Wednesday, July 9, 2014

Proposed labour law amendment by government of India

I wrote a related blogpost almost 3 years back. Please refer

Recently, I had been discussing about similar issue with a shop and establishment inspector that we are already maintaining all records in a better format, computerised and well adhering to the labour laws. Still, should we maintain the manual and hectic register under Bombay Shops and Establishment Act. The inspector himself was clear that all these laws are made decades ago and has no relevance today but they have to abide with its provisions to ensure compliance.

In above blogpost, I was certain about various changes and I think we need to have lesser laws but a greater work environment. See, most of the labour laws provisions to ensure that there should be no exploitation of workers/ employees happen. It is more welfare oriented for working class people. When these labour laws were made, society was more industrial in nature but with time, many things have changed. Industry is more service oriented now. Now there is organised retail, IT/ ITES sector. There is more white collar jobs and education level has increased. Considering this, all the labour laws should have been revised and updated on time to time basis. It was grossly ignored. 

I am happy that at least the present Narendra Modi led government is taking it seriously. I am reproducing a mail received from Teamlease and I hope you will love this.

The Government of Rajasthan and new Central Government has been extremely receptive about our loud calls to revise the decades old labor law regime. Rajasthan Government took unprecedented steps to make the State an investment friendly destination by legislating out few archaic provisions in the Shops and Establishment Act, the Factories Act and the Industrial Disputes Act, as applicable to the State. 

Now the Central Government has swung into action - Labor Department recently called for public comments on certain proposed amendments to the Minimum Wages Act and the Factories Act as per the attached notifications published on their website. ( ) & (

We have reviewed the Minimum Wages Act, the Factories Act and the proposed amendments. Based on our experience, we worked out the following recommendations that we intend to send back to the Labor Department. As a valued partner in our efforts to improve and develop India’s HR legal framework, we invite your inputs on the proposed changes. Please feel free to write in any additional recommendation you may have. We will try our best to ensure that our collective voice is heard at the appropriate level.

Minimum Wages Act
Consequence/ Reason
Multiple and varied definition of WAGES under various legislations namely:-
- Payment of Wages Act, 1936
- Minimum Wages Act, 1948 [Section 2 (h)]
- Bonus Act, 1965
- Gratuity Act, 1972
- Provident Fund Act, 1952
- ESI Act, 1948
- Workmen’s Compensation Act’23
- Industrial Disputes Act, 1947
Results in confusion while framing salary / wages structure and statutory deductions. The recommended definition will clearly signal the move away from a ‘salary’ or ‘wage’ thought world to the more widely accepted “CTC” concept.
WAGES/SALARY definition should be one and unambiguous [Section 2 (h) in MW Act]:

"Wages" means all remuneration, capable of being expressed in terms of money, which would, if the terms of the contract of employment, express or implied, were fulfilled, be payable to a person employed in respect of his employment or of work done in such employment, and includes house rent allowance (except in States where it is regulated by specific Act or Rules issued by such State Government), any contribution paid by the employer to any Pension Fund or Provident Fund or under any scheme of social insurance including ESIC, Labor Welfare Funds, statutory bonus and any gratuity payable on discharge, but does not
(i) the value of:
      (a) any house-accommodation, supply of light,
water, medical attendance, or
      (b) any other amenity or any service excluded
by general or special order of the appropriate

(ii) any travelling allowance or the value of any
travelling concession;
(iii) any sum paid to the person employed to defray special expenses entailed on him by the nature of his employment; or
Definition of Establishment
Confusion in figuring out which minimum wages as applied to Contract Laborers.
To include the following definition as Section (ee):

"(ee) Establishment includes any place where any work, service or industry is carried on."
HRA in States which have separate House Rent Allowance Act
Although the definition of Wages includes HRA, in states with separate HRA Act/Rules, Employers are forced to pay HRA in addition to wages.
Revised definition:
"and includes house rent allowance (except in States where it is regulated by specific Act or Rules issued by such State Government)…..
Minimum Wage revisions by States are not predictable and not publicized in the Official Gazette regularly
Notifications are not published officially on regular basis by States, and this results in retrospective revisions which is a violation of the Act. This is especially relevant since the attached recommendation contains more stringent punishments against violators.

Labor Department recommends a National Floor Level Minimum Wage that is proposed to be revised every six months in April and October based on CPI. In our view, a national floor level minimum wage is an unworkable concept and should be dropped. However, the States should be legally bound to consider and revise the MW based on local ground realities once in 6 months and publish the orders in the National Gazette.

