Legal Aspects of Employment Laws- Part-3

In continuation to my last article Legal Aspects of Employment Laws- Part-2 - A series of article with an intent to congregate fundamentals of employment laws applicable in India and to provide a broader oversight to HR professionals.

Punjab Shops and Commercial Establishment Act, 1958 -  In the era of globalization, we are always connected with our counterparts in other countries round the clock. But we tend to forget that there are certain norms we need to adhere to operate 365* 24 * 7. We need to have certain key exemptions in place from the government authorities for unhindered operation as per this act. For example, as per section 10 of this act, we need exemption for 365 days working, similarly under section 30, we would need exemption to enable female employees to work in night.

Leaves & Holidays -  Government has already fixed minimum leaves through Punjab Shops & Commercial Establishment Act, 1958. National holidays: 26 January, 15 August and 2 October | Festival holidays: 5 holidays with wages in a year | Casual leave: 7 days in a year | Sick leave: 7 days in a year | Earned leave: Every employee who has been in employment for not less than 20 days in a year shall be entitled to 1 days EL for every such 20 days. There may be change in numbers as per respective states act, however, letter and spirt of the act would be similar.

If we are operating on National Holidays, we must seek an exemption from the Labor department. We need to ensure that we send copy of this intimation to local police inspector also.  Attendance has to be taken on a separate register (Form-B). Employees working on National Holidays have to be paid additional one day salary.

Employees Provident Fund and Misc. Provisions Act, 1952 - Any person who is employed for work in an establishment or employed through contractor is eligible for Provident Fund. Employer contributes 12% of the Basic salary (Fixed) & employee also contributes 12% of the Basic salary (employee can increase its own contribution). It also says that Employees covered enjoys a benefit of Social Security in the form of an unwithdrawable (except in severely restricted circumstances like buying house, marriage/education, etc.) financial nest egg to which employees and employers contribute equally throughout the covered persons employment. This sum is payable normally on retirement or death. Other key benefit include Employee Pension Scheme.

The Payment of Bonus Act, 1965- It is applicable to all establishments wherein 20 or more employees are working.  Eligibility for Statutory Bonus -Employee whose Basic salary does not exceed Rs 10000 per month | Employees who have worked in the establishment for not less than 30 days | Not disqualified to claim bonus due to fraud, theft or any other misconduct | Bonus of employee drawing salary between Rs 3500/- and Rs 10000/- per month shall be calculated as if salary were Rs 3500 pm. Salient Features –Minimum :8.33% of salary/wages | Maximum 20% of salary/wages |Adjust any interim bonus paid while making payment of the final bonus. Formula for Statutory Bonus calculation – Minimum- 3500*12*8.33%= Rs.3500/- : Maximum- 3500*12*20%= Rs.8400/-


Employees State Insurance Act, 1948 - It applies to establishments consisting 10 or more employees. Employees drawing monthly salary of Rs. 10,000 or less are covered under ESI scheme. Employees are provided with health care and cash benefits in case of sickness, maternity and employment injury. In ESI employee’s contribution is 1.75% of wages and employers’ contribution - 4.75 % of wages

The Payment of Gratuity Act, 1972 - It applies to every establishment wherein 10 or more workers are employed. Retirement benefit is payable to an employee for a long and meritorious service. Gratuity is payable to an employee on termination of employment after rendering continuous service for not less than 5 years. The Maximum Ceiling for Gratuity payment as of now  is Rs.3,50,000/- only. Gratuity is paid on superannuation, resignation and death or disablement due to employment injury or disease. The Basis of Gratuity payment is 15 days of last basic for every completed year of service. Formula for Gratuity Calculation- Last drawn basic salary x 15/26 x No. of years of service. One thing which is important to know is your last drawn salary will comprise your basic + DA. For computation of gratuity, your service period will be rounded off to the nearest full year.

Thanks for your attention. Hope this series helped you provide an overview of relevant employement laws.

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