Types of Trainees and Labour Laws related to Trainees in India

A trainee is a person undergoing a training program within an organization, after graduation from the higher and technical course. These trainees may be subsequently absorbed into the organization on completion of the training program.

In India, there are no specific laws that determine or include the word ‘trainees’. We can identify three types of people who undergo training. They are Trainees, Interns, and Apprentices.

Trainees

As mentioned earlier, trainees are those individuals, usually, freshers, who lack specific skills and who undertake the specified training as ‘trainees’. Upon completion of training, they may be absorbed into the organization if found fit. Stipend is paid during the period of training.

Interns

Interns are students who are undergoing their education but due to the requirement of the curriculum, undertake an internship program in an organization. An internship is a temporary position that is mandated in the course that they are undergoing. In most cases, interns do not receive any wages during the period of internship. There are, however, exemptions where interns are paid during their internship.  However, paid internship is an exception.

Apprentices

An apprentice is a person who trains for a career by working under the supervision of a highly experienced individual or worker. The apprentices have a formal contract with the employer. The apprenticeship follows a clear plan and includes on-the-job training combined with an educational curriculum. The individual comes under the Apprentice Act, 1961. Apprentices are paid stipends ranging from Rs:9,000/- to a high of nearly Rs:21,000/-.

Labour Laws related to Trainees

In India, there are no specific labour laws that include trainees. A lot of confusion persists regarding whether they are eligible to receive the benefits that normal employees get. There are instances where trainees are looked upon as employees, and organizations that engage trainees should be aware of certain facts before engaging them.

Are trainees eligible for EPF?

A trainee is eligible to get the benefit of the EPF Act under certain circumstances. If the trainee is not a student and does not come under the Apprentices Act, 1961, then the trainee will be eligible for EPF deductions. This is subject to the trainee attracting Sec.2(b) and Sec.2(e) of the EPF Act.

 

Section 2(b)


section 2(b)

 

Section 2(e)


section 2(b)

Are trainees eligible for ESIC?

Trainees are generally paid a stipend. If the trainee satisfies Sec.2(9) of the ESIC Act, then he is considered an employee and is eligible to be subjected to ESIC contributions.

 

Section 2(9)


section 2(9)
section 2(9)

Are trainees subject to the Minimum Wages Act, 1948?

Trainees, especially in the private sector have to be paid the notified Minimum wages. The Minimum Wages Act contains a listing of the scheduled employment. As per the Act, temporary or probationers under scheduled employment must receive a minimum rate of wages as notified.
The Ministry of Labour and Employment, through its Notification G.S.R 680 (e) dated 22nd September 2014 notified the minimum wages to be paid to trade apprentices.

This minimum rate is calculated as a percentage of the salary of semi-skilled workers of the respective State or Union Territory. The percentages are as follows:

  • 70% during the first year of training.
  • 80% during the second year of training.
  • 90% during the third and fourth year of training.

In the event of a State or Union Territory not notifying the minimum wages then the lowest minimum wages of the scheduled employment for semi-skilled workers shall be considered for calculating the stipend.

 

G.S.R 680 (e)


G.S.R 680 (e)

Are Trainees eligible for Bonus?

Where the trainees are engaged under the Apprentices Act, 1961, they will not be entitled to a Bonus under Sec. 2(13) of the Payment of Bonus Act, 1965. The Apprentice is not considered an ’employee’ and is, therefore, not eligible to receive a Bonus.

If the trainee has not been engaged under the Apprentice Act, 1961, then the trainee is eligible for a Bonus under the Payment of Bonus Act, 1965 subject to satisfying Sec.8 of the Act.

 

section 2(13)


section 2(13)

section 8


section 8

Are Trainees eligible for Maternity benefits?

A trainee with one surviving child, engaged as an Apprentice under the Apprentices Act, 1961, may be granted maternity leave for 90 days from the date of its commencement without payment of the stipend, and the apprenticeship training period shall be extended accordingly.

The apprentice is eligible to receive the stipend during the extended period.

A woman trainee can also avail of the benefit under the Maternity Benefit Act, provided she satisfies Sec. 3(o) and Sec. 5(2) of the Act.

