LMLCLLS kCVIDLN1 IUND AND MISCLLLANLCUS kCVISICNS AC1 19S2

Scope and coverage

AppllcaLlon Lo facLorles and esLabllshmenLs employlng 20 or more persons
Can be made appllcable by cenLral governmenL Lo esLabllshmenLs employlng less Lhan 20 persons or lf
Lhe ma[orlLy of employees agree
cludes esLabllshmenLs employlng 30 or more persons or 20 or more persons buL less Lhan 30
persons unLll Lhe eplry of Lhree years ln Lhe case of Lhe former and flve years ln Lhe case of Lhe
former and flve years ln Lhe case of Lhe laLLer from Lhe daLe of seLLlng up of esLabllshmenL
Appllcable Lo all persons who are employed dlrecLly or lndlrecLly Lhrough conLracLors ln any klnd
of work
llglblllLy mployees drawlng pay not exceed|ng ks 6S00] per month
8enef|ts
AparL from Lermlnal dlsbursal of nonrefundable wlLhdrawals for Llfe lnsurance ollcles
ouse bulldlng Medlcal LreaLmenL Marrlage lgher educaLlon lamlly penslon 8eLlremenL
cumwlLhdrawal beneflLs
eposlL llnked lnsurance AmounL equal Lo Lhe average balance ln rovldenL lund of deceased
sub[ecL Lo a malmum of 8s 63000/
ln 8lC v 1 S arlharan 1971 Lab lC 931 (SC) lL was held LhaL Lemporary workers should noL be counLed
Lo declde wheLher Lhe AcL would apply
Coverage of Act 1he AcL has been eLended Lo lacLorles Mlnes oLher Lhan coal mlnes oLels and
resLauranLs lanLaLlon of Lea coffee rubber 1ea facLorles ln Assam have been ecluded vlde para
1(3)(a) of l Scheme 1radlng and commerclal esLabllshmenLs engaged ln purchase sale or sLorage of
goods sLabllshmenLs of eporLers lmporLers adverLlsers sLock echanges CanLeens sLabllshmenLs
of ALLorneys CA lCWAs nglneers and ConLracLors archlLecLs and medlcal pracLlLloners osplLals
1ravel agencles 8anks dolng buslness only ln one SLaLe Ceneral lnsurance perL servlces Clubs and
socleLles renderlng servlces Lo Lhelr members AgrlculLural farms llnanclal sLabllshmenLs oLher Lhan
banks 8ulldlng and consLrucLlon lndusLry oulLry farmlng unlverslLy college or schools 1he AcL has
been eLended wef 142001 vlde noLlflcaLlon daLed 2232001 Lo courler servlces AlrcrafL or alrllnes
oLher Lhan alrcrafL or alrllne owned or conLrolled by CovernmenL sLabllshmenL engaged ln renderlng
cleanlng and sweeplng servlces
Cnce an esLabllshmenL ls covered under l a|| |ts departments and branches wherever Lhey are
slLuaLed are also covered
CLher nonlacLory sLabllshmenLs Covered 8esldes facLorles oLher esLabllshmenLs employlng 20 or
more persons can be covered under Lhe AcL u/s 1(3)(b) varlous noLlflcaLlons have been lssued
eLendlng Lhe provlslons of l AcL Lo nonfacLory esLabllshmenLs Some ma[or among Lhem are
planLaLlon mlnes coffee hoLels and resLauranLs clnema and LheaLres Lradlng and commerclal
esLabllshmenLs laundry canLeens esLabllshmenLs of aLLorneys/CA/ lCWA/englneers/
archlLecLs/medlcal pracLlLloners hosplLals flnanclal esLabllshmenLs (oLher Lhan llCl u1l l8l SlC)
bulldlng and consLrucLlon lndusLry poulLry unlverslLy college schools sclenLlflc lnsLlLuLlons eLc
Act not app||cab|e to certa|n estab||shments As per SecLlon 16(1) Lhe l AcL does noL apply Lo (a) any
esLabllshmenL reglsLered under CooperaLlve SocleLles AcL or SLaLe law relaLlng Lo cooperaLlve socleLles
employlng less Lhan 30 persons and worklng wlLhouL pald of power (b) Lo any esLabllshmenL belonglng
Lo or under ConLrol of CenLral CovernmenL or a SLaLe CovernmenL and whose employees are enLlLled Lo
beneflL of conLrlbuLory provldenL fund or old age penslon (c) Lo any esLabllshmenL seL up under any
CenLral or SLaLe AcL and whose employees are enLlLled Lo beneflL of conLrlbuLory provldenL fund or old
age penslon
owever once AcL becomes appllcable lL conLlnues Lo apply even lf subsequenLly Lhe number ls lower
Lhan 20
Lmp|oyees covered under the scheme As per SecLlon 2(f) employee" means any person who ls
employed for wages ln any klnd of work manual or oLherwlse ln or ln connecLlon wlLh Lhe work of an
esLabllshmenL and who geLs hls wages dlrecLly or lndlrecLly from Lhe employer lL lncludes any person
(l) employed by or Lhrough a conLracLor ln or ln connecLlon wlLh Lhe work of Lhe esLabllshmenL (ll)
engaged as an apprenLlce noL belng an apprenLlce engaged under Lhe ApprenLlces AcL 1961 or under
Lhe sLandlng orders of Lhe esLabllshmenL
1hus (a) ersons employed Lhrough conLracLor ln connecLlon wlLh work of esLabllshmenL are also
covered (b) ApprenLlces employed under ApprenLlces AcL or under sLandlng orders of esLabllshmenL are
ecluded le Lhey are noL employees
NonL||g|b|e emp|oyees under I mployee whose 'pay' ls more Lhan 8s 6300 per monLh are noL
ellglble ApprenLlces as per cerLlfled sLandlng orders or under ApprenLlces AcL Casual employees are
noL covered owever employees employed Lhrough conLracLors have also Lo be covered under l
mployee Lo become member of lund lmmedlaLely on [olnlng very employee employed ln or ln
connecLlon wlLh work of a facLory or esLabllshmenL Lo whlch Lhe AcL applles ls enLlLled and requlred Lo
become member of rovldenL lund unless he ls an ecluded employee para 26(1) of l Scheme An
employee who ls drawlng 'pay' above prescrlbed llmlL (presenLly 8s 6300) can become member wlLh
permlsslon of AsslsLanL l Commlssloner lf he and hls employer agree para 26(6) of l Scheme
As per SecLlon 6 contr|but|on sha|| be pa|d by emp|oyer Q 12 of bas|c wages p|us dearness
a||owance cash va|ue of food concess|on and reta|n|ng a||owance 1hls amounL ls deflned as 'pay' as
per eplanaLlon Lo para 2(f)(ll) of l Scheme qual conLrlbuLlon ls payable by employee also
A person who ls already a member conLlnues Lo be a 'member' even lf hls 'pay' eceeds 8s 6300
owever Lhe conLrlbuLlon ls llmlLed Lo 8s 6300 only ara 26A (2) of l Scheme
8lC ls llable under Consumer roLecLlon AcL 1he 8eglonal rovldenL lund Commlssloner ls provldlng
servlce under Lhe AcL and hence he ls llable under Consumer roLecLlon AcL 8lC v Shlv kumar !oshl
(1996) 4 C1! 803 1996 LL8 641 (nC8C 3 member bench) conflrmed ln 8lC v Shlv kumar !oshl 1999
Al8 SCW 4436 1999(7) SCAL 433 2000 LL8 217 Al8 2000 SC 331 99 Comp Cas 347 (2000) CLA
8L Supp 26 24 SCL 46 (SC)
Lmp|oyees rov|dent Iund Scheme 1hls ls Lhe maln scheme under Lhe AcL 8oLh employer and
employee have Lo pay conLrlbuLlon Lo rovldenL lund 1he employer has Lo deducL conLrlbuLlon of
employee from Lhe salary of employee and has Lo pay boLh employees' conLrlbuLlon as well as
employer's conLrlbuLlon by a challan ln prescrlbed form 1he amounL has Lo be pald ln approved bank
Lmp|oyee Can ay n|gher Contr|but|on mployee has Lo conLrlbuLe 12/10 of hls pay as
conLrlbuLlon 1he employee can volunLarlly pay hlgher conLrlbuLlon above Lhe sLaLuLory raLe owever
employer does noL have Lo maLch Lhe volunLary conLrlbuLlon over and above Lhe sLaLuLory raLe ara
26(2) of l Scheme
Contr|but|on payab|e under I Scheme 1he rlnclpal mployer ls llable Lo pay conLrlbuLlon of hls own
employees as well as employees employed Lhrough conLracLor rlnclpal mployer can recover from
conLracLor Lhe amounL pald by hlm on behalf of conLracLor 1he contr|but|on |s 12 of 'pay' |e bas|c
wages p|us dearness a||owance cash va|ue of food concess|on and reta|n|ng a||owance ConLrlbuLlon
of boLh employer and employee ls same le 12 each ara 29 of l Scheme
Lmp|oyer has to pay h|s contr|but|on to LI ne cannot deduct h|s contr|but|on from wages of the
emp|oyee ara 31 of l Scheme owever he has Lo deducL employee's share from hls salary and
pay Lhe same ln l scheme 1hls deducLlon can be only from Lhe wages perLalnlng Lo perlod for whlch
conLrlbuLlon ls pald owever lf Lhere ls accldenLal omlsslon Lhe amounL can be recovered laLer
AmounL deducLed from salary of employees ls held ln LrusL by Lhe employer or conLracLor ara 32 of
l Scheme
CuL of employer's conLrlbuLlon of 12/10 the Lmp|oyer's contr|but|on of 833 w||| be d|verted to
Lmp|oyees' ens|on Scheme 1he balance wlll be reLalned ln Lhe l scheme 1hus on reLlremenL Lhe
employee wlll geL hls full share plus Lhe balance of mployer's share reLalned Lo hls credlL ln l
accounL 1hls dlverslon ls only wef 16Lh november 93 arller mployer's conLrlbuLlon Lo Lhelr credlL
wlll conLlnue Lo remaln Lo Lhelr credlL
Lower contr|but|on |n certa|n cases 1he employers and employee's conLrlbuLlon ls 12 each 1hls ls
appllcable Lo many of lndusLrles and esLabllshmenLs owever Lhls conLrlbuLlon ls noL appllcable Lo
any esLabllshmenL employlng less Lhan 20 persons any esLabllshmenL reglsLered wlLh 8oard for
lndusLrlal and llnanclal 8econsLrucLlon (8ll8) as a slck company Lhe lower raLe of conLrlbuLlon
conLlnues Llll lLs neL worLh ls poslLlve any oLher esLabllshmenL whlch has accumulaLed loss equal Lo or
more Lhan lLs asseLs and has also suffered cash loss ln lasL Lwo years ln cases of !uLe lndusLry 8eedl
lndusLry 8rlck lndusLry Colr lndusLry oLher Lhan Lhe splnnlng secLor Cuar gum facLorles Lhe
conLrlbuLlon ls 10
Interest on account l Commlssloner shall malnLaln accounL of each member of l scheme ara 39
of Scheme lnLeresL ls credlLed Lo Lhe accounL of employee 1he Interest |s ca|cu|ated on month|y
runn|ng ba|ance bas|s Amount stand|ng to cred|t at end of the month |s cons|dered for ca|cu|at|on of
|nterest for the fo||ow|ng month 1he lnLeresL raLe ls declared every year by CenLral CovernmenL ln
consulLaLlon wlLh CenLral 8oard of 1rusLees of rovldenL lund ara 60 of l Scheme
l for mployees lor new nLranLs
nrolmenL
An employee ls ellglble for membershlp from Lhe day he [olns Lhe covered esLabllshmenL lf Lhe
