western nations. Indian trade union
movement can be divided into three phases:
The first phase (1850 to1900)
During this phase the inception of trade unions took place. During this period, the working and living conditions
of the labor were poor and their working hours were long. Capitalists were only interested in their productivity
and profitability. In addition, the wages were also low and general economic conditions were poor in industries.
In order to regulate the working hours and other service conditions of the Indian textile laborers, the Indian
Factories Act was enacted in 1881. As a result, employment of child labor was prohibited.
The growth of trade union movement was slow in this phase and later on the Indian Factory Act of 1881 was
amended in 1891. Many strikes took place in the two decades following 1880 in all industrial cities. These
strikes taught workers to understand the power of united action even though there was no union in real terms.
Small associations like Bombay Mill-Hands Association came up by this time
The second phase (1900 to 1946)
This phase was characterized by the development of organized trade unions and political movements of the
working class. Between 1918 and 1923, many unions came into existence in the country. At Ahmadabad, under
the guidance of Mahatma Gandhi, occupational unions like spinners’ unions and weavers’ unions were formed.
A strike was launched by these unions under the leadership of Mahatma Gandhi who turned it into a Satyagrah.
These unions federated into industrial union known as Textile Labor Association in [Link] 1920, the First
National Trade union organization (The All India Trade Union Congress (AITUC)) was established. Many of
the leaders of this organization were leaders of the national Movement. In 1926, Trade union law came up with
the efforts of Mr. N N Joshi that became operative from 1927. During 1928, All India Trade Union Federation
(AITUF) was formed. On 1st June, 1927 the Indian Trade Unions Act, 1926 (16 of 1926) was framed. By
section 3 of the Indian Trade Unions (Amendment) Act, 1964 (38 of 1964) the word "Indian" has been omitted
and now it is known as THE TRADE UNIONS ACT, 1926 (16 of 1926).By the end of 1947 there was INTUC,
When the Socialist group broke away from the Congress in 1948 and formed a new political party (Praja
Socialist),socialist trade union leaders who were operating within, the INTUC seceded from it and formed.a new
central trade union orqanisation called the Hindustan Mazdoor Panchayat (HMP).This organization and the
Indian Federation of Labour came together under the name of Hind Mazdoor Sabha (HMS),the main objective
being to organize and promote the establishment of a democratic socialist society. A group of left-wing trade
unionist dissatisfied with the attitude of the majority of the socialist party, who had influence in the HMS,
formed yet another organisation: United Trade Union Congress (UTUC) in 1949
Post independence Phase
By 1949 the trade union movement was split again-with the INTUC, the' AITUC, the HMS and the UTUC
representing the 'four rival groups and a few national federations and unions remaining unaffiliated with any of
them. The close relationship of the INTUC with -the-Congress party, HMS with the Socialist party, AITUC
with the Communist party; and UTUC with the Revolutionary Socialist party and other splinter parties of the
'left was and is indicative of the continuing political involvement of the trade union movement.
Post independence period in India several strong changes in trade union movement of India.
There was a tremendous increase in the number of trade unions and those of which existed turned out be more
conscious and award of their rights and emerged strongly. This period experienced rapid changes in trade union
movement in India.
The most important factors being:
1. The constant influence of outside and international happenings.
2. The pressure of trade union rivalries.
3. Government’s Industrial Relations Policy with its provision for compulsory adjudication machinery.
4. The enhancement of labour laws conferring special privileges on registered trade unions.
5. Desires of workers to unite for safeguard their interest.
6. Attempts made by some employers to set up unions under their influence.
Present Scenario
The Indian trade unions have come to stay now not as ad hoc bodies or strike committees
but as permanent features of the industrial society. The political, economic,' historical and international factors
have all helped the unions to get a legal status and they now represent the workers. The unions have achieved a
remarkable status where' their voices are heard by the Government and the employers, they are consulted on
matters pertaining to improvement in conditions of work, health and safety, job security, wages , productivity all
matters concerning the interests of labour. The unions have created for them a platform to air their views;
policies and ideologies both at the state level and national level in the Standing Labour Committee and the,
Indian Labour Conference. Trade union rivalries have become more sharp in free India. The splitting up of
unions and formation of new unions having sympathies with political parties have permeated unions operating at
different levels. Through the status the unions have gained, the unions have been able to influence public
policy, labour and industrial legislation. They have played an important role in evolving suitable machinery of
joint consultation to negotiate various issues between labour and management.
Rapid changes in technology and successive revisions in pay have undoubtedly improved workers' conditions
within the organised sector but mostly at the cost of loss of control over jobs . Such structural changes among
the working population, along with economic growth and a sustained increase in capital intensity in both the
product and labour markets, have necessitated a paradigm shift in the roles of trade unions: from predominantly
bargaining institutions, they have become specialised, representing the voice and interests of labour. In the
post-economic reforms era, the enhanced penetration of media has caused workers to become better informed
and increasingly aware of economic issues in their respective industries. As a result, management has also
become more sensitive and skilled in handling relationships with employees, even in family-owned
and-managed businesses In addition to their traditional bargaining activities; unions now have a newly acquired
voice and representative function. Many of them are trying to increase their value to workers by providing a
variety of services to their members, as well as to the community to which they belong. Such services range
from providing legal and financial advice to improving skills.
These new functions of trade unions also called ancillary functions can be categorised into the following
groups:
i. Communication: Many large unions publish a newsletter or a magazine, with the main aim
of clarifying their policy or stance on certain principal issues, as well as to pass on fixation/revision of
information about their activities.
ii. Welfare activities: Many unions are engaged in a number of welfare activities, such as
providing housing and organising cooperative societies to improve the quality of workers' lives. The Textile
Labour Association (TLA), Ahmadabad, for example, has ventured to organise self-employed women (in the
Self Employed Women's Association [SEWA]) and has even started banking activities for this purpose.
iii. Education: Education helps to make workers aware of their surrounding environments. Unions make efforts
to launch educational programs for workers to enhance their knowledge of the work environment and to inform
them about issues concerning them, particularly those regarding their rights and responsibilities and regarding
procedures and systems that exist in the workplace for redressing grievances.
iv. Research: Union negotiators need updated information to be systematically collected and analysed at the
bargaining table. They also need to backup their wage demands with knowledge of the industry, of productivity,
and of comparative industry practices. Many unions conduct their own research to this effect, laying emphasis
on practical problems, especially day-to-day affairs at work

Problems of Trade Union

The following are some of the most important problems of the trade unions in India:
1. Multiplicity of Trade Unions and Inter-union Rivalry: “Multiple unions are mainly the result of political
outsiders wanting to establish unions of their own, with a view to increasing their political influence”. The
existence of different conflicting or rival organisatoins, with divergent political views, is greatly responsible for
inadequate and unhealthy growth of the movement. Within a single organisation one comes across a number of
groups comprising or ‘insiders and outsiders’, ‘new-comers’, and ‘old-timers’, moderates’ and radicals’, and
‘high’ and low caste’ people. This develops small unions. Inter-union and intra-union rivalry undermines the
strength and solidarity of the workers in many ways.
Multiplicity of unions lead to inter-union rivalries, which ultimately cuts at the very root of unionism, weakens
the power of collective bargaining, and reduces the effectiveness of workers in securing their legitimate rights.
Therefore, there should be “One union in one Industry”.
2. Small Size of Unions: The small size of unions is due to various factors, namely:
I. The fact that by nine workers may form a union under the Trade Union Act of 1926, and get it
registered and a large number of small unions have grown.
II. The structure of the trade union organization in the country – which is in most cases the factory or the
unit of employment; so whenever employees in a particular factory or mine are organized, a new union
is formed.
III. Unionism in India started with the big employers and gradually spread to smaller employers. This
process is still continuing and has pulled down the average membership. Though the number of unions
and union membership are increasing average membership is declining.
IV. Rivalry among the leaders and the Central Organisation has resulted in multiplicity of unions.
The small size of unions creates problems such as:
• Lack of funds to help its members.
• Lack of ability among the leaders and members.
• Low bargaining power.
• Rivalry between the unions
• Lack of unity among workers.
3. Financial Weakness: The financial weakness of the union may be attributed to the small size of union and
poor ability of its members to contribute. The other reasons are low subscriptions and irregular payments of
subscriptions by the members.
4. Leadership Issues: Another disquieting feature of the trade unions is the ‘outside’ leadership, i.e. leadership
of trade unions by persons who are professional politicians and lawyers and who have no history of physical
work in the industry. These political leaders are inevitably concerned with “maximizing their individual standing
as political leaders rather than with, maximizing the welfare of their members. Often these union leaders are not
adequately aware of the actual needs and pressing problems of the members. They therefore cannot put forth the
case of the union effectively. Hence, leadership should be promoted from within the rank and file and given a
more responsible role.
5. Politicalisation of the Unions: One of the biggest problems of the country’s trade union movement faces is
the influence of the political parties. i.e., the most distressing feature is its political character. The unions are
closely aligned with political parties, and political leaders continue to dominate the unions even now. The
supreme consequence of political involvement of unions in India in general, formed to safeguard and promote
the social and economic interests of workers, have tended to become tools of party politics. It should be noted
that decisions in the trade union fields are taken by the respective political parties to which the unions are
attached and, therefore, with the changing political situation, the decisions also change. With the split in the
political ideology, there develops factional split in the same trade union professing the same political ideology.
The divisions and sub-divisions, thus made, have affected adversely the trade union movement.
6. Problems of Recognition of Trade Unions: This is one of the basic issues in our industrial relation system
because employers are under no obligation to give recognition to any union. In the initial stages, the attitudes of
the employers towards the trade unions have been very hostile. The employers many a times have refused
recognition to trade unions either on the basis that unions consist of only a minority of employees; or that two or
more unions existed.

Structure of Trade Unions in India

In India, the structure of trade union consists of three levels: plant/shop or local, the state and the centre. It is
generally from the central level that the ideology of the important central federations of labour in India
percolates down to the state and local levels. Every national or central federation of labour in India has state
branches, state committees or state councils, from where its organization works down to the local level.
There are two types of organizations to which the trade unions in India are affiliated:
(i) National Federations, and
(ii) The Federations of Unions
1. The National Federations have all the trade unions in a given industry
as their affiliated members. Every trade union, irrespective of the industry to which it belongs, can join a general
national federation. Such federations are the apex of trade union policies a national character. The central union
organizations are national federations of labour based on different political ideologies.
Because of their political leanings, the affiliated trade unions in the field of labour relations follow either a
militant policy or a policy of cooperation with the employers and the government, or a policy of continuous
strife and litigation.
The trade union leadership to these national organizations is generally provided by the politicians. Such leaders
are found leading a dozen or more unions in a particular state. These unions may be in the petroleum industry,
the transport industry, electricity supply undertakings or craft unions, such as the rickshaw pullers‘ union or taxi
drivers‘ union. The national/central federations are empowered to decide the question of jurisdiction of the
various local and national unions.
A majority of these federations allow their affiliates to bargain independently with their respective employers.
The federations only act as coordinating authorities for different unions under their control. They also select
delegates to represent workmen in international conferences organized by the International Labour Organisation
or the International Confederation of Free Trade Unions. The all-India federation of trade unions has a regular
structure. For example:
The INTUC consists of a central organization, affiliated unions, industrial federation, regional branches and
councils functioning under the direct control or supervision of the central organization, the assembly of
delegates, the general council and the working committees.
The INTUC functions through its affiliated unions, delegates, assembly, general council (including
office-bearers), the working committees of the general council and the Pradesh bodies.
The UTUC consists of the general body (.delegates‘ assembly) general council, and the working committee of
general council.
The Hind Mazdoor Sabha (HMS) works through the general council, the working committee and affiliated
organization.
2. Federations of Unions: These are combinations of various unions for the purpose of gaining strength and
solidarity. They can resort to concerted action, when the need for such action arises, without losing their
individuality. Such federations may be local, regional, state, national and international. There are a few
organizations which are local in character, such as the Bharatiya Kamgar Sena, the Labour Progressive
Federation, Chennai, the National Front of Indian Trade Unions and the Co-ordinating Committee of Free Trade
Unions. Many Unions are affiliated to one or the other type of the following central organizations of workers:
(1) The Indian National Trade Union Congress
(2) The All-India Trade Union Congress
(3) The Hind Mazdoor Sabha
(4) The United Trade Union Congress
(5) The Centre of India Trade Unions
(6) Bharatiya Mazdoor Sangh
(7) The National Front of India Trade Unions
(8) The United Trade Union Congress (LS)
(9) The National Federation of Independent Trade Unions
(10) The Trade Union Co-ordination Committee
(11) Indian Confederation of Labour
(12) Hind Mazdoor Kisan Panchayat
(13) National Labour Organization

Besides the affiliated unions and their federations, there are a large number of
associations and federations which have not joined any one of the central workers‘ organizations. Some of these
are:
(1) The All India Bank Employees‘ Association;
(2) The All India Bank Employees‘ Federation;
(3) The All India Insurance Employees‘ Association;
(4) The All India Defence Employees‘ Federation;
(5) The All India Railway men‘s Federation;
(6) The National Federation of Posts and Telegraphs Employees;
(7) The National Federation of Indian Railway men;
(8) All India Pvt. Employees Federation;
(9) All India Electricity Employees Federation;
(10) All India Port and Dock Workers Federation;
(11) All India Defence Workers Federation;
(12) All India Chemical and Pharmaceutical Employees Federation.

In Great Britain, the British Trade Union Congress and in the USA, the American Federation of Labour and the
Congress of Industrial Organisation ([Link]) are the national organization of trade unions.
At the international level, the World Federation of Trade Unions (W.F.T.U.) and the International Confederation
of Free Trade Unions (I.C.F.T.U.) are two important organizations.

SOME IMORTANT TRADE UNIONS IN INDIA

At present there are twelve CTUOs in India as follows:
1. Bharatiya Mazdoor Sangh (BMS)
2. All India Trade Union Congress (AITUC)
3. Centre of Indian Trade Unions (CITU)
4. Hind Mazdoor Kamgar Panchayat (HMKP)
5. Hind Mazdoor Sabha (HMS)
6. Indian Federation of Free Trade Unions (IFFTU)
7. Indian National Trade Union Congress (INTUC)
8. National Front of Indian Trade Unions (NFITU)
9. National Labour Organisation (NLO)
10. Trade Unions Co-ordination Centre (TUCC)
11. United Trade Union Congress (UTUC)
12. United Trade Union Congress - Lenin Sarani (UTUC - LS)
AITUC, HMS to Merge In a significant development, two CTUOs, the AITUC and HMS, have decided to
merge.
Few of them are as:
ALL India Trade Union Congress (AITUC)
All India Trade Union Congress (AITUC) was founded in 1920 with Lala Lajpat Rai as its first president. Upto
1945 Congressmen, Socialists, Communists worked in the AITUC which was the central trade union
organisation of workers of India. Subsequently the trade union movement got split on political lines. The
membership of the AITUC is 3.6 million. The unions affiliated to AITUC are from textile, engineering, coal,
steel, road transport, electricity board and of unorganised sector such as beedi, construction and head-load
workers, anganwadi, local bodies and handloom. Recently a number of agriculture workers' unions have
affiliated themselves to AITUC.
The AITUC is affiliated with the World Federation of Trade Unions.

Indian National Trade Union Congress (INTUC) now as Rashtriya Mazdoor Congress
Indian National Trade Union Congress (INTUC) is the trade union wing of the Indian National Congress. It was
founded May 3, 1947, and is affiliated with the ICFTU Asia and Pacific Regional Organisation. Since AITUC
was under the stronghold of the Communists, the Congress labour leaders thought of forming a new central
trade union organization. To give effect to this idea, a conference was held at New Delhi under the chairman
ship of Sardar Vallabhai Patel. INTUC is the part and parcel of Congress Party which is already mentioned in
the "Constitution" of 1947 adopted by the Congress Party. INTUC has a membership of more than 3,892,011 .
Hind Mazdoor Sabha (HMS)
When the Socialists separated from the Congress, those who were dissatisfied with the pro-Communist policies
of the INTUC, formed a new organization, the Hind Mazdoor panchayat, which was merged with the Indian
Federation of Labour in 1948 under the name of the Hind Mazdoor Sabha. HMS is the third largest trade-union
federation in India after the All-India Trade Union Congress and the Indian National Trade Union Congress.
The HMS is affiliated with the International Confederation of Free Trade Unions.

United Trade Union Congress (UTUC)

Some trade union leaders of the socialist bent met together in December 1948 to form a new central organisation
of labour, called Hind Mazdoor Sabha. Some of the leaders did not agree with the principles and objectives of
the Sabha and they therefore, again met at Calcutta on December 27, 1948, and decided to call upon a
conference of trade union leaders to form a united Trade Union Committee. This Committee called for a
meeting of the various leaders at
Calcutta on April 30, 1949, and formed a new union under the name of United Trade Union Congress.

Bhartiya Mazdoor Sangh (BMS)

The Bharatiya Mazdoor Sangh (Indian Workers' Union) is the largest central trade union organization in India. It
was founded by Dattopantji Thengdi on July 23, 1955. BMS itself claims to have more than 10 million
members. It is estimated around 5860 unions are affiliated to the BMS. The BMS has a membership of more
than 65 lakhs workers. It can also be noted that the BMS is not affiliated to any International Trade Union
Confederation.

Centre of Indian Trade Union (CITU)

This was formed in 1970 when as a result of the rift in the AITUC, some members of the Communist Party
seceded. CITU is a National level Trade Union in India politically attached to the Communist Party of India
(Marxist). The Centre of Indian Trade Unions is today one of biggest assembly of workers and classes of India.
It has strong unchallengeable presence in the Indian state of Tripura besides a good presence in West Bengal and
Kerala.

Trade Union Act 1926

In India, the first organised trade union was formed in 1918 and since then they have spread in almost all the
industrial centres of the country. The legislation regulating these trade unions is the Indian Trade Unions Act,
1926. The Act deals with the registration of trade unions, their rights, their liabilities and responsibilities as well
as ensures that their funds are utilised properly. It gives legal and corporate status to the registered trade unions.
It also seeks to protect them from civil or criminal prosecution so that they could carry on their legitimate
activities for the benefit of the working class. The Act is applicable not only to the union of workers but also to
the association of employers. It extends to whole of India. Also, certain Acts, namely, the Societies Registration
Act, 1860; the Co-operative Societies Act, 1912; and the Companies Act, 1956 shall not apply to any registered
trade union, and that the registration of any such trade union under any such Act shall be void.
The Act is administered by the Ministry of Labour through its Industrial Relations Division.

Salient features of the Act

The Trade Unions Act 1926 has been amended from time to time and the most important being the Trade
Unions (Amendment) Act, 2001. This Act has been enacted in order to bring more transparency and to provide
greater support to trade unionism in India. Some of the salient features of the Trade Unions (Amendment) Act,
2001 are:-
1. No trade union of workmen shall be registered unless at least 10% or 100, whichever is less, subject to
a minimum of 7 workmen engaged or employed in the establishment or industry with which it is
connected are the members of such trade union on the date of making of application for registration.
2. A registered trade union of workmen shall at all times continue to have not less than 10% or 100 of the
workmen, whichever is less, subject to a minimum of 7 persons engaged or employed in the
establishment or industry with which it is connected, as its members.
3. A provision for filing an appeal before the Industrial Tribunal / Labour Court in case of
non-registration or for restoration of registration has been provided.
4. All office bearers of a registered trade union, except not more than one-third of the total number of
office bearers or five, whichever is less, shall be persons actually engaged or employed in the
establishment or industry with which the trade union is connected.
 5. Minimum rate of subscription by members of the trade union is fixed at one rupee per annum for rural
workers, three rupees per annum for workers in other unorganised sectors and 12 rupees per annum in
all other cases.
6. The employees who have been retired or have been retrenched shall not be construed as outsiders for
the purpose of holding an office in the trade union concerned.
7. For the promotion of civic and political interest of its members, unions are authorized to set up separate
political funds.
Hence, trade union legislation ensures their orderly growth, reduce their multiplicity and promote internal
democracy in the industrial organisation and the economy. The trade unions have thus acquired an important
place in the economic, political and social set up of the country.

Main Provisions of the Act

According to the Trade Unions Act,1926, ‘trade union’ means “any combination, whether temporary or
permanent, formed primarily for the purpose of regulating the relations between workmen and employers or
between workmen and workmen or between employers and employers, or for imposing restrictive conditions on
the conduct of any trade or business, and includes any federation of two or more trade unions”. The basic
provisions of the Act are:-
1. The Act provides for the registration of the trade unions with the ‘Registrars of Trade Unions’ set up in
different States, like the Office of Registrar (Trade Union) set up by the Government of National
Capital Territory of Delhi. For registration of a trade union, seven or more members of the union can
submit their application in the prescribed form to the Registrar of trade unions. The application shall be
accompanied by a copy of the ‘rules of the trade union’ and a statement giving the following
particulars:- (i) Names, occupations and addresses of the members making the application; (ii)The
name of the trade union and the address of its head office; (iii) The titles, names, ages, addresses and
occupations of the office bearers of the trade union as per the format given in the Trade Unions Act
1926. The Registrar, on being satisfied that the Union has complied with all the requirements of this
Act, shall register the trade union. Thereafter, it shall issue a certificate of registration in the prescribed
form as a conclusive evidence of registration of that trade Union.
2. The registered trade unions (workers & employers) are required to submit annual statutory returns to
the Registrar regarding their membership, general funds, sources of income and items of expenditure
and details of their assets and liabilities, which in turn submits a consolidated return of their state in the
prescribed proformae to Labour Bureau, Ministry of Labour and Employment. The Labour Bureau on
receiving the annual returns from different States/Union Territories, consolidates the all India statistics
and disseminates them through its publication entitled the ‘Trade Unions in India’ and its other regular
publications.
3. The general funds of a registered trade union shall not be spent on any other objects than those
specified in the Act. Also, a registered trade union may constitute a separate fund, from contributions
separately levied for or made to that fund, for the promotion of the civic and political interest of its
members. No member shall be compelled to contribute to such fund and a member who does not
contribute to the said fund shall not be excluded from any benefits of the trade union, or placed in any
respect either directly or indirectly under any disability or at any disadvantage as compared with other
members of the union by reason of his contribution to the said fund.
4. No office-bearer or member of a registered trade union shall be liable to punishment under the Indian
Penal Code in respect of any agreement made between the members for the purpose of furthering any
such object of the trade union as specified in the Act, unless the agreement is an agreement to commit
an offence.
5. No suit or other legal proceeding shall be maintainable in any civil court against any registered trade
union or any office-bearer or member thereof in respect of any act done in contemplation or furtherance
of a trade dispute to which a member of the trade union is a party on the ground only that such an act
induces some other person to break a contract of employment, or that it is in interference with the trade,
business or employment of some other person or with the right of some other person to dispose of his
capital of his labour as he wills.
6. The account books of a registered trade union and the list of members thereof shall be open to
inspection by an office-bearer or member of the trade union at such times as may be provided for in the
rules of trade union.
7. A person shall be disqualified for being chosen as, and for being a member of, the executive or any
other office-bearer or registered trade union if- (i) he has not attained the age of eighteen years; (ii) he
has been convicted by a court in India of any offence involving moral turpitude and sentenced to
imprisonment, unless a period of five years has elapsed since his release.
 8. Every office-bearer or other person bound by the rules of the trade union shall be punishable with the
payment of fine, if:-
Default is made on the part of any registered trade union in giving any notice or sending any statement
or other document as required by or under any provision of this Act; or
Any person willfully makes, or causes to be made, any false entry in, or any omission from, the general
statement or in or from any copy of rules or of alterations of rules sent to the Registrar; or
Any person who, with intent to deceive, gives to any member of a registered trade union or to any
person intending or applying to become a member of such trade union any document purporting to be a
copy of the rules of the trade union or of any alterations to the same which he/ she knows, or has reason
to believe, is not a correct copy of such rules or alterations as are for the time being in force, or any
person who, with the like intent, gives a copy of any rules of an unregistered trade union to any person
on the pretence that such rules are the rules of a registered trade union.
9. Any registered trade union may, with the consent of not less than two-thirds of the total number of its
members and subject to the provisions of of the Act, change its name. The change in the name of a
registered trade union shall not effect any of its rights or obligation or render defective any legal
proceeding by or against the union, and any legal proceeding which might have been continued or
commenced by or against it by its former name may be continued by its new name.
10. Any two or more registered trade unions may become amalgamated together as one trade union with or
without the dissolution or division of the funds of such trade unions or any of them, provided that the
votes of at least one-half of the members of each or every such trade union entitled to vote are
recorded, and that at least sixty percent of the votes recorded are in favour of the proposal. Such an
amalgamation shall not prejudice any right of any such unions or any right of a creditor or any of them.
11. When a registered trade union is dissolved, notice for the dissolution signed by seven members and by
the Secretary of the trade union shall, within fourteen days of the dissolution, be sent to the Registrar
and shall be registered by him if he is satisfied that the dissolution has been effected in accordance with
the rules of the trade union, and the dissolution shall have effect from the date of such registration.

RIGHTS AND LIABILITIES OF REGISTERED TRADE UNIONS (Section 15)

Objects on which general funds may be spent.- The general funds of a registered Trade Union shall not be spent
on any other objects than the following, namely: -

(a) the payment of salaries, allowances and expenses to office-bearers of the Trade Union;
(b) the payment of expenses for the administration of the Trade Union, including audit of the accounts of the
general funds of the Trade Union;
(c) the prosecution or defence of any legal proceeding to which the Trade Union or any member thereof is a
party, when such prosecution or defence is undertaken for the purpose of securing or protecting any rights of the
Trade Union as such or any rights arising out of the relations of any member with his employer or with a person
whom the member employs;
(d) the conduct of trade disputes on behalf of the Trade Union or any member thereof;
(e) the compensation of members for loss arising out of trade disputes;
(f) allowances to members or their dependants on account of death, old age, sickness, accidents or
unemployment of such members;
(g) the issue of, or the undertaking of liability under, policies of assurance on the lives of members, or under
policies insuring members against sickness, accident or unemployment;
(h) the provision of educational, social or religious benefits for members (including the payment of the expenses
of funeral or religious ceremonies for deceased members) or for the dependants of members;
(i) the upkeep of a periodical published mainly for the purpose of discussing questions affecting employers or
workmen as such;
(j) the payment, in furtherance of any of the objects on which the general funds of the Trade Union may be
spent, of contributions to any cause intended to benefit workmen in general, provided that the expenditure in
respect of such contributions in any financial year shall not at any time during that year be in excess of
one-fourth of the combined total of the gross income which has up to that time accrued to the general funds of
the Trade Union during that year and of the balance at the credit of those funds at the commencement of that
year; and
(k) subject to any conditions contained in the notification, any other object notified by the appropriate
Government in the official Gazette.

Recommendations of the second National Commission on labour with respect to fraud union registration
and recognition
When trade union does not furnish all the details to the registrar or thereafter, its registration may get cancelled
and may be declared as fraud. Following are the recommendations of NCL:
1. Every office-bearer or other person bound by the rules of the trade union shall be punishable with the
payment of fine, if:-
2. Default is made on the part of any registered trade union in giving any notice or sending any statement
or other document as required by or under any provision of this Act; or
3. Any person willfully makes, or causes to be made, any false entry in, or any omission from, the general
statement or in or from any copy of rules or of alterations of rules sent to the Registrar; or
4. Any person who, with intent to deceive, gives to any member of a registered trade union or to any
person intending or applying to become a member of such trade union any document purporting to be a
copy of the rules of the trade union or of any alterations to the same which he/ she knows, or has reason
to believe, is not a correct copy of such rules or alterations as are for the time being in force, or any
person who, with the like intent, gives a copy of any rules of an unregistered trade union to any person
on the pretence that such rules are the rules of a registered trade union.
5. Any registered trade union may, with the consent of not less than two-thirds of the total number of its
members and subject to the provisions of of the Act, change its name. The change in the name of a
registered trade union shall not effect any of its rights or obligation or render defective any legal
proceeding by or against the union, and any legal proceeding which might have been continued or
commenced by or against it by its former name may be continued by its new name.
6. Any two or more registered trade unions may become amalgamated together as one trade union
with or without the dissolution or division of the funds of such trade unions or any of them, provided that
the votes of at least one-half of the members of each or every such trade union entitled to vote are recorded,
and that at least sixty percent of the votes recorded are in favour of the proposal. Such an amalgamation
shall not prejudice any right of any such unions or any right of a creditor or any of them.

Trade Unions Amendment Bill, 2019

The Trade Unions (Amendment) Bill, 2019 was introduced in Lok Sabha.
The Bill amends the Trade Unions Act, 1926, which provides for the registration and regulation of trade
unions.

Key features of the Bill include:

1. The Bill seeks to provide for recognition of trade unions or a federation of trade unions at the
central and state level by the central and state government respectively.
2. The central or state government may make rules for:
● the recognition of such Central or State Trade Unions,
● and the authority to decide disputes arising out of such recognition, and the manner of
deciding such disputes.
3. The amendments will facilitate recognition of trade unions at central and state level to:
● ensure true representation of workers in these bodies;
● check on the arbitrary nomination of workers' representatives by the government;
● reduce litigations and industrial unrest

Question :1 How can a Trade Union be started and registered?

Any group of nine or more persons can form a Trade Union. However
no Trade Union of the workmen shall be registered unless at least 100% or 100, whichever is
Answer: less, persons engaged or employed in the Establishment or industry with which it is
connected are the members of such trade union on the date of making of application for
registration. The minimum age limit for membership of a Trade Union is 15 years unless the
Question :1 How can a Trade Union be started and registered?

rules of a particular trade union provide for higher age limit. However for being an office
bearer the person has to be above 18 years of age.

Question :2 What happens if some members withdraw before registration?

The application cannot become invalid merely on the grounds of withdrawal of such
members after the same has been made, even if up to half of the total number of the persons
Answer:
who have made the application have ceased to be associated or have given notice in writing
to the Registrar dissociating themselves from the application.

Question: 3 What documents are to be filed at the time of filing of application for registration?

Every application for registration of a Trade union shall be made in Form A appended to the
Answer: Trade Unions Act 1926 before the Registrar of Trade Unions and shall be accompanied by a
copy of Rules of the trade union and a statement giving following particulars.

(a) Names, occupations and address of the members making application.

(b) The name of the Trade union and the address of its lead Office.

The titles, names, ages addresses and occupations of the (office bearers) of the trade union as
per format given in Schedule I appended to the Trade Unions Act 1926.
(c) Where a trade union is in existence for more than a year before making an application to the
Registrar the application should be accompanied by a general statement of assets and
liabilities of the trade union as per Schedule III appended to the Trade Unions Act 1926.