 

Section 3(o)


Sec. 3(o)

 

Section 5(2)


Sec. 5(2)

Conclusion

From the available information, we can understand that

  • Trainees shall be considered for entitlement of EPF and ESI subject to them not being apprentices under the Apprentices Act, 1961.
  • Apprentices engaged under the Apprentices Act, 1961 are not treated as ’employees’ under the ESIC Act, whereas a trainee can be treated as an ’employee’.
  • Interns who are paid needn’t be considered for EPF and ESI, whereas unpaid interns have nothing to be deducted from as they do not receive any remuneration.
  • Trainee women apprentices engaged under the Apprentice Act, 1961 who have one surviving child may be granted 90 days leave under the Maternity Benefit Act, 1961.
  • Apprentices engaged under the Apprentices Act, 1961, or as per the Model Standing Orders, needn’t be considered for EPF.
  • Trade Apprentices are eligible for Minimum Wages.
  • Trainees in the scheduled employment as per the schedule of the Minimum Wages Act must receive a minimum of the notified rate.

GetifyHR has gained tremendous experience in handling these issues. Our Payroll Outsourcing Module is perfectly designed to handle all aspects of Payroll processing like generation of Payslips, Leave and Attendance, and Statutory requirements like EPF, ESI, PT, and TDS. Ours is a one-stop solution for all Payroll related issues.

HRM - Laws and Regulations

Human Resources Management (HRM) – Complying with Laws and Regulations

Introduction

Human Resources Management is a vital activity in any organization.  People are the greatest assets to a company or organization. Human Resources Management is a strategic approach to effectively and efficiently managing the employees in an organization. Human Resource Management is the process of employing people, training them for specific roles, remunerating them for their performance, developing policies for their well being, and strategizing to retain them.

The HR department acts as a liaison between the employer and the employees. The HR team helps to maintain the organizational structure of the workplace and ensures safe and efficient performance of the jobs. HR management holds many responsibilities and in this article, we will briefly touch on the functions of the HR department and fully focus on laws and regulations that companies have to comply with to be fully compliant.

Functional areas of Human Resources Management

HRM activities involve Hiring and Recruitment, Training, and development, maintaining Employer-Employee relationships, instilling and maintaining the company culture, handling the benefits and compensations due to the employees, handling indiscipline, and managing compliance issues. The focus of a company is to generate revenue and this can be achieved by, utilizing the skills and abilities of people.  HRM play a critical role in achieving this.

Hiring and Recruitment

Recruiting the best talent and retaining them is the top priority of many organizations. Similarly hiring to fill a role is a vital activity that is an ongoing process in any organization. The HR department plays a critical role in the hiring and recruitment process. The HR team works very closely with the other department heads or supervisors to identify the needs. The recruitment strategy is formulated and the HR team handles all activities like placing advertisements, screening applications, and interviewing the candidates.

Training and development

Retaining talent is a very critical task for all organizations, and the HR team performs this critical task.  The HR department to help employees to prepare for career advancements within the organization initiates Training and Development programs. This will assist in retaining talent and will benefit both employers and employees. This would usher in higher productivity and lower turnover rates. This also encourages job satisfaction and boosts the employees’ confidence in the organization.

Employer-Employee relationship

Maintaining a healthy employer-employee relationship contributes not only to the growth of the company but also creates greater trust in the management. The HR department is the liaison between the employer and the employees and will help mitigate any disagreements.

Amicable settlement of all employee grievances whether regarding benefits, compensation, work hours, workload, etc are achieved through consultations, thus creating a positive work atmosphere. This is vital for the growth of the company.

Maintaining Company Culture

Company culture may vary from company to company. The HR department may share the company’s values, vision, and rules with the employees during the onboarding process. Maintaining company culture means being able to identify any shortcomings within the organization and being able to address them for better functioning of the company. The HR team addresses these shortcomings effectively.