employee's emolumenLs eceed 8s 6300/ per monLh he has Lhe opLlon Lo [oln Lhe Scheme(s)
wlLh Lhe consenL of employer
eclare prevlous employmenL deLalls lf any ln lorm no 11 Lo Lhe employer
Cn becomlng a member of Lhe Schemes flle deLalls ln lorm no 2 (famlly parLlculars/
nomlnaLlons) Lhrough Lhe employer
lor lsLlng Members nrolmenL
Any change ln Lhe famlly sLaLus such as
Marrlage of Lhe member
AddlLlons / deleLlon ln Lhe famlly
Legal adopLlon of Lhe chlldren
Change of nomlnee ls Lo be flled ln lorm no 2 Lhrough Lhe employer
ln Lhe evenL Lhe member ls holdlng a Scheme CerLlflcaLe (under S 93) he should surrender Lhe same
Lo Lhe concerned lC offlce Lhrough hls employer
A member ls enLlLled Lo varlous beneflLs faclllLles such as wlLhdrawals advances penslons deaLh
lnsurance eLc
mployees' enslon Scheme 1hls scheme has been lnLroduced wef 16Lh november 93 1he Scheme
ls appllcable Lo all subscrlbers of mployers' rovldenL lund lL ls also compulsory Lo persons who were
subscrlbers as on 161193
Contr|but|on 1he employer's conLrlbuLlon of 833 wlll be dlverLed Lo Lhe fund of enslon Scheme
mployee does noL have Lo make any conLrlbuLlon mployer's conLrlbuLlon ls 12 ln such cases 833
ls dlverLed Lo enslon scheme and balance 367 as Lhe case may be wlll be ln credlL of employee's
name ln rovldenL lund accounL 1he 833 |s on max|mum sa|ary of ks 6S00 lf some employers are
paylng conLrlbuLlon on salary ln ecess of 8s 6300 the excess contr|but|on w||| be cred|ted to
rov|dent Iund account and not to ens|on scheme
no separaLe admlnlsLraLlon charges or lnspecLlon charges are payable as Lhese are already pald along
wlLh rovldenL lund conLrlbuLlon
8enef|ts Under 1he Scheme Members wlll geL penslon on superannuaLlon or reLlremenL from servlce
and upon dlsablemenL durlng employmenL lamlly penslon wlll be avallable Lo wldow/wldower for llfe
or Llll he/she remarrles ln addlLlon chlldren wlll be enLlLled Lo penslon upLo 23 years of Lhelr age ln
case of orphans penslon aL enhanced raLe ls avallable upon deaLh of wldow/wldower or ceaslng
paymenL of wldow penslon 8eneflL of penslon Lo chlldren or orphan ls only resLrlcLed for Lwo
chlldren/orphans
lf Lhe person ls unmarrled or has no famlly penslon ls avallable Lo nomlnee for a speclfled perlod
CommuLaLlon of enslon 1he member can commuLe 3333 of Lhe penslon so as Lo recelve hundred
Llmes Lhe monLhly penslon so commuLed as commuLed value of penslon 8alance wlll be pald on
monLhly basls
Lmp|oyees Depos|t L|nked Insurance Scheme 1he purpose of Lhe scheme ls Lo provlde llfe lnsurance
beneflLs Lo employees who are already covered under l/ll 1he employer has pay conLrlbuLlon equal
to 0S0 of the tota| wages of employee's ln addlLlon admlnlsLraLlve charges of 01 of LoLal wages
noLlflcaLlon no AC 303() daLed 2871976 lssued u/s 6C (2) of l AcL
1he emp|oyee does not contr|bute any amount to the scheme 1he salary llmlL for coverage of
employees ls same as LhaL of rovldenL lund
empLlon from Lhe scheme can be obLalned from 8lC lf LlC Croup CraLulLy scheme ls adopLed by
employer |f exempt|on |s granted on|y |nspect|on charges Q 000S are payab|e to I author|t|es
8eneflL Lo nomlnee of employee lf an employee dles durlng employmenL hls nomlnee or famlly
member geLs an amounL equal Lo average balance ln Lhe rovldenL lund AccounL of Lhe deceased
employee durlng lasL 12 monLhs lf such balance ls more Lhan 8s 33000 Lhe lnsurance amounL payable
ls 8s 33000 plus 23 of Lhe amounL ln ecess of 8s 33000 sub[ecL Lo overall llmlL of 8s 60000 lf Lhe
employees are covered under anoLher llfe lnsurance scheme whose beneflLs are beLLer Lhan Lhls
scheme an eempLlon from Lhls scheme can be obLalned lncreased Lo 33000 and 60000 wef
1362000
Lmp|oyees Depos|t L|nked Insurance Scheme
App||cab|||ty 1he Scheme applles Lo all Lhe esLabllshmenLs Lo whlch Lhe mployees rovldenL lund
Scheme applles
Membersh|p All Lhe members of Lhe mployees rovldenL lund Scheme are covered as members of
Lhe mployees eposlL Llnked lnsurance Scheme also
Contr|but|on under Lhls Scheme the members do not contr|bute any amount as contr|but|on
nowever the emp|oyer pays an amount equa| to 0S of the tota| wages pa|d to the members as
contr|but|on
Adm|n|strat|ve Charges As regards AdmlnlsLraLlve charges Lhe employer ls requlred Lo pay an amount
equa| to 001 of the wages sub[ecL Lo a mlnlmum of 8s 2/ per monLh
empLlon (SecLlon 17(2A) of Lhe AcL and ara 28 of mployees eposlL Llnked lnsurance Scheme
1976)
1he provlslons are avallable as per SecLlon 17(2A) of Lhe AcL and para 28(1) and 28(4) of Lhe mployees
eposlL Llnked lnsurance Scheme 1976 for granL of eempLlon Lo an esLabllshmenL or Lo an employee
or Lo a class of employees as Lhe case may be from Lhe operaLlon of all or any of Lhe provlslons of Lhe
Scheme where Lhe Llfe Assurance beneflL of Lhe Scheme ln Lhe esLabllshmenL ls more beneflclal Lhan
Lhe beneflLs provlded under Lhe sLaLuLory Scheme
Inspect|on Charges An employer of an esLabllshmenL eempLed from Lhe provlslons of Lhe mployees
eposlL Llnked lnsurance Scheme ls requlred to pay |nspect|on charges at the rate of 000S sub[ecL Lo
a mlnlmum of 8e1/ per monLh
Assurance 8enef|t 1he beneflL provlded under Lhe mployees eposlL Llnked lnsurance Scheme ls
called Assurance 8eneflL Cn Lhe deaLh of Lhe member whlle ln servlce Lhe nomlnee or any oLher person
enLlLled Lo recelve Lhe rovldenL lund beneflLs wlll ln addlLlon Lo Lhe rovldenL lund recelve Lhe
Assurance 8eneflL under mployees eposlL Llnked lnsurance Scheme
Sca|e of Assurance 8enef|t lrom 1493 onwards Lhe amounL of Assurance 8eneflL payable ls an
amounL equal Lo Lhe average balance ln Lhe amounL of deceased ln Lhe lund durlng Lhe precedlng 12
monLhs or durlng Lhe perlod of hls membershlp whlchever ls less ecepL where Lhe average balance
eceeds 8s 23000/ amounL payable shall be 8s 23000/ plus 23 of Lhe amounL ln ecess of
8s23000/ sub[ecL Lo a celllng of 8s 63000/ 1he lorm prescrlbed for clalmlng Lhe Assurance 8eneflLs
under Lhe mployees eposlL Llnked lnsurance Scheme 1976 ls lorm 3(ll)
What are the per|od|ca| returns to be sent by an emp|oyer to the rov|dent Iund Cff|ce?
1he employer of an uneempLed esLabllshmenL has Lo forward Lhe followlng reLurns 1hese reLurns wlll
lnclude deLalls requlred under Lhe Lhree schemes namely mployees rovldenL lund Scheme 1932
mployee eposlL Llnked lnsurance Scheme 1976 and mployee enslon Scheme 1993
a) Iorm9(kev|sed)
1he deLalls of employees enrolled as members of mployees rovldenL lundS32 mployees eposlL
Llnked lnsurance76 mployees enslon Scheme93 on coverage of Lhe esLabllshmenL 1hls ls Lo be
submlLLed lmmedlaLely afLer coverage wlLhln 13 days of coverage
b) Iorm 12A
1he deta||s of the contr|but|ons recovered from the members pa|d a|ong w|th deta||s of emp|oyers
contr|but|on adm|n|strat|ve charges 1h|s |s to be subm|tted month|y by 2Sth of fo||ow|ng month
c) IormS
1he deta||s of the emp|oyees enro||ed new|y to the rov|dent Iund 1o be subm|tted a|ong w|th Iorm
12A every month w|th|n 1S days of the fo||ow|ng month
d) Iorm10
1he deta||s of the emp|oyees |eav|ng serv|ce dur|ng the month 1o be subm|tted a|ong w|th form12A
e) Cha||ans
1he LrlpllcaLe copy of challans ln Loken of havlng remlLLed Lhe rovldenL lund dues ln Lhe bank Lo be
submlLLed along wlLh form12A every monLh
f) Iorm2(kev|sed)
Nom|nat|on form 1o be submlLLed along wlLh form3/9
g) Iorm3A
1he deLalls of wages conLrlbuLlons ln respecL of each member Lo be prepared flnanclal year wlse 1o
be submlLLed Lo Lhe rovldenL lund offlce by 30th of Apr|| every year
h) Iorm6A
lL ls ?early consolldaLed sLaLemenL of conLrlbuLlons 1o be forwarded yearly along wlLh form3A lL
should be ensured LhaL all Lhe form3A are enLered ln form6A lrrespecLlve of wheLher Lhe form3A was
forwarded for Lhe broken perlod and Lhe LoLal dues as per Lhe form12A for Lhe whole year agrees wlLh
Lhe LoLal of form6A wlLhln 30Lh Aprll
|) IormSA
8eLurn of ownershlp of Lhe esLabllshmenL 1o be forwarded lmmedlaLely afLer coverage whenever
Lhere ls a change ln Lhe ownershlp lL has Lo be lnLlmaLed wlLh ln 13 days of change
) Spec|men s|gnature
Speclmen slgnaLure of Lhe offlcer/offlcers who are auLhorlzed Lo slgn Lhe reLurns/documenLs relaLlng Lo
rovldenL lund forwarded lmmedlaLely afLer coverage whenever Lhere ls a change ln auLhorlzed
offlcer
1nL LMLCLLS S1A1L INSUkANCL AC1 (LSI AC1) 1948
1he Sl AcL has been passed Lo provlde for cerLaln beneflLs Lo employees ln case of slckness maLernlLy
and employmenL ln[ury and Lo make provlslons for relaLed maLLers As Lhe name suggesLs lL ls baslcally
an 'lnsurance' scheme le employee geLs beneflLs lf he ls slck or dlsabled
no lsmlssal or unlshmenL urlng erlod of Slckness SecLlon 73 of Lhe AcL provldes LhaL no employer
shall dlsmlss dlscharge or reduce or oLherwlse punlsh an employee durlng Lhe perlod employee ls ln
recelpL of slckness beneflL or maLernlLy beneflL e also cannoL dlsmlss dlscharge or oLherwlse punlsh
employee when he ls ln recelpL of dlsablemenL beneflL or ls under medlcal LreaLmenL or ls absenL from
work due Lo slckness
App||cab|||ty of LSI Scheme 1he scheme ls app||cab|e to a|| factor|es SecLlon 1(4) 1he ApproprlaLe
CovernmenL can also make lL appllcable Lo any oLher lndusLrlal commerclal agrlculLural or oLher
esLabllshmenLs by lssulng noLlflcaLlon and glvlng 6 monLh noLlce SecLlon 1(3)