Question: 4 What are other essential requirements?

Trade Union shall not be entitled to registration under the Trade Unions Act 1926 unless the
Answer: executive there of is constituted in accordance with the provisions of the Act and the rules
thereof provide for the matters contained in Schedule II

Question: 5 When is the registration certificate issued?

The Registrar, on being satisfied that the trade union has complied with all the requirements
Answer: of this Act in regard to registration shall register the Trade Union by entering the particulars
in a register.

Certificate
The Registrar on registering a Trade Union as detailed earlier shall issue a certificate of
of
registration in prescribed Form C which shall be conclusive evidence that the Trade Union
Registratio
has been duly registered.
n

Question:6 When can a registration be cancelled / withdrawn?

Answer:

(a) On an application from the Trade Union to be verified in such manner as may be prescribed.
 Question :1 How can a Trade Union be started and registered?

On satisfaction of the Registrar that the certificate has been obtained by fraudulent means or
mistake or that Trade Union has ceased to exist or has willfully and after notice from the
Registrar contravened any provision of the Trade Unions Act, 1926 or allowed any rule to
continue in force which is inconsistent with any such provision or has rescinded any rule
(b)
providing any matter provision for which is required by section 6. The Registrar has to
provide not less than two months notice previous in writing specifying the ground on which it
is proposed to withdraw or cancel the certificate, before actually withdrawing or canceling
the certificate.

Question:7 Where does the appeal against an order of cancellation lie?

Answer:

Any person aggrieved by any refusal of Registrar to register a Trade Union or by the
Appeal: withdrawal or cancellation of certificate of registration may, file an appeal before the
Industrial Tribunal/ Labour Court in case of non registration/cancellation of registration.

Question:8 What are the requirements for continued registration of a Trade Union ?

Answer:

A registered trade union of workmen shall at all times continue to have not less than 10% or
(i) 100 of the workmen, whichever is less, subject to a minimum of 7 persons engaged or
employed in the Estt or industry with whichever it is connected, as its members.

All office bearers of a registered trade union except not more than one third of the total
(ii) numbers of office bearers or five, whichever is less, shall be persons actually engaged or
employed in the Establishment or Industry with which trade union is connected.

Question:9 What are the broad objectives on which the Funds of a Trade Union can be spent?

Answer: General funds can be spent on :

(i) Salaries and administrative expenses of of Trade Union

(ii) Expenses relating to disputes and litigation for the Trade Union

Compensation and allowance to members and dependants for losses arising out of trade
(iii)
disputes and old age and sickness etc. and for education and social or religious benefits

(iv) Furtherance of other objectives of the Trade Union etc.

What is the difference between recognizing and registering a union?

A registered union does not automatically become recognized by the management. This means that although the
government has provided the union with the certificate of registration and considers it as a legitimate body, the
management refuses to negotiate with the union on some grounds.

A recognized union is one with which the management participates in collective bargaining, and signs
agreements related to wages and working conditions.

Industrial Democracy
Industrial democracy means that the management in industrial units is by the people, of the people and for the
people. Here people include all those who are concerned with the industrial unit. Industrial democracy connotes
an equilibrium between the rights of the dominant industrial hierarchy and the rights of employees with a broad
social objective.
The concept of industrial democracy is a complete departure from the traditional concept of autocratic
management or one man rule. Industrial democracy means the application of democratic principles in managing
industrial units.

In such type of system, workers are treated as responsible partners of an enterprise and are allowed to participate
in the decision making process through different methods. Workers are given the right of self-expression and an
opportunity to communicate their views on policy formulation.

The salient features of industrial democracy are as follows:

(i) Workers are treated as partners in the organisation and are given an opportunity to participate in the
management.
(ii) The various methods through which industrial democracy can be introduced are work committees, joint
management councils, suggestion schemes etc.
(iii) Workers are generally allowed to participate indirectly i.e. through their representatives. This participation
is restricted to certain aspects of management only. The participation of workers is sought only in those areas
which are directly related to them.
(iv) The morale of the workers is boosted as they have an effective say in the working of the enterprise where
they are working. They feel as if they have been elevated to a higher status.

Pre Requisites of Industrial Democracy:

The conditions necessary for effective implementation of industrial democracy are as follows:
1. In every organisation, there should be a strong trade union with effective leadership.
2. There should be willingness on the part of employers to treat workers as partners.
3. Industrial democracy cannot succeed unless all concerned-workers, employers, government and the
public-fully realize its importance and its due place in the national life.
4. The management and the unions should have the strong and genuine desire to deal with the industrial
problems peacefully and through democratic means.

Objectives of Industrial Democracy:

The objectives of industrial democracy are:

(i) The create a sense of belongingness of workers to the organisation.
(ii) To improve a sense of commitment to the organisational objectives, plans and activities among employers.
(iii) To satisfy the psychological needs of the employees.

(iv) To respect the human dignity of the employees.

Significance of Industrial Democracy:

The advantages of industrial democracy are as follows:
(i) There would be full cooperation of employees for the implementation of decisions as they participate in
decision making.
(ii) Industrial harmony can be maintained as the employees feel the sense of belongingness.
(iii) Productivity can be increased.

Workers’ Participation in Management

“Workers’ participation in management is the practice in which employees take part in management decisions
and it is based on the assumption of commonality of interest between employer and employee in furthering the
long term prospects of the enterprise and those working in it”.
According to G.S. Walpole, participation in management gives the workers a sense of importance, price and
accomplishment; it given him the freedom and the opportunity for self-expression; a feeling of belonging to his
place of work and a sense of workmanship and creativity. It provides for the integration of his interest with those
of the management and makes him a joint partner in the enterprise”.

The concept workers’ participation in management encompasses the following:

• It provides scope for employees in the decision making of the organisation.
• The participation may be at the shop level, departmental level or at the top level.
• The participation includes the willingness to share the responsibility by works as they
have a commitment to execute their decisions.
• The participation is conducted through the mechanism of forums which provide for
association of workers representatives.
• The basic idea is to develop self control and self discipline among works, so that the
management become “Auto Management”.

Objectives of Worker’s Participation

The scheme has psychological, social, ethical and political objectives.
● Its psychological objective of the scheme is to secure full recognition of the workers. Association of
worker with management provides him with a sense of importance, involvement and a feeling of
belongingness. He considers himself to be an indispensable constituent of the organisation.
● Socially, the need for participation arises because modern industry is a social institution with the
interest of employer, the share-holders, the community and the workers equally invested in it.
● The ethical objective of participation is to develop workers free personality and to recognize human
dignity.
● The political objective of participation is to develop workers conscious of their democratic rights on
their work place and thus bring about industrial democracy

Levels of Participation
Workers’ participation is possible at all levels of management; the only difference is that of degree and nature of
application. For instance, it may be vigorous at lower level and faint at top level. Broadly speaking there are
following five levels of participation:
1. Information participation: It ensures that employees are able to receive information and express their
views pertaining to the matters of general economic importance.
2. Consultative participation: Here works are consulted on the matters of employee welfare such as work,
safety and health. However, final decision always rests at the option of management and employees’
views are only of advisory nature.
3. Associative participation: It is extension of consultative participation as management here is under
moral obligation to accept and implement the unanimous decisions of employees.
4. Administrative participation: It ensure greater share of works in discharge of managerial functions.
Here, decision already taken by the management come to employees, preferably with alternatives for
administration and employees have to select the best from those for implementation.
5. Decisive participation: Highest level of participation where decisions are jointly taken on the matters
relation to production, welfare etc. is called decisive participation.

Forms of Workers’ Participation in Management

The forms of workers participation in management vary from industry to industry and country to country
depending upon the political system, pattern of management relations and subject or area of participation. The
forms of workers participation may be as follows:
1. Joint Consultation Model
2. Joint Decision Model
3. Self Management, or Auto Management Scheme
4. Workers Representation on Board

1. Joint consultation model: In joint consultation model the management consults with the workers before taking
decisions. The workers represent their view through ‘Joint consultative Committees’. This form is followed in
U.K., Sweden and Poland.
2. Joint decision model: In this form both the workers and management jointly decide and execute the decisions.
This form of participation is followed in U.S.A. and West Germany.
3. Self management of auto management: In this model, the entire control is in the hands of workers. Yugoslavia
is an example to this model. Where the state industrial units are run by the workers under a scheme called ‘Self
Management or Auto Management Scheme’.
[Link]’ representation on board: Under this method, the workers elect their representative and send them to
the Board to participate in the decision making process.
The participation of workers may be formal or informal. In the formal participation, it takes the forms of formal
structures such as Works Committee, Shop Councils, Production Committee, Safety Committee, Joint
Management Councils, Canteen Committee etc. The informal participation may be such as the supervisor
consulting the workers for granting leave, overtime, and allotment of worked or transfer of workers from one
department to another.

Specific of Purpose of Workers' Participation

1. It helps in managing resistance to change which is inevitable. For the growth and development of industry,
changes have to be welcomed; otherwise the organization will stagnate and be left behind. If the need for change
is jointly felt by all partners of production its acceptance can be high. Workers' participation in change strategy
can facilitate acceptable solutions with a view to secure effective and smooth implementations of decisions.
2. Workers' participation can encourage communication at all levels. Since both partners of production are
involved in the decision-making there will be fewer changes of distortion and/ or failure in communicating the
decision.
3. Joint decision- making ensures the there will be minimum industrial conflict an economic growth can be free
from distracting strife.
4. Workers' participation at the plant level can be seen as the first step to establishing democratic values in
society at large.

Pre-requisites/ Conditions for Effective Participation

The pre-requisites/ conditions for the success of any scheme of participative management are the following:
1. Firstly, there should be a strong, democratic and representative unionism for the success of participative
management.
2. Secondly, there should be mutually-agreed and clearly-formulated objectives for participation to
succeed.
3. Thirdly, there should be a feeling of participation at all levels.
4. Fourthly, there should be effective consultation of the workers by the management.
5. Fifthly, both the management and the workers must have full faith in the soundness of the philosophy
underlying the concept of labour participation.
6. Sixthly, till the participative structure is fully accepted by the parties, legislative support is necessary to
ensure that rights of each other are recognised and protected.
7. Seventhly, education and training make a significant contribution to the purposeful working of
participative management.
8. Lastly, forums of participation, areas of participation and guidelines for implementation of decisions
should be specific and there should be prompt follow-up action and feedback.
Workers’ Participation in Management in India
Workers participation in management in India was given importance only after independence. Industrial
Disputes Act of 1947 was the first step in this direction, which recommended for the setting up of Works
Committees. The Joint Management Councils were established in 1950 which increased the participation of
labour in management. The management scheme, 1970 gave birth to ‘Board of Management’. Since July 1975,
the two-tire participation model called ‘Shop Council’ at the shop level and ‘Joint Councils’ at the enterprise
level were introduced.
Based on the review and performance of previous schemes a new scheme was formulated in 1983. The new
scheme of workers participation was applicable to all central public sector enterprises, except those specifically
exempted. The scheme with equal number of representatives will operate both at shop as well as plant level. The
various functions of participative forum laid down in the scheme could be modified with the consent of parties.
The scheme could not make such head way due to lack of union leaders consensus of the mode of representation
and workers’ tendency to discuss ultra-vires issues e.g. pay scales, wages etc.
Prior to WPM Bill, 1990 all the schemes of participation were non-statutory and concentrated on particular
levels. For effective and meaningful participation at all levels, a bill was introduced in Parliament on 25th May,
1990. The bill provide for effective participation at all level by formulating schemes of participation. For
electing representatives for participation it also provides for secret ballot. The appropriate government may also
appoint inspectors to review participation schemes and the bill also has provision of punishment for those who
contravene any of the provision of the Act.

Reasons for failure in India

Workers’ participation schemes in India provide wide scope for application and upliftment of workers. But in
practice, these schemes have not met with success though they are successful in some private sector units. The
factors responsible for the failure are:
● Attitude of the management towards the scheme is not encouraging. The representatives of workers are
not given due recognition by the management.
● The attitude of trade unions towards the schemes is negative as they consider these schemes are
reducing the power of Trade Unions. Some Trade Unions boycott Joint Management Council meetings.
 The success these schemes require certain conditions.
● Management should appreciate the scheme and accept them in full faith.
● Trade unions have to cooperate with the schemes.
● Workers have to be educated.
Thus workers’ participation in management in India has yet to succeed. It can be done by educating the workers,
creating an environment in the organisatoin for coordination of workers and management.

UNIT II
Syllabus: Collective Bargaining: Significance, types & procedure of Collective bargaining Discipline:
The Industrial Employment (Standing Orders) Act 1961, Misconduct, Disciplinary Action, Types of
Punishments, Code of Discipline, Domestic Enquiry, Grievance Handling in IR: Grievance Settlement
Procedure, Industrial Disputes, Preventive & Settlement Machinery in India. Employee Participation
and Empowerment: Objectives, Employee Participation, Advantages of Employee Participation,
Employee Participation in India, Methods of Participation, Employee Empowerment. Case Studies

COLLECTIVE BARGAINING
Collective bargaining is defined as a process of negotiation between the employer and the organized workers
represented by their union in order to determine the terms and conditions of employment. The process of
collective bargaining is bipartite in nature, i.e. the negotiations are between the employers and employees
without a third party’s intervention. Thus collective bargaining serves to bridge the emotional and physiological
gulf between the workers and employers though direct discussions.
Collective bargaining is a process whereby trade unions, representing workers, and employers through their
representatives, treat and negotiate with a view to the conclusion of a collective agreement or renewal thereof or
the resolution of disputes.A collective agreement is usually an agreement in writing between an employer and a
union, on behalf of workers employed by the employer. It contains provisions reflecting terms and conditions of
employment of the workers, and conferring to them their rights, privileges and responsibilities.

The collective bargaining process comprises of five core steps:

1. Prepare: This phase involves composition of a negotiation team. The negotiation team should consist
of representatives of both the parties with adequate knowledge and skills for negotiation. In this phase
both the employer’s representatives and the union examine their own situation in order to develop the
issues that they believe will be most important. The first thing to be done is to determine whether there
is actually any reason to negotiate at all. A correct understanding of the main issues to be covered and
intimate knowledge of operations, working conditions, production norms and other relevant conditions
is required.
2. Discuss: Here, the parties decide the ground rules that will guide the negotiations. A process well
begun is half done and this is no less true in case of collective bargaining. An environment of mutual
trust and understanding is also created so that the collective bargaining agreement would be reached.
3. Propose: This phase involves the initial opening statements and the possible options that exist to
resolve them. In a word, this phase could be described as ‘brainstorming’. The exchange of messages
takes place and opinion of both the parties is sought.
4. Bargain: negotiations are easy if a problem solving attitude is adopted. This stage comprises the time
when ‘what ifs’ and ‘supposals’ are set forth and the drafting of agreements take place.
5. Settlement: Once the parties are through with the bargaining process, a consensual agreement is
reached upon wherein both the parties agree to a common decision regarding the problem or the issue.
 This stage is described as consisting of effective joint implementation of the agreement through shared
visions, strategic planning and negotiated change.

Types of Bargaining
[Link] / Distributive Bargaining: Distributive bargaining is the most common type of bargaining &
involves zero-sum negotiations, in other words, one side wins and the other loses. Both parties try to maximize
their respective gains. They try to settle economic issues such as wages, benefits, bonus, etc.
For Example, Unions negotiate for maximum wages & the management wants to yield as little as possible –
while getting things done through workers.
2. Cooperative /Integrative Bargaining: Integrative bargaining is similar to problem solving sessions in which
both sides are trying to reach a mutually beneficial alternative, i.e. a win-win situation. Both the employer & the
union try to resolve the conflict to the benefit of both parties. Both sides share information about their interests
and concerns and they create a list of possible solutions to best meet everyone’s needs. For Example, when
companies are hit by recession, they cannot offer the kind of wages and benefits demanded by workers. At the
same time they cannot survive without the latter’s support. Both parties realize the importance of surviving in
such difficult times and are willing to negotiate the terms of employment in a flexible way.
3. Productivity Bargaining:
This type of bargaining is done by the management, where the workers are given the incentives or the bonus for
the increased productivity. The workers get encouraged and work very hard to reach beyond the standard level
of productivity to gain the additional benefits.
Through this form of collective bargaining, both the employer and the employee enjoy the benefits in the form
of increased production and the increased pay respectively.
4. Composite Bargaining: Workers believed that productivity bargaining agreements increased their workloads.
Rationalization, introduction of new technology, tight productivity norms have added to this burden and made
the life of a worker somewhat uneasy. As an answer to such problems, labor has come in favor of composite
bargaining. In this method, labor bargains for wages as usual, but goes a step further demanding equity in
matters relating to work norms, employment levels, manning standards, environmental hazards , sub-contracting
clauses etc. This works in the favor of the workers, for e.g., when unions negotiate standards they ensure the
workload of workers don’t exceed.

Significance / Importance of Collective Bargaining

Collective Bargaining not only includes negotiation, administration and enforcement of the written contracts
between the employees and the employers, but also includes the process of resolving labour-management
conflicts. Thus,
collective bargaining is a legally and socially sanctioned way of regulating in the public interest the forces of
power and influence inherent in organized labour and management groups.
Importance of Employees
Collective Bargaining helps the employees:
(i) To develop a sense of self-respect and responsibility among the employees.
(ii) To increase the strength of the workers. Their bargaining capacity as a group increases.
(iii) To increase the morale and productivity of employees.
(iv) To restrict management‘s freedom for arbitrary action against the employees. Unilateral actions by the
management are discouraged.
(v) To strengthen the trade union movement.
Importance to Employers
(i) The workers feel motivated as they can talk to the employers on various matters and bargain for higher
benefits. As a result, their productivity increases.
(ii) It is easier for the management to resolve issues at the bargaining table rather than taking up complaints of
employees individually.
(iii) Collective bargaining promotes a sense of job security among the employees and thereby tends to reduce
cost of labour turnover to management, employees as well as the society at large.
(iv) Collective bargaining opens up the channels of communications between the top and bottom levels of
organization which may be difficult otherwise.
Importance to society
Collective Bargaining helps the society:
(i) To attain industrial peace in the country.
(ii) To establish a harmonious industrial climate which supports the pace of a nation‘s efforts towards economic
and social development since the obstacles to such development can be largely eliminated or reduced. As a
vehicle of industrial peace or harmony, collective bargaining has no equal.
(iii) To extend the democratic principle from the political to the industrial field. It builds up a system of
industrial jurisprudence by introducing civil rights in industry and ensures that management is conducted by
rules rather than by arbitrary decisions.
(iv) To check the exploitation of workers by the management.
(v) To distribute equitably the benefits derived from industry among all the participants including the
employees, the unions, the management, the customers, the suppliers and the public.

Recent Trends in Collective Bargaining

1. Decentralised and Individualized Bargaining
The collective bargaining in India remained largely decentralized, i.e. company or unit level bargaining rather
than Industry level bargaining. But in some sectors (mostly public sector industries) the industry level
bargaining was dominant. However, privatization of public sector transformed the industry level bargaining to
company level bargaining. On the other hand, due to drastic change in fomalisation of workforce and
downsizing in the industries, the strength and power of the trade unions is heavily reduced. The trade unions
mainly represented the interests of formal workers. Increasing number of informal workers in the companies
soon transformed the structure of the workforce in such a way that the formal workers became a minority.
Moreover, in some sectors like garment, there is almost complete in formalisation of the work force with only a
tiny section of formal workers. It happened in almost all sectors. Due to various reasons informal workers are
not able to form their own trade unions, and on the other hand they are not represented by the trade unions of the
formal workers. These situations resulted in spurt of individualized bargaining.
High level of informalisation of workforce combined with the individualized bargaining actually changed the
character of the trade unions also. In relevant sectors and industrial regions, it converted many trade unions
(particularly in sector dominated by informal workers) in to legal consultants (pursuing individual cases and
charging fees for their services) rather than collective bargaining agents.
2. Declining Wage Share
Declining strength of collective bargaining is also reflected in sharply increasing share of profit and drastically
declining the wage share (since 2001-02), resulting in depressing purchasing power. Approximately 73 million
out of 173 million wage earners throughout India do not receive minimum wages About 30–40 per cent of these
low-paid wage earners belong to poor families.
3. New Wave of Labour Movement for Unionisation
A new wave of workers struggle for unionization is emerging from below by and large independent from the
central trade unions. This is mainly emerging in the formal sector. The workers are realizing by their own
experiences that they cannot change their fate without organizing themselves in a trade union. In many cases the
workers do not get even the legal benefits like minimum wages, premium rate of overtime and holidays and
casual leaves. Once the union is formed, at least the minimum benefits guaranteed by law are easily available to
all workers. Actually large numbers of informal workers are illegally put in the category of informal, and they
can convert their status in to formal workers only by organizing themselves in a trade union. It is in this
background that even when the workers are facing unimaginable repression for their attempts to form a union,
they are fighting for it and more and more workers in new factories are also choosing the same.
In 2009-10, most of the well known workers struggles were on the issue of formation or for recognition of the
trade union for collective bargaining, e.g. Hyundai Workers Struggle for Recognition of the Union, Nokia
Workers Struggle for Wage Hike and Against Victimization, MRF Workers Struggle for Recognition of Union,
Pricol Workers Struggle for Recognition of Union, Graziano Workers struggle for Unionization, The Case of
Trade Union Repression in Nestle, Vivva Global Workers Struggle for Minimum Wages and Unionization, Rico
Auto Workers Struggle for Unionization and Sunbeam Workers Struggle for Democratisation of the union.
It is also interesting to note that in almost all the above cases both formal and informal workers came together in
these struggles. It explains that the conditions have already entered in a new phase when the numbers of
informal workers in factories are either equal to or more than formal workers and generally with same
competence levels. Therefore the enmity of formal workers with informal workers has gone. Now rather than
trying to oust informal workers, the formals are uniting with in formals and demanding regularization of their
jobs so that they get the same status and benefits as formal workers. Unionizing all the formal and informal
workers under the same union is actually one major step in this direction.
On the other hand, the industrialists are not ready to accept trade unions in their factories at any cost. They are
unleashing unimaginable repression on workers and trade union leaders when there are efforts to form trade
unions in their factories. Even after the trade unions are formed, managements are not ready to recognize them
and therefore deny them space for collective bargaining.
According the data of Government of India on strikes and lockouts (Indian Labour Statistics 2010), causal factor
of 34.8 percent cases of industrial disputes is recorded as indiscipline. 22 percent cases of industrial disputes are
around demands for wages and allowances (in many cases demanding only minimum wages fixed by the
government). Actually these two categories of industrial disputes largely reflect on the sufferings of informal
workers and repression unleashed by factory managements on unionization efforts of the workers. Moreover,
after the liberalization, man days lost in the lockouts are far more than the strikes by the workers. This is a
consistent trend.
In the meantime, the central trade unions are also increasingly realizing the importance of unity among trade
unions. This is reflected in formation of a Coordination Committee of eight Central Trade Unions on the other.
First joint action of this coordination committee was the one day All India General Strike on 7th Nov 2010,
which is said to be the biggest strike in India since independence with participation of about 100 million
workers from all over the country.
There are also new initiatives to organize informal sector workers particularly the agriculture workers. After the
implementation of National Rural Employment Guarantee Act, the new possibilities emerged to unionize the
rural workers around the NREGA. Many local level unions of rural workers and also regional platforms of rural
workers have started emerging. However, the system of collective bargaining in this sector is very different; it is
mostly on general issues like proper implementation of the act itself, ensuring minimum wages, employment
guarantee and workplace facilities. Since the wages (minimum wages) and facilities are fixed by law, the
struggle is actually for implementation of the NREGA. There are also initiatives to organize other informal
sector workers also like forest workers, fish workers and other self employed categories. But the movement is
still very weak and informal sector workers are by and large not able to realize the right of collective bargaining.

Employee Discipline
Discipline may be defined as an attitude of mind which aims at inculcating restraint, orderly behaviour and
respect for and willing obedience to a recognized authority.
According to Dr. Spiegel, “discipline is the force that prompts an individual or a group to observe the rules,
regulations and procedures which are deemed to be necessary to the attainment of an objective; it is force or fear
of force which restraints an individual or a group from doing things which are deemed to be destructive of group
objectives.

Types of Discipline
There are two types of discipline, one is positive and the other is negative.
Positive Discipline Positive discipline involves creation of an atmosphere in the organisation whereby
employees willingly conform to the established rules and regulations. Positive discipline can be achieved
through rewards and effective leadership. It employs constructive force to secure its compliance. It is
immeasurably more effective and pays a greater role in business management. Positive discipline prevails only
where the employees have a high morale. Positive discipline promotes cooperating and coordination with a
minimum of formal organization. It reduces the need for strict supervision required to maintain standards and
observe rules and regulations.
Negative Discipline Under negative discipline, penalties are used to force the workers to obey rules and
regulations. In other words, workers try to adhere to rules and regulations out of fear of warnings, penalties and
other forms of punishment. This is an unfavourable state that subjects the employees to frustration, and
consequently results in low morale. The drawback related to negative discipline is that an employee goes astray
in his behaviour whenever there is a slightest possibility of escaping the punishment or when he believes that his
action will go unnoticed.

The main aims and objectives of discipline are:

● To obtain a willing acceptance of the rules, regulations and procedures of an organisation so that
organizational objectives can be attained;
● To develop among the employees a spirit of tolerance and a desire to make adjustments;
● To give and seek direction and responsibility;
● To create an atmosphere of respect for human personality and human relations;
● To increase the working efficiency morale of the employees; and
● To impart an element of certainty despite several differences in informal behaviour patterns and other
related changes in an organisation.

The different approaches to discipline include

Human relation approach: In human relation approach the employee is helped to correct his deviations
Human resources approach: Under the human resources approach, the employee is treated as resource and the
act of indiscipline are dealt by considering the failure in the area of development, maintenance and utilization of
human resources.
Group discipline approach: The group as a whole sets the standards of discipline, and punishments for the
deviations. The individual employees are awarded punishments for their violation under the group discipline
approach.
Leadership approach: In this approach, every supervisor administers the rules of discipline and guides, trains
and controls the subordinates regarding disciplinary rules.
Judicial approach: In judicial approach, in disciplinary cases are dealt on the basis of legislation and court
decisions. The Industrial Employment Act, 1946, to a certain extent, prescribed the correct procedure that
should be followed before awarding punishment to an employee in India.
Over several decades of labor-management relationships, several principles on discipline have emerged.
Some of them are as follows:
1. Disciplinary action should not be taken unless there is an obvious necessity for it. Have all the facts; know
just what you want to do, and where necessary, secure approval in advance on any proposed action.
2. The reasons for disciplinary action should be made clear. In the case of negative action, the statement of the
reasons should be accompanied by an explanation of the manner in which the disciplinary action may be
avoided in the future.
3. Give the man a chance to present his side of the story, and do not argue. Know what’s in the employee’s mind,
it helps in discovering the “why” of his actions.
4. There should be no favouritism or discrimination in any disciplinary action. Consistency in disciplinary action
is extremely important. In general, it is more important than the degree of severity.
5. Reprot of or reprimand should be given as soon as possible after the occurrence of the act. Right timing is
important, but first have all the facts
6. Never discipline anyone in the presence of others.
7. Forgive and forget. When disciplinary action has been given, the supervisor should resume a normal attitude
toward the offending employee.
8. The discipline that is inflicted must be just, but sufficiently severe to meet there requirements of the situation.
9. Disciplinary measure should be applied by the immediate supervisor of the employee affected, rather than by
some other higher executive.
10. In general, negative disciplinary action cannot be successfully applied to large groups of employees
representing a substantial portion of one’s organization. If there is poor discipline among a large group, it is
possible that there is something vitally wrong in the situation. The remedy is correction of the situation, not a
disciplinary action

Factors necessary for effective disciplinary system include:

[Link] of supervisors is necessary: Power of executing discipline must be in the hands of trained persons so
as to ensure make proper use of Power on the offenders only, but not on innocents. That is a reason why
Supervisors and mangers need to be trained on when and how discipline should be used. Moreover, it should be
ensured that discipline decisions taken by trained superiors must be considered fair and unbiased by both
employees and managers so as to build up respect towards a system which will help in developing healthy
industrial relationships.
2. Centralization of discipline: .Centralized means that the discipline decisions should be uniform throughout
the organization. The greater the uniformity, higher will be the effectiveness of discipline procedure.
3. Impersonal discipline: Discipline should be handled impersonally. Managers should try to minimize the ill
feelings arising out of the decisions by judging the offensive behaviour and not by judging the person. Managers
should limit their emotional involvement in the disciplinary sessions.
4. Review discipline decisions: The disciplinary decisions must be reviewed before being implemented. This
will ensure uniformity and fairness of the system and will minimize the arbitrariness of the disciplinary system.
5. Notification of conduct that may result in discipline: Actions that lead to misconduct can be listed and
documented so the employees are aware of such actions. This will enable them to claim that they have not been
notified, in advance, regarding the same.
6. Information regarding penalties: The employer should define the penalties and other actions like warnings,
reprimands, discharge and dismissal well in advance. All these action plans must be communicated to the
employees.
7. Discipline shall be progressive: Discipline system should be progressive in nature. In a progressive discipline
approach the severity of actions to modify behavior increases with every step as the employee continues to show
improper behavior. The advantage of this approach is that employees can’t take it for granted.
8. Documentation: Effective discipline requires accurate, written record keeping and written notification to the
employees. Thus less chance will be left for the employee to say the he “did not know” about the policy.
9. Discipline should be fair: The disciplinary decision should be fair enough for the employee. Both
over-penalization and under-penalization are considered to be unfair for the problem employee. Moreover, an
internal fairness is to be maintained, that is, two employees who have committed the same offense should be
equally punished.
10. Discipline shall be flexible and consistent: The manager administering discipline must consider the effect of
actions taken by other managers and of other actions taken in the past. Consistent discipline helps to set limits
and informs people about what they can and cannot do. Inconsistent discipline leads to confusion and
uncertainty.
11. Disciplinary action should be prompt: The effective discipline should be immediate. The longer time lag
between the misconduct offense and the disciplinary action will result in ineffectiveness of the discipline;
besides it may give scope again to commit misconduct, which may create feeling of recklessness and negligence
in the minds of others over the organisation management and also may create feeling of levity among
employees.

Causes of Indiscipline:
The reasons could range anything from poor wages to, poor management and the communication gaps between
the union and management.
The common causes of indiscipline are as follows:
1. Unfair Management Practices: Management sometimes indulges in unfair practices like:
● Wage discrimination
● Non-compliance with promotional policies and transfer policies
● Discrimination in allotment of work
● Defective handling of grievances
● Payment of low wages
● Delay in payment of wages
● Creating low quality work life etc.
These unfair management practices gradually result in indiscipline.