Benefits and Compensation

Though it is an administrative task, the HR departments oversee both the mandated and voluntary company benefits. Employees contribute towards social security, unemployment, and workers’ compensation are mandated benefits, whereas other benefits like paid time off, disability income, etc are voluntary. They serve as additional incentives to the employees, both potential and current. HR managers are fully aware of the company benefits policy and are capable of clearly explaining this to the employees.

Handling indiscipline

The HR team is highly experienced and is, therefore, well equipped to handle indiscipline. Disciplinary action like issuing show cause notices, and termination are delicate issues and have to be handled fairly and consistently to prevent escalations. HR Managers must have a clear system in place to hold employees accountable. They should be able to consult with legal counsel to ensure they are well within the law in the handling of disciplinary issues.

Complying with Laws and Regulations

Statutory Compliance requirements have to be fully complied with by all companies that employ 10 or more employees. The Government enacts these rules and regulations to safeguard the interests of the employees by providing healthy working conditions and ensuring fair work practices.

The HR teams are entrusted with the task of seeing that the company is fully compliant with all the statutes, rules, and regulations. The government keeps tweaking these rules very often and the onus is on the HR team to update these changes.

These are some of the more important functions of Human Resource Management. We shall now proceed to the Labour Laws and Regulations that are to be managed by the Human Resource Management team.

Labour Laws and Rules

Labour Laws are a body of laws, administrative rulings, and precedents that address the legal rights of working people and the restrictions on their organizations. These laws define the rights and obligations of workers and employers in the workplace. Labour Laws arose due to the demand of employees for better working conditions, and their right to organize. From the employer side, the demand was to restrict the power of workers in many organizations and to keep labour costs down.

A wide number of Labour Laws were legislated and it was made mandatory for companies or organizations to strictly follow them. Companies, especially those employing a large number of employees look upon their Human Resources Management teams to handle these laws and keep the company compliant.

The role of the HR team becomes vital as these are subject to frequent changes, and therefore, there is a need for constant updation at the administrative level.

However, the Ministry of Labour and Employment, Government of India, introduced 4 Bills in 2019 to consolidate 29 of the existing labour laws into 4 Codes.  These Codes or Reforms hope to empower the worker, both in the organized and unorganized sectors, and safeguard their interests.

These 4 Labour Codes are:

  1. The Code of Wages, 2019
  2. The Code of Social Security, 2020
  3. The Industrial Relations Code, 2020 and
  4. The Occupational Safety, Health and Working Conditions Code, 2020

1.  The Code of Wages, 2019

The Code of Wages, 2019 subsumes the following 4 Acts.

1.     The Payment of Wages Act, 1936

The objective of this Act is to regulate the payment of wages to employees in time without delay and deduct the mandated contribution from the employees, and the employers under the provisions of the Act.

2.     The Minimum Wages Act, 1948

The objective of the Minimum Wages Act, 1948 is to secure minimum wages for all the workers whether skilled or unskilled in the scheduled employment. It hopes to safeguard employees and prevents exploitation by employers.

3.     The Payment of Bonus Act, 1965

The Payment of Bonus Act, 1965 provides the payment of bonus to persons employed in certain organizations, employing 10 or more employees, based on profit or productivity. The objective is to impose a legal responsibility upon the employer who is covered by the Act, to pay Bonus to their employees as an incentive.

4.     The Equal Remuneration Act, 1976

The Equal Remuneration Act, 1976 provides for the payment of equal remuneration to men and women employees without discrimination on grounds of gender.

2.  The Social Security Code, 2020

The Social Security Code has subsumed the following 9 Acts:

1.     The Workmen’s Compensation Act, 1923

The Workmen’s Compensation Act, 1923 provides workers employed in certain industries compensation for injuries suffered during employment and to make good the losses.

2.     The Employees State Insurance Act, 1948

The Employees State Insurance Act, 1948 is an Act to provide certain benefits to employees in the event of some eventualities like sickness, maternity, and employment-related injury.

3.     The Employees Provident Fund and Miscellaneous Provisions Act, 1952

The Employees Provident Fund and Miscellaneous Provisions Act, 1952 were enacted to provide social security to employees. Through this Act, the Employees Provident Fund was set up to provide a post-retirement benefit for the employees or their legal heirs in case of the death of the employee. The Act provides for the institution of provident fund, pension fund, and deposit-linked insurance fund for employees employed in establishments that come under the purview of the Act.