1hus Sl AcL can be made app||cab|e to 'shops' a|so owever slnce CovernmenL has Lo provlde for
hosplLals and medlcal faclllLles Lhe AcL can be made appllcable Lo dlfferenL parLs of SLaLe aL dlfferenL
daLes 1hus lf a facLory ls aL a place where SlC ls unable Lo provlde medlcal faclllLles Sl AcL may noL be
made appllcable Lo LhaL area
keg|ona| Cff|ces ] 8ranch Cff|ces Get Covered 8eglonal offlces of a facLory whlch have Lhelr
connecLlon Lo Lhe facLory and where Lhe rlnclpal mployer has conLrol over Lhe reglonal offlces Lhe
reglonal offlces wlll be covered under SlC yderabad AsbesLos CemenL roducLs v SlC Al8 1978 SC
336 (1978) 2 SC8 343 (1978) 1 SCC 194 If head off|ce |s covered under LSIC branch off|ces are a|so
covered when branch and pr|nc|pa| off|ce are |nterdependent and there |s un|ty of re|at|onsh|p
1ransporL CorporaLlon of lndla v SlC 1999(7) SCAL 63 2000 LL8 113 83 lL8 970 1999 Al8 SCW
4340 Al8 2000 SC 238 (SC 3 member bench)
CuLslde agencles can be covered ln M aLel v uCl (1986) 1 SCC 32 A8 1987 SC 447 1983 ll CL8 322
(SC) workers were glven work of maklng bldls as home 8lghL of re[ecLlon of bldls was wlLh employer lL
was held LhaL LesL of conLrol and supervlslon lles ln Lhe rlghL of re[ecLlon lL was held LhaL employees
worklng ouLslde can be covered under SlC lf Lhere ls masLer servanL relaLlonshlp
eflnlLlon of 'facLory' as per Sl AcL 1he 'lacLory' means any premlses where manufacLurlng process ls
carrled ouL lf manufacLure ls wlLhouL ald of power Lhe AcL ls appllcable lf persons employed are aL leasL
20 lf manufacLure ls wlLh ald of power Lhe AcL applles lf persons employed are aL leasL 10 SecLlon
2(12) owever 'mlnes' have been ecluded ManufacLurlng process has same meanlng as deflned
under lacLorles AcL SecLlon 2(14AA)
Cnce a factory or estab||shment |s covered |t cont|nues to be covered even |f number of emp|oyees
reduces SecLlon 1(6)
ConsLrucLlon Workers noL Covered ConsLrucLlon workers employed ln consLrucLlon acLlvlLles are noL
covered under SlC SlC clrcular no 12(11)11/27/99 lnslv daLed 1461999 owever lf
admlnlsLraLlve offlce employs 20 or more ellglble employees that estab||shment and emp|oyees
work|ng |n adm|n|strat|ve off|ce w||| be covered
mployer under Sl AcL 'rlnclpal mployer' means owner or occupler of facLory ead of deparLmenL
ln case of CovernmenL deparLmenL and erson responslble for supervlslon and conLrol ln case of any
oLher esLabllshmenL SecLlon 2(17) mployees worklng Lhough conLracLor are also covered
'ConLracLor' ls Lermed as 'lmmedlaLe mployer' 'lmmedlaLe employer' means a person who has
underLaken Lhe eecuLlon on Lhe premlses of facLory or esLabllshmenL Lo whlch Lhls AcL applles e may
do on hls own or under Lhe supervlslon of rlnclpal mployer 1he work should be parL of work of
facLory or esLabllshmenL of prlnclpal employer or ls prellmlnary or lncldenLal Lo Lhe work of facLory or
esLabllshmenL SecLlon 2(13) rlmary llablllLy of Sl conLrlbuLlon ls of rlnclpal mployer SecLlon
40(1) e can recover Lhe conLrlbuLlon pald by hlm from Lhe 'lmmedlaLe employer' le conLracLor
SecLlon 41
Lmp|oyee under LSI Act 'mployee' means any person employed for wages ln or ln connecLlon wlLh
work of a facLory or esLabllshmenL Lo whlch Lhe Sl AcL applles mployees drawlng wages upLo 8s
13000 per monLh are covered under Lhe Sl AcL scheme SecLlon 2(9) mployees lnclude persons
employed Lhrough conLracLor ApprenLlces oLher Lhan Lhose covered under 'ApprenLlces AcL' ersons
employed ln admlnlsLraLlon offlce deparLmenL or branch for purchase or sale of producLs Casual
workers engaged ln work lncldenLal Lo or connecLed wlLh work of facLory or esLabllshmenL mployees
worklng aL head offlce when facLory ls locaLed aL dlfferenL place CanLeen sLaff waLch and ward sLaff are
employees SLaff ln hosplLal aLLached Lo facLory are employees Members of lndlan naval MlllLary or Alr
lorces are ecluded
Io||ow|ng are not Lmp|oyees ersons drawlng wages over 8s 13000 per monLh member of Army
navy or Alr lorce arLners of flrm are noL employees even lf Lhey are drawlng wages 8 SlC v
8amanu[a MaLch lndusLry Al8 1983 SC 278 1983(1) SCC 218 1998(6) SCAL 38 ersons employed ln
CovernmenL esLabllshmenLs consLrucLlon workers engaged ln ralslng addlLlonal bulldlng subsequenL Lo
lnlLlal seL up of facLory
Contr|but|on to LSIC Iund 8oLh employee and employer have Lo make conLrlbuLlon Lo SlC 1he
employer has Lo deducL conLrlbuLlon from wages of employee and pay Lo SlC boLh Lhe employer's
conLrlbuLlon as well as employees' conLrlbuLlon SecLlon 39(1)
1he conLrlbuLlon ls payable for 'wage perlod' le Lhe perlod ln respecL of whlch wages are payable Lo
employee SecLlon 39(2) normally 'wage perlod' ls a monLh 1he emp|oyee's contr|but|on |s 17S of
wages lL should be rounded off Lo neL 3 palse mployees conLrlbuLlon ls noL payable when dally
wages are below 8s 13/
Lmp|oyer's contr|but|on |s 47S of tota| wage b||| of a|| emp|oyees |n respect of every wage per|od
1hus lL ls noL necessary Lo calculaLe employers conLrlbuLlon separaLely for each employee 473 of
gross wages should be calculaLed and rounded off Lo neL 3 palse mployees drawlng wages lower Lhan
8s 23 per day do noL have Lo pay employees share 1he contr|but|on has to be pa|d w|th|n 21 days
from c|ose of the month lL ls payable by a challan ln auLhorlzed bank lf Lhe conLrlbuLlon ls noL pald ln
Llme lnLeresL [ 12 ls payable SecLlon 39(3)(a)
ln addlLlon SlC auLhorlLles can lmpose 'damages' varylng from 3 Lo 23 of arrears of conLrlbuLlon u/s
838
mployer cannoL deducL employer's conLrlbuLlon from Lhe salary of employee SecLlon 40(3)
LlablllLy of rlnclpal mployer ln case of employees of conLracLor llablllLy ls of rlnclpal mployer ln
8rlLannla lndusLrles v SlC (2001) 98 l!8 320 (Mad C) lL was held LhaL rlnclpal mployer wlll be llable
Lo penalLy and damages also lf conLrlbuLlon ls noL pald on due daLe
Wage for purpose of LSI Act 'Wages' means a|| remunerat|on pa|d or payab|e |n cash to emp|oyee
accord|ng to terms of contract of emp|oyment and |nc|udes any payment made to an emp|oyee |n
respect of per|od of author|zed |eave |ockout |ayoff str|ke wh|ch |s not |||ega| and other add|t|ona|
remunerat|on pa|d at |nterva| not exceed|ng two months It does not |nc|ude contr|but|on pa|d by
emp|oyer to any pens|on fund or prov|dent fund 1rave|||ng a||owance ke|mbursement of expenses
made by nature of emp|oyment of the emp|oyee gratu|ty SecLlon 2(22)
1hus wages |nc|ude bas|c pay dearness a||owance c|ty compensatory a||owance payment of day of
rest overt|me wages house rent a||owance |ncent|ve a||owance attendance bonus mea| a||owance
and |ncent|ve bonus nowever wages do not |nc|ude annua| bonus un||atera| rewards scheme (|nam)
ex grat|a payments made every quarter or every year trave|||ng a||owance retrenchment
compensat|on encashment of |eave and gratu|ty
Contr|but|on per|od and 8enef|t per|od ConLrlbuLlon perlod ls (a) 1sL SepLember Lo 31sL March (b) 1sL
Aprll Lo 30Lh SepLember 1he correspondlng beneflL perlod ls (a) followlng 1sL !uly Lo 31sL ecember (b)
followlng 1sL !anuary Lo 30Lh !une 1hus 'beneflL perlod' sLarLs Lhree monLhs afLer Lhe 'conLrlbuLlon
perlod' are over 1he relevance of Lhls deflnlLlon ls LhaL slckness beneflL and maLernlLy beneflL ls
avallable only durlng 'beneflL perlod' 1hus an employee geLs Lhese beneflLs only afLer 9 monLhs afLer
[olnlng employmenL and paylng conLrlbuLlon owever oLher beneflLs are avallable durlng conLrlbuLlon
perlod also
8eneflLs Lo employees covered under Sl AcL An employee ls enLlLled Lo geL beneflLs whlch are medlcal
beneflLs as well as cash beneflLs e also can geL dlsablemenL beneflL
AMLN1 CI GkA1UI1 AC1 1972
CraLulLy ls a lump sum paymenL Lo employee when he reLlres or leaves servlce lL ls baslcally a
reLlremenL beneflL Lo an employee so LhaL he can llve llfe comforLably afLer reLlremenL owever under
CraLulLy AcL graLulLy ls payable even Lo an employee who reslgns afLer compleLlng aL leasL 3 years of
servlce
ln 1C 8eLlred mployees v elhl 1ransporL CorporaLlon 2001(4) SCAL 30 2001 Al8 SCW 2003 lL was
observed LhaL graLulLy ls essenLlally a reLlrlng beneflL whlch as per SLaLuLe has been made appllcable on
volunLary reslgnaLlon as well CraLulLy ls reward for good efflclenL and falLhful servlce rendered for a
conslderable perlod
Lmp|oyers ||ab|e under the scheme 1he AcL applles Lo every facLory mlne planLaLlon porL and
8allway Company lL also applles Lo every shop and esLabllshmenL where 10 or more persons are
employed or were employed on any day ln precedlng 12 monLhs SecLlon1 (3) Slnce Lhe AcL ls also
appllcable Lo all shops and esLabllshmenLs lL wlll apply Lo moLor LransporL underLaklngs clubs
chambers of commerce and assoclaLlons local bodles sollclLor's offlces eLc lf Lhey are employlng 10 or
more persons
mployees ellglble for graLulLy 'mployee' means any person (other than apprent|ce) employed on
wages ln any esLabllshmenL facLory mlne ollfleld planLaLlon porL rallway company or shop Lo do any
skllled semlskllled or unskllled manual supervlsory Lechnlcal or clerlcal work wheLher Lerms of such
employmenL are epress or lmplled and wheLher such person ls employed ln a managerlal or
admlnlsLraLlve capaclLy owever lL does noL lnclude any CenLral/SLaLe CovernmenL employee SecLlon
2(e) 1hus the Act |s app||cab|e to a|| emp|oyees workers as we|| as persons emp|oyed |n
adm|n|strat|ve and manager|a| capac|ty