2. Absence of Effective Leadership: Absence of effective leadership results in poor management in the areas of
direction, guidance, instructions etc. This in turn, results in indiscipline.
3. Communication Barriers: Communication barriers and absence of humane approach on the part of superiors
result in frustration and indiscipline among the workers. The management should clearly formulate the policies
regarding discipline. These policies should be communicated and the policies should be consistently followed in
the organisations. The management should also be empathetic towards the employees.
4. Varying Disciplinary Measures: Consistent disciplinary actions must be there in the organisation to provide
equal justice to all concerned. At different times and for everyone, the same standard of disciplinary measures
should be taken otherwise it may give rise to growing indiscipline in the industry in future i.e., the judicious
function on the past of management must be free form may bias, privilege or favouritism.
5. Defective Supervision: The attitude and behavior of the supervisor may create many problems. As the
maintenance of the discipline is the core of supervisory responsibilities, indiscipline may spring from the want
of the right type of supervision.

6. Inadequate attention to personnel Problems: Delay in solving personnel problems develops frustration among
individual workers. The management should be proactive so that there is no discontent among the workers. It
should adopt a parental attitude towards its employees.
7. Victimisation: Victimisation of subordinate also results in indiscipline. The management should not exploit
the workers. It is also in the long-term interest of the management to take care of its internal customers
8. Absence of Code of Conduct: This creates confusion and also provides chance for discrimination while taking
disciplinary action.
A code of conduct is a set of rules outlining the responsibilities of or proper practices for an individual, party or
organization.
9. Divide and Rule Policy: Many mangers in the business obtain secret information about other employees
through their trusted assistants. The spying on employees is only productive of a vicious atmosphere and of
undesirable in the organization.
10. Deferring settlement of Employee Grievances: The employee grievances cannot be put off by deferring or
neglecting their solutions. The grievances should properly be inquired into and settled by the managers in a
reasonable period. Neglect of grievances often results in reduced performance, low morale and indiscipline
among the employees. Strikes and work stoppages stem in many cases form the utter neglect of employee
grievances.
11. Mis-judgment in Promotion and Placements: Mis-judgment in personnel matters like promotion and
placements contribute to the growth of indiscipline in an enterprise. Cases of mis-judgment are carefully noted,
widely circulated, and hotly debated by the employees.

DISCIPLINARY PROCEDURE
Before starting the process of discipline, it is essential to hold a preliminary inquiry to know if a case of
indiscipline and misconduct exist. After this, the following steps should be followed:

1. Issue of charge sheet: Once the case of misconduct is established, the management should proceed to issue a
charge sheet to the employee. Charge sheet is merely a notice of the charge and provides the employee an
opportunity to explain his conduct. Therefore, charge sheet is generally known as a show cause notice. In the
charge sheet, each charge should be clearly specified. There should be a separate charge for each allegation and
charge should not relate to any matter, which has already been decided upon.
2. Consideration of Explanation. On getting the answer for the charge sheet served, the explanation furnished
should be considered and if it is satisfactory, no disciplinary action needs to be taken. On the contrary when the
management is not satisfied with the employee’s explanation, it can proceed with full-fledged enquiry.
(However, if the worker admits the charge, the employer can warn him or award him punishment without further
enquiry.)
3. Suspension pending Enquiry. In case the charge is grave that is serious, a suspension order may be served on
the employee along with the charge sheet. According to the Industrial Employment (Standing Order) Act, 1946,
the suspended worker is to be paid a subsistence allowance equal to one-half of his wages for the first ninety
days of suspension and three-fourths of wages for the remaining period of suspension if the delay in the
completion of disciplinary proceedings is not due to the worker’s conduct.
What is grave will depend on the discretion of the management. It has to be decided in accordance with the
Code Of Discipline.

4. Holding of Enquiry. An enquiry officer should be appointed to hold the enquiry and a notice to this effect
should be given to the concerned worker. Principle of natural justice must be followed. The worker should not
be denied the chance of explaining himself. The enquiry officer should give sufficient notice to the worker so
that he may prepare to represent his case and make submission in his defence. The enquiry officer should
proceed in a proper manner and examine witnesses. Fair opportunity should be given to the worker to
cross-examine the management witnesses.

The principles of natural justice can be summarised as follows:

Principle of Natural Justice

Tell the person what he has done

Hear Him
Give Him a Chance to defend himself

On the conclusion of the enquiry, the enquiry officer should record his findings and the reasons thereof. He
should refrain from recommending punishment and leave it to the decision of the appropriate authority.
5. Order of Punishment. Disciplinary action can be taken when the misconduct of the employee is proved. While
deciding the nature of disciplinary action, the employee’s previous record, precedents, effects of the action on
other employees, etc, have to be considered.

When the employee feels that the enquiry conducted was not proper and the action taken unjustified, he must be
given a chance to make appeal.

Drafting of Charge Sheet – Constituents of Charge

1. Time and place of the misconduct. Time and place are sometimes constituent of the charge itself.(e.g.
riotous behaviour within the office premises and during office hours). Even when the time and place do
not constitute an essential part of the charge, still they should be mentioned, so that the incident may be
specific and concerned employee may be able to meet the case.
2. The specific name of the misconduct should be mentioned. This is done by referring to the specific
provision of the Code of Conduct Regulation, that has been violated.
3. In case of habitual committal of the misconduct is made, the word ‘habitual’ should be mentioned. The
past record showing the habit should also be given.
4. When the time of the incident involving the misconduct is material and is given, the employer should
always mention the word ‘about’ or ‘around’ i.e. ‘about 2.00 pm’ or ‘around 2.00 PM’. Even if it is
proved that the employee did not commit the misconduct at 2.00 PM, and it had taken place at 2.10 or
2.15, the use of the word will save the situation. On account of the difficulty of being very precise the
charge is technically defective if either of the words mentioned is not used.
5. Charge sheet should contain facts instead of mere inference or judgement from facts. Mere use of
words like “insolence” or “unsatisfactory work”, “negligence”, “misbehaviour or indiscipline” cannot
 constitute a misconduct, unless supported by information about material incidents corroborating the
words used.
6. The time allowed for submission of reply by the delinquent officer and a statement that if no reply is
received within that time, it will be presumed that the delinquent officer has nothing to reply and that
he has admitted the charges and further action on the charge sheet will follow accordingly. However
despite this statement, if no reply is received, an oral inquiry should be conducted, after expiry of time
allowed for the reply.
Each incident constituting misconduct should be stated as a separate charge.

Kinds of punishment
A. Minor punishments
1. Oral Reprimand It is the mildest form of disciplinary action. It is a verbal interaction between the employees
and supervisor where they discuss the problem behaviour and the expectations to change the behaviours.
Superior makes clear to the subordinate that he does not approve of the subordinate’s behaviour. It is given for
minor offences like failure to obey safety rules, smoking in prohibited area, sleeping on the job or giving
sub-standard performance. It does not involve loss of wages to the employee.
2. Written Reprimand It is applied in case of habitual misconduct or inefficiency.—It involves the
documentation between employees and supervisor if the behaviour continues or if the employee further commits
a serious offense. A written warning is more official and summarizes the previous oral attempts. This written
feedback is discussed with the employee and then placed in his personnel file. It is issued in writing and brought
on record so that it may support, if necessary, any substantive punishment that may be given to the employee in
future. It states that certain privileges would be with held or withdrawn if the subordinate continues with his
present conduct.
3. Loss of privileges For offences like tardiness or leaving work without permission, the employee may be put
to loss of privileges like good job assignment, right to select machine or other equipments and freedom of
movement in workplace or company.
4. Fines Fine means deduction from the remuneration of the employee by way of punishment. Power to make
penal deductions from the remuneration of the employee by the employer is not implied unless it is reserved
under the contract of employment or statute.
5. Punitive Suspension Punitive suspension is inflicted on the workman as a punishment for some misconduct.
Under this an employee is prohibited from performing the duties assigned to him and his wages are with held for
so long as the prohibition subsists. Suspension pending enquiry is different in which the employee is entitled to
wages for the period of suspension.
B. Major Punishments Withholding of increments Withholding of annual increment of an employee in a
graded scale is a major punishment, for a certain period.
Demotion It means reduction of an employee to a lower grade from the one hitherto enjoyed by him.
Discharge It means the termination of a worker’s service. According to Industrial Employment Standing Orders
Act, 1946, 15 days notice has to be given to employee there by paying wages.
Dismissal It is referred as Industrial Capital Punishment, which is the ultimate and severe punishment than
discharge. Dismissal is a disqualification for future employment. In this the employee is not entitled to provident
fund or gratuity benefits.

Code of Discipline
To maintain harmonious relations and promote industrial peace, a Code of Discipline has been laid down which
applies to both public and private sector enterprises. It specifies various obligations for the management and the
workers with the objective of promoting cooperation between their representatives. The Fifteenth Indian Labour
Conference discussed the question of discipline in industry and lain down the following general principles
The Code is based on the following principles:

● There should be no strike or lockout without prior notice.

● No unilateral action should be taken in connection with any industrial matter.
● Employees should not follow go slow tactic.
● No deliberate damage should be caused to a plant or property
● Acts of violations, intimidation and coercion should not be resorted
● The existing machinery for the settlement of disputes should be utilized.
● Actions that disturb cordial relationships should be avoided.
The Code embodies four parts. Part I contains the duties and responsibilities of employees, workers and the
government in maintaining discipline in industry. Part II enlists the common obligations of management and
unions. Part III deals with the obligations of management only, while Part IV relates to those of the unions only.
In additions, Annexure-A to the Code embodies the national level agreement on the criteria for the recognition
of unions. A supplementary document contains the rights of recognized unions and a model grievance
procedure. Thus, the Code is highly comprehensive and ethical in its approach to the industrial relations system.

The basic objectives of Code of Discipline are to:

● Maintain peace and order in industry.

● Promote constructive criticism at all levels of management and employment.
● Avoid work stoppage in industry.
● Secure the settlement of disputes and grievances by a mutually agreed procedure.
● Avoiding litigation.
● Facilitate a free growth of trade unions.
● Eliminate all forms of coercion, intimidation and violations of rules and regulations governing
industrial relations.

HOT STOVE RULE

The "Hot-Stove Rule" of Douglas McGregor gives a good illustration of how to impose disciplinary action
without generating resentment. When you touch a hot stove, your discipline is immediate, with warning,
consistent, and impersonal.

These four characteristics, according to McGregor, as applied to discipline are self-serving and may be
explained as follows:

1. When you touch the hot stove, you burn your hand. The burn was immediate. Will you blame the hot
stove for burning your hand? Immediately, you understand the cause and effect of the offense. The discipline
was directed against the act not against anybody else. You get angry with yourself, but you know it was your
fault. You get angry with the hot stove too, but not for long as you know it was not its fault. You learn your
lesson quickly.
2. You had warning as you knew the stove was red hot and you knew what would happen to you if you touched
it. You knew the rules and regulations previously issued to you by the company prescribing the penalty for
violation of any particular rule so you cannot claim you were not given a previous warning.
3. The discipline was consistent. Every time you touch the hot stove you get burned. Consistency in the
administration of disciplinary action is essential. Excessive leniency as well as too much harshness creates not
only dissatisfaction but also resentment.
4. The discipline was impersonal. Whoever touches the hot stove gets burned, no matter who he is.
Furthermore, he gets burned not because of who he is, but because he touched the hot stove. The discipline is
directed against the act, not against the person. After disciplinary action has been applied, the supervisor should
take the normal attitude toward the employee.

In applying Hot Stove rule in disciplinary action, there must be company policies, rules and regulations
regarding certain behavior and conduct which were issued and clearly explained to employees and accepted by
them for compliance. Disciplinary action must be directed against the act, not against the person. It must be used
by supervisors as a tool to develop the employee and the group. The steps that should be followed are:

● Immediate investigation of the offense must be done to determine the facts. If the company is
unionized, the investigation must be conducted in the presence of the union steward or one of the
representatives of the union. Promptness is necessary in order that the employee will associate the
investigation with the offense rather than with his person.

● Previous warning. In labor relations, it is important that the company policies, rules and regulations be
issued to and explained to all employees upon induction as part of the orientation program. This should
be done by the supervisor with the help of the personnel department. In addition, whenever new
policies, rules and regulations are promulgated, they must be posted in the company's bulletin board,
circulated, and explained to the employees by the supervisor. It is good practices to have the employees
acknowledge receipt of a copy of the said rule or policy so they could not deny knowledge of the rules.
In some companies, the rules and regulations provide "progressive discipline" whereby penalties are
graduated depending upon the gravity and frequency of the violation.

● Consistency in the administration of disciplinary action is highly essential so that employees will know
what to expect as a consequence of an infraction or violation of the rule or regulation.
 ● Disciplinary action must be impersonal. It should be directed against the act, not the person. It should
be institutional, that is, for the protection and interest of the entire organization and for all employees,
and not done to satisfy the personal whim and caprice of the supervisor.

In nut Shell remember:

The Hot Stove Rule where discipline is concerned:-

● You had a warning – you knew what would happen if you touched the stove
● The penalty was consistent – everyone gets the same treatment
● The penalty is impersonal – a person is burned not because of who he or she is, but because the stove
was touched
● The penalty is not delayed.
● So check out the facts first, follow due process and, if appropriate, apply the discipline as soon after the
event as investigations will allow. If you fail to be consistent, you may end up getting your own fingers
burnt!

Misconduct
The term ‘misconduct’ usually implies an act done wilfully with a wrong intention, and conveys the idea of
wrongful intention. Whether a particular course of conduct will be regarded as misconduct is to be determined
from the nature of the conduct and not from its consequences.
Schedule 1, Clause 14(3) of Industrial Employment (Standing Orders) Central rules 1946, framed under
Industrial Employment (Standing Orders) Act 1946 provides for certain acts and omissions as misconduct.
These acts or omissions include wilful insubordination, disobedience, theft, fraud, dishonesty and habitual
negligence.
Misconduct can be misconduct relating to duty and can include acts like non-observance of duty,
non-performance of work, negligence of duty, absence without leave, strikes, go-slow, gherao and other acts
directly relating to discipline including acts subversive to discipline, insubordination, disobedience, riotous and
disorderly behaviour, damage to property et al. Misconduct also encompasses acts like theft, dishonesty and
fraud, disloyalty, moral turpitude, corruption et al.

Grievance
Beach defines a grievance as, ‘any dissatisfaction or feeling of injustice in connection with one’s employment
situation that is brought to the notice of the management.
In the Indian context, ‘grievance’ may be said to “the representation by a worker, a group of workers or the
unions to the management relation to the terms and conditions of employment, breach of the freedom of
association or the provisions of standing orders or non-implementation of the Government orders, conciliation
agreeme4nts or adjudicators’ awards”. It may also include representation against non-compliance with provision
of a collective agreement in an establishment where it has been signed.

Causes of Grievances
Grievances resulting from working conditions
• Poor physical conditions of work place.
• Lack of proper tools, machines and equipments.
• Frequent changes in schedules or procedures.
• Rigid production standards
• Improper matching of the worker with the job.
• Poor relationship with the supervisor.
Grievances resulting from management policy and practices
• Poor payment
• Lack of job security
• Inadequate benefits such as medical benefits, leave travel concession etc.
• Leave facilities
• Seniority
• Transfer
• Promotion
• Lack of career planning and development
• Hostility towards labour union
• Defective leadership style
• Communication gap
Grievances resulting from alleged violations of
• Violation collective bargaining agreement
• Violation of Central/State laws
• Violation of common rules
Grievances resulting from personal maladjustment
• Over ambition
• Excessive self-esteem

Methods of Indentifying Grievances

The following methods can help the employer to identify the grievances:
1. Directive observation: From the changed behaviour of employees, manager should be able to snuff the
causes of grievances. This he can do without its knowledge to the employee. This method will give
general pattern of grievances. In addition to normal routine, periodic interviews with the employees,
group meetings and collective bargaining are the specific occasions where direct observation can help
in unfolding the grievances.
2. Grip boxes: The boxes (like suggestion boxes) are placed at easily accessible spots to most employees
in the organisation. The employees can file anonymous complaints about their dissatisfaction in these
boxes. Due to anonymity, the fear of managerial action is avoided. Moreover, management’s interest is
also limited to the free and fair views of employees.
3. Open door policy: Most democratic by nature, the policy is preached most but practiced very rarely in
Indian organizations. But this method will be more useful in absence of an effective grievance
procedure; otherwise the organisation will do well to have a grievance procedure. Open door policy
demands that the employees, even at the lowest rank, should have easy access to the chief executive to
get his grievances redressed.
4. Exit interview: Higher employee turnover is a problem of every organisation. Employees leave the
organisation either due to dissatisfaction or for better prospects. Exit interviews may be conducted to
know the reasons for leaving the job. Properly conducted exit interviews can provide significant
information about the strengths and weaknesses of the organisation and can pave way for further
improving the management policies for its labour force.

Steps in handling grievances

It is important that grievance must be handled in a systematic manner. The following steps should be taken in
handling grievances:
1. Defining, describing or expressing the nature of the grievances as clearly and fully as possible;
2. Gathering all facts that serve to explain when, how, where, to whom and why the grievance occurred;
3. Establishing tentative solutions or answers to the grievances;
4. Gathering additional information to check the validity of the solutions and thus ascertain the best
possible solution;
5. Applying the solution, and
6. Following up the case to see that it has been handled satisfactorily and the trouble has been eliminated.

Model of Grievance Handling

Grievances generally arise from the day-do-day working relations in the undertaking, usually a employee or
trade union protest against an act or omission or management that is considered to violate worker’s rights Model
Grievance Procedure specifies the details of all the steps that are to be followed while redressing grievances.
These steps are:
STEP 1: In the first step the grievance is to be submitted to departmental representative, who is a representative
of management. He has to give his answer within 48 hours.
STEP 2: If the departmental representative fails to provide a solution, the aggrieved employee can take his
grievance to head of the department, who has to give his decision within 3 days.
STEP 3: If the aggrieved employee is not satisfied with the decision of departmental head, he can take the
grievance to Grievance Committee. The Grievance Committee makes its recommendations to the manager
within 7 days in the form of a report. The final decision of the management on the report of Grievance
Committee must be communicated to the aggrieved employee within three days of the receipt of report. An
appeal for revision of final decision can be made by the worker if he is not satisfied with it. The management
must communicate its decision to the worker within 7 days.
STEP 4: If the grievance still remains unsettled, the case may be referred to voluntary arbitration.

Merits of grievance Procedure:

 1. It encourages employees to raise concerns without fear of reprisal.
2. It provides a fair and speedy means of dealing with complaints.
3. It prevents minor disagreements developing into serious disputes.
4. It saves employer’s time and money as solutions are found for workplace problems.
5. It helps to build an organisational climate, based on openness and trust.
6. The grievance procedure also provides the employee with an avenue for upward
communication, justice and avoids appeals to outsiders because problems really can be solved within
the organization
Demerits of Grievance Procedure
Sometime it becomes very time consuming.

Industrial Disputes
Industrial disputes is “Any dispute or difference between the employers and employees, or between employs
workmen, or between workmen and workmen, which is connected with the employment or unemployment or
the terms of employment or with the conditions of labour of any person:”
There must be following ingredients of an industrial dispute: -
(i) There must be a relationship of employer and employee.
(ii) The worker must be on the roll list of the industry.
(iii) The demands of the workers must have been rejected by the employer.
(iv) The dispute may be between two employers or between two employees.
(v) The dispute may be connected with employment or terms of employment or with labour
conditions of any person.
(vi) The industrial unit must be a going concern. It must not be dead.

Dispute differs from discipline and grievance. While discipline and grievance focus on individuals, dispute
focuses on collectivity of individuals. In other words, the test of industrial dispute is that the interest of all or
majority of workmen is involved in it.
The following principles judge the nature of an industrial dispute:
1. The dispute must affect a large number of workmen who have a community of interest and
the rights of these workmen must be affected as a class.
2. The dispute must be taken up either by the industry union or by a substantial number of
workmen.
3. The grievance turns from individual complaint into a general complaint.
4. There must be some nexus between the union and the dispute.
5. According to Section 2A of the Industrial Disputes Act, 1947, a workman has a right to
raise an industrial dispute with regard to termination, discharge, dismissal, or
retrenchment of his or her service, even though no other workman or any trade union of
workman or any trade union of workmen raises it or is a party to the dispute.

Forms of Industrial Disputes:

The industrial disputes are manifested in the following forms:
Strikes: Strike is the most important form of industrial disputes. A strike is a spontaneous and concerted
withdrawal of labour from production. The Industrial Disputes Act, 1947 defines a strike as “suspension or
cessation of work by a group of persons employed in any industry, acting in combination or 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”.
According to Patterson “Strikes constitute militant and organised protest against existing industrial relations.
They are symptoms of industrial unrest in the same way that boils symptoms of disordered system”.
Depending on the purpose, Mamoria et. al. have classified strikes into two types: primary strikes and secondary
strikes.
(i) Primary Strikes:
These strikes are generally aimed against the employers with whom the dispute exists. They may include the
form of a stay-away strike, stay-in, sit-down, pen-down or tools- down, go-slow and work-to-rule, token or
protest strike, cat-call strike, picketing or boycott.
(ii) Secondary Strikes:
These strikes are also called the ‘sympathy strikes’. In this form of strike, the pressure is applied not against the
employer with whom the workmen have a dispute, but against the third person who has good trade relations
with the employer.
However, these relations are severed and the employer incurs losses. This form of strike is popular in the USA
but not in India. The reason being, in India, the third person is not believed to have any locus standing so far the
dispute between workers and employer is concerned.
There are many types of strikes. A few of them are discussed below:
(i) Economic Strike:
Under this type of strike, members of the trade union stop work to enforce their economic demands such as
wages, bonus, and other conditions of work.
(ii) Sympathetic Strike:
The members of a union collectively stop work to support or express their sympathy with the members of other
unions who are on strike in the other undertakings.
(iii) General Strike:
It means a strike by members of all or most of the unions in a region or an industry. It may be a strike of all the
workers in a particular region of industry to force demands common to all the workers. It may also be an
extension of the sympathetic strike to express general protest by the workers.
(iv) Sit Down Strike:
When workers do not leave their place of work, but stop work, they are said to be on sit down or stay in strike. It
is also known as tools down or pen down strike. The workers remain at their work-place and also keep their
control over the work facilities.
(v) Slow Down Strike:
Employees remain on their jobs under this type of strike. They do not stop work, but restrict the rate of output in
an organised manner. They adopt go- slow tactics to put pressure on the employers.
Grounds of Illegal Strike and Lockout -
Section 24 of the Industrial Dispute Act, 1947 lays down grounds which make the Strike and Lockout illegal
which are as follows -
(I) A Strike or lockout shall be illegal if it is commenced or declared in contravention of Section 22 (of the
Industrial Dispute Act, 1947) in public utility service. Under the provision of Section 22, a worker as well as the
employer is required to serve a valid notice within the period prescribed by the section before a Strike or a
lockout, as the case may be, can be illegal or justified under the said Act.
(II) A Strike or Lockout shall be illegal if it is commenced in contravention of Section 23 (of the Industrial
Dispute Act, 1947) in any industrial establishment. Under the Provision of Section 23 Strikes and Lockouts are
prohibited, in case, the matter under dispute pending before the arbitrator, Board of Conciliation, Labor Court ,
Labor Tribunal or during any period in which settlement or award is in operation, in respect of any of the matter
covered by the settlement or the award.
(III) A Strike or Lockout shall be illegal if it is continued in contravention of an order and by the appropriate
government under Section 10(3) or under sub-section 4(a) of Section 10-A of the said Act.

General and political strikes and bandhs come under the category of other strikes:
Lock-Outs:
Lock-out is the counter-part of strikes. While a ‘strike’ is an organised or concerted withdrawal of the supply of
labour, ‘lock-out’ is withholding demand for it. Lock-out is the weapon available to the employer to shut-down
the place of work till the workers agree to resume work on the conditions laid down by the employer. The
Industrial Disputes Act, 1947 defined lock-out as “the temporary shutting down or closing of a place of business
by the employer”.
Gherao:
Gherao means to surround. It is a physical blockade of managers by encirclement aimed at preventing the egress
and ingress from and to a particular office or place. This can happen outside the organisational premises too.
The managers / persons who are gheraoed are not allowed to move for a long time.
Sometimes, the blockade or confinements are cruel and inhuman like confinement in a small place without light
or fans and for long periods without food and water. The persons confined are humiliated with abuses and are
not allowed even to answer “calls of nature”.
The object of gherao is to compel the gheraoed persons to accept the workers’ demands without recourse to the
machinery provided by law. The National Commission on Labour has refused to accept ‘gherao’ as a form of
industrial protest on the ground that it tends to inflict physical duress (as against economic press) on the persons
gheraoed and endangers not only industrial harmony but also creates problems of law and order.
Workmen found guilty of wrongfully restraining any person or wrongfully confining him during a gherao are
guilty under Section 339 or 340 of the Indian Panel Code of having committed a cognizable offence for which
they would be liable to be arrested without warrant and punishable with simple imprisonment for a term which
may be extended to one month or with a fine up to Rs. 500, or with both.
Picketing and Boycott:
Picketing is a method designed to request workers to withdraw cooperation to the employer. In picketing,
workers through display signs, banners and play-cards drew the attention of the public that there is a dispute
between workers and employer.
Workers prevent their colleagues from entering the place of work and pursuade them to join the strike. For this,
some of the union workers are posted at the factory gate to pursuade others not to enter the premises but to join
the strike.
Boycott, on the other hand, aims at disrupting the normal functioning of the organisation. The striking workers
appeal to others for voluntary withdrawal of co-operation with the employer.
Types of Industrial Disputes:
The ILO’ has classified the industrial disputes into two main types.
They are:
1. Interest Disputes
2. Grievance or Right Disputes.
They are discussed one by one:
1. Interest Disputes:
These disputes are also called ‘economic disputes’. Such types of disputes arise out of terms and conditions of
employment either out of the claims made by the employees or offers given by the employers. Such demands or
offers are generally made with a view to arrive at a collective agreement. Examples of interest disputes are
lay-offs, claims for wages and bonus, job security, fringe benefits, etc.
2. Grievance or Right Disputes:
As the name itself suggests, grievance or right disputes arise out of application or interpretation of existing
agreements or contracts between the employees and the management. They relate either to individual worker or
a group of workers in the same group.
That’s way in some countries; such disputes are also called ‘individual disputes’. Payment of wages and other
fringe benefits, working time, over-time, seniority, promotion, demotion, dismissal, discipline, transfer, etc. are
the examples of grievance or right disputes.
If these grievances are not settled as per the procedure laid down for this purpose, these then result in
embitterment of the working relationship and a climate for industrial strife and unrest. Such grievances are often
settled through laid down standard procedures like the provisions of the collective agreement, employment
contract, works rule or law, or customs /usage in this regard. Besides, Labour Courts or Tribunals also adjudicate
over grievance or interest disputes.
Generally, industrial disputes are considered as ‘dysfunctional’ and ‘unhealthy’. These are manifested in the
forms of strikes and lock-outs, loss of production and property, sufferings to workers and consumers and so on.
But, sometimes industrial disputes are beneficial as well.
It is the dispute mainly which opens up the minds of employers who then provide better working conditions and
emoluments to the workers. At times, disputes bring out the causes to the knowledge of the public where their
opinion helps resolve them.

Different categories of Industrial Disputes

The Second Schedule of the I.D. Act deals with matters within the jurisdiction of Labour Courts, which fall
under the category of Rights Disputes. Such disputes are as follows:
1. The propriety or legality of an order passed by an employer under the standing orders;
2. The application and interpretation of standing orders, which regulate conditions of
employment.
3. Discharge or dismissal of workmen including reinstatement of, or grant of relief to,
workmen wrongfully dismissed;
4. Withdrawal of any customary concession or privilege;
5. Illegality or otherwise of a strike or lock-out; and
6. All matters other than those specified in the Third Schedule.
The Third Schedule of the I.D. Act deals with matters within the jurisdiction of Industrial Tribunals which could
be classified as Interest Disputes. These are as follows: -
1. Wages, including the period and mode of payment;
2. Compensatory and other allowances;
3. Hours of work and rest intervals;
4. Leave with wages and holidays;
5. Bonus, profit sharing, provident fund and gratuity;
6. Shift working otherwise than in accordance with standing orders;
7. Classification by grades;
8. Rules of discipline;
9. Rationalization;
10. Retrenchment of workmen and closure of establishment;
11. Any other matter that may be prescribed

Who can raise an Industrial Dispute?

Any person who is a workman employed in an industry can raise an industrial dispute. A workman includes any
person (including an apprentice) employed in an industry to do manual, unskilled, skilled, technical, operational,
clerical or supervisory work for hire or reward. It excludes those employed in the Army, Navy, Air Force and in
the police service, in managerial or administrative capacity. Industry means any business, trade, undertaking,
manufacture or calling of employers and includes any calling, service, employment, handicraft, or industrial
occupation or avocation of workmen.

How to raise an Industrial Dispute?

A workman can raise a dispute directly before a Conciliation Officer in the case of discharge, dismissal,
retrenchment or any form of termination of service. In all other cases listed above, the dispute has to be raised
by a Union / Management.

Methods for Settlement of Industrial Disputes as per Industrial Dispute Act 1947
Failure of the employees and the employers to sort out their differences bilaterally leads to the emergence of
industrial disputes. The Industrial Disputes Act, 1947 provides legalistic machinery for settlement of such
disputes by involving the interference of a third party.
The settlement machinery as provided by the Act consists of the three methods:
The three methods for settlement of industrial disputes are as follows:
1. Conciliation: In simple sense, conciliation means reconciliation of differences between persons. Conciliation
refers to the process by which representatives of workers and employers are brought together before a third
party with a view to persuading them to arrive at an agreement by mutual discussion between them. The
alternative name which is used for conciliation is mediation. The third party may be one individual or a group of
people.
In view of its objective to settle disputes as quickly as possible, conciliation is characterised by the following
features:
(i) The conciliator or mediator tries to remove the difference between the parties.
(ii) He/she persuades the parties to think over the matter with a problem-solving approach, i.e., with a give and
take approach.
(iii) He/she only persuades the disputants to reach a solution and never imposes his/her own viewpoint.
(iv) The conciliator may change his approach from case to case as he/she finds fit depending on other factors.
According to the Industrial Disputes Act 1947, the conciliation machinery in India consists of the following:
1. Conciliation Officer
2. Board of Conciliation
3. Court of Enquiry
A brief description of each of these follows:
Conciliation Officer: The Industrial Disputes Act, 1947, under its Section 4, provides for the appropriate
government to appoint such number of persons as it thinks fit to be conciliation officers. Here, the appropriate
government means one in whose jurisdiction the disputes fall.
While the Com­missioner /additional commissioner/deputy commissioner is appointed as conciliation officer for
undertakings employing 20 or more persons, at the State level, officers from central Labour Commis­sion office
are appointed as conciliation officers, in the case of Central government. The conciliation officer enjoys the
powers of a civil court. He is expected to give judgment within 14 days of the commencement of the
conciliation proceedings. The judgement given by him is binding on the parties to the dispute.