4.     The Employees’ Exchanges (Compulsory Notification of Vacancies) Act, 1959

The Employees’ Exchanges (Compulsory Notification of Vacancies) Act, 1959 provides for compulsory notification of vacancies to the Employment Exchange and the submission of returns relating to employment by the employer.

5.     The Maternity Benefit Act

The Maternity Benefit Act was enacted to regulate the employment of women at the time of their maternity. The Act entitles women employees to’ maternity benefit’ which is fully paid wages during the pre-maternity and post-maternity period. Women employees are eligible for maternity leave for 26 weeks.

6.     The Payment of Gratuity Act, 1972

The Payment of Gratuity Act provides for the payment of gratuity to employees as a token of appreciation for their contribution to the company. It is a monetary benefit provided to employees employed in mines, factories, plantations, oil fields, ports, and other establishments after their retirement.

The gratuity is 15 days’ salary for every year of employee service subject to a maximum of rupees ten lakhs.

7.     The Cine-workers Welfare Fund Act, 1981

The Cine-workers Welfare Fund Act, 1981 was enacted to provide for the levy and collection of a cess on feature films to finance the activities to promote the welfare of certain cine-workers. Workers covered under the Act received monthly remuneration of not less than Rs:8000/-.

8.     The Building and other Construction Workers Welfare Cess, 1996

This Act was enacted to regulate the employment and condition of service of building and other construction workers and to provide for their safety, health, and welfare measures and other matters connected therewith.

9.     The Unorganized Workers’ Social Security Act, 2008

The Unorganized Workers’ Social Security Act, 2008 enables the formulation of Welfare Schemes for the workers of the unorganized sector. This welfare scheme covers health and maternity benefits, life and disability cover, old age protection, etc.

3.  The Industrial Relations Code, 2020

The Industrial Relations Code, 2020 subsumes the following 3 Acts:

1.     The Industrial Disputes Act, 1942

The Industrial Disputes Act, 1942 was promulgated in April 1942. It was enacted to make provisions for the prevention and settlement of Industrial Disputes and for providing safeguards to the workers.

2.     The Trade Unions Act, 1926

The Trade Unions Act, 1926 was enacted to provide for the registration of Trade Unions and to define the law relating to registered Trade Unions.

3.     The Industrial Employment (Standing Orders) Act, 1946

The Industrial Employment (Standing Orders) Act, 1946 requires employers in Industrial Establishments to define conditions of employment under them.  The Act defines the laws which govern the relationship between the employer and the workman in an industrial establishment and includes the elements such as classification of worker, working hours, attendance, suspension, termination, etc.

4.  Occupational Safety, Health, and Working Conditions Code, 2020

The Occupational Safety, Health and Working Conditions Code, 2020 subsumes the following 13 Labour Acts in a single code.

1.     The Factories Act, 1948

The Factories Act, 1948 was enacted to consolidate and amend the law regulating labour in factories, with respect to occupational safety and health.

The Factories Act, 1987, amended the Act.

2.     The Contract Labour (Regulation and Abolition) Act, 1970

The Contract Labour (Regulation and Abolition) Act, 1970 is an Act to regulate the employment of contract labour in specific establishments and also provide for its abolition under certain circumstances. The Act was enacted to prevent the exploitation of contract labourers as there was no existing law.

3.     The Mines Act, 1952

The Mines Act, 1952 was enacted to provide measures relating to health, safety, and welfare of workers employed in mines and oil fields. The Act specifies the duties of the employer to manage the mines or mining operations and the health and safety of mines.

4.     The Dock Worker (Safety, Health and Welfare) Act, 1986

The Act provides for the health, safety, and welfare of dock workers and matters connected therewith. Any work within the vicinity of any port where loading, unloading, movement, or storage of cargo into or from a ship or other vessel, port, dock, storage place, or landing place comes under the purview of this Act.

5.     The Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996

This Act was enacted to regulate the employment and condition of service of building and other construction workers and to safeguard their health and provide for their safety and welfare measures and other matters connected therewith or incidental thereto.