Revise Section 3 (1) (a) as hereunder:

“The appropriate Government shall, in the manner hereinafter provided:-

(i)              Fix the minimum rates of wages payable to employees employed in an employment specified in Part I or Part II of the Schedule and in an employment added to either Part of the Schedule by notification under Section 27. Such minimum rates shall be revised once every six months in April and October on the basis of rise in Consumer Price Index for the respective state, zone, industry or skill level and shall be notified by the appropriate government in the National Gazette, to be effective after 30 days from the date of such notification.”

We also recommend that the remaining portion of the recommendation be deleted.
Proposal to make minimum wage revisions during pendency of a dispute before an appropriate forum applicable in respect of such employees by amending Section 3 (2A)
The proposed change is not justified in as much as the employer has to bear additional burden on account of continuing dispute. This will make it very difficult for employers to plan for contingent liabilities.
We recommend the proposal to amend Section 3(2A) be dropped.
Mention is made of only wage books and wage slips in Section 18 (3) of the MW Act
While the proposal recommends addition to “wage cards”, it persistently fails to recognize bank transfer, which is the preferred mode of payment nowadays. In fact, the only mode of payment of wages allowed in Delhi currently.
We recommend the following additions:
“provide for issue of wage books or wage slips or wage cards or bank transfer confirmation to employees employed in any scheduled employment by the employer or the transferring bank ”….


“authenticated in such wage books or wage slips or wage cards by the employer or his agent and on bank transfer confirmation by the transferring bank
Conflict of MW between sectoral rates and General MW
Confusion in figuring out which minimum wages applies in specific sectors.

There should be clarity that in case of ambiguity, the higher rates should apply.
The recommendations have sought to clarify as per proposed revision to Section 28, but paragraph 3 of the proposed draft should be more clear, as hereunder:

The minimum wage in respect of Scheduled Employment which has been notified by State Government is lower than the rates notified in Central sphere, the higher rates of wages shall be applicable in respect of such Scheduled Employment.”

Factories Act
Section 2 (k) definition of ‘manufacturing process’
Includes packing/ repacking or labeling/ stickering
Specifically exclude packing/repacking or labeling
Section 2(m) defines factory as any premises including the precincts thereof-·       

whereon ten or more workers are working or were working on any day of the preceding 12 months, and in any part of which a manufacturing process is being carried on with the aid of power, or

whereon twenty or more workers are working or were working on any day of the preceding 12 months, and in any part of which a manufacturing process is being carried on without the aid of power.
Even SSE comes under this definition
The definition should be amended to exempt small scale establishments from ambit of FA. Establishments with power employing up to 100 workers and without power up to 200 workers should be exempted.
Section 7 (4)
Appointment of new manager to be notified to Chief Inspector of Factories within 7 days.
Either extend the ambit of Sec 2 (n) or extend the number of days to 30
Sec 51 (Weekly hours not more than 48 hours in any week), Sec 52 (Weekly Holidays), Sec 54 (Daily working hours not more than 9 hours in any day), Sec 56 (The periods of work of an adult worker in a factory shall be so arranged that inclusive of his intervals for rest under section 55, they shall not spread over more than 10.5 hours in any day

Sec 64 and 65 curtails the power of the appropriate government to make rules in this regard
Inflexibility of working hours as per the Act increases the pressure on Employer in the light of the seasonality factor and stringent operational timeframes.
1. Flexibility to increase or decrease the working hours depending on the seasonality, subject to adequate rest intervals and payment of OT.
2. Limits on OT Hours to be relaxed, especially for seasonal industries. OT to be completely voluntary by employees. Adequate rest hours to be provided.
According to section 66, except for IT, ITES, Hospitals or any other exempted establishment, no woman worker can be required to work between 7.00 p.m. and 6.00 a.m. i.e., in night shift. Hotels, Restaurants & Pubs can work till midnight.
Restrictions pose problems for industry especially in certain seasons where skilled manpower is not readily available.
Restrictions are antiquated with women playing a more assertive role in society today.
Discretionary power given to Labor Department for giving exemptions creates opportunity for corruption.

We recommend the exemption be made universal, subject to the Employer providing adequate security at workplace and transportation to women employees.


These are a small portion of changes. We need many amendments including in Shops and Establishment Act, Payment of Gratuity Act (Mandatory insurance coverage yet not notified), Employee's compensation Act, ESIC Act and so on. We need to modernise them. 

All comments are welcome. 


July 10, 2014

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