Duties of conciliation officers

(1) Where any industrial dispute exists or is apprehended, the conciliation officer may, shall, hold conciliation
proceedings in the prescribed manner.

(2) The conciliation officer shall, for the purpose of bringing about a settlement of the dispute, without delay,
investigate the dispute and all matters affecting the merits and the right settlement thereof and may do all such
things as he thinks fit for the purpose of inducing the parties to come to a fair and amicable settlement of the
dispute.

(3) If a settlement of the dispute or of any of the matters in dispute is arrived at in the course of the conciliation
proceedings the conciliation officer shall send a report thereof to the appropriate government [or an officer
authorized in this behalf by the appropriate government] together with a memorandum of the settlement signed
by the parties to the dispute.

(4) If no such settlement is arrived at , the conciliation officer shall, as soon as practicable after the close of the
investigation, send to the appropriate Government a full report setting forth the steps taken by him for
ascertaining the facts and circumstances relating to the dispute and for bringing about a settlement thereof,
together with a full statement of such facts and circumstances, and the reasons on account of which, in his
opinion, a settlement could not be arrived at.

(5) If, on a consideration of the report referred to in sub-section (4), the appropriate government is satisfied that
there is a case for reference to a Board, [Labor Court, Tribunal or National Tribunal], it may make such
reference. Where the appropriate government does not make such a reference it shall record and communicate to
the parties concerned its reasons therefor.

(6) A report under this section shall be submitted within fourteen days of the commencement of the conciliation
proceedings or within such shorter period as may be fixed by the appropriate government:

38[PROVIDED that, 18[subject to the approval of the conciliation officer,] the time for the submission of the
report may be extended by such period as may be agreed upon in writing by all the parties to the dispute.]

Board of Conciliation: In case the conciliation officer fails to resolve the dispute between the disputants, under
Section 5 of the Industrial Disputes Act, 1947, the appropriate government can appoint a Board of Conciliation.
Thus, the Board of Conciliation is not a permanent institution like conciliation officer. It is an adhoc body
consisting of a chairman and two or four other members nominated in equal numbers by the parties to the
dispute.
The Board enjoys the powers of civil court. The Board admits disputes only referred to it by the government. It
follows the same conciliation proceedings as is followed by the conciliation officer. The Board is expected to
give its judgment within two months of the date on which the dispute was referred to it.
In India, appointment of the Board of Conciliation is rare for the settlement of disputes. In practice, settling
disputes through a conciliation officer is more common and flexible.
2. Arbitration: Arbitration is a process in which the conflicting parties agree to refer their dispute to a neutral
third party known as ‘Arbitrator’. Arbitration differs from conciliation in the sense that in arbitration the
arbitrator gives his judgment on a dispute while in conciliation, the conciliator disputing parties to reach at a
decision.
The arbitrator does not enjoy any judicial powers. The arbitrator listens to the view points of the conflicting
parties and then gives his decision which is binding on all the parties. The judgment on the dispute is sent to the
government. The government publishes the judgment within 30 days of its submission and the same becomes
enforceable after 30 days of its publication. In India, there are two types of arbitration: Voluntary and
Compulsory.
Voluntary Arbitration:
In voluntary arbitration both the conflicting parties appoint a neutral third party as arbitrator. The arbitrator acts
only when the dispute is referred to him/her. With a view to promote voluntary arbitration, the Government of
India has constituted a tripartite National Arbitration Promotion Board in July 1987, consisting of
representatives of employees (trade employers and the Government. However, the voluntary arbitration could
not be successful because the judgments given by it are not binding on the disputants. Yes, moral binding is
exception to it.
Compulsory Arbitration:
In compulsory arbitration, the government can force the disputing parties to go for compulsory arbitration. In
other form, both the disputing parties can request the government to refer their dispute for arbitration. The
judgment given by the arbitrator is binding on the parties of dispute.
3. Adjudication: The ultimate legal remedy for the settlement of an unresolved dispute is its reference to
adjudica­tion by the government. The government can refer the dispute to adjudication with or without the
consent of the disputing parties. When the dispute is referred to adjudication with the consent of the disputing
parties, it is called ‘voluntary adjudication.’ When the government herself refers the dis­pute to adjudication
without consulting the concerned parties, it is known as ‘compulsory adjudication.
The Industrial Disputes Act, 1947 provides three-tier machinery for the adjudication of indus­trial disputes:
1. Labour Court
2. Industrial Tribunal
3. National Tribunal
A brief description on these follows:
Labour Court: Under Section 7 of the Industrial Disputes Act, 1947, the appropriate Government by notifying in
the official Gazette, may constitute Labour Court for adjudication of the industrial disputes The labour court
consists of one independent person who is the presiding officer or has been a judge of a High Court, or has been
a district judge or additional district judge for not less than 3 years, or has been a presiding officer of a labour
court for not less than 5 years. The labour court deals with the matters specified in the second schedule of the
Industrial Disputes Act, 1947.
These relate to:
1. The property or legality of an employer to pass an order under the standing orders.
2. The application and interpretation of standing orders.
3. Discharge or dismissal of workers including reinstatement or grant of relief to workmen wrongfully
dismissed.
4. Withdrawal of any statutory concession or privilege.
5. Illegality or otherwise of a strike or lockout.
6. All matters other than those reserved for industrial tribunals.

Industrial Tribunal: Under Section 7A of the Act, the appropriate Government may constitute one or more
Industrial tribunals for the adjudication of industrial disputes. Compared to labour court, industrial tribunals
have a wider jurisdiction. An industrial tribunal is also constituted for a limited period for a particular dispute on
an adhoc basis.
The matters that come within the jurisdiction of an industrial tribunal include the following:
1. Wages, including the period and mode of payment.
2. Compensatory and other allowances.
3. Hours of work and rest periods.
4. Leave with wages and holidays.
5. Bonus, profit sharing, provident fund, and gratuity.
6. Classification by grades.
7. Rules of discipline.
8. Rationalisation.
9. Retrenchment of employees and closure of an establishment or undertaking.
10. Any other matter that can be prescribed.

National Tribunal:
This is the third one man adjudicatory body appointed by the Central Govern­ment by notification in the Official
Gazette for the adjudication of industrial disputes of national importance. The central Government may, if it
thinks fit, appoint two persons as assessors to advise the National Tribunal. When a national tribunal has been
referred to, no labour court or industrial tribunal shall have any jurisdiction to adjudicate upon such matter.
A person shall not be qualified for appointment as the presiding officer of a National Tribunal unless he is, or
has been, a Judge of a High Court.
Following are a few suggestions to make the settlement machinery more effective:
1. The trained and experienced officers who are well acquainted with the problems of industrial workers should
be entrusted with the responsibility of dealing with conciliation machinery Political and administrative
interference should not be allowed to cloud the functioning of conciliation machinery.
2. One way to strengthen the adjudication machinery is to substitute it by setting up Industrial Relations
Commissions (IRCs), both at the Central and the State level, on the lines suggested by the National Commission
on Labour. The IRC should also be empowered to oversee the working of the conciliation machinery.
3. In order to make arbitration fair, the arbitrator chosen for settling disputes be mutually acceptable to both the
union and the management. This can be facilitated if the government prepares the panel of experienced
arbitrators at the national and the state levels so that arbitrators are chosen from the panel, as and when required.
4. The government should refrain from actively intervening in the matters of industrial disputes unless it is must
for her to intervene in the disputes.

Industrial employment (standing orders) act, 1946

There are ‘service conditions’ or ‘service rules’ for various employees like Government employees, bank
employees, LIC employees etc. The Industrial Employment (Standing Orders) Act, 1947 is designed to provide
service rules to workmen.

The object of the Act is to require employers in industrial establishments to formally define conditions of
employment under them.
What are ‘Standing Orders’?
‘Standing Orders’ means rules of conduct for workmen employed in industrial establishments. ‘Standing orders’
means rules relating to matters set out in the schedule to the Act. [section 2(g)].

The schedule to the Act requires that following should be specified in Standing Orders -
(a) Classification of workmen i.e. temporary, badli, casual, permanent, skilled etc.
(b) Manner of intimating to workmen working hours, shift working, transfers etc.
(c) Holidays
(d) Attendance and late coming rules
(e) Leave rules
(f) Leave eligibility and leave conditions
(g) Closing and reopening of sections of industrial establishment
(h) Termination of employment, suspension, dismissal etc. for misconduct and acts or
omissions which constitute misconduct
(i) Retirement age
(j) Means of redressal of workmen against unfair treatment or wrongful exactions by
employer
(k) Any other matter that may be prescribed.

Coverage of Act - The Act is applicable to all ‘industrial establishments’ employing 100 or more workmen.
[section 1(3)].

‘Industrial establishment’ means (i) an industrial establishment as defined in section 2(i) of Payment of Wages
Act (ii) Factory as defined in section 2(m) of Factories Act (iii) Railway (iv) Establishment of contractor who
employs workmen for fulfilling contract with owner of an industrial establishment. [section 2(e)].

The term ‘industrial establishment’ includes factory, transport service, construction work, mines, plantation,
workshop, building activity, transmission of power etc.

Workman - ‘Workman’ has meaning assigned to it under section 2(s) of Industrial Disputes Act. [section 2(i)].
Thus, ‘workman’ includes skilled, unskilled, manual or clerical work. However, ‘workman’ does not include
employees engaged in managerial or administrative capacity or supervisory capacity. ‘Workman’ does not
include workers subject to Army Act, Navy Act or Air Force Act or to police or prison services.

Approval of Standing Orders

1. Every employer covered under the Act has to prepare ‘Standing Orders’, covering the matters required
in the ‘Standing Orders’. Five copies of these should be sent to Certifying Officer for approval. [section
3(1)]. ‘Certifying Officer’ means Labour Commissioner and any officer appointed by Government to
be ‘Certifying Officer’. [section 2(c)].

2. The Certifying Officer will inform the Union and workmen and hear their objections. After that, he will
certify the ‘Standing Orders’ for the industrial establishment. [section 5]. Till standing orders are
certified, ‘Model Standing Order’ prepared by Government will automatically apply. [section12A].

3. Standing order should be displayed in English and local language on special notice boards at or near
entrance of the establishment. [section 9]. Modifications of Standing Order shall be done by following
similar procedure. [section 10].

4. Once the ‘Standing Orders’ are certified, they supersede any term and condition of employment,
contained in the appointment letter. If there is inconsistency between ‘Standing Order’ and
‘Appointment Letter’, the provisions of ‘Standing Order’ prevail
5. Standing orders are binding on employer and employee. These are statutorily imposed conditions of
service. However, they are not statutory provisions themselves (meaning that the ‘Standing Orders’
even when approved, do not become ‘law’ in the sense in which Rules and Notifications issued under
delegated legislation become after they are published as prescribed.)
Model Standing Orders - The Act has prescribed Model Standing Orders. These are automatically applicable
till employer prepares his own ‘Standing Orders’ and these are approved by ‘Certifying Officer’. [section 12A].
Disciplinary Action - The most important use of ‘Standing Orders’ is in case of disciplinary action. A workman
can be punished only if the act committed by him is a ‘misconduct’ as defined under the ‘Standing Orders’. The
‘Model Standing Orders’ contain such acts like insubordination, disobedience, fraud, dishonesty, damage to
employer’s property, taking bribe, habitual absence or habitual late attendance, riotous behaviour, habitual
neglect of work, strike in contravention of rules etc. as misconducts. The ‘Certified Standing Orders’ may cover
other acts as ‘misconduct’, if approved by ‘Certifying Officer’.

Subsistence Allowance – Where a workman is suspended by employer pending investigation or enquiry into
complaints or charges of misconduct against him, the workman shall be paid subsistence allowance equal to
50% of wages for first 90 days of suspension and 75% of wages for remaining period till completion of
disciplinary proceedings. [section 10A(1)]. - - ‘Wages’ has same meaning as under section 2(rr) of Industrial
Disputes Act. [section 2(i)].

SHORT NOTES
Arbitration
Arbitration, a form of alternative dispute resolution (ADR), is a technique for the resolution of disputes outside
the courts, where the parties to a dispute refer it to one or more persons, by whose decision they agree to be
bound. It is a settlement technique in which a third party reviews the case and imposes a decision that is legally
binding for both sides. Arbitration can be either voluntary or mandatory. Arbitration is a proceeding in which a
dispute is resolved by an impartial adjudicator whose decision the parties to the dispute have agreed, will be
final and binding.
Adjudication
It is the legal process by which an adjudicator or judge reviews evidence and argumentation including legal
reasoning set forth by opposing parties or litigants to come to a decision which determines rights and obligations
between the parties involved. Three types of disputes are resolved through adjudication: 1. Disputes between
private parties, such as individuals or corporations. 2. Disputes between private parties and public officials. 3.
Disputes between public officials or public bodies.
Conciliation
A form of Alternate Dispute Resolution (ADR) in which a neutral third-party hears both sides and then issues a
non-binding suggested resolution. Conciliation is neither arbitration nor mediation. The parties choose an
independent third party who hears both sides, either privately or together, and then prepares a compromise
which the conciliator believes is a fair disposition of the matter. The conciliator's report or conclusions are then
put to both sides, who may agree or disagree with it. It is not binding nor is it enforceable unless the parties
adopt it. Conciliation is used in labour disputes before arbitration. Conciliation means bringing two opposing
sides together to reach a compromise in an attempt to avoid taking a case to trial.
Arbitration, in contrast, is a contractual remedy used to settle disputes out of court. In arbitration the two parties
in controversy agree in advance to abide by the decision made by the arbitrator, whereas conciliation is less
structured.
Mediation
Mediation, as used in law, is a form of alternative dispute resolution (ADR), is a way of resolving disputes
between two or more parties. A third party, the mediator assists the parties to negotiate their own settlement
(facilitative mediation). In some cases, mediators may express a view on what might be a fair or reasonable
settlement, generally where all the parties agree that the mediator may do so (evaluative mediation). One
significant difference between conciliation and mediation lies in the fact that conciliators possess expert
knowledge of the domain in which they conciliate. The conciliator can make suggestions for settlement terms
and can give advice on the subject-matter. Conciliators may also use their role to actively encourage the parties
to come to a resolution. In certain types of dispute the conciliator has a duty to provide legal information. This
helps any agreement reached to comply with any relevant statutory framework pertaining to the dispute.
Therefore conciliation may include an advisory aspect. Mediation works purely facilitative, the practitioner has
no advisory role. Instead, a mediator seeks to help parties to develop a shared understanding of the conflict and
to work toward building a practical and lasting resolution
 UNIT III
Syllabus: The Factories Act, 1948 & The Factories (Amendment) Bill, 2016 & The shop &
Establishment Act 1948, The Payment of Wages Act, 1923 and amendment in 2020, The Workmen’s
compensation Act, 1972 The Industrial Disputes Act, 1947

Industrial Dispute Act 1947

The Industrial Disputes Act, 1947 extends to whole of India. It came into operation on the first day of April,
1947. This Act replaced the Trade Disputes Act of 1929. The Trade Disputes Act imposed certain restraints on
the right of strike and lockout in Public Utility Services. But no provision existed for the settlement of Industrial
Disputes, either by reference to a Board of Conciliation or to a Court of Inquiry. In order to remove this
deficiency, the Industrial Disputes Act, 1947 was passed.
The act has been amended from time to time. The latest amendment to the act was made effective from
15-9-2010
Industrial disputes act contains 40 Sections divided into 7 Chapters, as under:-
Chapter-I deals with the title, definitions, etc.
Chapter-II contains Works Committee in an industrial establishment in which one hundred or more workmen
are employed consisting of representatives of employers and workmen engaged in the establishment. The
main purpose of the Works Committee to promote measures for securing and preserving amity and good
relations between the employer and workmen and, to that end, to comment upon matters of their common
interest or concern and endeavour to compose any material difference of opinion in respect of such matters.
This Chapter also provides for various authorities such as Conciliation Officers, Labour Courts and Tribunals.
Chapter –III contains the main scheme of the Act such as reference of disputes to labour Courts and Industrial
Tribunals.
Chapter-IV lays down the procedure, power and duties of the authorities constituted under the Act.
Chapter V contains provisions to prohibit strikes and lock-outs, declaration of strikes and lock-outs illegal, and
provisions relating to lay-off and retrenchment and closure which are applicable to establishments employing
100 and more workers.
Chapter VI contains provisions of various penalties under the Act.
Chapter VII contains miscellaneous provisions.
The principal objects of Industrial Disputes Act
The principal objects of Industrial Disputes Act as analyzed and interpreted by the Supreme Court are as
follows.
(1) To promote measures for securing and preserving amity and good relations between employers and
workmen;
(2) To provide a suitable machinery for investigation and settlement of industrial dispute between employers
and employers, employers and workmen, or between workmen and workmen with a right of representation by a
registered Trade Union or by association of Employers.
(3) To prevent illegal strikes and lock-outs;
(4) To provide relief to workmen in the matter of lay-off, retrenchment and closure of an
enterprise. .
(5) To give workmen the right of collective bargaining and promote conciliation.

Main Features or Characteristics of the Act:

Some of the important features of the Act may be summarised as below:
1. Any industrial dispute may be referred to an industrial tribunal by mutual consent of parties to dispute or by
the State Government, if it deems expedient to do so.
2. An award shall be binding on both the parties to the dispute for the operated period, not exceeding one year;
3. Strike and lockouts are prohibited during:
(a) The pendency of conciliation and adjudication proceedings;
(b) The pendency of settlements reached in the course of conciliation proceedings
(c) The pendency of awards of Industrial Tribunal declared binding by the appropriate
Government.
[Link] public interest or emergency, the appropriate Government has power to declare the transport (other than
railways), coal, cotton textiles, food stuffs and iron and steel industries to be public utility services for the
purpose of the Act, for a maximum period of six months.
5. In case of lay-off or retrenchment of workmen, the employer is requested to pay compensation to them. This
provision stands in the case of transfer or closure of an undertaking.
6. A number of authorities (Works Committees, Conciliation Officers, Board of conciliation, Courts of Inquiry,
Labour Courts, Tribunal and National Tribunal) are provided for settlement of Industrial disputes. Although the
nature of powers, functions and duties of these authorities differ from each other, everyone plays important role
in ensuring industrial peace.
The act provides for the following authorities for Investigation and Settlement of industrial disputes:
(i) Works Committee
(ii) Conciliation Officer
(iii) Boards of Conciliation
(iv) Court of Inquiry
(v) Labour Court
(vi) Labour Tribunals
(vii) National Tribunals
Industrial Tribunal and National Tribunal
Industrial Tribunal-cum-Labour Courts are set up under the provisions of Industrial Disputes Act, 1947 for
adjudication of industrial disputes arising in Central Sphere. There are 22 CGIT-cum-LCs set up in various
States, out of which 10 are under Non-Plan and 12 under Plan Scheme. The CGIT-cum-LC No.1, Mumbai and
CGIT-cum-LC, Kolkata also function as National Tribunals. These CGIT-cum-LCs are headed by Presiding
Officers who are selected from amongst High Court Judges (serving/retired) or Distt./Addl. Distt. Judges
(serving/retired).
The CGIT-cum-LCs have been set up with the objective of maintaining peace and harmony in the industrial
sector by quick and timely disposal of industrial disputes through adjudication so that industrial growth does not
suffer on account of any widespread industrial unrest. Moreover, due to increasing awareness about their rights
and Labour laws among the workers, there is a gradual increase in the number of cases being filed under the
[Link] before the CGIT-cum-LCs. Restructuring of workforce on account of application of latest technology in
the industries has also resulted in retrenchment, declaration of surplus etc. which has further led to an increase
in workers’ grievances.
According to Section 7-A of Industrial dispute act The appropriate Government may, by notification in the
Official Gazette, constitute one or more Industrial Tribunals for the adjudication of industrial disputes relating to
any matter, whether specified in the Second Schedule or the Third Schedule and for performing such other
functions as may be assigned to them under this Act Industrial Tribunal can adjudicate on the following matters:
1. Wages, including the period and mode of payment;
2. Compensatory and other allowances;
3. Hours of work and rest intervals;
4. Leave with wages and holidays;
5. Bonus, profit sharing, provident fund and gratuity;
6. Shift working otherwise than in accordance with standing orders;
7. Classification by grades;
8. Rules of discipline;
9. Rationalization;
10. Retrenchment of workmen and closure of establishment; and
11. Any other matter that may be prescribed.
National Tribunal is the third one- man adjudication body appointed by the central government to deal with
disputes of national importance or issues which are likely to affect the industrial establishments in more than
one state.

THE INDUSTRIAL DISPUTES (AMENDMENT) ACT, 2010.

The Government has amended the Industrial Disputes Act, 1947 vide the Industrial Disputes (Amendment) Act,
2010. The Act has been amended after a series of tri-partite consultations interalia to do away with the
ambiguity in the definition of Appropriate Government and series of Judgments of the Apex Court interpreting
the definition differently. The amended provisions have come into force vide Notification No.2278 (E) dated
15.9.2010. The amended Act provides for the following:
● The definition of term ‘appropriate Government’ has been amplified which will eliminate all
ambiguities in the interpretation of the definition of ‘appropriate Government’.
● Wage ceiling of the workers working in a supervisory capacity has been enhanced from one thousand
six hundred rupees per month to ten thousand rupees per month. The wage ceiling has been enhanced
to be in consonance with the increase in wages of industrial workers and also to bring about parity with
other labour laws like Employees State Insurance Act, 1948, Payment of Bonus Act, 1965 and Payment
of Wages Act, 1936.
● The amended Act provide direct access for the workman to the Labour Court or Tribunal in case of
disputes arising out of Section 2-A pertaining to retrenchment, discharge, dismissal or termination of
services etc. Before the present amendment, such a dispute could be adjudicated by CGIT-cum LC
only after a reference is made by the ‘appropriate Government’. As a consequence of this amendment,
the workman can directly approach the CGIT-cum-LC after filing his grievance before the conciliation
machinery to resolve the issue within 45 days if the conciliation machinery fails to resolve the issue.
There will be no need for him to approach the ‘appropriate Government’ for making a reference. This
amendment has enabled the aggrieved workman to choose the alternative of adjudication for resolution
of his dispute faster.
● The amended Act provides to establish a Grievance Redressal Machinery (GRM) within industrial
establishment having 20 or more workmen with one stage appeal at the head of the establishment for
resolution of disputes arising out of individual grievances. With this amendment, the workman will get
one more alternative grievance redressal mechanism for the resolution of his dispute within the
organization itself with minimum necessity for adjudication. The concept of GRM will in no way affect
the right of the workman to raise dispute on the same issue under the provision of Industrial Disputes
Act, 1947.
● The amended Act also provides to expand the scope of qualification of Presiding Officers of
CGIT-cum-LC by making officers of Central Labour Service of the rank of Deputy Chief Labour
Commissioner and State Labour Department of the rank of Joint Labour Commissioner and officers of
the Indian Legal Service [Link] eligible for the post of Presiding Officer in CGIT-cum-LC. This will
enable the Government to appoint the Presiding Officers from wide range of eligible officers from the
relevant field.
● The amended Act also provides to empower the Labour Court or Tribunal to execute their awards,
orders of settlements arrived at as a decree of a Civil Court. This amendment will ensure better
enforcement of the awards given by CGITs-cum-LC.
● The amended Act empowers the Government to make rules to decide and review the salaries and
allowances and other terms and conditions for appointment of Presiding Officers.

Industrial Disputes Are Prevented by Different Methods

Method 1. Through Function Labour Welfare Officer:
Under Factories Act, labour welfare officer has to discharge the following function:
a. Supervision of welfare programmes – He has to supervise welfare programmes like housing, recreation,
sanitation, working of joint committees, grievance redressal, etc.
b. Counselling to workers – He has to provide counselling to workers on personal and family problems,
rendering advice to enable them to adjust to work environment and education.
c. Advising on policy formulation – He has to educate management in the matter of formulating policies relating
to labour welfare measures, training programmes meeting statutory obligations of workers, developing fringe
benefits and workers education.
d. Liaison with workers – He has to establish liaison with workers so that the latter may appreciate the need for
harmonious relations between management and worker, understand the implications of HR polices and come to
a settlement with the management.
e. Liaison with management – Establishing liaison with management so that the management appreciates the
worker’s view points on various matters, different heads of departments meet the statutory obligations under the
Act, maintaining congenial relations with workers and implementing various welfare schemes.
f. Working with external public – This includes establishing contact with factory inspectors, medical officers and
other agencies in the community to improve productivity and productive efficiency of workers.

Method 2. Tripartite and Bipartite Bodies:

Tripartite bodies involve employee, employer and Government. Bipartite committee comprises of employer and
employee. Tripartite committee includes committees on Conventions, steering committee on wages, central
implementation and evaluation machinery, Central Board of Worker’s Education and National Productivity
Council.
Workers committee is an example for Bipartite committee. This committee is represented by employer and
employees. It is established through legislation. Method of constitution of this committee is specified in the
enactment. .
Functions of Workers Committee:
i. Promoting industrial goodwill.
ii. Securing cooperation from the employer and the employees.
iii. Removing causes of friction between parties to dispute.
iv. Creating an atmosphere for voluntary settlement of issues like wage benefits, bonus, terms of employment,
workload, welfare, training, promotion, transfer, etc. Inter-union-rivalry, union’s opposition, employee’s
reluctance to use workers committee for setting dispute hinder its effective functioning.

Method 3. Standing Orders:

These are orders governing the condition of employment under Industrial Employment (Standing Orders) Act of
1946. It regulates conditions of employment from the entry level to exit of employees. It serves as a code of
conduct for employees during their service in a given undertaking.
National Commission of Labour, 1999, stipulates the following in the standing orders:
i. Establishment employing 20 or more should put in place standing orders or regulations.
ii. Standing orders can be prepared by employer and employees/ recognized unions/federations.
iii. In case of disagreement between the employer and the employee, matter would be determined by the
certifying authority i.e., Labour Commissioner having jurisdiction. Once the standing order is passed, it is
binding on the parties to dispute.

Method 4. Grievance Committee:

Grievance committee comprising the representatives of employees and employer can be established .and can
periodically examine the issues and give redressal. The committee may inform the progress or status of
grievance reported, in case it is felt that redressal may take time.
The committee may explain its inability to the grievant whenever it is not possible to redress the grievance
within the scope of its authority. It may advise the grievant as to what may be done to further have it redressed.
Thus, such a professional functioning of grievance committee can shoot trouble which may snowball into
dispute at a later stage.

Method 5. Joint Management Council (JMC):

Industrial Policy Resolution, 1956, gave birth to JMC. It provides an opportunity to workers to participate in
management.

Factories Act 1948

The term industry refers to a steady and systematic activity in which a trade is organised, whereas a factory is
the place where such activities are being carried on. The entire day-to-day administration of the factories is
governed by the principal Act of 1948 amended Act, which is an improvement of 1934 Act. This Act extends to
the whole of India, including Jammu and Kashmir. Unless otherwise provided, it also applies to factories
belonging to the Central and State.
The main objectives of the Indian Factories Act, 1948 are to regulate the working conditions in factories, to
regulate health, safety welfare, and annual leave and enact special provision in respect of young persons, women
and children who work in the factories.

The Factories Act, 1948, is a central enactment, deals with occupational health and safety as well as
welfare of workers employed in a factory.
* The Act is enforced by the Factory Directorates under the State Governments and the administration of Union
Territories.(UT)
* The Ministry of Labour and Employment (MOL&E)in the Central Government is accountable to Parliament
for ensuring uniform application of the Act throughout the country by issuing model rules to be adopted by the
State Government and Union Territories with necessary modifications to suit local needs.

Object of the Act

The object of the Factories Act of 1948 is
(a) To improve health, welfare and safety of the workmen.
(b) To regulate by imposing restriction as to hours of work including rest and provisions for
availing of leave.
(c) To make stringent provisions as regards employment of women and young persons and
duration of their work
Coverage of the act
The coverage of the Act is confined to the:
1. Factories using power and employing 10 or more workers on any working day of the preceding twelve
months;
2. Factories not using power and employing 20 or more workers on any working day of the preceding
twelve months; and the
3. Factories specially notified under Section 85 of the Factories Act by the State Govts./Union Territories
IMPORTANT CONCEPTS AND DEFINITIONS
(a) Factory means any premises including the precincts thereof:-
i) Wherein ten or more workers are working, or were working on any day of the preceding twelve
months and in any part of which a manufacturing process is being carried on with the aid of power, or
is ordinarily so carried on, or
ii) Wherein twenty or more workers are working or were working on any day of the preceding twelve
months, and in any part of which a manufacturing process is being carried on without the aid of power,
or is ordinarily so carried on.
(b) Worker means a person (employed directly or through any agency including a contractor) with or
without the knowledge of the principal employer, whether for remuneration or not in any
manufacturing process, or in cleaning any part of the machinery or premises used for a manufacturing
process, or in any kind of work incidental to or connected with the manufacturing process, or the
subject of manufacturing process (but does not include any member of the armed forces of the Union).
(c) Manufacturing process means any process for: -
i) Making, altering, repairing, ornamenting, finishing, packing, oiling, washing, cleaning, breaking up,
demolishing or otherwise treating or adapting any article or substance with a view to its use, sale,
transport, delivery or disposal or
ii) Pumping oil, water, sewage or any other substance or
iii) Generating, transforming or transmitting power or
iv) Composing types for printing, printing by letter press, lithography, photogravure of other similar
process or book binding,
v) Constructing, reconstructing, repairing, refitting, finishing or breaking up ships or vessels,
vi) Preserving or storing any article in cold storage.
⮚ 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;
 (d) Hazardous Process means any process or activity in relation to an industry specified in the First
Schedule where, unless special care is taken, raw materials used therein or the intermediate or finished
products, by- products, wastes or effluents thereof would cause material impairment of the health of the
persons engaged in or connected therewith, or results in the pollution of the general environment.
Provided that the State Government may, by notification in the Official Gazette, amend the First
Schedule by way of addition, omission or variation of any industry specified in the said Schedule.
(e) Fatal Injury means injury resulting from industrial accident which caused death to the worker.
(f) Non-Fatal Injury means injury resulting from industrial accident, which prevented injured worker
from attending to work for a period of 48 hours or more immediately following the injuries.
(g) Adult means a person who has completed his eighteenth year of age.
(h) Adolescent means a person who has completed his fifteenth year of age but has not completed his
eighteenth year.
(i) Child means a person who has not completed his fifteenth year of age.
(j) Average Daily Number of Workers Employed The average daily number of workers employed is
calculated by dividing the aggregate number of attendance on working days (that is, mandays worked) by the
number of working days in the year. Attendance on separate shifts (e.g. night and day shifts) should be counted
separately. Days on which the factory was closed for whatever cause and days on which the manufacturing
process was not carried on should not be treated as working days. Partial attendance for less than half a shift on
a working day should be ignored, while attendance for half a shift or more on such day should be treated as full
attendance.
(k) Mandays Worked Mandays Worked means total Number of attendance during a calendar year.
(l) Average Number of Hours Worked per week The Average number of hours worked per week means the
total actual hours worked by all workers during the year excluding the rest intervals but including overtime
worked, divided by the product of average number of workers employed daily in the factory and 52 weeks. In
case the factory has not worked for the whole year, the number of weeks during which the factory worked
should be used in place of 52.