CraLulLy ls payable Lo a person on (a) reslgnaLlon (b) LermlnaLlon on accounL of deaLh or dlsablemenL
due Lo accldenL or dlsease (c) reLlremenL (d) deaLh normally graLulLy ls payable only afLer an employee
compleLes flve years of conLlnuous servlce ln case of deaLh and dlsablemenL Lhe condlLlon of mlnlmum
3 years' servlce ls noL appllcable SecLlon 4(1)
1he AcL ls appllcable Lo all employees lrrespecLlve of Lhe salary
Amount of gratu|ty payab|e Gratu|ty |s payab|e Q 1S days wages for every year of comp|eted serv|ce
In the |ast year of serv|ce |f the emp|oyee has comp|eted more than 6 months |t w||| be treated as fu||
year for purpose of gratu|ty ln case of seasonal esLabllshmenL graLulLy ls payable [ 7 days wages for
each season SecLlon 4(2)
Wages sha|| cons|st of bas|c p|us DA as per |ast drawn sa|ary nowever a||owances ||ke bonus
comm|ss|on nkA overt|me etc are not to be cons|dered for ca|cu|at|ons SecLlon 2(s)
ln case of employees pald on monLhly wages basls per day wages should be calculaLed by dlvldlng
monLhly salary by 26 days Lo arrlve aL dally wages eg lf lasL drawn salary of a person (baslc plus A) ls
8s 2600 per monLh hls salary per day wlll be 8s 100 (2600 dlvlded by 100) 1hus Lhe employee ls
enLlLled Lo geL 8s 1300 13 days mulLlplled by 8s 100 dally salary for every year of compleLed servlce
lf he has compleLed 30 years of servlce he ls enLlLled Lo geL graLulLy of 8s 43000 (8s 1300 mulLlplled
by 30) Malmum graLulLy payable under Lhe AcL ls 8s 330 lakhs (Lhe celllng was 8s 100000 whlch was
lncreased Lo 230 lakhs on 24997 by an ordlnance whlch was laLer lncreased Lo 8s 330 lakhs whlle
converLlng Lhe ordlnance lnLo AcL
Malmum CraLulLy ayable Max|mum gratu|ty payab|e |s ks 10 |akhs SecLlon 4(3) Cf course
emp|oyer can pay more mployee has also rlghL Lo geL more lf obLalnable under an award or conLracL
wlLh employer as made clear ln SecLlon 4(3)
no Compulsory lnsurance of graLulLy llablllLy SecLlon 4A provldes LhaL every employer musL obLaln
lnsurance of hls graLulLy llablllLy wlLh LlC or any oLher lnsurer owever CovernmenL companles need
noL obLaln such lnsurance lf an employee ls already member of graLulLy fund esLabllshed by an
employer he has opLlon Lo conLlnue LhaL arrangemenL lf an employer employlng more Lhan 300
persons esLabllshes an approved graLulLy fund he need noL obLaln lnsurance for graLulLy llablllLy
owever Lhls SecLlon has noL yeL been broughL lnLo force ence presenLly such compulsory lnsurance
ls noL necessary
CraLulLy cannoL be aLLached CraLulLy payable cannoL be aLLached ln eecuLlon of any decree or order
of any clvll revenue or crlmlnal courL as per SecLlon 13 of Lhe AcL
ayment of 8onus Act 196S
ln lLs declslon Lhe LA1 lald down Lhe prlnclples lnvolved ln Lhe granL of bonus Lo workers 1hese
prlnclples are known as Lhe LA1 lormula Accordlng Lo Lhe formula Lhe followlng prlor charges were Lo
be deducLed from gross proflLs
rovlslon for depreclaLlon
8eserve for rehablllLaLlon
8eLurn of 6 per cenL on Lhe pald up caplLal and
8eLurn on Lhe worklng caplLal aL a lower raLe Lhan Lhe reLurn on paldup caplLal
1he balance lf any was called avallable surplus" and Lhe workmen were Lo be awarded a reasonable
share ouL of lL by way of bonus for Lhe year
8onus has become almosL as deferred wages due Lo provlslon of payment of m|n|mum 833 and
max|mum 20 bonus
1he AcL ls appllcable Lo (a) any facLory employlng 10 or more persons where any processlng ls carrled
ouL wlLh ald of power (b) CLher esLabllshmenLs (esLabllshed for purpose of proflL) employlng 20 or more
persons Mlnlmum bonus payable ls 833 and malmum ls 20 8onus ls payable annually wlLhln 8
monLhs from close of accounLlng year 8onus |s payab|e to a|| emp|oyees whose sa|ary or wages do not
exceed ks 3S00 per month prov|ded they have worked for at |east 30 days |n the account|ng year
nowever for ca|cu|at|on of bonus max|mum sa|ary of ks 2S00 |s cons|dered
Cnce the Act |s app||cab|e |t cont|nues to app|y even |f number of emp|oyees fa|| be|ow 20 1he AcL ls
appllcable Lo CovernmenL companles and corporaLlons owned by CovernmenL whlch produces goods or
renders servlces ln compeLlLlon wlLh prlvaLe secLor owever Lhe AcL ls noL appllcable Lo CovernmenL
employees Lhe employees of Munlclpal CorporaLlon or MunlclpallLy rallway employees unlverslLy and
employees of educaLlonal lnsLlLuLlons publlc secLor lnsurance employees employees of 88l and publlc
secLor flnanclal lnsLlLuLlons charlLable hosplLals soclal welfare organlzaLlons and defense employees
1he AcL does noL apply Lo any lnsLlLuLlon esLabllshed noL for purposes of proflL
sLabllshmenLs Lo whlch Lhe AcL ls appllcable 1he AcL applles Lo (a) every facLory and (b) every oLher
esLabllshmenL ln whlch LwenLy or more persons are employed on any day durlng an accounLlng year
SecLlon 1(3)
AcL noL Lo apply Lo cerLaln classes of employees SecLlon 32 of Lhe AcL provldes LhaL Lhe AcL shall noL
apply Lo Lhe followlng classes of employees
mployees employed by any lnsurer carrylng on general lnsurance buslness and Lhe employees
employed by Lhe Llfe lnsurance CorporaLlon of lndla
Seamen as deflned ln clause (42) of SecLlon 3 of Lhe MerchanL Shlpplng AcL 1938
mployees reglsLered or llsLed under any scheme made under Lhe ock Workers (8egulaLlon of
mploymenL) AcL 1948 and employed by reglsLered or llsLed employers
mployees employed by an esLabllshmenL engaged ln any lndusLry called on by or under Lhe
auLhorlLy of any deparLmenL of CenLral CovernmenL or a SLaLe CovernmenL or a local auLhorlLy
1he lndlan 8ed Cross SocleLy or any oLher lnsLlLuLlon of a llke naLure lncludlng lLs branches
unlverslLles and oLher educaLlonal lnsLlLuLlons
lnsLlLuLlons (lncludlng hosplLals chambers of commerce and soclal welfare lnsLlLuLlons)
esLabllshed noL for Lhe purpose of proflL
mployees employed Lhrough conLracLors on bulldlng operaLlons
mployees employed by Lhe 8eserve 8ank of lndla
1he lndusLrlal llnance CorporaLlon of lndla
Any llnanclal CorporaLlon esLabllshed under SecLlon 3 or any !olnL llnanclal CorporaLlon
esLabllshed under SecLlon 3A of Lhe SLaLe llnanclal CorporaLlons AcL 1961
1he eposlL lnsurance CorporaLlon
1he naLlonal 8ank for AgrlculLure and 8ural evelopmenL
1he unlL 1rusL of lndla
1he lndusLrlal evelopmenL 8ank of lndla
1he Small lndusLrles evelopmenL 8ank of lndla esLabllshed under SecLlon 3 of Lhe Small
lndusLrles evelopmenL 8ank of lndla AcL 1989
1he naLlonal ouslng 8ank
Any oLher flnanclal lnsLlLuLlon (oLher Lhan 8anklng Company) belng an esLabllshmenL ln publlc
secLor whlch Lhe CenLral CovernmenL may by noLlflcaLlon speclfy havlng regard Lo (l) lLs caplLal
sLrucLure (ll) lLs ob[ecLlves and Lhe naLure of lLs acLlvlLles (lll) Lhe naLure and eLenL of flnanclal
asslsLance or any oLher concesslon glven Lo lL by Lhe CovernmenL and (lv) any oLher relevanL
facLor
AparL from Lhe above Lhe approprlaLe CovernmenL has necessary powers under SecLlon 36 Lo eempL
any esLabllshmenL or class of esLabllshmenLs from all or any of Lhe provlslons of Lhe AcL for a speclfled
perlod havlng regard Lo lLs flnanclal poslLlon and oLher relevanL clrcumsLances and lL ls of Lhe oplnlon
LhaL lL wlll noL be ln Lhe publlc lnLeresL Lo apply all or any of Lhe provlslons of Lhls AcL LhereLo lL may
also lmpose such condlLlons whlle accordlng Lhe eempLlons as lL may conslder flL Lo lmpose
A||ocab|e Surp|us
lL means (a) ln relaLlon Lo an employer belng a company (oLher Lhan a banklng company) whlch has not
made Lhe arrangemenLs prescrlbed under Lhe lncomeLa AcL for Lhe declaraLlon and paymenL wlLhln
lndla of Lhe dlvldends payable ouL of lLs proflLs ln accordance wlLh Lhe provlslons of SecLlon 194 of LhaL
AcL 67 of Lhe avallable surplus ln an accounLlng year
(b) ln any oLher case 60 of such avallable surplus SecLlon 2(4)
Ava||ab|e Surp|us
lL means Lhe avallable surplus under SecLlon 3 SecLlon 2(6)
Award
Award" means an lnLerlm or a flnal deLermlnaLlon of any lndusLrlal dlspuLe or of any quesLlon relaLlng
LhereLo by any Labor CourL lndusLrlal 1rlbunal or naLlonal 1rlbunal consLlLuLed under Lhe lndusLrlal
lspuLes AcL 1947 or by any oLher auLhorlLy consLlLuLed under any correspondlng law relaLlng Lo
lnvesLlgaLlon and seLLlemenL of lndusLrlal dlspuLes ln force ln a SLaLe and lncludes an arblLraLlon award
made under SecLlon 10A of LhaL AcL or under LhaL law SecLlon 2(7)
Lmp|oyee mployee" means any person (oLher Lhan an apprenLlce) employed on a salary or wages
noL eceedlng 8s3300 per mensem ln any lndusLry Lo do any skllled or unskllled manual supervlsory
managerlal admlnlsLraLlve Lechnlcal or clerlcal work or hlre or reward wheLher Lhe Lerms of
employmenL be epress or lmplled SecLlon 2(13)
art t|me permanent emp|oyees work|ng on f|xed hours are emp|oyees
Lmp|oyer mployer" lncludes
ln relaLlon Lo an esLabllshmenL whlch ls a facLory Lhe owner or occupler of Lhe facLory lncludlng
Lhe agenL of such owner or occupler Lhe legal represenLaLlve of a deceased owner or occupler
and where a person has been named as a manager of Lhe facLory under clause (f) of SubsecLlon
7(1) of Lhe lacLorles AcL 1948 Lhe person so named and
ln relaLlon Lo any oLher esLabllshmenL Lhe person who or Lhe auLhorlLy whlch has Lhe ulLlmaLe
conLrol over Lhe affalrs of Lhe esLabllshmenL and where Lhe sald affalrs are enLrusLed Lo a
manager managlng dlrecLor or managlng agenL such manager managlng dlrecLor or managlng
