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While defining 'labor' as a resource working for some business entity, it involves the inevitable tripartite relationship of the labor with the employer and a labor union of the workplace almost every time. Labor law essentially intercedes this relationship among these three and works as a security mechanism to protect labors' or employees' interests against exploitation by the employers, benefits such as minimum socially acceptable conditions, at par wages, work insurance etc., promotion of industrial peace and amity.

Labor law also plays a significant role to regulate the conduct of the employee from the employers' perspective. Some laws are instrumental in providing employees with a platform to raise grievances/concerns, get them remedied through various defined mechanisms and recognition to methods of collective bargains. Perhaps, the employers see them as a challenge in ease of doing business while finding them leaning towards employees profoundly and putting excessive obligations over them. Also, the compliance rules of Labor law are ages old.

Importance of Labor Compliance

Each establishment in India must comply against various statuary compliance rules of Labor law.  The scope of compliance is pretty vast, and it requires to produce records of compliances as evidence under various statues in case of any prosecution. There are unembellished penalties prescribed by the law in case of failure to comply.

Labor law comprises of various acts while covering every possible aspect of labors' rights.  Applicability of the Acts depends upon the type of the establishment, and more than one law may apply to the employer and employees, respectively.

Compliance Concepts Under Labor Law

Labor laws essentially inter-alia provide for protecting employee benefits, termination, the rules and regulations set for employees etc. composition of Labor law includes various acts of labor Compliance rules. It is for the state as well as the central government to enforce compliances. The followings are some major labor law compliance rules:

Building and Other Construction Workers (Regulation of Employment and Conditions Services) Act, 1996

The Act applies to construction sites employing ten or more workers through a Contractor; however, it does not apply to the sites falling under the effect of the Factories Act, 1948 or Mines Act, 1952.

The Act collects CESS from the construction sites, and use that money for registered workers' welfare. The CESS is 1% of the total cost to build the building.

Contract Labor (Regulation and Abolition) Act, 1970

The Act applies to establishments or contractors with 20 or more workers employed for 12 months as contract labors. It does not apply for places with the casual nature of work, and the employer cannot contract labors if he does not register under the Act.

Employment State Insurance Act, 1948

This Act provides employees with benefits such as maternity, sickness and employment injury among others. The Act applies to employees drawing monthly wages up to Rs. 15,000.

The Act covers government factories; perhaps it excludes seasonal factories. Such factories must get themselves registered under this Act. Both the employers and employees must contribute towards the insurance fund named Employees State Insurance (ESI) Fund. The ESI fund is held and administered by the Employees State Insurance Corporation (ESIC) for administration, which is established under the Act for the administration of the Employees State Insurance Scheme (ESIS). It may also to be noted that persons benefiting under this Act are not entitled to receive any benefits under other enactments.

Factories Act, 1948

This Act governs the working conditions of workers in factories. It enforces owners of factories to ensure that the employment of labors is in conditions conducive to their safety and health.

Industrial Employment (Standing Order) Act, 1946

This Act applies to industries having 100 or more workers employed in 12 months.

Payment of Wages Act, 1936

This Act or enactment secures timely payment of wages for employees, working in certain establishments, without any unauthorized deductions. The wage-disbursement period cannot exceed one month as prescribed under Section 4 of it. All payments of wages must be made on a working day. According to Section 6 of the Act, wages must be paid in current currency, by cheques or by crediting the wages in the employees' bank accounts.

Section 13(A) provides that every employer has to maintain prescribed registers and records for three years, detailing specified particulars of persons employed, work performed by them, wages paid to them, the deductions made from their wages, and such other particulars in a prescribed form.

There are a few more such as:

  • Minimum Wages Act, 1948
  • Mines Act, 1952
  • Industrial Employment (Standing Order) Act, 1946, etc.

Events of Non- Compliance OR Risks of Non-Compliance

Employers already see labor law as challenging and greatly inclined towards employees. It is complemented by fiercely enforced compliance rules too, and therefore non-compliance of the law can prove from costly to fetal for establishments. There may be a variety of consequences in cases of non-compliance of labor laws in India, such as:

  • Fines
  • Penalties
  • Lawsuit
  • Loss of Credibility
  • Loss of Contract
  • Closure of business

No business would want to risk being in non-compliance of Labor law today, and therefore, this particular aspect of the business has become a serious focus. Labor law is so vast and deep concerning the aspects that it covers and conditional application of its Acts; it is a herculean task to remain 100% in compliance all the time. To avert the adverse consequences of non-compliance, most of the mid and large companies now prefer opting for labor law consultants to manage their compliance concerns. It is apparently a right step considering the complexities of the law itself.

By: Harshavardhan Abburi
The author can also be reached at

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