What do you understand by a “young person”? Distinguish between adult and adolescent as defined in
the factories act, 1948.

"Young person" means a person, who is either a child or an adolescent. Child means a person who has not
completed his fifteenth year of age and adolescent means a person, who has completed his fifteenth year of age
but has not completed his eighteenth year.

Parameters Adult Adolescent

Definition As per Factories act "Adult" means a "Adolescent" means a person, who has
person who has completed his eighteenth completed his fifteenth year of age but has
year of age not completed his eighteenth year.

Work Permission Adult worker is not required or allowed to Adolescent is not required or allowed to
work in a factory for more than forty-eight work in any factory, unless a certificate of
hours in any week. fitness granted with reference to him under
section 69, is in the custody of manager of
the factory, and carries while he is at work,
a token giving a reference to such
certificate.

Work Rules Adult worker is not required or allowed to No female adolescent or a male adolescent
work in any factory unless his name and who has not attained the age of seventeen
other particulars have been entered in the years but who has been granted a
register of adult workers certificate of fitness to work in a factory as
an adult, is required or allowed to work in
any factory except between 6 A.M. and 7
P.M.
The main objective of Factories Act, 1948 is to ensure adequate safety measures and to promote the health and
safety and welfare of the workers employed in factories. The act also makes provisions regarding employment
of women and young persons (including children & adolescents), annual leave with wages etc.
The Act extended to whole of India including Jammu & Kashmir and covers all manufacturing processes and
establishments falling within the definitions of “factory” as defined u/s 2(m) of the act. Unless otherwise
provided it is also applicable to factories belonging to Central/State Government (section 116)

The Factories (Amendment) Bill, 2014 was introduced in Lok Sabha on August 7, 2014. It proposes to
amend the Factories Act, 1948.
• The Act aims to ensure adequate safety measures and promote the health and welfare of the workers
employed in factories. The Statement of Objects and Reasons states that the amendments proposed in
the Bill are based on the changes in the manufacturing practices and technologies, ratification of ILO
conventions, judicial decisions, recommendations of various Committees and decisions taken in the
conferences of Chief Inspectors of Factories.
• Definitions: The Act defines a factory as any premises (with certain exceptions) where manufacturing
was undertaken with aid of power and at least 10 people were employed during the last 12 months (20
or more people if no power was used). The Bill specifies that the state government may raise the
minimum number of workers employed in the definition to 20 (if power is used) and 40 (if power is not
used).
• The Bill also amends the definitions of: (i) hazardous process, (ii) manufacturing process, (iii)
occupier, and (iv) prescribed. It adds the definitions of: (i) hazardous substance, and (ii) disability
• Power to make Rules: The Act allows the state government to make Rules regarding various matters.
The Bill grants the central government power to make Rules regarding some of these matters.
• The Act permits the state government to make Rules regarding any matter which: (i) is covered by the
Act or may be prescribed, or (ii) is appropriate to give effect to the purposes of the Act. The Bill states
that the state government's power to make Rules will be restricted to matters where the central
government does not have such powers. The central government may frame Rules in consultation with
state governments, to bring uniformity in the areas of occupational safety, health or any other matter.
• Compounding of offences: The Bill seeks to permit the central or state government to prescribe the
authorised officers and the amount, for compounding of the certain offences before commencement of
the prosecution. The central or state governments may amend the list of compoundable offences.
• Employment of women and persons with disability: The Act prohibits women from working: (i) on
certain machines in motion, (ii) near cotton-openers, and (iii) between 7:00 PM and 6:00 AM. The Bill
seeks to remove the first two restrictions. It proposes to empower the state government to allow
women to work during night hours in a factory or group of factories if: (i) there are adequate safeguards
for safety, health and comfort of women (including night crèches, ladies’ toilets and transportation from
the factory to their residence), and (ii) it has held due consultations with and obtained the consent of the
women workers, the employer and the representative organisations of the employers and workers.
• The Bill seeks to impose restrictions on employment of pregnant women and persons with disability in
certain works or processes.
• Manufacturer's liability to ensure safety: The Act places the liability of ensuring that an article to be
used in a factory is safe on the designer, importer, supplier or manufacturer. The Bill extends such
liability to the designer, importer, supplier or manufacturer of any substance used in a factory.
• Facilities for workers: The Act mandates a factory employing more than 150 people to provide
shelters or restrooms. The Bill states that a factory with more than 75 workers should provide separate
shelters or restrooms for male and female workers.
• Overtime and paid leave: The Bill increases the maximum number of overtime hours allowed to a
worker and relaxes the provisions regarding entitlement of workers to paid leave.
• Workers’ safety: The Bill introduces provisions for: (i) supply of protective equipment and clothing
to workers exposed to hazards, and (ii) rules regarding hazardous processes. It modifies the provisions
regarding: (i) precautions against dangerous fumes and gases, (ii) explosive or inflammable dust or gas,
and (iii) dangerous operations.
• Penalties: The Act specifies the penalties for various offences. The Bill raises the penalties for 12 of
these offences (including contraventions by the occupier or manager, a worker, or a designer, importer,
supplier or manufacturer of an article or substance).

Provisions Regarding Health

1) Cleanliness
2) Disposal of Wastes & Effluents
3) Ventilations & Temperature
 4) Dust & Fumes
5) Artificial Humidification
6) Overcrowding
7) Lighting
8) Drinking Water
9) Latrines & Urinals
10) Spittoons
Provisions Regarding Safety:
Fencing of Machinery
1) Work on or near Machinery in motion
2) Employment of Young Persons on Dangerous Machines
3) Striking Gear and Devices for cutting off power
4) Self Acting Machines
5) Casing of New Machinery
6) Prohibition of Employment of Women & Children near Cotton openers
7) Hoists, lifts, Lifting Machines and others
8) Revolving Machinery
9) Pressure Plant
10) Floors, Stairs & Means or Access
11) Pits, Sumps, Opening in Floors and others
12) Excessive Weights
13) Protection of Eyes\precautions against Dangerous Fumes, Gases & others
14) Precautions Regarding use of portable electric light
15) Explosive or Inflammable Dust, Gas
16) Precautions in case of fire
17) Specifications of Defective Parts or Tests of Stability
18) Safety of Buildings and machines
19) Safety officers
Provisions Regarding Welfare of Workers
1) Washing Facilities
2) Facilities for Storing & Drying clothing
3) Facilities for Sitting
4) First Aid facilities
5) Canteens, Shelters, Rest Rooms & Lunch Rooms
6) Creches
7) Welfare Officers

Hazardous Processes
Provisions regarding Hazardous Process were instructed in the Act under a new chapter by the Factories
(Amendment) Act, 1987.
This Act instructed two new schedules:
I. Listing the industries involving hazardous process
II. Relating to permissible levels of certain chemical substances in work environment
Provisions Regarding Hazardous Processes
1) Constitution of Site Appraisal Committee
2) Compulsory Disclosure of Information
3) Special Responsibility of the occupier in relation to Hazardous processes:
4) Maintaining accurate and up-to-date health and medical records of workers exposed to any chemical,
toxic or any other harmful substances manufactured, stored, handled or transported
5) Appointing qualified, experienced & compete persons in handling such substances to supervise
handling and for protecting the workers from the hazard
6) Providing for medical examination of every worker at intervals
7) Appointment of Inquiry Committee
8) Emergency Standards
9) Permissible Limits of Exposure of chemical and toxic
10) Substances
11) Workers’ participation in safety management
12) Right of workers to warn about imminent danger

Working Hours of Adults

 • Weekly Hours: < 48 hours
• Weekly Holidays : at least 1 holiday in a week , substitute holidays
• Compensatory Holidays
• Daily Hours : < 9 hours
• Intervals for rest : at least half an hour
• Spread Over
Night Shifts
• Prohibition of Overlapping Shifts : not more than 2 continuous shift
• Extra wages for overtime : wages at the rate of twice at his ordinary rate of wages for overtime
• Notice of period of work

What steps must be taken in case of Fatal Accidents/ Dangerous occurrence under Factories Act
EXAMPLE
A Factory, ‘X’ built a boundary wall surrounding its premises. The said boundary wall separates the premises of
the said Factory ‘X’ from the premises of Factory, ‘Y’. A worker of a contractor of Factory ‘X’ was operating
some machinery near the boundary wall within the premises of Factory ‘X’. While operating the said machinery,
the worker accidentally caused the machinery to collide with a portion of the boundary wall. The portion of the
wall most affected by the collision collapsed into the premises of Factory ‘Y’ and three female workers, who
were employees of a contractor of Factory ‘Y’ and who were working in the premises of Factory ‘Y’, were
killed on account of the debris falling over them.

The personnel of Factory ‘X’ telephonically informed the Factory Inspector’s office and local police authorities
about the accident and the deaths. The Factory ‘X’ and ‘Y’ are separate factories belonging to different
enterprises and are totally unconnected to each other.

Below are the steps that are required to be taken under the law prescribed in the Factories Act and Rules for
dealing with accidents.
As per Section 88 of the Factories Act, 1948 if an accident occurs in any factory which causes death, or bodily
injury by reason of which the person injured is prevented from working for a period of 48 hours or more
immediately following the accident, the Manager of the factory shall send notice of the same to such authorities
and in such form as may be prescribed by the Rules framed by the State Government in that regard.
As per Rule 115, in case of an accident or a dangerous occurrence in a factory which causes death or is of a
serious nature, the following steps need to be taken:
Within 4 hours of the accident, the Manager of the factory has to send a notice of the happening of the accident
and / or occurrence by telephone, special messenger or telegram to the Factory Inspector and the Administrative
Medical Officer, Employees’ State Insurance Scheme (if ESI is applicable to the factory). Where the accident
has cause death, or is likely to cause death, then such a notice needs to also be sent within 4 hours of the
occurrence of the accident to :
The District Magistrate or Sub-Divisional Magistrate
The Officer-in-charge of the nearest police station
The nearest relatives of the injured or deceased person.
There is no set format for the above notice. The notice may contain information of the happening of the accident
and may mention, in case of death of persons in the factory due to the accident, how many such persons have
died.
The above notice is to be confirmed by the Manager of the Factory to the above authorities by sending a written
report of the accident in prescribed Form of Factories Rules or in Form of the Employees’ State Insurance
(General) Regulations, 1950 (if ESI is applicable), and in the case of a dangerous occurrence in Form 24-A,
within 12 hours of the occurrence of the accident. A copy of Form 24 is annexed to this Note as Annexure ‘A’.
A copy of Form 24-A is annexed to this Note as Annexure ‘B’.
Thus, where the accident is of a serious nature but has not resulted in death, the notice within 4 hours of the
accident and the written report in Form 24 shall be sent only to the Factory Inspector and Administrative
Medical Officer, Employees’ State Insurance Scheme (if ESI is applicable). However, if death has occurred or is
likely to occur, then such notice and written report will also be sent to the other persons as listed above.
Also, in the event of an accident where an injured person subsequently dies due to the accident, the information
of his death wherever known shall be sent by the Manager by telephone, special messenger or telegram within
24 hours of the occurrence to the following authorities:
1. The Factory Inspector,
2. Administrative Medical Officer, Employees’ State Insurance Scheme (if ESI is applicable)
3. The District Magistrate or Sub-Divisional Magistrate
4. The Officer-in-charge of the nearest police station
For the purpose of Rule 115, ‘accident of a serious nature means an accident which results in –
1. Immediate loss of any part of the body or any limb or part thereof;
2. Crushed or serious injury to any part of the body due to which loss of the same is obvious or any injury
which is likely to prove fatal;
3. Unconsciousness; or
4. Severe burns or scalds due to chemicals, steam or any other cause.
Penalty for Contravention: Section 92 of the Factories Act gives the general penalty for contravention of the Act
and Rules. The Section states that the occupier and manager of the factory shall each be guilty of an offence and
punishable with imprisonment for upto two years or with fine upto one lakh rupees or with both. Therefore,
failure to send notice of the fatal accident in 4 hours and written report within 12 hours as mentioned above can
lead to prosecution of the occupier and manager of the factory.

Report of accident by the Manager

1. Name and address of occupier

2. Occupier’s Registration No./Licence No.
3. Address of premises where accident happened
4. Nature of Industry
5. Department, shift hours (if any) and exact place where the accident happened
6. Name of injured person.
7. Insurance Number.
8. Address of injured person
9. Sex
10. Age (last birthday)
11. Occupation of injured person
12. Local office to which attached.
13. Date and hour of accident
14. Hour at which he started work on the day of accident
15. Whether wages in full or part are payable to him for the day of his accident
16. Cause of accident, –
17. if caused by machinery –
18. give name of the machine and part causing the accident, and
19. State whether it was moved by mechanical power at that time;
20. State exactly what the injured person was doing at that time,
21. In your opinion, was the injured person at the time of accident-
22. acting in contravention of the provisions of any law applicable to him; or
23. acting in contravention of any orders given by or on behalf of occupier; or
24. acting without instructions from his occupier,
25. If reply to clauses (i), (ii), or (iii) of clause © is in affirmative, state whether the act was done for the
purpose of and in connection with the occupier’s trade or business.
26. If the accident happened while traveling by availing of the transport facility provided by the occupier,
state whether –
27. the injured person was traveling as a passenger to or from his place of work;
28. the injured person was traveling with the express or implied permission of the occupier;
29. the transport is being operated by or on behalf of the occupier or some other person by whom it is
provided in pursuance of arrangements made with the occupier; and
30. the vehicle was being/not being operated in the ordinary course of public transport service.
31. If the accident happened while meeting emergency state –
32. its nature;
33. whether the injured person at the time of accident was employed for the purpose of his occupier’s trade
or business in or about the premises at which the accident took place.
Describe briefly how the accident occurred.
Name and address of witnesses –
…………………………………………………………………………
…………………………………………………………………………
Nature and extent of injury (e.g., fatal, loss of fingers, fracture of leg, scald, etc).
Location of injury (right leg, left hand or left eye etc.),
If the accident is not fatal, state whether the injured person has returned to work.
If so, date and hour of return to work.
Physician, dispensary or hospital from whom or where the injured person received or is receiving treatment.
Name of dispensary / panel doctor elected by the insured person.
Has injured person died?
If so, date of death.
I certify that to the best of my knowledge and belief the above particulars are correct in every respect.

Place : ……………………… Signature…………………………………

Date of dispatch of report Designation………………………………

This space to be completed by Inspector of Factories.

District ……………………………
Date of receipt of report ……………………………
Accident number ……………………………
Industry number ……………………………
Causation number ……………………………
Date of investigation ……………………………
Result of investigation ……………………………

NOTICE OF DANGEROUS OCCURRENCE

Name and address of the factory
Name and address of occupier of the factory
Name and address of the Manager
Nature of Industry
Branch or Department and exact place where the dangerous occurrence took place
Date and hour of occurrence
Nature of dangerous occurrence (state exactly what happened)
I certify that to the best of my knowledge and belief the above particulars are correct in every respect.

Place : ……………………… Signature of the Occupier / Manager

Date of dispatch of report

Factories Act (Amendment Bill 2016)

These amendments relate to increase in overtime hours from the existing 50 hours per quarter to 100
hours (Section 64) and existing 75 hours per quarter to 125 hours (Section 65).
The Factories (Amendment) Bill, 2016 that seeks to increase the working overtime hours up to 100 per quarter.
The existing law permits the state governments to make rules related to the regulation of overtime hours of
work.
However, the total number of hours of overtime must not exceed 50 hours for a quarter.
Now, the new bill passed by the lower house raises this limit to 100 hours. The new bill also introduces a
provision which permits the central or state government to extend the 115-hour limit to 125 hours. It is pertinent
to note that no worker will be allowed to work overtime, for more than seven days at a stretch.

The Shop and Establishment Act

An Act to amend and consolidate the law relating to the regulation of hours of work, payment of wages, leave,
holidays, terms of service and other conditions of work of persons employed in shops, commercial
establishments, establishments for public entertainment or amusement and other establishments and to provide
for certain matters connected therewith.
The Shop and Establishment Act is regulated by the Department of Labor and regulates premises wherein any
trade, business or profession is carried out. The act not only regulates the working of commercial
establishments, but also societies, charitable trusts, printing establishments, educational institutions run for gain
and premises in which banking, insurance, stock or share brokerage is carried on. This act regulates areas such
as working hours, rest interval for employees, opening and closing hours, closed days, national and religious
holidays, overtime work, rules for employment of children, annual leave, maternity leave, sickness and casual
leave, etc.,
Premises Regulated by the Shop & Establishment Act
The Shop and Establishment Act in India is promulgated by the state and may slight differ from state to state.
However, as per the Act, all shops and commercial establishments operating within each state are covered by the
respective Shop & Establishments Act. Shops are defined as premises where goods are sold either by retail or
wholesale or where services are rendered to customers, and includes an office, a store-room, godown,
warehouse or workhouse or work place. Establishments are defined as shop, a commercial establishment,
residential hotel, restaurant, eating-house, theatre or other places of public amusement or entertainment. Further,
establishments as defined by the act may also include such other establishments as defined by the Government
by notification in the Official Gazette. However, factories are not covered by the shops & establishments act and
are regulated by the Factories Act, 1948.
Aspects Regulated by Shop and Establishment Act
The Shop and Establishment Act regulates a number of aspects relating to the operation of a shop or commercial
establishment. Some of the key areas regulated by the shop and establishment act include:
1. Hours of work
2. Interval for rest and meals
3. Prohibition of employment of children
4. Employment of young person or women
5. Opening and closing hours
6. Close days
7. Weekly holidays
8. Wages for holidays
9. Time and conditions of payment of wages
10. Deductions from wages
11. Leave policy
12. Dismissal
13. Cleanliness
14. Lighting and ventilation
15. Precautions against fire
16. Accidents
Record keeping
Shop and Establishment Act License
Any shop or commercial establishment that commences operation must apply to the Chief Inspector for a Shop
and Establishment Act License within the prescribed time. The application for license in the prescribed form
must contain the name of the employer, address of the establishment, name of the establishment, category of the
establishment, number of employees and other relevant details as requested. On submission of the application
and review by the Chief Inspector, the shop or commercial establishment will be registered and a registration
certificate will be issued to the occupier. The registration certificate must be prominently displayed at the shop
or commercial establishment and renewed periodically, as per the act.
In case the shop or establishment would like to close down the business, the occupier should notify the Chief
Inspector in writing within fifteen days of the closing. The Chief Inspector after reviewing the request for
closure can remove the shop or commercial establishment from the register and cancel the registration
certificate.

Is Shops and Establishment Act Applicable To E-commerce?

Most State Acts have a separate section on exemptions from registrations. E-commerce does not come under
this section in any of the State Acts. However, it is also not expressly mentioned within the definition of “shops”
or “establishment”, giving rise to the conundrum of its applicability to e-commerce entities. Therefore, a deeper
examination of this issue is necessary.

Based on the aforementioned precedents, it is clear that the presence of premises is a prerequisite for getting
registered under the Act. However, since e-commerce companies operate completely in an online mode on the
internet, physical space is not necessary for business – especially in the wake of the e-commerce boom that has
changed the way traditional markets operate in the last 2-3 years.

As per the Karnataka Shops and Establishment Act, a “shop” means any premises where any trade or business is
carried on or where services are rendered to customers, and includes offices or warehouses (whether on the same
premises or otherwise) used in connection with such trade or business, but does not require that a commercial
establishment or a shop be attached to a factory.

Thus, an e-commerce entity having an office space or a warehouse also necessitates that the e-commerce entity
be registered under the Act. No e-commerce entity can function without a registered workplace, even if it might
be the home of the entrepreneur itself as it will be considered an office, thereby warranting a license under the
Act. By implication, if there is a physical place to handle the official work of an e-commerce business, then a
license under the Act is required.

In this context, it is pertinent to note the proposal by the government of Rajasthan to include e-commerce within
the purview of the Rajasthan Shops and Establishment Act 1958. The proposed amendment states, "Any
premises where any trade or business or e-commerce is being carried out but (the premises) is not covered under
a shop or a commercial establishment' would be included.”The move by the government of Rajasthan
acknowledges the applicability of the law to e-commerce companies,but the proposed amendment fell short of
being enacted into law.

Moreover, the Minister of State in the Ministry of Commerce & Industry (Shri [Link], 2021) while
answering unstarred questions in the Parliament regarding regulations governing e-commerce clearly stated that
the “Activities of e-commerce companies inter alia involve the compliance of Shops and Establishment Act of
the State concerned.”

Furthermore, The Reserve Bank of India has laid out Know Your Customer (KYC) guidelines - accounts of
proprietary concerns under which if a separate account in the name of the business is to be created for
e-commerce transactions, a license under the Act would be a necessity. Thus, as most e-commerce entities have
a payment gateway for their online store, RBI requires valid entity proof for the same via the Shops and
Establishment license which will enable opening the account with ease.

Payment of wages Act 1936

The Payment of Wages Act, 1936 is a central legislation which has been enacted to regulate the payment of
wages to workers employed in certain specified industries and to ensure a speedy and effective remedy to them
against illegal deductions and/or unjustified delay caused in paying wages to them.. It applies to the persons
employed in a factory, industrial or other establishment or in a railway, whether directly or indirectly, through a
sub-contractor. Further, the Act is applicable to employees drawing wages upto Rs. 24000/- a month (2017
ammendment)
The Central Government is responsible for enforcement of the Act in railways, mines, oilfields and air transport
services, while the State Governments are responsible for it in factories and other industrial establishments.

The Basic Provisions Of The Act Are As Follows:-

1. The person responsible for payment of wages shall fix the wage period up to which wage payment is to
be made. No wage-period shall exceed one month.
2. All wages shall be paid in current legal tender, that is, in current coin or currency notes or both.
However, the employer may, after obtaining written authorisation of workers, pay wages either by
cheque or by crediting the wages in their bank accounts.
3. All payment of wages shall be made on a working day. In railways, factories or industrial
establishments employing less than 1000 persons, wages must be paid before the expiry of the seventh
day after the last date of the wage period. In all other cases, wages must be paid before the expiry of the
tenth day after the last day of the wage period. However, the wages of a worker whose services have
been terminated shall be paid on the next day after such termination.
4. Although the wages of an employed person shall be paid to him without deductions of any kind, the
Act allows deductions from the wages of an employee on the account of the following:-
(i) fines;
(ii) absence from duty;
(iii) damage to or loss of goods expressly entrusted to the employee;
(iv) housing accommodation and amenities provided by the employer;
(v) recovery of advances or adjustment of over-payments of wages;
(vi) recovery of loans made from any fund constituted for the welfare of labour in
accordance with the rules approved by the State Government, and the interest due
in respect thereof;
(vii) subscriptions to and for repayment of advances from any provident fund;
(viii) income-tax;
(ix) payments to co-operative societies approved by the State Government or to a
scheme of insurance maintained by the Indian Post Office;
(x) deductions made with the written authorisation of the employee for payment of any
premium on his life insurance policy or purchase of securities.
 The Act prescribes following rules for fines:-
● Fines shall be imposed for approved list of acts and omissions.
● A notice specifying such list shall be exhibited in the prescribed manner on the premises in which the
employment is carried on or at the prescribed places in case a person is employed in railways.
● No fine shall be imposed on any employed person until he has been given an opportunity of showing
cause against the fine, or other-wise, than in accordance with such procedure as may be prescribed for
the imposition of fines.
● The total amount of fine which may be imposed in any one wage period on any employed person shall
not exceed an amount equal to three per cent of the wages payable to him in respect of that
wage-period.
● No fine shall be imposed on any employed person who is under the age of fifteen years.
● No fine imposed on any employed person shall be recovered from him by installments or after the
expiry of sixty days from the day on which it was imposed.
● All fines and all realisations thereof shall be recorded in a register to be kept by the person responsible
for the payment of wages.
Hence, the main object of the Act is to eliminate all malpractices by laying down the time and mode of payment
of wages as well as securing that the workers are paid their wages at regular intervals, without any unauthorised
deductions.
The Act was amended by the Payment of Wages (Amendment) Act, in order to enlarge its scope and provide
for more effective enforcement. The main amended provision is the enhancement of wage ceiling month from
18,000 to Rs. 24,000 with effect from 28th August 2017 for the applicability of the Act as well as empowering
the Government to enhance the ceiling by notification in future.

CLAIMS WHICH CAN BE MADE UNDER THE ACT:

1. Delay in payment of earned wages or unauthorized deductions from the earned wages of the workmen,
redressal can be obtained by filing an application under Section 15 of the Act, before the competent
authority notified by the Government.
2. The application can be made either by the Inspector appointed under the Act, or by aggrieved person
himself or through a registered trade union in prescribed formats viz., Form NO. A, Form No. B and
Form C as the case may be.

3. The competent authority who hears the application may direct for immediate payment of earned wages
in addition to imposing compensation for the said delay in payment of wages or ten times the wages for
the unauthorised deductions made.

4. Any aggrieved workmen working in registered factories may contact the concerned area Inspector of
Factories for suitable redressal.

RULES FOR PAYMENT OF WAGES ( Secs 3-6)

[Link] for payment of wages.— Every employer shall be responsible for the payment of all wages
required to be paid under this Act to persons employed by him and in case of persons employed in
(a).Factories, a person named as the manager
(b) in industrial or other establishments, a person responsible to the employer for the supervision and control of
the industrial or other establishment;
(c) upon railways (other than in factories), a person in this behalf for the local area concerned;
(d) in the case of contractor, a person designated by such contractor who is directly under his charge;
(e) in any other case, a person designated by the employer as a person responsible for complying with the
provisions of the Act;
2. Fixation of wage-periods.
Every person responsible for the payment of wages under section 3 shall fix periods (in this Act referred to as
wage-periods) in respect of which such wages shall be payable.
(2) No wage-period shall exceed one month.
3. Time of payment of wages.
The wages of every person employed upon or in--
(a) any railway, factory or industrial or other establishment upon or in which less than one thousand persons are
employed, shall be paid before the expiry of the seventh day,
(b) any other railway, factory or industrial or other establishment, shall be paid before the expiry of the tenth
day,
(c)in the case of persons employed on a dock, wharf or jetty or in a mine, the balance of wages found due on
completion of the final tonnage account of the ship or wagons loaded or unloaded, as the case may be, shall be
paid before the expiry of the seventh day from the day of such completion.
(d) In case of termination of employment: Where the employment of any person is terminated by or on behalf of
the employer, the wages earned by him shall be paid before the expiry of the second working day from the day
on which his employment is terminated. Where the employment of any person in an establishment is terminated
due to the closure of the establishment for any reason other than a weekly or other recognised holiday, the wages
earned by him shall be paid before the expiry of the second day from the day on which his employment is so
terminated.
(e) Exemption: The appropriate Government may, by general or special order, exempt the person responsible for
the payment of wages from the operation of the above provisions in certain cases.
(f) All payments of wages shall be made on a working day.
4. Medium of Payment of wages: Wages to be paid in current coin or currency notes. All wages shall be paid
in current coin or currency notes or in both. The employer may, after obtaining the written authorisation of the
employed person, pay him the wages either by cheque or by crediting the wages in his bank account.