agenL SecLlon 2(14)
Sa|ary or Wages
1he Salary or Wage" means all remuneraLlon (oLher Lhan remuneraLlon ln respecL of overLlme work)
capable of belng epressed ln Lerms of money whlch would lf Lhe Lerms of employmenL epress or
lmplled were fulfllled be payable Lo an employee ln respecL of hls employmenL or of work done ln such
employmenL and lncludes dearness allowance (LhaL ls Lo say all cash paymenLs by whaLever name
called pald Lo an employee on accounL of a rlse ln Lhe cosL of llvlng) buL does not |nc|ude
any oLher allowance whlch Lhe employee ls for Lhe Llme belng enLlLled Lo
Lhe value of any house accommodaLlon or of supply of llghL waLer medlcal aLLendance or any
oLher amenlLy or of any servlce or of any concesslonal supply of food gralns or oLher arLlcles
any Lravellng concesslon
any bonus (lncludlng lncenLlve producLlon and aLLendance bonus)
any conLrlbuLlon pald or payable by Lhe employer Lo any penslon fund or provldenL fund or for
Lhe beneflL of Lhe employee under any law for Lhe Llme belng ln force
any reLrenchmenL compensaLlon or any graLulLy or oLher reLlremenL beneflL payable Lo Lhe
employee or any egraLla paymenL made Lo hlm
any commlsslon payable Lo Lhe employee SecLlon 2(21)
'lacLory' has same meanlng as per lacLorles AcL SecLlon 2(17) of 8onus AcL
1he words used are 'number of persons employed' ence all persons employed are Lo be consldered
lncludlng Lhose who are noL ellglble for bonus 1hus all employees lncludlng Lhose whose salary or
wages eceed 8s 3300 per annum wlll have Lo be consldered for purpose of decldlng ellglblllLy
sLabllshmenL ln publlc secLor covered only ln cerLaln cases 1he AcL applles Lo esLabllshmenL ln publlc
secLor only lf Lhe esLabllshmenL ln publlc secLor sells Lhe goods or renders servlces ln compeLlLlon wlLh
an esLabllshmenL ln prlvaLe secLor and Lhe lncome from such sale or servlces or boLh ls noL less Lhan
LwenLy per cenL of Lhe gross lncome of Lhe esLabllshmenL ln publlc secLor for LhaL year SecLlon 20(1)
ln oLher cases Lhe provlslons of Lhls AcL do noL apply Lo Lhe employees employed by any esLabllshmenL
ln publlc secLor SecLlon 20(2) As per secLlon 32(v)(c) Lhe AcL does noL apply Lo any lnsLlLuLlon
esLabllshed noL for purposes of proflL
sLabllshmenL ln publlc secLor means an esLabllshmenL owned conLrolled or managed by (a) a
CovernmenL company as deflned ln secLlon 617 of Lhe Companles AcL 1936 (1 of 1936) (b) a
corporaLlon ln whlch noL less Lhan forLy per cenL of lLs caplLal ls held (wheLher slngly or Laken LogeLher)
by Lhe CovernmenL or Lhe 8eserve 8ank of lndla or a corporaLlon owned by Lhe CovernmenL or Lhe
8eserve 8ank of lndla SecLlon 2(16) sLabllshmenL whlch ls noL ln publlc secLor ls 'esLabllshmenL ln
prlvaLe secLor' secLlon 2(13)
CorporaLlon" means any body corporaLe esLabllshed by or under any CenLral rovlnclal or SLaLe AcL buL
does noL lnclude a company or a cooperaLlve socleLy SecLlon 2(11)
Lstab||shments to |nc|ude departments undertak|ngs and branches Where an esLabllshmenL conslsLs
of dlfferenL deparLmenLs or underLaklngs or has branches wheLher slLuaLed ln Lhe same place or ln
dlfferenL places all such deparLmenLs or underLaklngs or branches shall be LreaLed as parLs of Lhe same
esLabllshmenL for Lhe purpose of compuLaLlon of bonus under Lhls AcL SecLlon 3
Who are e||g|b|e for bonus Lmp|oyees draw|ng sa|ary or wages upto ks 3S00 per month are ent|t|ed
to bonus |f he has worked for at |east 30 work|ng days |n an account|ng year ven a worker worklng ln
seasonal facLory ls ellglble lf he has worked for aL leasL 30 worklng days ApprenLlces are noL ellglble for
bonus
Sa|ary above ks 2S00 |s not cons|dered for ca|cu|at|on of 8onus SecLlon 12 mployee drawlng
salary/wage eceedlng 8s 3300 ls noL enLlLled Lo any bonus under Lhe AcL
1hus m|n|mum bonus Q 833 w||| be ks 2S00 and max|mum Q 20 w||| be ks 6000 for the year
when sa|ary of emp|oyee exceeds ks 2S00 but |s |ess than ks 3S00
Dut|es ] k|ghts of Lmp|oyer
DU1ILS
1o calculaLe and pay Lhe annual bonus as requlred under Lhe AcL
1o subm|t an annu| return of bonus pa|d to emp|oyees dur|ng the year |n Iorm D to the
Inspector w|th|n 30 days of exp|ry of t|me ||m|t spec|f|ed for payment of bonus
1o cooperaLe wlLh Lhe lnspecLor produce before hlm Lhe reglsLers/records malnLalned and
such oLher lnformaLlon as may be requlred by Lhem
1o geL accounL audlLed as per Lhe dlrecLlons of a Labor CourL/1rlbunal or any such oLher
auLhorlLy
kIGn1S
An employer has Lhe followlng rlghL Lo forfelL bonus of an employee who has been dlsmlssed
from servlce for fraud rloLous or vlolenL behavlor or LhefL mlsapproprlaLlon or saboLage of any
properLy of Lhe esLabllshmenL
8lghL Lo make permlsslble deducLlons from Lhe bonus payable Lo an employee such as
fesLlval/lnLerlm bonus pald and flnanclal loss caused by mlsconducL of Lhe employee
8lghL Lo refer any dlspuLes relaLlng Lo appllcaLlon or lnLerpreLaLlon of any provlslon of Lhe AcL Lo
Lhe Labor CourL or Labor 1rlbunal
Computat|on of amount ava||ab|e for d|str|but|on as bonus 1he esLabllshmenL has Lo prepare a
balance sheeL and proflL and loss accounL of Lhe year and ca|cu|ate the 'gross prof|t' 'ava||ab|e surp|us'
and 'a||ocab|e surp|us' as per method and formu|a g|ven |n 8onus Act
1he method for ca|cu|at|on of annua| bonus |s as fo||ow
1) CalculaLe Lhe gross proflL ln Lhe manner speclfled ln llrsL Schedule ln case of a banklng
company or Second Schedule ln any oLher case
2) CalculaLe Lhe Avallable Surplus
Ava||ab|e Surp|us A+8 where A Cross roflL epreclaLlon admlsslble u/s 32 of Lhe lncome La AcL
evelopmenL allowance lrecL Laes payable for Lhe accounLlng year (calculaLed as per Sec7) Sums
speclfled ln Lhe 1hlrd Schedule
8 lrecL 1aes (calculaLed as per Sec 7) ln respecL of gross proflLs for Lhe lmmedlaLely precedlng
accounLlng year lrecL 1aes ln respecL of such gross proflLs as reduced by Lhe amounL of bonus for
Lhe lmmedlaLely precedlng accounLlng year
3) CalculaLe Allocable Surplus
Allocable Surplus 60 of Avallable Surplus 67 ln case of forelgn companles
Make ad[usLmenL for 'SeLon' and 'SeLoff' lor calculaLlng Lhe amounL of bonus ln respecL of an
accounLlng year allocable surplus ls compuLed afLer conslderlng Lhe amounL of seL on and seL off from
Lhe prevlous years as lllusLraLed ln lourLh Schedule
1he allocable surplus so compuLed ls dlsLrlbuLed amongsL Lhe employees ln proporLlon Lo salary or
wages recelved by Lhem durlng Lhe relevanL accounLlng year
4) ln case of an employee recelvlng salary or wages above 8s 2300 Lhe bonus payable ls Lo be
calculaLed as lf Lhe salary or wages were 8s 2300 pm only
Set off and set on prov|s|ons lL may happen LhaL ln some years Lhe allocable surplus ls more Lhan Lhe
amounL pald Lo employees as bonus calculaLlng lL [ 20 Such ecess 'allocable surplus' ls carrled
forward Lo neL year for calculaLlon purposes 1hls ls called 'carry forward for belng seL on ln succeedlng
years' 1he celllng on seL on LhaL ls requlred Lo be carrled forward ls 20 of LoLal salary and wages of
employees employed ln Lhe esLabllshmenL ln oLher words even lf acLual ecess ls more Lhan 20 of
salary/wages only 20 ls requlred Lo be carrled forward 1he amounL seL on ls carrled forward only
upLo and lncluslve of Lhe fourLh accounLlng year lf Lhe amounL carrled forward ls noL uLlllzed ln LhaL
perlod lL lapses secLlon 13(1)
Slmllarly ln a parLlcular year Lhere may be lower 'allocable surplus' or no 'allocable surplus' even for
paymenL of 833 bonus Such shorLfall ls also carrled Lo neL year 1hls ls called 'carry forward for belng
seL off ln succeedlng years' 1hus ln every year 'allocable surplus' ls calculaLed 1o Lhls amounL seL on
from prevlous years ls added Slmllarly seL off lf any from prevlous years ls deducLed 1hls glves
amounL whlch ls avallable for dlsLrlbuLlon as bonus 1he amounL seL off ls carrled forward only upLo and
lncluslve of Lhe fourLh accounLlng year lf Lhe amounL carrled forward ls noL seL off ln LhaL perlod lL
lapses SecLlon 13(2)
M|n|mum bonus very employer shall be bound Lo pay Lo every employee ln respecL of any accounLlng
year a mlnlmum bonus whlch shall be 833 per cent of the sa|ary or wage earned by the emp|oyee
dur|ng the account|ng year or one hundred rupees wh|chever |s h|gher wheLher or noL Lhe employer
has any allocable surplus ln Lhe accounLlng year Where an employee has noL compleLed flfLeen years of
age aL Lhe beglnnlng of Lhe accounLlng year Lhe mlnlmum bonus payable ls 833 or 8s 60 whlchever ls
hlgher SecLlon 10
Whlle compuLlng number of worklng days an employee shall be deemed Lo have worked ln an
esLabllshmenL even on Lhe days on whlch (a) e was lald off (b) e was on leave wlLh salary/wages (c)
e was absenL due Lo Lemporary dlsablemenL caused by accldenL arlslng ouL of and ln course of
employmenL and (d) mployee was on maLernlLy leave wlLh salary/wages SecLlon 14
aymenL of malmum bonus Where ln respecL of any accounLlng year Lhe allocable surplus eceeds
Lhe amounL of mlnlmum bonus payable Lo Lhe employees Lhe employer shall ln lleu of such mlnlmum
bonus be bound Lo pay Lo every employee ln respecL of LhaL accounLlng year bonus whlch shall be an
amounL ln proporLlon Lo Lhe salary or wage earned by Lhe employee durlng Lhe accounLlng year sub[ecL
Lo a malmum of LwenLy per cenL of such salary or wage SecLlon 11(1) ln compuLlng Lhe allocable
