Important Labour Laws for Private Employees
Updated: Aug 22, 2021
As an employee working at a private organization, it is essential that your rights are safeguarded and protected to ensure a healthy working environment and to prevent misuse by any working party that can be your colleagues or employer. There are certain laws and acts that are to be implemented in an organization as part of the HR policies and by-laws of the employer such as relating to the payment of salaries, sexual harassment policies, maternity benefits, provident funds, and others.
1) Employee Agreement: When joining an organization, a formal agreement is executed between the employee and employer regards to the terms of employment, tenure of the period, termination of employment, notice period, and company policies regards to the code of conduct and others. As an employee, you should ensure that you have an agreement in place and that is duly signed by you, as this acts as a record of the employment at the organization, and in case of any issue during leaving of the organization, you can refer this document to the organization. Also for the company, this acts as a safeguard regards to the individual responsibilities he/she has to maintain working as an employee at the organization. 2) Payment of Wages Act 1936: The Payment of Wages Act, 1936 was enacted with a view to ensure that wages are payable to employed persons and were disbursed by the employers within the prescribed time limit and that no deductions other than those authorized by law were made by them. All employees are covered under the Code including those in supervisory, administrative, and managerial roles. The act is not applicable to employees earning wages more than INR 24,000. If an employee is not receiving his/her remuneration as per the employment agreement, can approach the Labour Commissioner or file a civil suit for arrears in salary. 3) Maternity Benefit Act 2017: The Maternity Benefit Act, 1961 protects the employment of women during the time of their maternity and entitles them to a maternity benefit that is full paid absence from work – to take care of her child. As per the Act, to be eligible for maternity benefit, a woman must have been working as an employee in an establishment for a period of at least 80 days within the past 12 months.
The act is applicable to all establishments employing 10 or more employees. The establishments include factories, mines, plantations, Government establishments, shops, and others recognized under the legislation.
The duration of paid leave for a pregnant female employee is 26 weeks, including 8 weeks of postnatal paid leaves. In case of a complicated pregnancy, delivery, premature birth, medical termination, female employees are entitled to 1 month of paid leave. In the case of tubectomy procedure, only 2 weeks of additional paid leave is provided.
4) Sexual Harassment of Women at Workplace Act 2013: Also known as the POSH act, the act is applicable to every workplace, establishment, company, or organization employing 10 or more employees who are working as full time, part-time, interns, or consultants irrespective of its location or nature of industry across India. It aims at providing a safe workplace for women and imposing the employers with the responsibility to ensure a safe working environment. Sec 2(n) defines Sexual Harassment as any one or more of the following unwelcome acts or behavior: Physical contact and advances, a demand or request for sexual favors, making sexually colored remarks, showing pornography, any other unwelcome physical, verbal or non-verbal conduct of sexual nature. As part of the POSH Act, It is mandatory for every employer to constitute an Internal Complaints Committee(ICC) at the workplace. ICC must deliberate and resolve complaints on sexual harassment at the workplace and recommend disciplinary actions if any to the employer. ICC consists of a senior-level women employee who shall be appointed as the presiding officer, 2 employees preferably who have experience in social work, and 1 member from NGO or an external member committed to the cause of women, shall be nominated by the employer. Also, one-half of the total Members nominated shall be women. During the Inquiry, The ICC is given the same power vested in Civil Court power to summon any person and examine them on oath, require the discovery and production of documents and the Inquiry shall be completed within 90 days. On the completion of the Inquiry, the Inquiry report is sent to ICC within 10 days, and when the ICC arrives at the conclusion that allegations against the alleged person have not been proved, then it shall recommend the Employer to not take any action.
If the allegations are proven to be true, then, the ICC shall recommend the Employer to take the following action: 1) Take action for sexual harassment as misconduct in accordance with the service rules, or any manner prescribed.
2) Deduct from the salary or wages such sum, as it may be appropriate to pay the aggrieved woman or to her legal heirs.
Also Read: Validity of POSH Act at Remote Workspace?
5) Provident Fund: The Employee Provident Fund scheme is governed by the Employees Provident Fund Act, 1952 and managed by the Employees’ Provident Fund Organisation (EPFO). The EPF scheme mandatorily applies to all the establishments that have employed a minimum of 20 people. If any establishments with less than 20 employees would like to opt for voluntary registration then they can too, and they will be eligible for EPF right from the beginning of their employment. Under an EPF scheme, the employee and employer both contribute to the fund. For an employee, it is 12% of the fixed wages excluding HRA. The employer needs to contribute equally to the EPF account. In the 12% amount which the employer contributes the breakdown of the amount is as below 8.33% to the Pension Fund and 3.67% to the EPF account.
Investment under PF, can be declared under 80c during the tax filing period by the employee.
6) Gratuity Act: The gratuity rules are mandated under the Payment of Gratuity Act, 1972. Gratuity is a lump sum amount that employers pay their employees as a sign of gratitude for the services provided. Subjected to certain conditions. To be eligible, an employee has to render his/her services for 5 continuous years in a single organization. As per Section 4(1), the completion of continuous service of 5 years is not required where termination of employment is due to death or disablement.
Gratuity is paid at a rate of 15 days' wages for every completed year of service. The "15 days' wages" will be calculated by dividing the last drawn wages by 26 and multiplying the result by 15. Under Section 4(3), the maximum gratuity that is payable is fixed at ₹20,00,000. Any gratuity amount paid in excess of ₹20,00,000 is taxable in the employee's hands.
Gratuity = (15 * last drawn salary * number of completed years of service) / 26