Rules for Deduction of Wages (Sec.7-13)

Sec. 7 provides that the wages of an employed person shall be paid to him without deductions of any kind
except those authorised by or under the Payment of Wages Act, 1936 [Sec.7 (1)] .
Kinds of Deductions
Deductions from the wages of an employed person shall be made only in accordance with the provisions of this
Act, and may be of the following kinds only, namely:-
(a) Deduction for fines [Secs.7 (2)(a) and 8]:
(1) No fine shall be imposed on any employed person save in respect of such acts and omissions on his part as
the employer, with the previous approval of the State Government or of the prescribed authority, may have
specified by notice under sub-section (2).
(2) A notice specifying such acts and omissions shall be exhibited in the prescribed manner on the premises in
which the employment is carried on or in the case of person employed upon a railway (otherwise than in a
factory), at the prescribed place or places.
(3) No fine shall be imposed on any employed person until he has been given an opportunity of showing cause
against the fine, or otherwise than in accordance with such procedure as may be prescribed for the imposition of
fines.
(4) The total amount of fine which may be imposed in any one wage-period on any employed person shall not
exceed an amount equal to three per cent of the wages payable to him in respect of that wage-period.
(5) No fine shall be imposed on any employed person who is under the age of fifteen years.
(6) No fine imposed on any employed person shall be recovered from him by instalments or after the expiry of
sixty days from the day on which it was imposed.
(7) Every fine shall be deemed to have been imposed on the day of the act or omission in respect of which it was
imposed.
(8) All fines and all realisations thereof shall be recorded in a register to be kept by the person responsible for
the payment of wages under section 3 in such form as may be prescribed; and all such realisations shall be
applied only to such purposes beneficial to the persons employed in the factory or establishment as are approved
by the prescribed authority.
(b) Deductions for absence from duty: Deductions may be made under clause (b) of sub-section (2) of section
7 only on account of the absence of an employed person from the place or places where, by the terms of his
employment, he is required to work, such absence being for the whole or any part of the period during which he
is so required to work.
(2) The amount of such deduction shall in no case bear to the wages payable to the employed person in respect
of the wage-period for which the deduction is made a larger proportion than the period for which he was absent
bears to the total period, within such wage period, during which by the terms of his employment, he was
required to work.
If, however, ten or more employed persons acting in concert absent themselves without due notice (that is to say
without giving the notice which is required under the terms of their contracts of employment) and without
reasonable cause, such deduction from any such person may include such amount not exceeding his wages for
eight days as may be any such terms be due to the employer in lieu of due notice. In this regard an employed
person shall be deemed to be absent from the place where he is required to work if, although present in such
place, he refuses, in pursuance of a stay-in strike or for any other cause which is not reasonable in the
circumstances, to carry out his work.
(c) Deductions for damage to or loss of goods expressly entrusted to the employed person for custody, or for
loss of money for which he is required to account, where such damage or loss is directly attributable to his
neglect or default;
(1) A deduction under clause (c) or clause (o) of sub-section (2) of section 7 shall not exceed the amount of the
damage or loss caused to the employer by the neglect or default of the employed person.
(1A) A deduction shall not be made under clause (c) or clause (m) or clause (n) or clause (o) of sub-section (2)
of section 7 until the employed person has been given an opportunity of showing cause against the deduction or
otherwise than in accordance with such procedure as may be prescribed for the making of such deductions.
(2) All such deductions and all realisations thereof shall be recorded in a register to be kept by the person
responsible for the payment of wages under section 3 in such form as may be prescribed.
(d) Deductions for services rendered.- A deduction under clause (d) or clause (e) of sub-section (2) of section
7 shall not be made from the wages of an employed person, unless the house-accommodation amenity or service
has been accepted by him, as a term of employment or otherwise, and such deduction shall not exceed an
amount equivalent to the value of the house-accommodation amenity or service supplied and, in the case of a
deduction under the said clause (e), shall be subject to such conditions as the State Government may impose.
(5) Deductions for recovery of advances.- Deductions under clause (f) of sub-section (2) of section 7 shall be
subject to the following conditions, namely:--
(1) recovery of an advance of money given before employment began shall be made from the first payment of
wages in respect of a complete wage-period, but no recovery shall be made of such advances given for travelling
expenses;
(2) recovery of an advance of money given after employment began shall be subject to such conditions as the
State Government may impose;
(3) recovery of advances of wages not already earned shall be subject to any rules made by the State
Government regulating the extent to which such advances may be given and the instalments by which they may
be recovered.
(6) Deductions for recovery of loans.- Deductions for recovery of loans granted under clause (fff) of
sub-section (2) of section 7 shall be subject to any rules made by the State Government regulating the extent to
which such loans may be granted and the rate of interest
payable thereon.
(7) Deductions for payments to co-operative societies and insurance schemes.- Deductions under clause (j) 4
and clause (k) of sub-section (2) of section 7 shall be subject to such conditions as the State Government may
impose.

New Wage Code

The Code on Wages, 2019, has been notified on 08 August 2019, and the provisions of the Payment of Wages
Act, 1936, the Minimum Wages Act, 1948, the Payment of Bonus Act, 1965 and the Equal Remuneration Act,
1976, have been rationalised and subsumed therein. The Code provides for universal minimum wage across
employments in organized and unorganized sector. The Code mandates the Central Government to fix floor
wage and that the minimum rates of wages fixed by the appropriate Governments shall not be less than the floor
wage. The Code prohibits gender discrimination in matters related to wages and recruitment of employees for
the same work or work of similar nature done by an employee. Every employee, drawing wages not exceeding
a monthly amount as notified by the Central or State Government, and having put in at least 30 days of work in
an accounting year, will be entitled to an annual bonus at the rate of 8.33% of wages earned or Rs. 100,
whichever is higher.
“Labour” as a subject is in the Concurrent List of the Constitution of India and under the Codes, the power to
make rules is vested with the Central Government as well as the State Governments as appropriate Government.
As a step towards implementation of the four Labour Codes, the Central Government has pre-published the draft
Rules, inviting comments of all stakeholders. As per available information, 31, 26, 25 and 25 States/Union
Territories have pre-published the draft Rules under the Code on Wages, 2019, the Industrial Relations Code,
2020, the Code on Social Security, 2020 and the Occupational Safety Health and working Conditions Code,
2020 respectively.
The Labour Codes were drafted after wide consultations including nine tripartite meetings involving employers’
and workers’ representatives, regional Labour Conferences, inter-Ministerial consultations and based on reports
of the Parliamentary Standing Committee on Labour. The endeavor has been to align the Labour Codes with the
present economic scenario and technological advancements along with reduction in multiplicity of definitions &
authorities. The Codes tend to ease compliance mechanism aiming to promote ease of doing business/setting up
of enterprises, attract investment and catalyze creation of employment opportunities while ensuring safety,
health and social security of every worker. Use of technology has been introduced in order to ensure
transparency & accountability in enforcement. Decriminalization of minor offences has also been provided in
the Labour Codes.
This information was given by the Minister of State for Labour & Employment, Shri Rameswar Teli in a written
reply in Lok Sabha today.
[Link]
[Link]

Overview of Code on Wages Bill 2019

The government of India began considering a plan in 2015 to consolidate India’s 44 labour laws into four codes
in order to rationalize labour laws and improve ease of doing business. The other three are the Occupational
Safety, Health and Working Conditions Code, the Industrial Relations Code, and the Code on Social Security.

The Code on Wages Bill, in turn, will subsume four laws:

1 . Minimum Wages Act (MWA)\

2. Payment of Wages Act (PWA

3. Payment of Bonus Act (PBA)

4. Equal Remuneration Act.(ERA)

The bill was passed by the Rajya Sabha on 2 August 2019.

The bill received assent from President Ram Nath Kovind on 8 August. The bill is a series of many labour
reforms undertaken by the Government of India

What changes will the Code on Wages Bill bring?

In addition, other changes will also become available:

1. As per the bill, a committee of trade unions, employers and the state government will fix a floor wage
for workers throughout the country.
2. Provident fund (PF) and gratuity components and take-home pay of employees will be impacted. The
new definition of wages caps allowances at 50% of total compensation.
3. The basic pay will be 50% or more of total pay as per the new code. This will change the salary
structure of most employees as the non-allowance part is usually lower than 50%.
4. As provident funds (PF) are based around basic salary, it will go up, which means that the take-home
pay will come down.
5. Post-retirement pay-out will go higher due to higher contributions due to provident funds
6. Companies will also see their cost rise as the contribution towards PF and gratuity increases.
7. Aspirants must go through the Occupational Safety, Health and Working Conditions Code 2020
introduced in the Parliament in September 2020, at the linked article. It is one of the three bills passed
in the Lok Sabha related to Labour reforms.

Salient Features of Code on Wages Bill

The following are some of the features of the Code on Wages Bill, 2019:
Uniform Applicability: The Wage Code now will ensure uniform applicability of the timely payment of wages.
Irrespective of wage ceilings and different industrial sectors when previous laws like the Payment of Wages Act,
Minimum Wages Act had placed restrictions.
Uniform Definition of Wages: The definition of ‘wages’ slightly varied across PWA, MWA, PBA and this has
resulted in numerous litigations. Therefore, the Wage Code seeks to provide a single uniform definition of
‘wages’ for the purposes of computation and payment of wages to the employees. As per Wage Code, the term
‘wages’ means all remuneration whether, by way of salaries, allowances or otherwise, expressed in terms of
money and includes basic pay; dearness allowance; and retaining allowance if any.
The distinction between Employee and Worker: The Wage Code provides separate definitions of ‘worker’
and ‘employee’. The definition of ‘employee’ is broader than that of ‘worker’.
Equal Remuneration: The Wage Code prohibits discrimination on the ground of gender with respect to wages
by employers or for purpose of recruitment, with respect to the same or work of similar nature of work.
Payment of Bonus: There is no significant change from PBA and the provisions relating to the payment of
bonus are also consistent with the terms of PBA. Earlier, the applicability was limited to employees drawing
wages not exceeding INR 21,000 per month. Now, under the Wage Code, the appropriate government is
empowered to fix the wage threshold for determining the applicability.
Workmen’s Compensation Act 1923

The Workmen’s Compensation Act, 1923 provides for payment of compensation to workmen and their
dependants in case of injury and accident (including certain occupational disease) arising out of and in the
course of employment and resulting in disablement or death. The Act applies to railway servants and persons
employed in any such capacity as is specified in Schedule II of the Act. The schedule II includes persons
employed in factories, mines, plantations, mechanically propelled vehicles, construction works and certain other
hazardous occupations. There is no wage limit for coverage of workers under the Act.
It does not, however, apply to (i) persons serving in Armed Forces an d (ii ) workers covered by the Employees’
State Insurance Act, 1948.
The amount of compensation to be paid depends on the nature of the injury and the average monthly wages and
age of workmen. The minimum and maximum rates of compensation payable for death (in such cases it is paid
to the dependents of workmen) and for disability have been fixed and is subject to revision from time to time.
In case of death the minimum amount of compensation fixed is Rs.1,20,000 whereas it is Rs.1,40,000 in case of
permanent total disablement . The maximum amount of compensation payable is Rs.4.56 lakh in the case of
death and Rs.5.48 lakh in the case of permanent total disablement. Under the maximum compensation limit, the
monthly wage limit of Rs. 8,000 has been increased to Rs. 15,000. These enhanced rates of compensation have
come into force w.e.f. 1.01.2020
A Social Security Division has been set up under the Ministry of Labour and Employment , which deals with
framing of social security policy for the workers and implementation of the various social security schemes. It is
also responsible for enforcing this Act. The Act is administered by the State Governments through
Commissioners for Workmen's Compensation.
The Main Provisions of the Act Are:-
1. An employer is liable to pay compensation:-
(i) if personal injury is caused to a workman by accident arising out of and in the course of
his employment;
(ii) if a workman employed in any employment contracts any disease, specified in the Act as
an occupational disease peculiar to that employment.
2. However, the employer is not liable to pay compensation in the following cases:-
i) If the injury does not result in the total or partial disablement of the workman
ii) for a period exceeding three days.
ii) If the injury, not resulting in death or permanent total disablement, is caused by an
accident which is directly attributable to:-
a) the workman having been at the time of the accident under the influence of drink
or drugs; or
b) the willful disobedience of the workman to an order expressly given, or to a rule
expressly framed, for the purpose of securing the safety of workmen; or
c) the willful removal or disregard by the workman of any safety guard or other
device which has been provided for the purpose of securing safety of workmen.
3. The State Government may, by notification in the Official Gazette, appoint any person to be a
Commissioner for Workmen's Compensation for such area as may be specified in the notification.
Any Commissioner may, for the purpose of deciding any matter referred to him for decision under
this Act, choose one or more persons possessing special knowledge of any matter relevant to the
matter under inquiry to assist him in holding the inquiry.
4. Compensation shall be paid as soon as it falls due. In cases where the employer does not accept the
liability for compensation to the extent claimed, he shall be bound to make provisional payment
based on the extent of liability which he accepts, and, such payment shall be deposited with the
Commissioner or made to the workman, as the case may be.
5. If any question arises in any proceedings under this Act as to the liability of any person to pay
compensation (including any question as to whether a person injured is or is not a workman) or as
to the amount or duration of compensation (including any question as to the nature or extent of
disablement), the question shall, in default of agreement, be settled by a Commissioner. No Civil
Court shall have jurisdiction to settle, decide or deal with any question which is by or under this
Act required to be settled, decided or dealt with by a Commissioner or to enforce any liability
incurred under this Act.
6. The State Government may, by notification in the Official Gazette, direct that every person
employing workmen, or that any specified class of such persons, shall send at such time and in
such form and to such authority, as may be specified in the notification, a correct return specifying
the number of injuries in respect of which compensation has been paid by the employer during the
 previous year and the amount of such compensation together with such other particulars as to the
compensation as the State Government may direct.
7. Whoever, fails to maintain a notice-book which he is required to maintain; or fails to send to the
Commissioner a statement which he is required to send; or fails to send a report which he is
required to send; or fails to make a return which he is required to make, shall be punishable with
fine.

Partial disablement means, where the disablement is of a temporary nature, such disablement as
reduces the earning capacity of a workman in any employment in which he was engaged at the time of
the accident resulting in the disablement, and, where the disablement is of a permanent nature, such
disablement as reduces his earning capacity in every employment which he was capable of
undertaking at that time: provided that every injury specified 1 in Part II of Schedule I shall be
deemed to result in permanent partial disablement

Amendments in the Workmen’s Compensation Act

Workmen's compensation Act has been amended on 9th January 2010.
Following are the major changes.
(1) The compensation payable on death from the injury, is (i) minimum of Rs.80000 is increased to Rs.120000
or (ii) 50% of the monthly wages of deceased multiplied by the relevant factor.
(2) The compensation payable on Permanent Total Disablement from the injury, is (i) minimum of Rs.90000 is
increased to Rs.140000 or (ii) 60% of the monthly wages of deceased multiplied by the relevant factor.
(3) Definition of wages remains unaltered.
(4) For the purpose of claims settlement actual monthly wages have to be calculated without ceiling of
Rs.4000/- which will lead to multifold increase in claim outgo. The maximum amount of claim compensation
payable was Rs. 4.56 lakh in the case of death and Rs. 5.48 lakh in the case of permanent total disablement.
With the ceiling of Rs.4000/- being removed, the claims outgo will increase.
(5) Definition of workmen replaced by "Definition of Employee"- also now includes CLERICAL employees.

Revised monthly wage ceiling limit of 50% of Rs.8000 increased to Rs.15000-Employees Compensation Act for
maximum compensation calculation.

Now, a new monthly wage-ceiling limit of Rs. 15000 is introduced for the purpose of calculation of 50% of it
during computation of Maximum compensation under the Act. Hence, the maximum compensation can go
UPTO 50% of 8000 which comes to Rs. 4000/- that shall be multiplied by Age factor. Thus, effectively it was
erstwhile 50% of Rs.8000 and now it is 50% of Rs.15000

UNIT IV
Syllabus: The Payment of Minimum wages act 1936, The Contract Labour (Abolition & regulative) Act ,The ESI
Act, 1948, The Trade unions act, 1926

Minimum Wages Act 1948

The Minimum Wages Act, 1948 was enacted to safeguard the interests of workers, mostly in the unorganised
sector by providing for the fixation of minimum wages in certain specified employments. It binds the employers
to pay their workers the minimum wages fixed under the Act from time to time.
Under the Act, both the Central Government and the State Governments are the appropriate Governments to fix,
revise, review and enforce the payment of minimum wages to workers in respect of 'scheduled employments'
under their respective jurisdictions.

The appropriate Government is required to appoint an Advisory Board for advising it, generally in the matter of
fixing and revising minimum rates of wages. The Central Government appoints a Central Advisory Board for
the purpose of advising the Central and State Governments in the matters of the fixation and revision of
minimum rates of wages as well as for co-ordinating the work of Advisory Boards.
Minimum wage and an allowance linked to the cost of living index and is to be paid in cash, though payment of
wages fully in kind or partly in kind may be allowed in certain cases. The minimum rate of wages consists of a
basic wage and a special allowance, known as 'Variable Dearness Allowance (VDA)' linked to the Consumer
Price Index Number. The allowance is revised twice a year, once in April and then in October.
Under the Minimum Wages Act, there are two methods for fixation/revision of minimum wages, namely:-
 1. Committee method - Under this method, committees and sub-committees are set up by the
appropriate Governments to hold enquiries and make recommendations with regard to fixation and
revision of minimum wages, as the case may be.
2. Notification method - Under this method, Government proposals are published in the Official
Gazette for information of the persons likely to be affected thereby and specify a date not less than
two months from the date of the notification on which the proposals will be taken into consideration.
After considering the advice of the Committees/Sub-committees and all the representations received by the
specified date in Notification method, the appropriate Government shall, by notification in the Official Gazette,
fix/revise the minimum wage in respect of the concerned scheduled employment and it shall come into force on
expiry of three months from the date of its issue. The Government may review the minimum rates of wages and
revise the minimum rates at intervals not exceeding five years.
The fixation of minimum wages depends on a number of factors such as level of income and paying capacity,
prices of essential commodities, productivity, local conditions, etc. Since these factors vary from State to State,
the wages accordingly differ throughout the country. Hence, in the absence of a uniform national minimum
wage, the Central Government introduced a 'national floor level minimum wage'. The last revision being made
was Rs. 178/- per day with effect from 20.11.19, on the recommendations of the Central Advisory Board. All
the States/UTs Governments are required to ensure that fixation/revision of minimum rates of wages in all the
scheduled employments is not below this national minimum wage.
Also, in order to bring uniformity in the minimum wages of scheduled employments, the Union Government has
requested the States to form regional Committees. Hence, five Regional Minimum Wages Advisory Committees
have been formed in the country

MAIN PROVISIONS OF THE MINIMUM WAGES ACT, 1948

Following are the main provisions of the Act
1 Fixing Of Minimum Rates of Wages
a) It provides for fixing minimum wages in certain employments where labour is ignorant or less organised and
is vulnerable to exploitation. Minimum wages are not to be fixed in respect of any industry in which there are
less than 1,000 employees in the whole State. (Under the 1957 amendment to the Act of 1948, this limiting
condition has been substantially relaxed.)
b) The Act provides for the fixation of
(a)A minimum time rate
(b)A minimum piece rate
(c) A guaranteed time rate
(d)An overtime rate appropriate to different occupations and different classes of
workers.
c)The minimum wage fixed or revised by the appropriate Government will include the following
(a) A basic rate of wages and a special allowance at a rate to be adjusted, at such intervals and in such
manner as the appropriate government may direct, to accord as nearly as practicable with the variation
in the cost of living index number applicable to such workers.
(b) A basic rate of wages with or without the cost of living allowance , and the cash value of the
concessions in respect of suppliers of essential commodities at concession rates, where so authorised:
or
(c) An all inclusive rate allowing for the basic rate, the cost of living allowance and the cash value of the
concessions, if any.
(d) The cost of living allowance and the cash value of the concessions in respect of supplies of essential
commodities at concession rate shall be computed by the competent authority at such intervals and in
accordance with such directions as may be specified or given by the appropriate government. The Act
lays down that wages should be paid in cash, although it empowers the appropriate Governments for
the payment of minimum wages wholly or partly in kind.
i Payment Of Minimum Rate Of Wages
The employer is required to pay to every employee, engaged in a scheduled employment under him, wages at a
rate not less than the minimum rate of wages notified for that class of employees without any deduction except
as may be authorised.
ii Fixing Hours For Normal Working Day
In regard to any scheduled employment, minimum rates of wages in respect of which have been fixed under
this Act, the appropriate Government may
(a) fix the number of hours of work which shall constitute a normal working day, inclusive of one or more
specified intervals;
(b) provide for a day of rest in every period of seven days which shall be allowed to all employees or to any
specified class of employees and for the payment of remuneration in respect of such days of rest;
(c) provide for payment for work on a day of rest at a rate not less than the overtime rate
iii Wages For Two Or More Classes Of Work
If an employee performs two or more classes of work, to each of which a different rate of wage is applicable, the
employer is required to pay to such an employee in respect of the time respectively occupied in each such class
of work, wages at not less than the minimum rate in force in respect of each such class.
iv Maintenance Of Registers And Records
Every employer is required to maintain registers and records giving particulars of employees, the work
performed by them, the wages paid to them, the receipts given by them and any other required particulars.
v Inspections
The appropriate Government may, by notification in the Official Gazette, appoint inspectors for this purpose
under the Act and define the local limits for their functions.
vi Claims
The appropriate Government may, by notification in the Official Gazette, appoint Labour Commissioner or
Commissioner for Workmen’s Compensation or any officer not below the rank of Labour Commissioner or any
other officer with experience as a judge of a civil court or as a Stipendiary Magistrate, to hear and decide for any
specified area, all claims arising out of the payment of less than the minimum rates of wages as well as payment
for days of rest or for work done.
vii Authorised Deductions
The deductions can be made on account of:
(a) Fines
(b) Damage or Loss
c) Breach of Contract
2. As per the Act , the appropriate government means (i) In relation to any scheduled employment carried on by
or under the authority of the Central Government or a railway administration or in relation to a mine, oilfield or
major port or any corporation established by a Central Act, the Central Government and (ii) In relation to any
other scheduled employment , the State Government.
3.. Cost of living index number in relation to employees in any scheduled employment in respect of which
minimum rates of wages have been fixed , means the index number ascertained and declared by the competent
authority by notification in the Official Gazette to be the cost of living index number applicable to employee in
such employment.
4. Competent authority means the authority appointed by the appropriate government by notification in its
Official Gazette to ascertain from time to time the cost of living index number applicable to the employees
employed in the scheduled employment specified in such notification.

Current Minimum Wage in Delhi

The Following rates are applicable in respect of Unskilled, semiskilled and skilled categories in all schedules
employments except employment in "Shop And Establishment and employment in 'Clubs'
The minimum rates of wages in Agriculture including the basic rates and Variable Dearness Allowance payable
w.e.f. 01.10.2022 to the employees would be same as under:-

● Valid in September 2022

● Minimum wage with effect from 1 April 2022.
● The amounts are in Indian Rupee (₹).

SCHEDULED EMPLOYMENT

Basic per VDA per Total per Total

month month month per da

Unskilled ₹14,842.00 ₹1,664.00 ₹16,506.00 ₹635.0

Semi-skilled ₹16,341.00 ₹1,846.00 ₹18,187.00 ₹700.0

Skilled ₹17,991.00 ₹2,028.00 ₹20,019.00 ₹770.0

Clerical and supervisory staff - Non ₹16,341.00 ₹1,846.00 ₹18,187.00 ₹700.0
Matriculate

Clerical and supervisory staff - Matriculate ₹17,991.00 ₹2,028.00 ₹20,019.00 ₹770.0

but not Graduate

Clerical and supervisory staff - Graduate and ₹19,572.00 ₹2,184.00 ₹21,756.00 ₹837.0
above

The Government of (NCT) Delhi revised minimum wages including variable dearness allowance,
dated 23rd May 2022. As per [Link].12(142)/02/MW/VII/Partfile/2618-2641, it will be effective from
1st April 2022.

Employees’ State Insurance Act (ESI) 1948

The Employees' State Insurance Act, 1948 (ESI Act) provides for health care and cash benefit payments in the
case of sickness, maternity and employment injury. The Act applies to all non-seasonal factories run with power
and employing 10 or more persons and to those factories which run without power and employing 20 or more
persons. The appropriate Government may after notification in the Official Gazette, extend the provision of the
Act to any other establishment or class of establishments, industrial, commercial, agriculture or otherwise.
Under the Act, cash benefits are administered by the Central Government through the Employees State
Insurance Corporation (ESIC), whereas the State Governments and Union Territory Administrations are
administering medical care.
Employees' State Insurance is a self-financing social security and health insurance scheme for Indian workers.
For all employees earning INR21000 or less per month as wages, the employer contributes 3.25 percentage and
employee contributes 0.75 percentage, total share 4 percentage except when the “average daily wages in a wage
period” are equal to or less than Rs.137 ( as per 2019 revised limit) . This fund is managed by the ESI
Corporation (ESIC) according to rules and regulations stipulated there in the ESI Act 1948, which oversees the
provision of medical and cash benefits to the employees and their family through its large network of branch
offices, dispensaries and hospitals throughout India. ESIC is an autonomous corporation under Ministry of
Labour and Employment, Government of India. But most of the dispensaries and hospitals are run by concerned
state governments.
The Employees' State Insurance Corporation (ESIC) is the premier social security organization in the country. It
is the highest policy making and decision taking authority under the ESI Act and oversees the functioning of the
ESI Scheme under the Act. The corporation comprises members representing Central and State Governments,
employers, employees, Parliament and the medical profession. Union Minister of Labour functions as the
Chairman of the Corporation. A Standing Committee constituted from among the members of the Corporation
acts as the Executive Body for the administration of the Scheme.

The basic provisions of the Act are:-

1. Every factory or establishment to which this Act applies shall be registered within such time and in
such manner as may be specified in the regulations made in this behalf. (The employer should get his
factory or establishments registered with the E.S.I. Corporation within 15 days after the Act becoming
applicable to it, and obtain the employer’s Code Number. The regional officer will allot a code number
to the employer, which must be quoted in all documents and correspondence).
2. It provided for an integrated need based social insurance scheme that would protect the interest of
workers in contingencies such as sickness, maternity, temporary or permanent physical disablement,
and death due to employment injury resulting in loss of wages or earning capacity.
3. It also provided for six social security benefits:-
a. Medical Benefit
b. Sickness Benefit (SB)
c. Maternity Benefit (MB)
d. Disablement Benefit
e. Dependants' Benefit(DB)
 f. Funeral Expenses
4. The Central Government may, by notification in the Official Gazette, establish a Corporation to be
known as the 'Employees' State Insurance Corporation' for the administration of the scheme of
Employees' State Insurance in accordance with the provisions of the Act.
5. The Corporation may, in addition to the scheme of benefits specified in this Act, promote measures for
the improvement of the health and welfare of insured persons and for the rehabilitation and
re-employment of insured persons who have been disabled or injured and may incur in respect of such
measures expenditure from the funds of the Corporation within such limits as may be prescribed by the
Central Government.
6. The contribution payable under this Act in respect of an employee shall comprise contribution payable
by the employer and contribution payable by the employee and shall be paid to the Corporation. The
contributions shall be paid at such rates as may be prescribed by the Central Government.
7. All contributions paid under this act and all other moneys received on behalf of the Corporation shall
be paid into a fund called the 'Employees' State Insurance Fund' which shall be held and administered
by the Corporation for the purposes of this Act.
8. Whoever, for the purpose of causing any increase in payment or benefit under this Act, or for the
purpose of causing any payment or benefit to be made where no payment or benefit is authorised by or
under this Act, or for the purpose of avoiding any payment to be made by himself under this Act or
enabling any other person to avoid any such payment, knowingly makes or causes to be made any false
statement or false representation, shall be punishable with imprisonment or with fine or with both.
9. If the person committing an offence under this Act is a company, every person, who at the time the
offence was committed was in charge of, and was responsible to, the company for the conduct of the
business of the company, as well as the company, shall be deemed to be guilty of the offence and shall
be liable to be proceeded against and punished accordingly.

Child Labour (Prohibition & Regulation) Act, 1986

“An Act to prohibit the engagement of children in all occupations and to prohibit the engagement of adolescents
in hazardous occupations and processes and the matters connected therewith or incidental thereto.”.
It intends to:
This Bill intends to-
(i) ban the employment of children, i.e., those who have not completed their fourteenth year, in specified
occupations and
processes;
(ii) lay down a procedure to decide modifications to the Schedule of banned occupations or processes;
(iii) regulate the conditions of work of children in employments where they are not, prohibited from working;
(iv) lay down enhanced penalties for employment of children in violation of the provisions of this Act, and other
Acts
which forbid the employment of children;
(v) to obtain uniformity in the definition of "child" in the related laws.

Prohibition of employment of children in certain occupations and processes.- No child shall be employed
or permitted to work in any of the occupations set forth in Part A of the Schedule or in any workshop wherein
any of the processes set forth in Part B of the Schedule is carried on:
Provided that nothing in this section shall apply to any workshop wherein any process is carried on by the
occupier with the aid of his family or to any school established by, or receiving assistance or recognition from,
Government.

The prohibited occupations for children under 14 years are:

1. Occupations that are related to the transport of passengers, goods or mails by railway;
2. Cinder picking, clearing of an ash pit or building operation in the railway premises;
3. Working in a catering establishment which is situated at a railway station and if it involves moving
from one platform to another or from one train to another or going into or out of a moving train;
4. The occupation which involves work related to the construction of a railway station or any other work
where such work is done in close proximity to or between the railway lines;
5. Any occupation within the limits of any port;
6. Work which involves the selling of crackers and fireworks in shops having a temporary license;
7. Working in Slaughterhouses.
Prohibited processes for children under the age of 14 years are mentioned under the Schedule in Part B. They
are as follows:
 1. The process involving the making of Bidi;
2. The process which involves carpet-weaving;
3. Manufacturing cement or bagging of cement;
4. The processes such as Cloth printing, dyeing, and weaving;
5. The processes that involve the manufacturing of matches, explosives, and fireworks;
6. Mica-cutting and splitting;
7. Any manufacturing process such as shellac manufacture, soap manufacture, tanning;
8. The process of wool-cleaning;
9. Work that is related to the building and construction industry;
10. Manufacture of slate pencils;
11. Manufacture of products from agate;
12. Manufacturing processes in which toxic metals and substances such as lead, mercury, manganese,
chromium, cadmium, benzene, pesticides and asbestos are used;
13. Cashew and Cashew Nut descaling and processing;
14. Soldering processes in electronic industries.
The Act in total prohibits approximately 13 occupations and 51 processes for the employment of children.
Article 24 of the Indian Constitution includes the provision for the prohibition of employment of children in
factories. The Act also lays down certain guidelines for employers, which is to be followed in case the employee
is a child of age less than 14 years.
According to the Act, the employer cannot make a child employee work between 7 p.m. and 8 a.m. and no
overtime is allowed for them. It is not allowed for an employer to make a child work for more than 3 hours
without an interval of at least one hour and in total, an employer should not make a child work for more than six
hours a day. Adequate provisions must be made by the employer for the health and safety of the child
employees. Basic facilities such as drinking water, toilets, disposal of waste, ventilation, etc must be provided by
the employer. The employer needs to notify the Factory Inspector if in case he employs a child for employment.
Production of age certificate of the child employee is also needed according to the rules of the Act.

Child Labour Technical Advisory Committee

The Central Government may, if it thinks it to be necessary can constitute an advisory committee i.e. the Child
Labour Technical Advisory Committee by giving notification about it in the Official Gazette. It is the duty of the
Committee to advise the Central Government if there’s a need to add occupations or processes to the Schedule.
The Central Government appoints the members of the Committee but the Committee should not exceed more
than 10 members. The Committee shall also consist of a Chairman. There isn’t any limitation on the number of
meetings Committee shall have. The Committee shall meet whenever they feel necessary and the meetings shall
be regulated according to the procedure which shall be decided by them.

The Committee may itself constitute one or more sub-committees if they feel a need to do so.

The Chairman and other members of the Committee are entitled to an allowance.

Regulation of Conditions of Work of Children

There are certain regulations provided under the Child Labour (Prohibition and Regulation) Act, 1986 which the
employer needs to follow while employing a child in the establishment. Proper work conditions are to be
provided by the employer.
Hours and period of work
As per the Act, no child employee shall be allowed to work in any establishment in excess of the number of
hours that have been decided on and prescribed for such an establishment or class of establishment. The number
of hours shall be fixed by the establishment and the child employee must not be allowed to work for more than
three hours without a break of one hour. The total number of hours of work for a child employee shall not
exceed six hours. Six hours shall also include one hour of interval. According to the Act, the employer cannot
make a child employee work between 7 p.m. and 8 a.m. and no employer must permit the child employee to
work overtime. If a child has already worked in an establishment in a day, then such a child must not be
permitted to work in another establishment on the same day.