surplus under Lhls secLlon Lhe amounL seL on or Lhe amounL seL off under Lhe provlslons of secLlon 13
shall be Laken lnLo accounL ln accordance wlLh Lhe provlslons of LhaL secLlon SecLlon 11(2)
1hus max|mum bonus payab|e to emp|oyee |s 20 |n any account|ng year
Spec|a| rov|s|ons w|th respect to certa|n new|y set up estab||shments
ln Lhe case of newly seL up esLabllshmenLs followlng provlslons have been made under SecLlon 16 for
Lhe paymenL of bonus
Where an esLabllshmenL ls newly seL up wheLher before or afLer commencemenL of Lhls AcL Lhe
employees of such esLabllshmenL shall be enLlLled Lo be pald bonus under Lhls AcL ln accordance wlLh
Lhe provlslons of subsecLlons (1A) (18) and (1C)
(1A) ln Lhe flrsL flve accounLlng years followlng Lhe accounLlng year ln whlch Lhe employer sells
Lhe goods produced or manufacLured by hlm or renders servlces as Lhe case may be from such
esLabllshmenL bonus shall be payable only ln respecL of Lhe accounLlng year ln whlch Lhe
employer derlves proflL from such esLabllshmenL and such bonus shall be calculaLed ln
accordance wlLh Lhe provlslons of Lhls AcL ln relaLlon Lo LhaL year buL wlLhouL applylng Lhe
provlslons of SecLlon 13
(18) lor Lhe slLh and sevenLh accounLlng year ln whlch Lhe employer sells Lhe goods produced
or manufacLured by hlm or renders servlces as Lhe case may be from such esLabllshmenL Lhe
provlslons of SecLlon 13 shall apply sub[ecL Lo Lhe followlng modlflcaLlons namely
Ior the s|xth account|ng year
SeL on seL off as Lhe case may be shall be made ln Lhe manner lllusLraLed ln Lhe lourLh Schedule Laklng
lnLo accounL Lhe ecess or deflclency lf any as Lhe case may be of Lhe allocable surplus seL on or seL off
ln respecL of Lhe flfLh and slLh accounLlng year
Ior the seventh account|ng year
SeL on or seL off as Lhe case may be shall be made ln Lhe manner lllusLraLed ln Lhe lourLh Schedule
Laklng lnLo accounL Lhe ecess or deflclency lf any as Lhe case may be of Lhe allocable surplus seL on or
seL off ln respecL of Lhe flfLh slLh and sevenLh accounLlng years
(1C) lrom Lhe elghLh accounLlng year followlng Lhe accounLlng year ln whlch Lhe employer sells
Lhe goods produced or manufacLured by hlm or renders servlces as Lhe case may be from such
esLabllshmenL Lhe provlslons of SecLlon 13 shall apply ln relaLlon Lo such esLabllshmenL as Lhey
apply ln relaLlon Lo any oLher esLabllshmenL
Lxp|anat|on I lor Lhe purpose of subsecLlon (1) an esLabllshmenL shall noL be deemed Lo be newly seL
up merely by reason of a change ln lLs locaLlon managemenL or ownershlp
Lxp|anat|on II lor Lhe purpose of subsecLlon (lA) an employer shall noL be deemed Lo have derlved
proflL ln accounLlng year unless
e has made provlslon for LhaL year's depreclaLlon Lo whlch he ls enLlLled under Lhe lncomeLa AcL or
as Lhe case may be under Lhe AgrlculLure lncome La law and
1he arrears of such depreclaLlon and losses lncurred by hlm ln respecL of Lhe esLabllshmenL for Lhe
prevlous accounLlng years have been fully seL off agalnsL hls proflLs
Lxp|anat|on III lor Lhe purposes of subsecLlon (1A) (18) and (1C) sale of Lhe goods produced or
manufacLured durlng Lhe course of Lhe Lrlal runnlng of any facLory or of Lhe prospecLlng sLage of any
mlne or an oll fleld shall noL be Laken lnLo conslderaLlon and where any quesLlon arlses wlLh regard Lo
such producLlon or manufacLure Lhe declslon of Lhe approprlaLe CovernmenL made afLer glvlng Lhe
parLles a reasonable opporLunlLy of represenLlng Lhe case shall be flnal and shall noL be called ln
quesLlon by any courL or oLher auLhorlLy
(2) 1he provlslons of subsecLlons (1A) (18) and (1C) shall so far as may be apply Lo new deparLmenLs
or underLaklngs or branches seL up by elsLlng esLabllshmenLs
rovlded LhaL lf an employer ln relaLlon Lo an elsLlng esLabllshmenL conslsLlng of dlfferenL deparLmenLs
or underLaklngs or branches(wheLher or noL ln Lhe same lndusLry) seL up aL dlfferenL perlods has before
Lhe 29Lh May 1963 been paylng bonus Lo Lhe employees of all such deparLmenLs or underLaklngs or
branches were seL up on Lhe basls of Lhe consolldaLed proflLs compuLed ln respecL of all such
deparLmenLs or underLaklngs or branches Lhen such employer shall be llable Lo pay bonus ln
accordance wlLh Lhe provlslons of Lhls AcL Lo Lhe employee of all such deparLmenLs or underLaklngs or
branches (wheLher seL up before or afLer LhaL daLe) on Lhe basls of Lhe consolldaLed proflLs compuLed as
aforesald
WlLhln Lhe meanlng of SecLlon 16(1A) Lhe word proflL" musL obvlously be consLrued accordlng Lo lLs
ordlnary sense A sense whlch ls undersLood ln Lrade and lndusLry because Lhe raLlonale behlnd SecLlon
16(1A) ls LhaL lL ls only when Lhe employer sLarLs maklng proflLs ln Lhe commerclal sense LhaL he should
become llable Lo pay bonus under Lhe AcL
roflL ln Lhe commerclal sense can be ascerLalned only afLer deducLlng depreclaLlon and slnce Lhere are
several meLhods of compuLlng depreclaLlon Lhe one adopLed by Lhe employer ln Lhe absence of any
sLaLuLory provlslon Lo Lhe conLrary would govern Lhe calculaLlon planaLlon ll Lo SecLlon 16(1A) says
LhaL Lhe employer shall noL be deemed Lo have derlved proflLs unless he has made provlslon for LhaL
years' depreclaLlon Lo whlch he ls enLlLled Lo under Lhe lncomeLa AcL 1hls eplanaLlon embodles a
clear leglslaLlve mandaLe LhaL ln deLermlnlng for Lhe purpose of subsecLlon (1A) of SecLlon 16 wheLher
Lhe employer has made proflL from Lhe esLabllshmenL ln accounLlng year depreclaLlon should be
provlded ln accordance wlLh Lhe provlslons of Lhe lncomeLa AcL
Clearly Lherefore lf depreclaLlon ls as prescrlbed ln Lhe lncome 1a AcL 1here ls no proflL for Lhe year ln
quesLlon and Lhere ls no llablllLy on Lhe parL of Lhe employer Lo pay bonus under Lhe AcL (1he
ManagemenL of CenLral Coal Washery v Workmen 1978ll Labor Law !ournal 330)
Adustment of customary or |nter|m bonus
Where ln any accounLlng year(a) an employer has pald any u[a bonus or oLher cusLomary bonus Lo an
employee or (b) an employer has pald a parL of Lhe bonus payable under Lhls AcL Lo an employee before
Lhe daLe on whlch such bonus becomes payable Lhen Lhe employer shall be enLlLled Lo deducL Lhe
amounL of bonus so pald from Lhe amounL of bonus payable by hlm Lo Lhe employee under Lhls AcL ln
respecL of LhaL accounLlng year and Lhe employee shall be enLlLled Lo recelve only Lhe balance (SecLlon
17)
Deduct|ons of certa|n amounts from bonus
Where ln any accounLlng year an employee ls found gullLy of mlsconducL causlng flnanclal loss Lo Lhe
employer Lhen lL shall be lawful for Lhe employer Lo deducL Lhe amounL of loss from Lhe amounL of
bonus payable by hlm Lo Lhe employee under Lhls AcL ln respecL of LhaL accounLlng year only and Lhe
employee shall be enLlLled Lo recelve Lhe balance lf any (SecLlon 18)
1|me ||m|t for payment of bonus
Where Lhere ls a dlspuLe regardlng paymenL of bonus pendlng before any auLhorlLy under SecLlon 22 all
amounLs payable Lo an employee by way of bonus under Lhls AcL shall be pald ln cash by hls employer
w|th|n a month from the date from whlch Lhe award becomes enforceable or Lhe seLLlemenL comes
lnLo operaLlon ln respecL of such dlspuLe
ln any other case the bonus shou|d be pa|d w|th|n a per|od of e|ght months from the c|ose of the
account|ng year owever Lhe approprlaLe CovernmenL or such auLhorlLy as Lhe approprlaLe
CovernmenL may speclfy ln Lhls behalf may upon an appllcaLlon made Lo lL by Lhe employer and for
sufflclenL reasons by order eLend Lhe sald perlod of 8 monLhs Lo such furLher perlod or perlods as lL
Lhlnks flL so however LhaL Lhe LoLal perlod so eLended shall noL ln any case eceed Lwo years (SecLlon
19)
keference of d|sputes under the Act
Where any dlspuLe arlses beLween an employer and hls employee wlLh respecL Lo Lhe bonus payable
under Lhls AcL or wlLh respecL Lo Lhe appllcaLlon of Lhls AcL Lo an esLabllshmenL ln publlc secLor Lhen
such dlspuLe shall be deemed Lo be an lndusLrlal dlspuLe wlLhln Lhe meanlng of Lhe lndusLrlal lspuLes
AcL 1947 or any correspondlng law relaLlng Lo lnvesLlgaLlon and seLLlemenL of lndusLrlal dlspuLes ln
force ln a SLaLe and provlslons of LhaL AcL or as Lhe case may be such law shall save as oLherwlse
epressly provlded apply accordlngly (SecLlon 22)
Accuracy of Accounts
Where any lndusLrlal dlspuLe arlses wlLh respecL Lo bonus payable under Lhe AcL Lhe audlLed balance
sheeL and proflL and loss accounL of a corporaLlon or a company or a banklng company shall be
presumed Lo be correcL Slmllarly ln Lhe case of employers noL belng corporaLlon company or banklng
company audlLed accounLs wlll be presumed Lo be correcL for Lhe purpose of paymenL of bonus
8onus ||nked w|th product|on or product|v|ty
SecLlon 31A enables Lhe employees and employers Lo evolve and operaLe a scheme of bonus paymenL
llnked Lo producLlon or producLlvlLy ln lleu of bonus based on proflLs under Lhe general formula
enshrlned ln Lhe AcL owever bonus paymenLs under SecLlon 31A are also sub[ecL Lo Lhe mlnlmum of
833 and malmum of 20 ln oLher words a mlnlmum of 833 ls payable ln any case and Lhe
malmum cannoL eceed 20 (SecLlon 31A)
ower of Lxempt|on
lf Lhe approprlaLe CovernmenL havlng regard Lo Lhe flnanclal poslLlon and oLher relevanL clrcumsLances
of any esLabllshmenL or class of esLabllshmenLs ls of oplnlon LhaL lL wlll noL be ln publlc lnLeresL Lo apply
all or any of Lhe provlslons of Lhls AcL LhereLo lL may by noLlflcaLlon ln Lhe Cfflclal CazeLLe eempL for
