Understanding and complying with Indian labour laws is crucial for HR professionals to ensure legal compliance, maintain employee satisfaction, and avoid penalties. Below is a detailed breakdown of the key labour laws applicable to a Private Limited Company (Pvt. Ltd.) in India:
1. Code on Wages, 2019: Minimum Wages & Timely Salary Payment
This law consolidates four labour regulations: the Minimum Wages Act, Payment of Wages Act, Bonus Act, and Equal Remuneration Act.
Key Provisions:
- Timely Salary Payment: Wages must be paid on time—before the 7th of the following month.
- Minimum Wages Compliance: Pay employees according to the minimum wages set by the state or central government.
- No Unauthorized Deductions: Only legal deductions (PF, TDS, etc.) are allowed.
Implementation Guide:
- Review Minimum Wage Rates: Regularly check and update wages as per state and central guidelines.
- Establish Payroll Systems: Set up automated payroll software to ensure accurate and timely payments.
- Monitor Salary Cycles: Ensure salaries are processed by the 5th and credited by the 7th of every month.
- Document Deductions: Keep records of all legal deductions with proper authorization.
- Audit Compliance: Conduct periodic audits to ensure wage law compliance.
2. Payment of Wages Act, 1936: Salary Slips Are Mandatory
Ensures employees receive their wages in a timely, transparent manner with clear documentation.
Key Provisions:
- Salary Slips: Mandatory for all employees; must be provided monthly.
- Payment Mode: Wages should be paid via bank transfer or cheque—cash payments are prohibited.
Implementation Guide:
- Generate Digital Salary Slips: Use HR software to automatically generate and email salary slips.
- Verify Payment Mode: Ensure all payments are made through traceable methods (bank/cheque).
- Inform Employees: Communicate salary structures and deductions clearly.
- Maintain Salary Records: Keep salary records for at least 3 years for audit purposes.
3. Shops & Establishments Act (State-Specific): Working Hours & Leaves
This state-level act regulates working conditions, holidays, and employee welfare.
Key Provisions:
- Working Hours: Max 9 hours/day or 48 hours/week.
- Weekly Off: At least one day off per week.
- Leave Policy: Employees are entitled to annual leaves, public holidays, and sick leave as per state laws.
Implementation Guide:
- Register the Business: Obtain a Shops & Establishments license from the state labour department.
- Define Work Hours: Implement a work schedule aligned with statutory limits.
- Create Leave Policies: Offer annual, sick, and maternity leave in line with state-specific regulations.
- Display Notices: Post statutory working hours and holidays in the office.
- Conduct Compliance Audits: Ensure policies are updated with changes in state regulations.
4. EPF Act, 1952: Provident Fund (PF) for Employees
A social security scheme for retirement benefits.
Key Provisions:
- Applicability: Mandatory for companies with 20+ employees.
- Contribution: 12% of basic salary from both employer and employee.
Implementation Guide:
- Register with EPFO: Apply for an EPF registration number through the EPFO portal.
- Deduct PF Contributions: Automate monthly deductions and employer contributions.
- File Monthly Returns: Submit EPF returns (Form 12A) before the 15th of every month.
- Communicate PF Benefits: Educate employees on PF withdrawals and benefits.
5. ESI Act, 1948: Health & Insurance Benefits
Provides medical and cash benefits to employees during illness, maternity, and employment injury.
Key Provisions:
- Applicability: Mandatory for companies with 10+ employees.
- Contribution: Employer pays 3.25%, employee 0.75% of wages.
Implementation Guide:
- Register with ESIC: Obtain an ESI code number through the ESIC portal.
- Deduct & Deposit Contributions: Ensure monthly deductions and deposits are made by the 15th.
- Employee Registration: Enroll all eligible employees under the scheme.
- Compliance Check: Ensure medical benefits are accessible to all covered employees.
6. Maternity Benefit Act, 1961: 26 Weeks Paid Maternity Leave
Key Provisions:
- Leave Duration: 26 weeks of paid maternity leave for women with at least 80 days of work.
- Nursing Breaks: Two daily breaks for nursing mothers.
Implementation Guide:
- Update HR Policies: Include maternity benefits in the employee handbook.
- Handle Leave Requests: Document and process maternity leave applications.
- Ensure Job Protection: Prohibit termination during maternity leave.
- Monitor Compliance: Submit reports to labour authorities as required.
7. Payment of Gratuity Act, 1972: Gratuity After 5 Years of Service
Key Provisions:
- Eligibility: Pay gratuity if an employee works 5+ years.
- Calculation:
Formula = (Last Salary × 15 Days × Years of Service) ÷ 26
Implementation Guide:
- Track Service Period: Maintain detailed service records.
- Calculate Gratuity: Automate calculations using the official formula.
- Timely Payment: Pay gratuity within 30 days of resignation/retirement.
8. Industrial Disputes Act, 1947: No Wrongful Termination
Key Provisions:
- Notice Period: Minimum 1-month notice or compensation.
- Layoff Rules: Obtain government approval for mass layoffs.
Implementation Guide:
- Document Termination: Maintain records of performance and misconduct.
- Provide Notice/Compensation: Ensure fair severance pay.
- Employee Grievance: Establish internal dispute resolution processes.
9. POSH Act, 2013: Workplace Harassment Prevention
Key Provisions:
- Internal Complaints Committee (ICC): Mandatory for workplaces with 10+ employees.
- Confidentiality: Ensure the identity of complainants remains confidential.
Implementation Guide:
- Form ICC: Include a Presiding Officer and external NGO member.
- Policy Implementation: Draft and distribute an Anti-Sexual Harassment Policy.
- Conduct Awareness Programs: Annual training on workplace conduct.
- File Annual Report: Submit compliance reports to district officers.
By following these detailed steps, HR professionals in Pvt. Ltd. companies in India can ensure legal compliance, foster a positive work environment, and protect both employee and employer rights.