Weekly Holidays
Every child who is employed in an establishment shall mandatorily be allowed a holiday each week. The
holiday must be for a whole day. The day of the week must be decided on which it would be a holiday for the
employees of the establishment and the notice regarding the same must be exhibited in a conspicuous place of
the establishment. The notice should be of a permanent nature and should not be altered more than once in three
months.
Notice to Inspector
Notice is needed to be sent to the Inspector within whose local limits the establishment is situated by the
employer of such establishment if he employs a child employee or by the occupier of an establishment in which
a child is employed or is permitted to work. The notice to be sent must be in writing. It must contain the
following particulars:
1. the name of the establishment and place in which it is situated,
2. name of the person who manages the establishment,
3. the postal address of the establishment,
4. the details such as the nature of occupation or process which is carried on in the establishment.
Every employer who permits a child to work in his establishment is needed to send a notice within 30 days to
the Inspector within whose local limits the establishment is situated. Where a process is carried on by the
occupier with the aid of Government or it receives assistance or recognition from Government for it then such
establishment shall not be subject to the provisions of Section 7, 8, 9 of the Act.

Dispute as to age
In case if a question arises between an Inspector and an occupier on the age of the child who was permitted to
work by the occupier in an establishment then the Inspector can prescribe a medical authority to decide on the
age of such a child in case of absence of an age certificate.

Maintenance of register
The occupier shall maintain a register which shall include information with respect to children who are
employed or permitted to work in his establishment. The register which is made available by the occupier for
inspection at all times shall contain:
1. The name and date of birth of the children who are employed by the occupier;
2. Number of hours and period of work for which the child employee is made to work;
3. The nature of employment and the work which the child employee is made to do;
4. Other particulars which may be prescribed.

Display of notice containing abstract of Sections 3 and 14

The notice containing abstract of Sections 3 and 14 of the Act shall be displayed by every occupier of the
establishment in a conspicuous and accessible place of the establishment and in case the employer is a railway
administration or a port authority then the notice must be displayed in a conspicuous and accessible place at
every station or within the limits of a port as the case may be. The notice must be written in a local language
and in the English language.

Health and Safety

The Government may by giving a notification to the Official Gazette make rules for the health and safety of the
children who are employed or permitted to work in an establishment or any class of establishments if the
Government feels necessary to do so. According to the Act the rules which must be followed by the
establishment for the purpose of safety and cleanliness are as follows:
1. The cleanliness of the place of work must be taken care of and it should be free from any kind of
nuisance;
2. There must be a proper place for disposal of wastes and effluents;
3. Proper provisions for ventilation should be made and an adequate level of temperature should be
maintained in the place of work;
4. Provisions should be made to reduce dust and fumes;
5. Artificial humidification shall be made;
6. Lighting must be proper in the place of work;
7. Drinking water must be provided;
8. Toilets must be made in the place of work for the employees;
9. Spittoons should be provided in order to keep the workplace clean;
10. The machines which are in the workplace should be fenced properly;
11. Children must not be allowed to work near machinery which is in motion;
12. Children must not be permitted to work on dangerous machines;
13. Children must be instructed, trained and supervised in relation to the employment of children on
dangerous machines;
14. Device for cutting off power should be used;
15. Self-acting machines should be used in the workplace;
 16. Easing of new machinery;
17. Proper floors should be made and proper means to access through stairs shall be made;
18. Pits, sumps, openings in floor shall be made;
19. Child employees shall not be permitted to lift excessive weights while working;
20. Protection for eyes must be provided;
21. Children must not exposed to explosives or inflammable dust, gas, etc;
22. In case fire is used in work, proper precautions must be taken;
23. Proper maintenance of buildings and machinery shall be taken.

Miscellaneous
Penalties
When an employer employs a child or permits a child to work in contravention of the provisions of Section 3,
the employer shall be liable for punishment with imprisonment for a term which may extend to one year or with
fine and the fine imposed shall not be less than rupees ten thousand and which may extend to rupees twenty
thousand or with both.

Whoever is convicted of the said offence under Section 3 and repeats the same offence again in future then he
shall be punished with imprisonment for a term which shall not be less than six months and can be extended to
two years.

When an employer fails to give a notice as stated under Section 9 or fails to maintain a register comprising the
details of child employees as required by Section 11 of the Act or if the employer makes any false entry in any
such register, or fails to display a notice containing an abstract of Section 3, or if the employer fails to comply
with or contravenes any other provisions of the Act or any of the rules which are made thereunder, he shall be
punished with simple imprisonment which may extend to one month or with fine which may extend to ten
thousand rupees or with both imprisonment and fine.

UNIT V
Syllabus: The payment of Bonus Act, 1965 The payment of Gratuity Act, 1972 The Maternity Benefit Act, 1961
Employee’s Provident fund & Miscellaneous Provisions Act, 1952

Payment of Gratuity Act 1972

The Act was enacted to provide for a scheme for the payment of gratuity to employees engaged in factories,
mines, oilfields, plantations, ports, railway companies, shops or other establishments employing ten or more
persons and for matters connected therewith or incidental thereto. The appropriate Government may, by
notification, and subject to such conditions as may be specified in the notification, exempt any establishment to
which this Act applies or any employee or class of employees employed therein, from the operation of the
provisions of this Act, if in the opinion of the appropriate Government, the employees in such establishment are
in receipt of gratuity or pension benefits not less favourable than the benefits conferred under this Act.
The Act is administered by the Central Government in:-
(i) establishments which are under its control;
(ii) establishments having branches in more than one State; and
(iii) major ports, mines, oil fields and the railways. While, in all other cases, it is administered by the State
Governments and the Union Territory administrations. The appropriate Government may, by
notification, appoint any officer to be a controlling authority, who shall be responsible for the
administration of this Act and different controlling authorities may be appointed for different areas.
Besides, here is Central Industrial Relation Machinery (CIRM) in the Ministry of Labour which is responsible
for enforcing this Act. It is also known as the Chief Labour Commissioner (Central) [CLC(C)] Organisation. It
is headed by the Chief Labour Commissioner (Central).
Organisations with a workforce of 10 employees on a single day in the preceding 12 months are liable to pay
gratuity. If the number of employees of the same organisation reduces to under 10, it will still have to pay the
gratuity, as per regulations of the Act.
The main provisions of the Act are:-

1. Gratuity shall be payable to an employee on the termination of his employment after he has rendered
continuous service for not less than five years:-
(i) on his superannuation; or
(ii) on his retirement or resignation; or
(iii) on his death or disablement due to accident or disease, provided that the completion of
continuous service of five years shall not be necessary where the termination of the
employment of any employee is due to death or disablement.
2. The employer shall pay gratuity to an employee at the rate of fifteen days' wages based on the rate of
wages last drawn by the employee concerned for every completed year of service or part thereof in
excess of six months.
3. In the case of a monthly rated employee, the fifteen days' wages shall be calculated by dividing the
monthly rate of wages last drawn by him by twenty-six and multiplying the quotient by fifteen. While,
in the case of a piece-rated employee, daily wages shall be computed on the average of the total wages
received by him for a period of three months immediately preceding the termination of his
employment, and, for this purpose, the wages paid for any overtime work shall not be taken into
account.
4. The amount of gratuity payable to an employee shall not exceed twenty lakh rupees (amendment
2016).
5. For the purpose of computing the gratuity payable to an employee who is employed, after his
disablement, on reduced wages, his wages for the period preceding his disablement shall be taken to be
the wages received by him during that period, and his wages for the period subsequent to his
disablement shall be taken to be the reduced wages.
6. The gratuity of an employee, whose services have been terminated for any act, wilful omission or
negligence causing any damage or loss to, or destruction of, property belonging to the employer, shall
be forfeited to the extent of the damage or loss so caused. The gratuity payable to an employee may be
wholly or partially forfeited:-
(i) if the services of such employee have been terminated for his riotous or disorderly conduct
or any other act of violence on his part; or
(ii) if the services of such employee have been terminated for any act which constitutes an
offence involving moral turpitude, provided that such offence is committed by him in the
course of his employment.
7. 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 an application made to it in this
behalf by the aggrieved person, 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, by
notification, specify, from the date of expiry of the prescribed time, as arrears of land revenue and pay
the same to the person entitled thereto.
8. Whoever, for the purpose of avoiding any payment to be made by himself under this Act or of
enabling any other person to avoid such payment, knowingly makes or causes to be made any false
statement or false representation, shall be punishable with imprisonment or with fine or with both.
 Also, if an employer contravenes or makes default in complying with any of the provisions of this Act
or any rule or order made there under, shall be punishable with imprisonment or with fine or with both.
Determination of the amount of Gratuity
(1) A person who is eligible for payment of gratuity under this Act or any person authorised, in writing, to act on
his behalf shall send a written application to the employer, within such time and in such form, as may be
prescribed, for payment of such gratuity.
(2) As soon as gratuity becomes payable, the employer shall, whether an application referred to in sub-section
(i) 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.
(3) The employer shall arrange to pay the amount of gratuity within thirty days from the date it becomes payable
to the person to whom the gratuity is payable. (3-A) 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 such rate, not exceeding the
rate notified by the Central Government from time to time for repayment of long term deposits, as that
Government may, by notification specify: Provided that 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.
(4)(a) If there is any dispute as to the amount of gratuity payable to an employee under this Act or as to the
admissibility of any claim of, or in relation to, an employee for payment of gratuity, or as to the person entitled
to receive the gratuity, the employer shall deposit with the Controlling Authority such amount as he admits to be
payable by him as gratuity.
(b) Where there is a dispute with regard to any matter or matters specified in Clause (a), the employer or
employee or any other person raising the dispute may make an application to the Controlling Authority for
deciding the dispute.
5(c) The Controlling Authority shall, after due inquiry and after giving the parties to the dispute a reasonable
opportunity of being heard, determine the matter or matters in dispute and, if, as a result of such inquiry any
amount is found to be payable to the employee, the Controlling Authority shall direct the employer to pay such
amount or, as the case may be, such amount as reduced by the amount already deposited by the employer.
6(d) The Controlling Authority shall pay the amount deposited, including the excess amount, if any, deposited
by the employer, to the person entitled thereto.
7(e) As soon as may be after a deposit is made under Clause (a), the Controlling Authority shall pay the amount
of the deposit- (i) to the applicant where he is the employee; or
(ii) where the applicant is the employee, to the nominee or, as the case may be, the guardian of such nominee or
heir of the employee if the Controlling Authority is satisfied that there is no dispute as to the right of the
applicant to receive the amount of gratuity.
(5) For the purpose of conducting an inquiry under Sub-Section (4), the controlling authority shall have the same
powers as are vested in a Court, while trying a suit, under the Code of Civil Procedure,1908 (5 of 1908), in
respect of the following matters namely:-
(a) enforcing the attendance of any person or examining him on oath;
(b) requiring the discovery and production of documents;
(c) receiving evidence on affidavits;
(d) issuing commissions for the examination of witnesses.
(6) Any inquiry under this Section shall be a judicial proceeding within the meaning of Sections 193 and 228,
and for the purpose of Section 196, of the Indian Penal Code, 1860 (45 of 1860).
(7) Any person aggrieved by an order under sub-section (4), may, within sixty days from the date of the receipt
of the order, prefer an appeal to the appropriate Government or such other authority as may be specified by the
appropriate Government in this behalf: Provided that the appropriate Government or the appellate authority, as
the case may be, may, if it is satisfied that the appellant was prevented by sufficient cause from preferring the
appeal within the said period of sixty days, extend the said period by a further period of sixty days. Provided
further that no appeal by an employer shall be admitted unless at the time of preferring the appeal, the appellant
either produces a certificate of the controlling authority to the effect that the appellant has deposited with him an
amount equal to the amount of gratuity required to be deposited under subsection (4), or deposits with the
appellate authority such amount.
(8) The appropriate Government or the appellate authority, as the case may be, may, after giving the parties to
the appeal a reasonable opportunity of being heard, confirm, modify or reverse the decision of the controlling
authority.

Calculating gratuity
For the calculation of the 5 years, a single year is assessed as 240 working days for employees working in
organisations that do not involve work underground. For those working in mines and other such fields, a year is
assessed as 190 days.
In respect of Employees covered Under the Payment of Gratuity Act, 1972:
As per the Act, the gratuity amount is 15 days’ wage multiplied by the number of years put in by you. Here
wage refers to basic salary plus dearness allowance. Take the monthly salary drawn by you last (basic +
dearness allowance) at the time of resignation or retirement. Divide this by 26. This gives you your daily salary.
Multiply this amount by 15 days, and further by the number of years of service you have put in.
If you have put in 10 years and seven months in an organisation, your service period will be taken to be 11
years. But if your service tenure is 10 years and five months, then for the purpose of this calculation your tenure
will be taken to be 10 years only.
Take an example. Suppose that your average monthly salary is Rs 26,000. Your daily salary will be Rs 1,000.
Multiply this by 15 and then by 10. The gratuity you are entitled to after 10 years of service will be Rs 1.5 lakh.
Formula :- Gratuity shall be calculated as per the below formula:
Gratuity = Last drawn salary x 15/26 x No. of years of service
Your last drawn salary will comprise your basic + DA. For computation of gratuity, your service period will be
rounded off to the nearest full year.
In respect of Employees not covered Under the Payment of Gratuity Act, 1972:
For non-government employees, who are not covered under this Act, the manner of calculating gratuity is
different. First, the average salary is calculated: for this the average of last ten months’ salary is taken (this will
include the basic plus dearness allowance plus commission as a percentage of turnover achieved by the
employee). Divide this average salary by 30 (ignore fractions). Now, multiply this amount by 15 and further
with the number of years of service put in. Dividing the daily salary by 30 instead of 26 does put those not
covered by the Gratuity Act at a disadvantage.
Formula :- Gratuity shall be calculated as per the below formula
Gratuity = Last drawn salary x ½(15/30) x No. of years of service
Your last drawn salary will comprise your basic + DA+ commission on sales on turnover basis. For computation
of gratuity, your service period will not be rounded off to the nearest full year. While calculating completed
years, any fraction of the year will be ignored. For instance, if the employee has a total service of 20 years, 10
months and 25 days, only 20 years will be factored into the calculation.
Income Tax Treatment of Gratuity
For government employees, entire amount of gratuity received on retirement or death is currently exempted
from income tax.

In case of non-government employees, income tax rules on gratuity are applicable depending on whether
employees are covered under the Payment of Gratuity Act, 1972 or not.

For non-government employees covered under the Gratuity Act, the income tax exemption on any gratuity
received is least of the following:
● Maximum amount specified by the government which is currently Rs. 20 lakh
● Last drawn salary X 15/26 X years of service
● Actual gratuity received

For non-government employees not covered under the Payment of Gratuity Act, the income tax exemption
on any gratuity received is least of the following:
● Half month's average salary for each completed year of service
● Maximum amount specified by the government which is currently Rs. 10 lakh
● Actual gratuity received
(Average monthly salary is to be computed on the basis of average of salary for 10 months immediately
preceding the month (not the day) of retirement)

Gratuity New Rules 2022

The new labour law has been implemented on 1st July 2022 for all organisations and corporations. As per the
new labour law, the working hours, Provident fund, and in-hand salary has shrunk. The biggest impact of this
law will be on take-home salaries.
1. As per the gratuity rules 2022, organisations must ensure that 50% of employees' CTC (cost to
company) is basic pay and the remaining 50% comprises employee allowances, house rent, and
overtime. And if the company pays any additional allowances or exemptions that exceed 50% of the
CTC, it will be treated as remuneration.
 2. As per the gratuity new rules 2022, the law restricts the maximum basic pay to 50% of CTC which will
increase the gratuity bonus that is to be paid to employees and the gratuity amount will be calculated on
a large salary base that comprises basic pay and allowances.
3. Employees get paid for working overtime which is working for 15 minutes or more.
4. The government has made it clear that the work capacity is a maximum of 48 hours.

Provident Fund Act 1952

Provident fund is a fund that provides benefits to the employees of a company (who are members of the fund),
upon termination of their employment. Both the employees and the employer are required to make contributions
to the fund in accordance with the predetermined rates. To become eligible for membership of the fund, a
worker must have completed one year's continuous service or have worked for 240 days during a period of 12
months. The employees have to contribute at a certain rate of the basic wage, dearness allowance and retaining
allowances. Similarly, employers also contribute at the same rate.
The main objective of the act is:
(i) To secure and make some provisions for the future of industrial workers after their retirement
and for their dependents in case of death.
(ii) It provides insurance to workers and their dependents against risks of old age, retirement,
discharge retrenchment or death of the workers.
(iii) It is applicable to every establishment which is engaged in any one or more of the industries
specified in Schedule I of the Act or any activity notified by Central Government in the
Official Gazette and employing 20 or more persons.
Presently, three schemes are in operation under the Act and are administered by the Central Board of Trustees.
The three schemes taken together provide to the employees an old age and survivorship benefits, a long term
protection and security to the employee and after his death to his family members, and timely advances
including advances during sickness and for the purchase/construction of a dwelling house during the period of
membership. These three schemes are as follows:-
1. Employees' Provident Fund Scheme, 1952 :- This seeks to provide financial security for employees in
an establishment by providing a system of compulsory savings. The scheme covers employees getting
wages not exceeding Rs. 15,000 per month. The scheme takes care of following needs of the members
of the fund:- (i) Retirement;(ii) Medical Care;(iii) Housing; (iv) Family obligation;(v) Education of
Children; and (vi) Financing of Insurance Polices. However, a death relief fund has been set up under
the Employees’ Provident Fund Scheme to provide relief to the nominees or heirs of the deceased
member.
2. Employees' Deposit Linked Insurance Scheme, 1976 :- The Central Government with the motive of
providing additional Social Security in the form of Life Insurance to the family of the deceased
member of the Provident Fund, introduced the Employees Deposit Linked Insurance Scheme. Under it,
on the death of an employee, while in service, who is the member of the Employees’ Provident fund,
the persons entitled to receive the provident fund accumulations would be paid an additional amount
equal to the average balance in the provident fund account of the deceased during the preceding 12
months.
3. Employees' Pension Scheme, 1995 (replacing the Employees' Family Pension Scheme, 1971) :- A
pension (also known as superannuation) is a retirement plan intended to provide a person with a secure
income for life .It can also be defined payments or benefits attributable to employees at the time of
retirement, during old age, at the time of permanent disablement or in the form of family pensions in
case of death of the worker, etc. The Employees Pension Scheme was introduced for the industrial
workers wherein pension at the rate of 50 percent pay is payable to the employees on retirement on
completion of 33 years contributory service. A minimum 10 years service is required for entitlement to
pension. In case of death of an employee, the scheme provides for grant of pension to family members
on the basis of salary and service of the employee. The scheme was financed by diverting a portion of
the employers' and employees' contribution to the Employees Provident Funds with an additional
contribution by the Central Government.
In respect of establishments employing 20 or more persons and engaged in industry notified under Section 6 of
Act ( other than the Establishments. declared as sick ) 12% of the basic pay DA , Cash value of food concession
and retaining allowance , if any, subject to a maximum of Rs.6500/- per month. Voluntary higher contributions
are also acceptable at the joint request of the member and the employer. However, the rate of contribution is
10% in respect of the following categories of establishments:
1. Any establishment covered prior to 22.9.97 in which less than 20 persons are employed.
 2. Any sick industrial company as defined in Clause(0) of Sub-Section(1) of Section 3 of the sick
industrial companies ( special provisions ) Act 1985 and which has been declared as such by the Board
for Industrial and Financial Reconstruction.
3. Any Establishment which has at the end of any financial year accumulated losses equal to or exceeding
its entire net worth.
4. Any Establishment engaged in manufacturing of (a) Jute , (b) Beedi , (c) Brick , (d) Coir (other than
spinning sector), (e) Guar Gum Industries/Factories.
b) The Employees' Pension Scheme
From and out of employer's share of Provident Fund contributions 8.33% of the total wages limited to Rs.
6500/- per month is segregated and credited to the Employees' Pension Fund in A/C No. 10 ( w.e.f. 1-06-2001).
The Central Government also would contribute at the rate of 1.1 / 6% of total wages.
c) Employees' Deposit Linked Insurance Scheme:
No amount is recovered from employee's wages . Employer should pay 0.5% of total wages subject to a ceiling
of Rs. 6500/- per month

PF WITHDRAWL
1) To encourage long-term savings, the government has formulated tax laws accordingly. If the
withdrawal from a recognised PF happens after five years of continuous employment, it attracts no tax
liability. In case of employment with different employers, if the PF balance maintained with the old
employer is transferred to the PF account of the new employer, it is considered a continuous
employment.

2) If an employee has been terminated because of certain reasons beyond his or her control (such as ill
health and discontinuation of business of employer), the withdrawal does not attract any tax,
irrespective of the number of years of employment.

3) In case of a withdrawal before five years, the amount becomes taxable in the same financial year.
Thus, the amount has to be shown in your tax return for the next assessment year. The employer's
contribution to PF and interest earned on it is added to one's income and taxed accordingly.

4) In addition, if you have claimed benefits under Section 80C on your own PF contribution, it will be
taxed as salary. The interest earned on your own contribution will be taxed as 'income from other
sources' and taxed according to the respective tax slabs.

5) TDS (tax deducted at source) - If the withdrawal is after a period of five years of continuous
employment, it attracts no TDS or any tax. What happens if the period of service is less than five
years?
If PAN has not been submitted to the EPFO authorities, TDS is deducted at 30 per cent. If PAN has
been submitted along with Form 15G/15H, no TDS is deducted. If form 15G/15H is not submitted and
PAN is submitted, TDS @ 10% is deducted. Form 15H or 15G is meant to prevent TDS for those
whose income falls below the taxable limit.

One may choose to withdraw EPF completely or partially.

According to the EPF Act, to claim final PF settlement, one has to retire from service after attaining 58 years of
age. The total PF balance includes the employee's contribution and that of the employer, along with the accrued
interest. In addition, he will be eligible to get the Employees' Pension Scheme (EPS) amount as well depending
on the years of service.
Under the existing rule, employees who resign from a job before they turn 58 years of age can withdraw the full
PF balance (and the EPS amount depending on the years of service), if he is out of employment for 60 straight
days (two months) or more after leaving a job and then withdraw. However, in a decision taken at the 222nd
central board of trustees meeting of EPFO in June 2018, it was decided that subscribers of Employees Provident
Fund Organisation (EPFO) who resign from their service can now withdraw 75% of their total provident fund
kitty after one month from the date of cessation of service to meet their monthly financial commitments. Along
with the PF, one is also allowed to withdraw the EPS amount if the service period has been less than 10 years
and not later on. Once this milestone is crossed, the employee compulsorily gets pension benefits after
retirement
EPF can be completely withdrawn under any of the following circumstances:
a. When an individual retires from employment
b. When an individual remains unemployed for a period of 2 months or more. Here, it needs a mention that the
fact that the individual is unemployed for more than 2 months has to be certified by a gazetted officer. Further,
complete withdrawal of EPF while switching over from one job to another without remaining unemployed for 2
months or more(i.e. During the interim period between changing jobs), will be against the PF rules and
regulations and therefore illegal. Partial withdrawal of EPF can be done under certain circumstances and subject
to certain prescribed conditions which have been discussed in brief below:

Employment provided fund and Miscellaneous Provision Act 1952

The Employment Provident Fund and Miscellaneous Provision Act, 1952 provides retirements benefits such as
provident fund, family pension and deposit-linked insurance. This act covers establishments employing 20 or
more persons and is restricted to those drawing wages up to Rs. 3500 per month and is applicable to about 175
industries or classes of establishments. The minimum rate of contribution under the act presently is 8.33 per
cent. However in respect of 98 industries or classes of establishment employing 50 or more persons, it has been
enhanced to 10 per cent. Under the act, this contribution is deducted from the wages of employees and deposited
in the Fund set up for the purpose. The employers have to make a matching contribution. The amount of
provident fund held in employee’s name along with interest is paid to him at the time or his retirement.

Contributions and matters which may be provided for in Schemes – The contribution which shall be paid by
the employer to the Fund shall be 10% and 12% in case of establishments. Of the basic wages, dearness
allowance and retaining allowance, if any, for the time being payable to each of the employees whether
employed by him directly or by or through a contractor, and the employee‟s contribution shall be equal to the
contribution payable by the employer in respect of him and may, if any employee so desires, be an amount
exceeding ten percent of his basic wages, dearness allowance and retaining allowance if any, subject to the
condition that the employer shall not be under an obligation to pay any contribution over and above his
contribution payable under this section:
Provided further that where the amount of any contribution payable under this Act involves a fraction of a rupee,
the Scheme may provide for rounding off of such fraction to the nearest rupee, half of a rupee, or quarter of a
rupee.
Death relief
A Death Relief Fund was established under the Employee Provident Fund Scheme in 1964 to provide financial
assistance to nominees or heirs of deceased members of unexempted establishments getting maximum salary of
Rs. 1500 per month at the time of death. The amount was restricted to the sum equal to the amount of PF
balance falling short of Rs. 2000.

Employees deposit-linked insurance schemes, 1976 as amended in 1990

Under this scheme, in case of death of an employee, the person entitled to received his accumulated provident
fund gets an additional insurance amount equal to average balance in PF account of the deceased during the
preceding twelve months provided that such average balance was not less than Rs. 500 during the said period.
The maximum amount to be paid is restricted to Rs. 25,000 and the employees are not required to make any
contribution to it.
Family pension scheme
This scheme was introduced in 1971. It provides long-term financial security to families of industrial workers in
case of their premature death. It is made out of the Employees Provident Fund to which the government makes
additional contribution for the purpose. Family pension ranges from Rs. 250 to Rs. 750 per month depending on
the period of membership. Presently family pensioners are also entitled to assurance benefits of Rs. 500 to meet
immediate expenses.
Retirement-cum-withdrawal benefit
A member is entitled to withdrawal benefit on retirement or superannuation at the rates ranging between Rs. 110
to Rs. 400 (for one years membership) and from Rs. 9000 to Rs. 19825 (for 40 years membership) depending
upon the pay range of the members and length of his membership.

Those members whose average basic wages are up to Rs. 5,000 will get loyalty-cum-life benefit of Rs. 30,000.
Similarly, the members with wages of Rs. 5,001—10,000 Will be eligible for Rs. 40,000 benefit.
All those members getting more than Rs. 10,000 monthly wage will be eligible for Rs. 50,000
loyalty—cum—life benefit under the proposed scheme.

Maternity Benefit Act

The Maternity Benefit Act, 1961 regulates employment of women in certain establishments for a certain period
before and after childbirth and provides for maternity and other benefits. Such benefits are aimed to protect the
dignity of motherhood by providing for the full and healthy maintenance of women and her child when she is
not working.
The Act is applicable to mines, factories, circus industry, plantations, shops and establishments employing ten or
more persons, except employees covered under the Employees’ State Insurance Act, 1948. It can be extended to
other establishments by the State Governments.
The Central Industrial Relations Machinery (CIRM) in the Ministry of Labour is responsible for enforcing this
Act. CIRM is an attached office of the Ministry and is also known as the Chief Labour Commissioner (Central)
[CLC(C)] Organisation. The CIRM is headed by the Chief Labour Commissioner (Central).

Objective
The Maternity Benefit Act, 1961, protects the employment of women during the time of maternity and entitles
them to a full paid absence from work to take care for the child. The amendments in 2016 seek to increase
maternity leave period to 26 weeks in all establishments, including private sector.

The main provisions of the Act are:-

1. No employer shall knowingly employ a woman in any establishment during the six weeks immediately
following the day of her delivery or her miscarriage. Also, no woman shall work in any establishment
during the six weeks immediately following the day of her delivery or her miscarriage.
2. Every woman shall be entitled to, and her employer shall be liable for, the payment of maternity benefit
at the rate of the average daily wage for the period of her actual absence immediately preceding and
including the day of her delivery and for the six weeks immediately following that day. The 'average
daily wage' means the average of the woman's wages payable to her for the days on which she has
worked during the period of three calendar months immediately preceding the date from which she
absents herself on account of maternity, or one rupee a day, whichever is higher.
3. No woman shall be entitled to maternity benefit unless she has actually worked in an establishment of
the employer from whom she claims maternity benefit, for a period of not less than one hundred and
sixty days in the twelve months immediately preceding the date of her expected delivery. For the
purpose of calculating the days on which a woman has actually worked in the establishment, the days
for which she has been laid off during the period of twelve months immediately preceding the date of
her expected delivery shall be taken into account.
4. The maximum period for which any woman shall be entitled to maternity benefit shall be twelve
weeks, that is to say, six weeks up to and including the day of her delivery and six weeks immediately
following that day.
 5. No deduction from the normal and usual daily wages of a woman entitled to maternity benefit shall be
made by reason only of - (i) the nature of work assigned to her by virtue of the provisions of the Act; or
(ii) breaks for nursing the child allowed to her under the provisions of the Act.
6. If a woman works in any establishment after she has been permitted by her employer to absent herself
for any period, during such authorised absence, she shall forfeit her claim to the maternity benefit for
such period.
7. If any employer contravenes the provisions of this Act or the rules made there under, he/ she shall be
punishable with imprisonment or with fine or with both; and where the contravention is of any
provision regarding maternity benefit or regarding payment of any other amount and such maternity
benefit or amount has not already been recovered, the court shall, in addition recover such maternity
benefit or amount as if it were a fine and pay the same to the person entitled thereto.