such perlod as may be speclfled Lhereln and sub[ecL Lo such condlLlons as lL may Lhlnk flL Lo lmpose such
esLabllshmenL or class of esLabllshmenLs from all or any of Lhe provlslons of Lhls AcL (SecLlon 36)
CovernmenL should conslder publlc lnLeresL flnanclal poslLlon and wheLher workers conLrlbuLed Lo Lhe
loss before granL of eempLlon (!k Chemlcals v MaharashLra 1996 lll CLA 8om 12)
App||cat|on of certa|n |aws not barred
Save as oLherwlse epressly provlded Lhe provlslons of Lhls AcL shall be ln addlLlon Lo and noL ln
derogaLlon of Lhe lndusLrlal lspuLes AcL 1947 or any correspondlng law relaLlng Lo lnvesLlgaLlon and
seLLlemenL of lndusLrlal dlspuLes ln force ln a SLaLe (SecLlon 39)
kLCCVLk CI 8CNUS DUL
Where any bonus ls due Lo an employee by way of bonus employee or any oLher person auLhorlzed by
hlm can make an appllcaLlon Lo Lhe approprlaLe governmenL for recovery of Lhe money due lf Lhe
governmenL ls saLlsfled LhaL money ls due Lo an employee by way of bonus lL shall lssue a cerLlflcaLe for
LhaL amounL Lo Lhe collecLor who Lhen recovers Lhe money
Such app||cat|on sha|| be made w|th|n one year from the date on wh|ch the money became due Lo Lhe
employee
owever Lhe appllcaLlon may be enLerLalned afLer a year lf Lhe appllcanL shows LhaL Lhere was sufflclenL
cause for noL maklng Lhe appllcaLlon wlLhln Llme
CIILNCLS AND LNAL1ILS
lor conLravenLlon of Lhe provlslons of Lhe AcL or rules Lhe penalLy ls lmprlsonmenL upLo 6 monLhs or
flne up Lo 8s1000 or boLh
lor fallure Lo comply wlLh Lhe dlrecLlons or requlslLlons made Lhe penalLy ls lmprlsonmenL upLo 6
monLhs or flne up Lo 8s1000 or boLh
ln case of offences by companles flrms body corporaLe or assoclaLlon of lndlvlduals lLs dlrecLor
parLner or a prlnclpal offlcer responslble for Lhe conducL of lLs buslness as Lhe case may be shall be
deemed Lo be gullLy of LhaL offence and punlshed accordlngly unless Lhe person concerned proves LhaL
Lhe offence was commlLLed wlLhouL hls knowledge or LhaL he eerclsed all due dlllgence
AMLN1 CI WAGLS AC1 1936
Cb[ecLlves
1o ensure regular and prompL paymenL of wages and Lo prevenL Lhe eplolLaLlon of a wage
earner by prohlblLlng arblLrary flnes and deducLlons from hls wages
AppllcablllLy of Lhe AcL
4 AppllcaLlon for paymenL of wages Lo persons employed ln any facLory
4 Not app||cab|e Lo wages whlch average ks 6S00 per month or more
4 Wages lnclude all remuneraLlon bonus or sums payable for LermlnaLlon of servlce buL do noL
lnclude house renL relmbursemenL llghL vehlcle charges medlcal epenses 1A eLc
Important prov|s|ons of the Act
4 8esponslblllLy of Lhe employer for paymenL of wages and fllng Lhe wage perlod
4 rocedures and Llme perlod ln wage paymenL
4 aymenL of wages Lo dlscharged workers
4 ermlsslble deducLlons from wages
4 nomlnaLlons Lo be made by employees
4 enalLles for conLravenLlon of Lhe AcL
4 qual remuneraLlon for men and women
4 CbllgaLlons and rlghLs of employers
4 CbllgaLlons and rlghLs of employees
1he AcL ls Lo regulaLe paymenL of wages Lo cerLaln class of employed persons 1he maln purpose of Lhls
AcL ls Lo ensure regular and Llmely paymenL of wages Lo Lhe employed persons Lo prevenL unauLhorlzed
deducLlons belng made from wages and arblLrary flnes belng lmposed on Lhe employed persons 1he AcL
eLends Lo Lhe whole of lndla
App||cat|on of the Act
1he AcL applles Lo paymenL of wages Lo persons employed ln facLory or rallways lL also applles Lo any
'lndusLrlal or oLher esLabllshmenL' speclfled ln SecLlon 2(ll) SecLlon 1(4) 'lacLory' means facLory as
deflned ln SecLlon 2(m) of lacLorles AcL lndusLrlal or oLher esLabllshmenL speclfled ln SecLlon 2(ll) are
1ramway or moLor LransporL servlces Alr LransporL servlces ock wharf or [eLLy lnland vessels Mlnes
quarry or ollfleld lanLaLlon Workshop ln whlch arLlcles are produces adopLed or manufacLured 1he
AcL can be eLended Lo oLher esLabllshmenL by SLaLe/CenLral CovernmenL
resenLly Lhe AcL applles Lo employees drawlng wages upLo 8s 6300 SecLlon 1(6) very
employer ls responslble for paymenL Lo persons employed by hlm on wages SecLlon 3
Mean|ng of Wages Wages means all remuneraLlon epressed ln Lerms of money and lncludes
remuneraLlon payable under any award or seLLlemenL overLlme wages wages for hollday and any sum
payable on LermlnaLlon of employmenL owever lL does noL lnclude bonus whlch does noL form parL of
remuneraLlon payable value of house accommodaLlon conLrlbuLlon Lo l Lravellng allowance or
graLulLy SecLlon 2(vl)
now wages shou|d be pa|d Wages can be pald on dally weekly forLnlghLly or monLhly basls buL wage
perlod cannoL be more Lhan a monLh SecLlon 4 Wages should be pald on a worklng day Wages are
payab|e on or before 7th day after the 'wage per|od' In case of factor|es emp|oy|ng more than 1000
workers wages can be pa|d on or before 10th day after 'wage per|od' |s over SecLlon 3(1) normally
'wage perlod' ls a 'monLh' 1hus normally wages should be pald by 7Lh of followlng monLh and by 10Lh
lf Lhe number of employees ls 1000 or more Wages should be pald ln colns and currency noLes
owever wlLh auLhorlzaLlon from employee lL can be pald by cheque or by credlLlng ln hls bank
accounL SecLlon 6
Deduct|ons perm|ss|b|e educLlon on accounL of absence of duLy flnes house accommodaLlon lf
provlded recovery of advance loans glven lncome La provldenL fund Sl conLrlbuLlon LlC premlum
amenlLles provlded and deducLlon by order of CourL eLc ls permlLLed Max|mum deduct|on can be S0
owever malmum deducLlon upLo 73 ls permlsslble lf deducLlon ls parLly made for paymenL Lo
cooperaLlve socleLy SecLlon 7
I|nes Speclflc noLlce speclfylng acLs and omlsslons for whlch flne can be lmposed should be ehlblLed
on noLlce board eLc Such noLlce can be lssued only afLer obLalnlng speclflc approval from SLaLe
CovernmenL llne can be lmposed only afLer glvlng employee a personal hearlng I|ne can be max|mum
3 of wages |n a month I|ne cannot be recovered |n |nsta||ments SecLlon 8
Labor Law Concesslons
31 Labor Laws and SSI
1he CovernmenL of lndla has made several aLLempLs Lo revamp rela and slmpllfy Labor laws relaLlng Lo
Small Scale lndusLrles Cne of Lhem ls Lhe slmpllflcaLlon procedure envlsaged by Lhe Labor AcL enacLed
ln 1988 Lo asslsL Lhe small esLabllshmenLs 1he AcL namely Labor Laws (eempLlon from furnlshlng
reLurns and malnLalnlng reglsLers by cerLaln esLabllshmenL) AcL 1988 covers Labor relaLed acLs and
Lhus provldes
sLabllshmenL employlng 1019 persons ls requlred Lo malnLaln only 3 reglsLer and Lo submlL an
annual core reLurn only
sLabllshmenL employlng less Lhan 10 persons ls requlred Lo malnLaln only 1 reglsLer and Lo
submlL an annual core reLurn only
Cnly one lnspecLor wlll be responslble for varlous Labor laws ecepL ln case of lacLory AcL and
8oller AcL
1he Labor ollcles for Small Scale lndusLrles ls governed by comprehenslve laws 1he followlng
laws and pollcles are appllcable for Small Scale lndusLrles ln lndla
1he Iactor|es Act 1948
Cbect|ves 1o ensure adequaLe safeLy measures and Lo promoLe Lhe healLh and welfare of Lhe workers
employed ln facLorles 1o prevenL haphazard growLh of facLorles Lhrough Lhe provlslons relaLed Lo Lhe
approval of plans before Lhe creaLlon of a facLory
App||cab|||ty of the Act
Appllcable Lo Lhe whole of lndla lncludlng !ammu kashmlr
Covers all manufacLurlng processes and esLabllshmenLs falllng wlLhln Lhe deflnlLlon of 'facLory'
Appllcable Lo all facLorles uslng power and employlng 10 or more workers and lf noL uslng
power employlng 20 or more workers on any day of Lhe precedlng 12 monLhs
Scheme of the Act
1he AcL conslsLs of 120 SecLlons and 3 Schedules
Schedule 1 conLalns llsL of lndusLrles lnvolvlng hazardous processes
Schedule 2 ls abouL permlsslble level of cerLaln chemlcal subsLances ln work envlronmenL
Schedule 3 conslsLs of llsL of noLlflable dlseases
Important prov|s|ons the Act
Iac|||t|es and Conven|ences 1he facLory should be kepL clean SecLlon 11 1here should be
arrangemenL Lo dlspose of wasLes and effluenLs SecLlon 12 venLllaLlon should be adequaLe
8easonable LemperaLure for comforL of employees should be malnLalned SecLlon 13 usL and fumes
should be conLrolled below permlsslble llmlLs SecLlon 14 ArLlflclal humldlflcaLlon should be aL
prescrlbed sLandard level SecLlon 13 Cvercrowdlng should be avolded SecLlon 16 AdequaLe llghLlng
drlnklng waLer laLrlnes urlnals and splLLoons should be provlded SecLlons 17 Lo 19 AdequaLe
splLLoons should be provlded SecLlon 20
We|fare AdequaLe faclllLles for washlng slLLlng sLorlng cloLhs when noL worn durlng worklng hours
SecLlon 42 lf a worker has Lo work ln sLandlng poslLlon slLLlng arrangemenL Lo Lake shorL resLs should
be provlded SecLlon 44 AdequaLe llrsL ald boes shall be provlded and malnLalned SecLlon 43
Iac|||t|es |n case of |arge factor|es lollowlng faclllLles are requlred Lo be provlded by large facLorles
Ambulance room lf 300 or more workers are employed CanLeen lf 230 or more workers are employed
lL should be sufflclenLly llghLed and venLllaLed and sulLably locaLed SecLlon 46 8esL rooms / shelLers
wlLh drlnklng waLer when 130 or more workmen are employed SecLlon 47 Creches lf 30 or more
women workers are employed SecLlon 48 lull Llme Welfare Cfflcer lf facLory employs 300 or more
workers SecLlon 49 SafeLy Cfflcer lf 1000 or more workmen are employed
Safety All machlnery should be properly fenced Lo proLecL workers when machlnery ls ln moLlon
