Introduction:
Startups are associated with a new age work environment which is innovative, solving modern day problems, having new ideas and lots of positive energy. But the employers and employees associated with such a work environment have to comply with labour laws which are centuries old. These labour regulations have not adapted to the modern work environment but have only been amended. There is a growing need to evolve the labour regulations to meet rapidly modernizing work environment conditions. It is important for every employer to know his responsibilities towards his employees and this can be done by complying with the required labour laws and regulations. It includes compliances with respect to payment of wages act, gratuity, provident fund, maternity benefits, sexual harassment at workplace, working conditions, medical benefits, retirement benefits etc. In this blog, we are going to discuss the labour law compliances required for startups in India.
Startup India & labour law compliances:
The Ministry of labour and employment for the promotion and growth of startups in India have simplified the compliance procedures by providing for self- certification for the startups under various labour laws. It has made the process of conducting inspections more meaningful and simple. Startups are allowed to self-certify (through the Startup mobile app) with 6 labour laws. Further no inspections shall be conducted for a period of 3 years. Startups are to be inspected on receipt of credible and verifiable complaint of violation, filed in writing and approved by at least one level senior to the inspecting officer. The self – certification with respect to the central acts is done by applying on or logging on to the Shram Suvidha Portal. The Startups may self-certify compliance in respect of following Labour Laws:
• The Building and Other Constructions Workers (Regulation of Employment & Conditions of Service) Act, 1996;
• The Inter-State Migrant Workmen (Regulation of Employment & Conditions of Service) Act, 1979;
• The Payment of Gratuity Act, 1972;
• The Contract Labour (Regulation and Abolition) Act, 1970;
• The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952;
• The Employees’ State Insurance Act, 1948;
27 states and Union territories have implemented the process of self- certification to startups under 6 labour laws. Nine states (Haryana, Madhya Pradesh, Maharashtra, Rajasthan, Gujarat, Uttar Pradesh, Punjab, Uttarakhand, and Delhi) have integrated their portals with Shram Suvidha Portal. Overall, 169 DPIIT recognized Startups have availed the benefits of self-certification. This will boost the startup sector and also make them disciplined by adhering to the required laws.
The Building and Other Constructions Workers (Regulation of Employment & Conditions of Service) Act, 1996:
This act regulates the employment and conditions of service of building and other construction workers. It provides for their safety, health and welfare measures and other related matters. The chapter VI of this act is extremely important which is about work hours, welfare conditions, other conditions of service. It further provides details about registration of establishments, registration of building workers as beneficiaries, safety and health measures, inspections, responsibilities of employers, responsibilities for payment of wages and compensation. A startup during the construction of its work space or office premises has to self- certify by complying with this act.
The Inter-State Migrant Workmen (Regulation of Employment & Conditions of Service) Act, 1979:
This act regulates the employment of inter-State migrant workmen. It provides for their conditions of service and for matters connected therewith. It applies to all the establishments employing five or more migrant workmen from other states in the last or preceding twelve months and also to contractors who have employed five or more inter-State workmen in the last or preceding 12 months. It is also required that the establishment must be registered with the local authority while employing migrant workers. This also applies to contractors employing workers from one state and deploying them in other states. So startups having its registered office in one state, having migrant employees(five or more than five) working in it from other states in the last or preceding twelve months have to provide self-certification by complying with this act.
Payment of gratuity act, 1972:
This act is applicable to startups in which ten or more persons are employed, or were employed, on any day of the preceding twelve months. Further after the application of this act to a particular startup having more than ten or more employees or once a startup is governed under this act then even if the number of employees working under that particular startup falls below ten, still this act will be applicable to such startup operating with employees less than ten. Gratuity is a payment made to an employee on the termination of his employment or service after rendering continuous service for five years or more. The maximum gratuity amount payable shall not exceed twenty lakhs. Further gratuity has to be paid at the rate of 15 days per year of service of the last drawn salary, with the years of service rounded down to the nearest whole number. Gratuity is payable within 30 days of the last date of employment. It is advised to the startups that they provide for gratuity benefits on their balance sheets, at the end of each financial year.
Contract Labour (Regulation and Abolition) Act, 1970:
This act is to regulate the employment of contract labour in certain establishments and to provide for its abolition in certain circumstances. In the context of startups this act is applicable, if it has employed twenty or more employees or workmen on contract labour basis in the last or preceding twelve months(in the case of Maharashtra, Andhra Pradesh and Uttar Pradesh, it is fifty or more workmen or employees). This is also applicable in the same way as above to the contractors providing labour on contract basis to the startups. Further this act is not applicable to startups in which work only of an intermittent or casual nature is performed. Here intermittent work means that work which is performed for less than 120 days or not more than 120 days in the last or preceding 12 months period. Also if such work is of seasonal nature then it is an intermittent work if it is performed for less than 60 days or not more than 60 days in the last or preceding 12 months. Further decision as to whether a work is intermittent or not is to be decided, in case of confusion or doubt, by the appropriate government which can be the central government or state government by consulting the central board or state board. Further this act provides details about registration of establishments(startups in our case) employing startup labour, welfare and health of contract labour etc. A startup has to provide self-certification by ensuring complete compliance with this act if it is hiring employees on contract basis subject to above.
The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952:
This act provides for the institution of provident funds, pension funds and deposit-linked insurance funds for employees in factories and other establishments. A startup is governed by this act if it employs 20 or more people or employees for work. Further once a startup is governed by this act then even if the number of employees working in that startup become less than 20, then also this act will continue to regulate such a startup. This act makes it mandatory for an employee to contribute funds for the future of an employee after his retirement. Employers and employees both shall contribute 12% of wages in EPF. EPF contributions are mandatory for employees earning less than Rs. 15,000 per month. For employees earning more, employees and employers may mutually agree to PF contribution, but it is not mandatory.
The Employee State Insurance Act, 1948:
This Act provides certain benefits to employees in case of sickness, maternity and employment injury and other related matters. A startup is governed by this act if it employs 10 or more persons or employees for work. Further once a startup is governed by this act then even if the number of employees working in that startup become less than 10, then also this act will continue to regulate such a startup Contributions are made both from the employer and employee in the ESI fund. Such contributions are mandatory for employees earning less than Rs. 15,000 or lesser. Currently, the employee’s contribution rate is 0.75% of the wages and that of employer’s is 3.25% of the wages paid/payable in respect of the employees in every wage period. Employees in receipt of a daily average wage up to Rs.137/- are exempted from payment of contribution. Employers will however contribute their own share in respect of these employees.
Conclusion:
So this blog will help readers, entrepreneurs planning to launch a startup and startup enthusiasts to understand the labour laws to which they have to comply with and provide self-certification for. It will provide them with background knowledge before undergoing the self – certification process. In the next blog, we will take a look at some important labour regulations relating women employees and other important labour regulations to which compliance is essential for every startup. We will also look at important legal documentations relating to the labour laws.