Maternity Leave
The Maternity Benefit (Amendment) Act 2016, passed by the Rajya Sabha in August 2016, has also been passed
by the Lok Sabha in March 2017.
Under the new Law, maternity leave is raised from current 12 weeks to 26 weeks. The prenatal leave is also
extended from six to eight weeks. However, a woman with already two or more children is entitled to 12 weeks’
maternity leave. The prenatal leave in this case remains six weeks.
The Act also provides for adoption leave of 12 weeks for a woman who adopts a child under the age of three
months. A commissioning mother is also entitled to a 12-week leave from the date the child is handed over to
her. A commissioning mother is defined as “biological mother who uses her egg to create an embryo implanted
in any other woman” (the woman who gives birth to the child is called host or surrogate mother).
In case where the nature of work assigned to a woman is of such nature that she may work from home, the
employer may allow her to do so after availing of the maternity benefit for such period and on such conditions
as the employer and the woman may mutually agree
The Act further requires an employer to inform a woman worker of her rights under the Act at the time of her
appointment. The information must be given in writing and in electronic form (email).
Female civil servants are entitled to maternity leave for a period of 180 days for their first two live born
children.
Further,
1) Every establishment having fifty or more employees shall have the
facility of créche within such distance as may be prescribed, either separately or along with common facilities :
Provided that the employer shall allow four visits a day to the creche by the woman, which shall also include the
interval for rest allowed to her.
(2) Every establishment shall intimate in writing and electronically to every woman at the time of her initial
appointment regarding every benefit available under the Act.’’.
Income The maternity leave is awarded with full pay on completion of at least 80 days in an establishment in
the 12 months prior to her expected date of delivery. The maternity benefit is awarded at the rate of the average
daily wage for the period of a worker's actual absence from work.
Payment of medical bonus
Apart from 12 weeks of salary, a female worker is entitled to a medical bonus of 3,500 Indian [Link]
woman entitled to maternity benefit under this Act shall also be entitled to receive from her employer a medical
bonus, of Rs. 1000/- , if no pre-natal confinement and post-natal care is provided for by the employer free of
charge.
The Central Government may from time to time, by notification in the Official Gazette, increase the amount of
medical bonus subject to the maximum of Rs. 20,000/-.
Under the National Food Security Act 2013, pregnant women and lactating mothers are entitled to receive
maternity benefit of at least Rs. 6,000. The Act further requires that subject to such schemes as may be framed
by the Central Government, every pregnant woman and lactating mother will be entitled to free meals during
pregnancy and six months after the child birth, through the local Anganwadi, so as to meet their nutritional
needs.

Leave for miscarriage, etc.

In case of miscarriage or medical termination of pregnancy, a woman shall, on production of such proof as may
be prescribed, be entitled to leave with wages at the rate of maternity benefit, for a period of six weeks
immediately following the day of her miscarriage or, as the case may be, her medical termination of pregnancy.

Leave with wages for tubectomy operation

In case of tubectomy operation, a woman shall, on production of such proof as may be prescribed, be entitled to
leave with wages at the rate of maternity benefit for a period of two weeks immediately following the day of her
tubectomy operation.]

Leave for illness arising out of pregnancy, delivery, premature birth of child, [miscarriage, medical
termination of pregnancy or tubectomy operation]
A woman suffering from illness arising out of pregnancy, delivery, premature birth of child, [miscarriage,
medical termination of pregnancy or tubectomy operation] shall, on production of such proof as may be
prescribed, be entitled, in addition to the period of absence allowed to her under section 6, or, as the case may
be, under section 9, to leave with wages at the rate of maternity benefit for a maximum period of one month.

Nursing breaks
Every woman delivered of a child who returns to duty after such delivery shall, in addition to the interval for
rest allowed to her, be allowed in the course of her daily work two breaks of the prescribed duration for nursing
the child until the child attains the age of fifteen months.

(Maternity Benefit (Amendment) Act, 2016.) 11A.

(1) Every establishment having fifty or more employees shall have the facility of creche within such distance as
may be prescribed, either separately or along with common facilities:
Provided that the employer shall allow four visits a day to the creche by the woman, which shall also include the
interval for rest allowed to her.

(2) Every establishment shall intimate in writing and electronically to every woman at the time of her initial
appointment regarding every benefit available under the Act.

Dismissal during absence of pregnancy

(1) When a woman absents herself from work in accordance with the provisions of this Act, it shall be unlawful
for her employer to discharge or dismiss her during or on account of such absence or to give notice of discharge
or dismissal on such a day that the notice will expire during such absence, or to vary to her disadvantage any of
the conditions of her service.

(2) (a) The discharge or dismissal of a woman at any time during her pregnancy, if the woman but for such
discharge or dismissal would have been entitled to maternity benefit or medical bonus referred to in section 8,
shall not have the effect of depriving her of the maternity benefit or medical bonus:

PROVIDED that where the dismissal is for any prescribed gross misconduct, the employer may, by order in
writing communicated to the woman, deprive her of the maternity benefit or medical bonus or both.

(b) Any woman deprived of maternity benefit or medical bonus, or both, or discharged or dismissed during or on
account of her absence from work in accordance with the provisions of this Act, may, within sixty days from the
date on which order of such deprivation or discharge or dismissal is communicated to her, appeal to such
authority as may be prescribed, and the decision of that authority on such appeal, whether the woman should or
should not be deprived of maternity benefit or medical bonus, or both, or discharged or dismissed shall be final.

(c) Nothing contained in this sub-section shall effect the provisions contained in sub-section (1).

No deduction of wages in certain cases

No deduction from the normal and usual daily wages of a woman entitled to maternity benefit under the
provisions of this Act shall be made by reason only of-
(a) the nature of work assigned to her by virtue of the provisions contained in sub-section (3) of section 4; or
(b) breaks for nursing the child allowed to her under the provisions of section 11.

Payment of Bonus Act 1965

The Payment of Bonus Act, 1965 was enacted to provide for the payment of bonus to persons employed in
certain establishments on the basis of profits or productivity and for the matters connected therewith.
The Act applies to:-
(i) every factory as defined under the Factories Act, 1948; and
 (ii) every other establishment in which twenty or more persons are employed on any day during an
accounting year. However, the Government may, after giving two months' notification in the
Official Gazette, make the Act applicable to any factory or establishment employing less than
twenty but not less than ten persons.

The Act is enforced through the Central Industrial Relations Machinery (CIRM). CIRM is an attached office of
the Ministry of Labour and is also known as the Chief Labour Commissioner (Central) [CLC(C)] Organisation.
It is headed by the Chief Labour Commissioner (Central).

Objective of the Act

1. To improve statutory liability to pay bonus [reward for good work] in case of profits or losses.
2. To prescribe formula for calculating bonus
3. To prescribe Minimum & Maximum percentage bonus
4. To provide of set off/set on mechanism
5. To provide redressal mechanism

The key provisions of the Act are:-

1. According to the Act, the term 'employee' means "any person employed on a salary or wage not
exceeding three thousand and five hundred rupees per mensem in any industry to do any skilled or
unskilled manual, supervisory, managerial, administrative, technical or clerical work for hire or reward,
whether the terms of employment be express or implied".
2. An employee is entitled to be paid by his employer a bonus in an accounting year subjected to the
condition that he/she has worked for not less than 30 working days of that year.
3. An employer shall pay minimum bonus at the rate of 8.33% of the salary or wages earned by an
employee in an year or one hundred rupees, whichever is higher. Here it is not required that the
employer has any allocable surplus in the accounting year. However, where an employee has not
completed fifteen years of age at the beginning of the accounting year, the minimum bonus payable is
8.33% or sixty rupees, whichever is higher.
4. In any accounting year, if the allocable surplus exceeds the amount of minimum bonus payable to the
employees, the employer shall in lieu of such minimum bonus, be bound to pay bonus (maximum
bonus) equivalent to the amount which shall not exceed 20% of the salary or wages earned by
employees.

5. In computing the allocable surplus, the amount set on or the amount set off shall be taken into account.
In other words:- (i) If, in any accounting year, the allocable surplus exceeds the amount of maximum
bonus payable to the employees in the establishment, then the excess surplus is carried forward for
being set on in the succeeding accounting year and so on up to and inclusive of the fourth accounting
year for the purpose of payment of bonus; or (ii) If there is no or less allocable surplus in respect of that
year, then such a shortfall is carried forward for being set off in the succeeding accounting year and so
on up to and inclusive of the fourth accounting year.
6. Where in any accounting year, any amount has been carried forward and set on or set off, 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.
7. All amounts payable to an employee by way of bonus under this Act shall be paid in cash by his
employer within a month from the date on which the award become enforceable or the settlement
comes into operation, in respect of any dispute regarding payment of bonus. But, in any other case, it
shall be paid within a period of eight months from the close of the accounting year.
8. However, the Government may order, upon receiving application made to it by the employer and for
sufficient reasons, to extend the said period of eight months to such further period or periods as it
thinks fit, such that that the total period so extended shall not, in any case, exceed two years.
9. An employee shall be disqualified from receiving bonus if he/ she is dismissed from service for:- (i)
fraud; or (ii) riotous or violent behaviour while on the premises of the establishment; or (iii) theft,
misappropriation or sabotage of any property of the establishment.
Employees eligible for bonus: The Act mandates payment of bonus to employees’ whose salary or wage is up
to Rs 10,000 per month. The Bill seeks to increase this eligibility limit to Rs 21,000 per month.
Calculation of bonus: The Act provides that the bonus payable to an employee will be in proportion to his or
her salary or wage.
Prior publication of rules: The Act provides that the central government may make rules to implement its
provisions. The Bill seeks to mandate prior However, if an employee’s salary is more than Rs 3,500 per month,
for the purposes of calculation of bonus, the salary will be assumed to be Rs 3,500 per month. The Bill seeks to
raise this calculation ceiling to Rs 7,000 per month or the minimum wage notified for the employment under the
Minimum Wages Act, 1948 (whichever is higher).publication of such rules in the Official Gazette to allow for
more public consultation.
Definitions.
Section
(1) "accounting year" means-
(i) in relation to a corporation, the year ending on the day on which the books and accounts of the corporation
are to be closed and balanced;
(ii) in relation to a company, the period in respect of which any profit and loss account of the company laid
before it in annual general meeting is made up, whether that period is a year or not;
(iii) in any other case-
(a) the year commencing on the 1st day of April; or
(b) if the accounts of an establishment maintained by the employer thereof are closed and balanced on any day
other than the 31st day of March, then, at the option of the employer, the year ending on the day on which its
accounts are so closed and balanced

(4) "allocable surplus" means-

(a) in relation to an employer, being a company (other than a banking company)] which has not made the
arrangements prescribed under the Income-tax Act for the declaration and payment within India of the dividends
payable out of its profits in accordance with the provisions of section 194 of that Act, 67% of the available
surplus in an accounting year;
(b) in any other case, 60% of such available surplus;

(11) "corporation" means any body corporate established by or under any Central, Provincial or State Act but
does not include a company or a co-operative society;

(12) "direct tax" means-

(a) any tax chargeable under-

(i) the Income-tax Act;
(ii) the Super Profits Tax Act, 1963 (14 of 1963);
(iii) the Companies (Profits) Surtax Act, 1964 (7 of 1964);
(iv) the agricultural income-tax law; and

(b) any other tax which, having regard to its nature or incidence, may be declared by the Central Government,
by notification in the Official Gazette, to be a direct tax for the purposes of this Act;

(2015 amendment)

Section 2 (13) "employee" means any person (other than an apprentice) employed on a salary or wage not
exceeding 21,000/- rupees per month in any industry to do any skilled or unskilled manual, supervisory,
managerial, administrative, technical or clerical work for hire or reward, whether the terms of employment be
express or implied; (2007 amendment)

[Employees eligible for bonus: The Act mandates payment of bonus to employees’ whose salary or wage is up
to Rs 21,000 per month.]

For calculation purposes Rs.7,000 per month maximum will be taken even if an employee is drawing up to
Rs.7,000 per month. (Sec. 12)

(15) "establishment in private sector" means any establishment other than an establishment in public sector;

(16) "establishment in public sector" means an establishment owned, controlled or managed by-

(a) a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956);

(b) a corporation in which not less than forty per cent of its capital is held (whether singly or taken together) by-
(i) the Government; or
(ii) the Reserve Bank of India; or
(iii) a corporation owned by the Government or the Reserve Bank of India;

Payment of Bonus Act not to apply to certain classes of employees [Section 32]
Life Insurance Corporation ,
The Indian Red Cross Society or any other institution of a like nature,
Universities and other educational institutions ,
Institutions (including hospitals, chambers of commerce and society welfare institutions) established not for
purposes of profit,
Employees employed through contractors on building operations,
Employees employed by the Reserve Bank of India,
The Industrial Finance Corporation of India,
Financial Corporations,
the National Bank for Agriculture and Rural Development,
the Unit Trust of India,
the Industrial Development Bank of India,

Calculation of bonus with respect to certain employees. [Sec 12] (2015 amendment)
Where the salary or wage of an employee exceeds Rs.7,000/- per mensem, the bonus payable to such employee
under Sec.10, or as the case may be, under Sec.11, shall be calculated as if his salary or wage were Rs.7,000/-
per mensem.
The Government has decided to enhance the eligibility limit for payment of bonus 3500/- per month
Disqualification for bonus. [Sec 9]
An employee shall be disqualified from receiving bonus under this Act, if he is dismissed from service for
Fraud; or (b) Riotous or violent behaviour while on the premises of the establishment; or
Theft, misappropriation or sabotage of any property of the establishment.

Payment of minimum bonus. [Sec 10]

Bonus should be paid along with the salary
Every year, every employer shall be bound to pay bonus to every employee. A minimum bonus which shall be
8.33% cent of the salary or wage earned by the employee during the accounting year or 100/- rupees, whichever
is higher.
Bonus shall be payable in case of profits or losses in the accounting year.

Section 36 - Power of exemption of bonus payment by government

In certain circumstances payment of minimum bonus can be exempted by the appropriate government by taking
consideration into relevant circumstances of concern factory or establishment which is in losses. Payment of
bonus exemption by the appropriate government may be given for a certain period only.

Payment of Maximum Bonus [Sec 11]

In case the allocable surplus amount [Section 2(4)] exceeds the minimum bonus (8.33%) payable amount to
employees, the employer is bound to pay extra percentage of bonus.
But maximum of 20% of bonus is payable to the every employee on the wage or salary earned during the year.
Proportionate, reduction in bonus in certain cases [Sec 13]
Where an employee has not worked for all the working days in an accounting year, the minimum bonus of one
hundred rupees or, as the case may be, of sixty rupees, if such bonus is higher than 8.33 per cent. of his salary or
wage for the days he has worked in that accounting year, shall be proportionately reduced.

Computation of number of working days. [Sec 14]

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

(b) He has been on leave with salary or wage;
(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 wage, during the accounting year.
CALCULATIONS FOR BONUS PAYMENT

Computation of gross profits [Sec 4].

There few differences in computation of gross profits in case of banking company and other than banking
companies. For accurate computation of the gross profits in case of banking companies refer to First schedule
and for other companies but not banking companies refer to Second schedule. But over view for computation of
gross profits is mentioned below

Net profit (P&L a/c) +Add following items

Income tax
provision for: Bonus to employees, Depreciation, Direct taxes,
Bonus paid to employees in respect of previous accounting years
The amount, if any, paid to, or provided for payment to, an approved gratuity fund
The amount actually paid to employees on their retirement or on termination of their employment for any reason
Donations
annuity due
Capital expenditure (other than capital expenditure on scientific research
capital losses
capital losses (other than losses on sale) of Capital assets on which depreciation has been allowed for
income-tax or agricultural income-tax).
Losses of, or expenditure relating to, any business situated outside India.

Deduct

(a) Capital receipts and capital profits (other than profits on the sale of assets on which depreciation has been
allowed for income-tax or agricultural income-tax).

(b) Profits of, and receipts relating to, any business situated outside India.

(c) Income of foreign concerns from investments outside India.

(d) Expenditure or losses (if any) debited directly to reserves, other than -

i. Capital expenditure and capital losses (other than losses on sale of capital assets on which depreciation has not
been allowed for income-tax or agricultural income-tax) ;

ii. Losses of any business situated outside India.

(e) In the case of foreign concerns proportionate administrative (over head) expenses of Head Office allocable to
Indian business.

(f) Refund of any direct tax paid for previous accounting years and excess provision, if any, of previous
accounting years relating to bonus, depreciation, taxation or development rebate or development allowance, if
written back.

Computation of Available surplus [Section 5]

Available surplus = gross profit [derived as per First Schedule or Second Schedule of this act] – (minus)
Depreciation, investment allowance or development allowance [Section 6] - (minus) direct taxes payable
[Section 7] - (minus) further sums as are specified in respect of the employer in the Third Schedule of this act
consist of dividend payable (preference shares), reserves and % of paid up equity share capital [investment].

Allocable surplus [sec 2 (4)]

Allocable surplus= 67% of the available surplus (other than banking companies) or 60% of the available surplus
(banking companies and companies linked with abroad)

Payment of bonus calculated on the allocable surplus which is derived by the above calculation

Set-On and Set-Off Of Allocable Surplus [Sec 15]

Set-On (In case of huge profits,)

Excess allocable surplus remain after paying the maximum bonus of 20% on the wage or salary of the
employee, Should be carried forward to the next following year to be utilized for the purpose of payment of
bonus in case of the shortage of the allocable surplus or losses occur. This is called as Set-On

Set-Off (in case of losses occur)

When there are no profits (available surplus or allocable surplus) or the amount falls short or deficiency for
payment of minimum bonus to employees 8.33%, such deficiency amount should be adjusted to the current
accounting year from the Set-On amount which was carried forward in case of excess allocable surplus in the
previous year. This is called as Set-Off.

Set on and set off of allocable surplus

(1) Where for any accounting year, the allocable surplus exceeds the amount of maximum bonus payable to the
employees in the establishment under section 11, then, the excess shall, subject to a limit of twenty per cent 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 in the manner illustrated in the Fourth
Schedule.
(2) 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 in the establishment under section 10, and
there is no amount or sufficient amount carried forward and set on under sub-section (1) 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 set off in the succeeding accounting year and so on up to and
inclusive of the fourth accounting year in the manner illustrated in the Fourth Schedule.
(3) The principle of set on and set off as illustrated in the Fourth Schedule shall apply to all other cases not
covered by sub-section (1) or sub-section (2) for the purpose of payment of bonus under this Act.
(4) 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

Special provisions [Sec 16]

In case of new establishments up to 5 years, employees’ bonus is payable only in case of profits only but not in
losses by the management or employer.
1. Condition that the Profits are remaining amounts after deducting expenses, depreciation and taxes.
Deduction of certain amounts from bonus payable. [sec 18]
Employee is found guilty of misconduct causing financial loss to the employer, then, it shall, be lawful
for the employer to deduct the amount of loss from the amount of bonus payable by him to the
employee under this Act in respect of that accounting year only and the employee shall be entitled to
receive the balance, if any.

2. Time limit for payment. [Sec 19]: Bonus should be paid within a period of 8 months from the close of
the accounting year.
Maximum extended period for payment of bonus is 2 years, but with the permission of the government
only
3. Recovery of bonus due from an employer [Sec 21]
If any amount is due to employee as bonus from his employer, he can write and apply to the
government for the recovery of the bonus from the employer. Application shall be made within one
year from the date on which the money became due to the employee from the employer

Calculation of Bonus
Bonus=Basic Salary+DA*12*8.33%
For Example if Basic salary is 5000 and DA 1000 so,
Bonus =5000+1000*12*8.33/100
= 6000*12*8.33/100
= 72000*8.33/100
= 5997.6 RS. Annual Bonus
And, if company have big profits for any financial year so it can be 20% maximum.
The Contract Labour (Regulation And Abolition) Act, 1970

The Object of) Act, 1970 is to prevent exploitation of contract labour and also to introduce better conditions of
work. A workman is deemed to be employed as Contract Labour when he is hired in connection with the work
of an establishment by or through a Contractor. Contract workmen are indirect employees. Contract Labour
differs from Direct Labour in terms of employment relationship with the establishment and method of wage
payment. Contract Labour, by and large is not borne on pay roll nor is paid directly. The Contract Workmen are
hired, supervised and remunerated by the Contractor, who in turn, is remunerated by the Establishment hiring
the services of the Contractor.

What is the definition of ‘Contractor’ under the Act?

The Act defines Contractor as a person who undertakes to produce a given result for the establishment, other
than a mere supply of goods or articles of manufacture to such establishment, through contract labour or who
supplies contract labour for any work of the establishment.
In other words, Contractor is the person supplying contract labour to an establishment undertaking to produce a
given result for it. It is noteworthy that subContractors or ‘piece wagers’ also qualify as Contractors who need to
apply for the registration of the establishment and license.
Moreover, the definition of Contractor is given under Section 2 (1) (c) of The Contract Labour (Regulation and
Abolition) Act, 1970.
Who is a ‘Principal Employer’?
A “principal employer” is a person who is responsible for the supervision and control of the establishment. In
the case of a factory, such person would include the owner or occupier of the factory or a manager under the
Factories Act, 1948.
As per Section 2 (1) (g) of the Act, a principal employer would mean and include the head of any government or
local authority; the ‘owner’ or ‘occupier’ or ‘manager’ of a factory (under the Factories Act, 1948); owner,
agent or manager of a mine; or any person responsible for the supervision and control in an establishment.

The obligations of a principal employer under the Contract Labour Act are that of vicarious liability on owners
of establishments. The Contract Labour Act provides respite and recourse to contract labour from non-payment
of wage by allowing them access to the principal employer in the occurrence of a default by the contractor.
Registration And Licensing
The Act applies to the Principal Employer of an Establishment and the Contractor where in 20 or more
workmen are employed or were employed even for one day during preceding 12 months as Contract Labour. For
the purpose of calculating the number, contract labour employed for different purposes through different
contractor has to be taken into consideration. This Act does not apply to the Establishments where work
performed is of intermittent or seasonal nature. If a Principal Employer or the Contractor falls within the vicinity
of this Act then, such Principal Employer and the Contractor have to apply for Registration of the Establishment
and License respectively. The contractor The Act also provides for Temporary Registration in case the Contract
Labour is hired for a period not more than 15 days. Any change occurring in the particulars specified in the
Registration or Licensing Certificate needs to be informed to the concerned Registering Officer within 30 days
of such change. From combined reading of Section 7 and Rules 17 & 18 of the Contract Labour (Regulation and
Abolition) Central Rules, 1971, it appears that the Principal Employer has to apply for registration in respect of
each establishment. Other important point to note is that a License issued for One Contract cannot be used for
entirely different Contract work even though there is no change in the Establishment.

Penal Provisions
Section 9 of the Act provides that the Principal Employer, to whom this Act is applicable, fails to get registered
under the Act, then such Principal Employer cannot employ contract labour. It also appears that if the
Establishment is not registered or if the Contractor is not licensed then the contract labour shall be deemed to be
the direct workmen and the Principal Employer or the Establishment shall be liable for the wages, services and
facilities of the contract labour etc. For contravention of the provisions of the Act or any rules made thereunder,
the punishment is imprisonment for a maximum term upto 3 months and a
fine upto a maximum of Rs.1000/-.

Responsibilities
The Act enjoins Joint and Several responsibity on the Principal Employer and the Contractor. The Principal
Employer should ensure that the Contractor does the following:
a) Pays the wages as determined by the Government, if any, or;
b) Pays the wages as may be fixed by the Commissioner of Labour.
c) In their absence pays fair wages to contract labourer.
d) Provides the following facilities:
i. Canteen (if employing 100 or more workmen in one place) and if the work is likely to last for 6 months or
more.
ii. Rest rooms where the workmen are required to halt at night and the work is likely to last for 3 months or
more.
iii. Requisite number of latrines and urinals - separate for men and women.
iv. Drinking water.
v. Washing.
vi. First Aid.
vii. Crche
e) Maintains various registers and records, displays notices, abstracts of the Acts, Rules etc.
f) Issues employment card to his workmen, etc

Requirements /Checklist For Principal Employer

1. Registration of the Establishment.
2. Display of the following notices rate of wages, hours of work, wage
period, date of payment of wages, date of payment of unpaid wages and name and address of the inspector
having jurisdiction.
3. Maintenance and Preservation of Register of Contractor.
4. Filing of Return of Commencement and Completion of the Contract.
5. Filing of Annual Return.
6. Supervising the responsibilities of Contractor to avoid enjoining of the liabilities.
7. Ensure provision that facilities of Canteen, Drinking Water, Washing, Rest Room, Latrines and Urinals, First
Aid, Crche’ are provided by the Contractor.

Requirements/Checklist For Contractor

1. Licensing.
2. Renewal of the License.
3. Maintenance and Preservation of Register of Persons employed, Muster Roll, Register of wages, Register of
Fines, Register of Deductions for damages or loss, Register of advances, Register of overtime.
4. Display of Notice rate of wages, hours of work, wage period, date of payment of wages, date of payment of
unpaid wages and name and address of the inspector having jurisdiction.
5. Provide facilities of Canteen, Drinking Water, Washing, Rest Room, Latrines and Urinals, First Aid, Crche.
6. Employment card.
7. Service Certificates.
8. Half yearly return.

Registration and Licensing

Manner of making application for registration of establishments.—
(1) The application referred to in sub-section (1) of section 7 shall be made in triplicate in Form I to the
registering officer of the area in which the establishment sought to be registered is located.
(2) The application referred to in sub-rule (1) shall be accompanied by a 2 [demand draft] showing payment of
the fees for the registration of the establishment.
(3) Every application referred to in sub-rule (1) shall be either personally delivered to the registering officer or
sent to him by registered post.
(4) On receipt of the application referred to in sub-rule (1), the registration officer shall, after noting thereon the
date of receipt by him of the application, grant an acknowledgement to the applicant.

Grant of certificate of registration.

(1) The certificate of registration granted under sub-section (2) of section 7 shall be in Form II.
(2) Every certificate of registration granted under sub-section (2) of section 7 shall contain the following
particulars, namely:—
(a) the name and address of the establishment;
(b) the maximum number of workmen to be employed as contract labour in the establishment;
(c) the type of business, trade, industry, manufacture or occupation which is carried on in the establishment;
(d) such other particulars as may be relevant to the employment of contract labour in the establishment
(3) The registering officer shall maintain a register in Form III showing the particulars of establishment in
relation to which certificates of registration have been issued by him.
(4) If, in relation to an establishment, there is any change, in the particulars specified in the certificate of
registration, the principal employer of the establishment shall intimate to the registering officer, within thirty
days from the date when such change takes place, the particulars of, and the reasons for, such change.

Circumstances in which application for registration may be rejected.

(1) If any application for registration is not complete in all respects, the registering officer shall require the
principal employer to amend the application so as to make it complete in all respects.
(2) If the principal employer, on being required by the registering officer to amend his application for
registration, omits or fails to do so, the registering officer shall reject the application for registration.

Amendment of certificate of registration

(1) Where, on receipt of the intimation under sub-rule (4) of rule 18, the registering officer is satisfied that an
amount higher than the amount which has been paid by the principal employer as fees for the registration of the
establishment is payable, he shall require such principal employer to pay a sum which, together with the amount
already paid by such principal employer, would be equal to such higher amount of fees payable for the
registration of the establishment and to produce the demand draft showing such deposit.
(2) Where, on receipt of the intimation referred to in sub-rule (4) of rule 18, the registering officer is satisfied
that there has occurred a change in the particulars of the establishment, as entered in the register in Form III, he
shall amend the said register and record therein the change which has occurred: Provided that no such
amendment shall affect anything done or any action taken or any right, obligation or liability acquired or
incurred before such amendment: Provided further that the registering officer shall not carry out any amendment
in the register in Form III unless the appropriate fees have been deposited by the principal employer.

Application for a licence

(1) Every application by a contractor for the grant of a licence shall be made in triplicate in Form IV, to the
licensing officer of the area in which the establishment, in relation to which he is the contractor, is located.
(2) Every application for the grant of a licence shall be accompanied by a certificate by the principal employer
in Form V to the effect that the applicant has been employed by him as a contractor in relation to his
establishment and that he undertakes to be bound by all the provisions of the Act and the rules made there under
in so far as the provisions are applicable to him as principal employer in respect of the employment of contract
labour by the applicant.
(3) Every such application shall be either personally delivered to the licensing officer or sent to him by
registered post.
(4) On receipt of the application referred to in sub-rule (1), the licensing officer shall, after noting thereon the
date of receipt of the application, grant an acknowledgment to the applicant.
(5) Every application referred to in sub-rule (1) shall also be accompanied by a demand draft showing—
(i) the deposit of the security at the rates specified in rule 24, and (ii) the payment of the fees at the rates
specified in rule 26. 22.
Matters to be taken into account in granting or refusing a licence.—In granting or refusing to grant a licence, the
licensing officer shall take the following matter into account, namely:— (a) whether the applicant
(i) is a minor, or
(ii) is of unsound mind and stands so declared by a competent court; or
(iii) is an undischarged insolvent, or
(iv) has been convicted (at any time during a period of five years immediately preceding the date of application)
of an offence which, in the opinion of the Central Government, involves moral turpitude;
(b) whether there is an order of the appropriate Government or an award or settlement for the abolition of
contract labour in respect of the particular type of work in the establishment for which the applicant is a
contractor;
(c) whether any order has been made in respect of the applicant under sub-section (1) of section 14, and, if so,
whether a period of three years has elapsed from the date of that order; (d) whether the fees for the application
have been deposited at the rate specified in rule 26; and
(e) whether security has been deposited by the applicant at the rates specified in rule 24. 23.

Refusal to grant licence

(1) On receipt of the application from the contractor, and as soon as possible thereafter, the licensing officer
shall investigate or cause investigation to be made to satisfy himself about the correctness of the facts and
particulars furnished in such application and the eligibility of the applicant for a licence.
(2) (i) Where the licensing officer is of opinion that the licence should not be granted, he shall, after affording
reasonable opportunity to the applicant to be heard, make an order rejecting the application.
(ii) The order shall record the reasons for the refusal and shall be communicated to the applicant.

Security
(1) Before a licence is issued, an amount calculated at the rate of Rs. 90 for each of the workman to be
employed as contract labour, in respect of which the application for licence has been made, shall be deposited by
the contractor for due performance of the conditions of the licence and compliance with the provisions of the
Act or the rules made thereunder:
(2) Provided that where the contractor is a co-operative society, the amount deposited as security shall be at the
rate of 1 [Rs. 15] for each other of the workmen to be employed as a contract labour.]
3 [(1A) Where the applicant for the licence was holding a licence in regard to another work and that licences
had expired, the licensing officer, if he is of the view that any amount out of the security deposited in respect of
that licence is to be directed to be refunded to the applicant under rule 31, may, on an application made for that
purpose in Form VA by the applicant adjust the amount so to be refunded towards the security required to be
deposited in respect of the application for the new licence and the applicant need deposit, in such a case, only
the balance amount, if any, after making such adjustment.] (2) 3 [The amount of security, or the balance amount,
required to be deposited under sub-rule (1) or, as the case may be, under sub-rule (1A)] shall be paid in the local
treasury under the Head of Account “Section T—Deposits & Advances— Part II Deposits bearing interest—(c)
Other Deposit Accounts— Departmental and Judicial Deposits—Civil Deposits—Deposits, under Contract
Labour (Regulation and Abolition) Act, 1970 (Central).”