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Labour Statutory Compliances
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Employees' Provident Funds
An employer requires a Provident Fund (PF) to provide their employees with a mandatory retirement savings plan, contributing to their long-term financial security by building a retirement corpus, which also helps attract and retain talent by demonstrating a commitment to employee welfare and benefits; additionally, it can improve the company’s image as a responsible employer that values its workforce. A PF scheme shows employees that the company is invested in their future, which can boost morale and loyalty, making it easier to retain good employees.
In Indian labour law, the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (EPF&MP Act) governs the establishment and management of provident funds for employees in factories and other establishments, ensuring a social security scheme for retirement and other contingencies. Both employers and employees contribute to the Employees’ Provident Fund (EPF). Employees contribute 12% of their basic salary and dearness allowance. Employers also contribute 12% of the employee’s basic salary and dearness allowance. The Employees’ Provident Fund Organisation (EPFO) is responsible for the regulation and management of provident funds in India. Employees can access their accumulated EPF amount upon retirement, resignation, or in certain other circumstances like medical emergencies or marriage can take advances.
The administration of Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 and its associated schemes falls under the purview of a tripartite body known as the Central Board of Trustees (CBT), Employees’ Provident Fund. The CBT comprises representatives from various sectors, including the government (both central and state), employers, and employees.
The CBT administers three schemes – Employees’ Provident Fund (EPF) Scheme 1952, Employees’ Pension Scheme (EPS) 1995 and Employees’ Deposit Linked Insurance (EDLI) Scheme 1976 for the workforce engaged in the organized sector in India. The Board is assisted by the Employees’ PF Organization (EPFO), consisting 147 offices across the country. The EPFO is under the administrative control of the Ministry of Labour & Employment, Government of India
Employees' State Insurance
Employees’ State Insurance provides a mandated social security system for the employees, covering medical care, maternity benefits, sickness allowances, and compensation for work-related injuries, which can help improve employee satisfaction, reduce absenteeism due to illness, and potentially attract better talent by demonstrating a commitment to employee well-being; all while being funded through contributions from both the employer and employee. Employees’ State Insurance Scheme is governed by the law Employees’ State Insurance Act (ESI Act) of 1948.
The ESI Act 1948 encompasses certain health related eventualities that the workers are generally exposed to; such as sickness, maternity, temporary or permanent disablement, Occupational disease or death due to employment injury, resulting in loss of wages or earning capacity-total or partial. All the establishments covered under the ESI Act and all factories that employ more than 10 employees and pay wages below or upto Rs.21,000 per month (Rs.25,000 for employees with disability) must register with the ESIC and contribute towards the ESI scheme.
The ESI Act is applicable to all non-seasonal factories employing 10 or more persons. The State Governments have extended the coverage under Section 1(5) of the Act to Shops, Hotel, Restaurants, Cinema including preview theatres, Road-motor transport undertakings, Newspaper establishments, Private Medical Institutions, Educational Institutions and to contract and casual employees of Municipal Corporation/Municipal Bodies employing 10 or more persons in the certain States/UTs, where State Government is the appropriate Government. The Central Government has extended the coverage under Section 1(5) to Shops, Hotels, Restaurants, Road Motor Transport establishments, Cinema including preview theatres, Newspaper establishments, establishment engaged in Insurance Business, Non-Banking Financial Companies, Port Trust, Airport Authorities, Warehousing establishments employing 20 or more Persons, where Central Government is the appropriate Government.
Under the Employees’ State Insurance (ESI) scheme, the employer contributes 3.25% of the employee’s wages, while the employee contributes 0.75%
Shops and Establishment
The Shop and Establishment Act regulates the shops and commercial establishments operating within the state. Every state has its own Shop and Establishment Act. However, the general provisions of the Act are the same in all states. The Labour Department of the respective states implements the Shop and Establishment Act
An employer needs to take shop and establishment registration to ensure legal compliance with labour laws, protecting both the business and its employees by guaranteeing adherence to regulations regarding working hours, wages, holidays, and other employment terms. It is also a proof of legitimacy when applying for business loans or permits. This is governed by the Shop and Establishment Act 1960. The act aims to provide fair working conditions and ensure that employees’ rights are protected, regulate working hours, wages, leave policies, and other terms of employment, ensure that employees receive benefits like maternity leave, weekly holidays, and other entitlements.
The shops and commercial establishments covered under the Act must mandatorily apply for registration under the respective state Act. All establishments and business, including the people working and maintaining a business from home, must obtain a Shop and Establishment Registration Certificate or Shop License (“Certificate”) under this Act. The procedure for obtaining the Shop and Establishment Registration Certificate differs from state to state. It can be obtained online or offline
MSME/Udyam Registration
Udyam registration, also known as MSME registration is a government initiative by the Ministry of Micro, Small & Medium Enterprises (MSME) to register and classify MSMEs. The MSME registration will help the MSMEs in availing the benefits of government schemes such as the Credit Guarantee Scheme, Credit Linked Capital Subsidy Scheme, Public Procurement Policy, and Protection against delayed payments, etc. MSMEs are eligible for priority sector lending from banks with low rate of interest.
The Government of India has devised the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006. Micro means enterprises with the investment in plant and machinery does not exceed Rs. 25 lakhs in Manufacturing & Production Industry and does not exceed Rs. 10 lakhs in Services industry. Small means enterprises with the investment in plant and machinery is more than Rs. 25 lakh but does not exceed Rs. 5 crore in Manufacturing & Production Industry and is more than Rs. 10 lakh but does not exceed Rs. 2 crore in Services industry. Medium means enterprises with the investment in plant and machinery is more than 5 crore but does not exceed Rs. 10 crore in Manufacturing & Production Industry and is more than 5 crore but does not exceed Rs. 10 crore in Services industry.
Proprietorships, partnership firms, companies, trusts, or societies are eligible for MSME registration.