SecLlon 21 Lo 27 olsLs and llfLs should be ln good condlLlon and LesLed perlodlcally SecLlon 28 and
29 ressure planLs should be checked as per rules SecLlon 31 lloor sLalrs and means of access should
be of sound consLrucLlon and free form obsLrucLlons SecLlon 32 SafeLy appllances for eyes dangerous
dusLs gas and fumes should be provlded SecLlons 33 and 36 Worker ls also under obllgaLlon Lo use Lhe
safeLy appllances e should noL mlsuse any appllance convenlence or oLher Lhlngs provlded SecLlon
111 ln case of hazardous subsLances addlLlonal safeLy measures have been prescrlbed SecLlons 41A Lo
41 AdequaLe flre flghLlng equlpmenL should be avallable SecLlon 38 SafeLy Cfflcer should be
appolnLed lf number of workers ln facLory ls 1000 or more SecLlon 408
Work|ng nours A worker cannoL be employed for more Lhan 48 hours ln a week SecLlon 31 Weekly
hollday ls compulsory lf he ls asked Lo work on weekly hollday he should have full hollday on one of
Lhree days lmmedlaLely or afLer Lhe normal day of hollday SecLlon 32(1) e cannoL be employed for
more Lhan 9 hours ln a day SecLlon 34 AL leasL half an hour resL should be provlded afLer 3 hours
SecLlon 33 1oLal perlod of work lncluslve of resL lnLerval cannoL be more Lhan 103 hours SecLlon 36
A worker should be glven a weekly hollday Cverlapplng of shlfLs ls noL permlLLed SecLlon 38 noLlce of
perlod of work should be dlsplayed SecLlon 61
Cvert|me Wages lf a worker works beyond 9 hours a day or 48 hours a week overLlme wages are
double Lhe raLe of wages are payable SecLlon 39(1) A workman cannoL work ln Lwo facLorles 1here ls
resLrlcLlon on double employmenL SecLlon 60 owever overLlme wages are noL payable when Lhe
worker ls on Lour 1oLal worklng hours lncludlng overLlme should noL eceed 60 ln a week and LoLal
overLlme hours ln a quarLer should noL eceed 30 8eglsLer of overLlme should be malnLalned An
employee worklng ouLslde Lhe facLory premlses llke fleld workers eLc on Lour ouLslde headquarLers are
noL enLlLled Lo overLlme 8 AnanLhan v Avery lndla 1972(42) l!8 304 (Mad C) * lrecLor of SLores v
S ube 1978 Lab lC 390 32 l!8 299 1978 l LLn 464 36 lL8 420
Lmp|oyment of Women A woman worker cannoL be employed beyond Lhe hours 6 am Lo 700 pm
SLaLe CovernmenL can granL eempLlon Lo any facLory or group or class of facLorles buL no woman can
be permlLLed Lo work durlng 10 M Lo 3 AM ShlfL change can be only afLer weekly or oLher hollday and
noL ln beLween SecLlon 66
N|ght Sh|ft for women lacLorles AcL ls proposed Lo be amended Lo allow nlghL shlfL for women
workers 1he CovernmenL has declded Lo amend SecLlon 66 of Lhe lacLorles AcL 1948 Lo allow
employmenL of women workers beLween 700 pm and 600 am 1he demand of women's organlzaLlons
and ln Lune wlLh Lhe presenL economlc globallzaLlon Lhe CovernmenL has declded Lo brlng ln Lhen
requlred changes ln Lhe AcL 1hls flelblllLy would be avallable Lo all manufacLurlng unlLs lncludlng Lhe
apparel secLor 1hls declslon has been Laken afLer meeLlngs wlLh Lhe represenLaLlves of Lhe employers
and Lhe Lrade unlons 1he proposed 8lll wlll empower Lhe SLaLe CovernmenLs for allowlng Lhe necessary
flelblllLy ln employmenL of women durlng nlghL shlfL ln facLorles
1he proposed amendmenL would lnLeralla provlde LhaL Lhe employer has Lo ensure occupaLlonal safeLy
and adequaLe proLecLlon Lo Lhe women workers owever Lhe SLaLe CovernmenL or any person
auLhorlzed by lL would be allowlng employmenL of women durlng nlghL only afLer consulLlng Lhe
workers or Lhelr represenLaLlve organlzaLlons and concerned employers or Lhelr represenLaLlves 1he
SLaLe CovernmenLs are also empowered Lo frame Lhelr own rules for allowlng such permlsslons
kecord of Workmen A reglsLer (musLer roll) of all workers should be malnLalned no worker should be
permlLLed Lo work unless hls name ls ln Lhe reglsLer 8ecord of overLlme ls also requlred Lo be
malnLalned SecLlon 62
Leave A worker ls enLlLled ln every calendar year annual leave wlLh wages aL Lhe raLe of one day for
every 20 days of work performed ln Lhe prevlous calendar year provlded LhaL he had worked for 240
days or more ln Lhe prevlous calendar year Chlld worker ls enLlLled Lo one day per every 13 days Whlle
calculaLlng 240 days earned leave maLernlLy leave upLo 12 weeks and lay off days wlll be consldered
buL leave shall noL be earned on Lhose days SecLlon 79 Leave can be accumulaLed upLo 30 days ln case
of adulL and 40 days ln case of chlld Leave admlsslble ls ecluslve of holldays occurrlng durlng or aL
elLher end of Lhe leave perlod Wage for perlod musL be pald before leave beglns lf leave ls for 4 or
more days SecLlon 81 Leave cannoL be Laken for more Lhan Lhree Llmes ln a year AppllcaLlon for leave
should noL normally be refused 1hese are mlnlmum beneflLs mployer can of course glve addlLlonal
or hlgher beneflLs
Wages for C1 and Leave Sa|ary Wages for leave encashmenL and overLlme wlll lnclude dearness
allowance and cash equlvalenL of any beneflL owever lL wlll noL lnclude bonus or overLlme
Ch||d Lmp|oyment Chlld below age of 14 cannoL be employed SecLlon 67 Chlld above 14 buL below
13 years of age can be employed only for 43 hours per day or durlng Lhe nlghL SecLlon 71 e should
be cerLlfled flL by a cerLlfylng surgeon SecLlon 68 e cannoL be employed durlng nlghL beLween 10 pm
Lo 6 am SecLlon 71 A person over 13 buL below 18 years of age ls Lermed as 'adolescenL' e can be
employed as an adulL lf he has a cerLlflcaLe of flLness for a full days work from cerLlfylng surgeon An
adolescenL ls noL permlLLed Lo work beLween 7 pm and 6 am SecLlon 70 1here are more resLrlcLlons
on employmenL of female adolescenL 8eglsLer of chlld workers should be malnLalned SecLlon 73
L|st of Industr|es Invo|v|ng nazardous rocesses
1nL IIkS1 SCnLDULL
See SecLlon 2(cb)
lerrous meLallurglcal lndusLrles
lnLegraLed lron and SLeel
lerroalloys
Speclal SLeels
nonferrous meLallurglcal lndusLrles
rlmary MeLallurglcal lndusLrles namely zlnc lead copper manganese and alumlnlum
loundrles (ferrous and nonferrous)
CasLlngs and forglngs lncludlng cleanlng or smooLhlng/roughenlng by sand and shoL blasLlng
Coal (lncludlng coke) lndusLrles Coal LlgnlLe Coke eLc
luel Cases (lncludlng Coal gas roducer gas WaLer gas)
ower CeneraLlng lndusLrles
ulp and paper (lncludlng paper producLs) lndusLrles
lerLlllzer lndusLrles
nlLrogenous
hosphaLlc
Mled
CemenL lndusLrles
orLland CemenL (lncludlng slag cemenL puzzolona cemenL and Lhelr producLs)
eLroleum lndusLrles
Cll 8eflnlng
LubrlcaLlng Clls and Creases
eLrochemlcal lndusLrles
rugs and harmaceuLlcal lndusLrles
narcoLlcs rugs and harmaceuLlcals
lermenLaLlon lndusLrles (lsLlllerles and 8rewerles)
8ubber (SynLheLlc) lndusLrles
alnLs and lgmenL lndusLrles
LeaLher 1annlng lndusLrles
lecLroplaLlng lndusLrles
Chemlcal lndusLrles
Coke Cven byproducLs and CoalLar lsLlllaLlon roducLs
lndusLrlal Cases (nlLrogen oygen aceLylene argon carbondlolde hydrogen sulphurdlolde
nlLrous olde halogenaLed hydrocarbon ozone eLc)
lndusLrlal Carbon
Alkalles and Aclds
ChromaLes and dlchromaLes
Leads and lLs compounds
lecLrochemlcals (meLalllc sodlum poLasslum and magneslum chloraLes perchloraLes and peroldes)
lecLroLhermal produces (arLlflclal abraslve calclum carblde)
nlLrogenous compounds (cyanldes cyanamldes and oLher nlLrogenous compounds)
hosphorous and lLs compounds
alogens and alogenaLed compounds (Chlorlne lluorlne 8romlne and lodlne)
ploslves (lncludlng lndusLrlal eploslves and deLonaLors and fuses)
lnsecLlcldes lunglcldes herblcldes and oLher esLlcldes lndusLrles
SynLheLlc 8esln and lasLlcs
Manmade llbre (Celluloslc and noncelluloslc) lndusLry
ManufacLure and repalr of elecLrlcal accumulaLors
Class and Ceramlcs
Crlndlng or glazlng of meLals
ManufacLure handllng and processlng of asbesLos and lLs producLs
LracLlon of olls and faLs from vegeLable and anlmal sources
ManufacLure handllng and use of benzene and subsLances conLalnlng benzene
ManufacLurlng processes and operaLlons lnvolvlng carbon dlsulphlde
yes and yesLuff lncludlng Lhelr lnLermedlaLes
lghly flammable llqulds and gases
1nL 1nIkD SCnLDULL
See SecLlons 89 and 90
LIS1 CI NC1IIIA8LL DISLASLS
Lead polsonlng lncludlng polsonlng by any preparaLlon or compound of lead or Lhelr sequelae Lead
LeLraeLhyl polsonlng hosphorus polsonlng or lLs sequelae Mercury polsonlng or lLs sequelae
Manganese polsonlng or lLs sequelae Arsenlc polsonlng or lLs sequelae olsonlng by nlLrous fumes
Carbon dlsulphlde polsonlng 8enzene polsonlng lncludlng polsonlng by any of lLs homologues Lhelr
nlLro or amldo derlvaLlves or lLs sequelae Chrome ulceraLlon or lLs sequelae AnLhra Slllcosls
olsonlng by halogens or halogen derlvaLlves of Lhe hydrocarbons of Lhe allphaLlc serles aLhologlcal
manlfesLaLlons due Lo radlum or oLher radloacLlve subsLances xrays rlmary eplLhellomaLous cancer
of skln 1olc anaemla 1olc [aundlce due Lo polsonous subsLances Cll acne or dermaLlLls due Lo
mlneral olls and compounds conLalnlng mlneral oll base 8ysslonosls AsbesLosls CccupaLlonal or
conLracL dermaLlLls caused by dlrecL conLracL wlLh chemlcals and palnLs 1hese are of Lwo Lypes LhaL ls
prlmary lrrlLanLs and allerglc senslLlzers nolse lnduced hearlng loss (eposure Lo hlgh nolse levels)
8erlylllum polsonlng Carbon monolde Coal mlners pneumoconlosls hosgene polsonlng
CccupaLlonal cancer lsocyanaLes polsonlng 1olc nephlrlLs