6.     The Plantation Labour Act, 1951

The Plantation Labour Act, 1951 was enacted to regulate the working conditions of workers employed in plantations, and to provide for their welfare. According to the Act, land refers to any piece of land that measures 5 hectares or more that is used to cultivate tea, coffee, cardamom, cinchona, rubber or any other plant, and which employs 15 or more workers on any day of the preceding 12 months.

7.     The Inter-state Migrant Workmen (Regulation of Employment and Condition of Service) Act, 1979

This Act was enacted by Parliament to regulate the conditions of service of inter-state labourers. The Act’s objective is to protect migrant workers who are deployed outside their native states in India.

8.     The Working Journalists and other News Paper Employees (Conditions of Service and Miscellaneous Provisions) Act, 1955

The objective of this Act is to regulate the services of working journalists and other persons employed in newspaper establishments.

9.     The Working Journalists (Fixation of Rates of Wages) Act, 1958

This Act provides for the fixation of rates of wages of working journalists and matters connected therewith.

10.  The Cine Workers and Cinema Theatre Workers Act, 1981

The Cine Workers and Cinema Theatre Workers Act, 1981 was enacted to provide for the regulation of the condition of employment of certain cine workers and cinema theatre workers and matters connected therewith.

11.  The Motor Transport Workers Act, 1961

The Motor Transport Workers Act, 1961 provides for the welfare of motor transport workers and to regulate the conditions of their work.

12.  The Sales Promotion Employees (Condition of Services) Act, 1996

This Act was enacted to regulate certain conditions of service of sales promotion employees in certain establishments. The establishment in this instance applies to every establishment engaged in the pharmaceutical industry.

13.  The Beedi and Cigar Workers (Condition of Employment) Act, 1966

The Beedi and Cigar Workers (Condition of Employment) Act, 1966 was enacted to provide for the welfare of the workers employed in establishments that were involved in the manufacture of beedi and cigars, and to regulate the conditions of their work and for matters connected therewith.

These 4 Labour Codes were passed by Parliament but are yet to be implemented. These reforms will lead to a stable atmosphere for businesses to invest in and create a win-win situation for both the employer and the employees.

Other Laws that are mandated

A few more laws that are mandated are briefed below:

1.     Apprentices Act, 1961

The Apprentices Act was enacted to regulate and control the training of apprentices in the industry and to utilize the facilities available in the industry for imparting practical training with the view to meeting the requirements of skilled manpower for the industry.

2.     The Employees’ Liability Act, 1938

The Employees Liability Act, 1938 was enacted as a protective umbrella for workmen who bring suits for damages for injuries sustained by them against certain defenses of the employer. The Act has been amended in the year 1970 and is applicable throughout India.

3.     The Environment Protection Act, 1986

The Environment Protection Act, 1986 was enacted with the main objective to provide protection and improvement of the natural environment and for matters connected therewith. The act empowers the Centre to take all such measures as it deems necessary for the protection of the environment.

4.     The Indian fatal Accidents Act, 1855

The Indian Fatal Accidents Act, 1855 was enacted to deal with the recovery of damages for the death of a person caused by a ‘wrongful act, neglect, or default’ of another person.

5.     The Personal Injuries (Compensation Insurance) Act, 1963

This Act imposes a liability on the employers to pay compensation to workmen sustaining personal injuries and to provide for insurance for employers against such liability.

6.     Public Liability Insurance Act, 1991

This is an Act enacted to provide public liability insurance for the purpose of providing immediate relief to the persons affected by accidents occurring while handling any hazardous substances and for matters connected therewith.

7.     The Weekly Holidays Act, 1942

The Weekly Holidays Act, 1942 was enacted to grant weekly holidays to persons employed n shops, restaurants, and theatres without any deduction or abatement of wages. The Act is applicable throughout India but shall come into force only when the state government implements the same through a notification in the gazette.

Conclusion

All these Acts have been enacted with the specific purpose of safeguarding the interests of the workers both in the organized and unorganized sectors. With the Government of India passing the much-awaited Labour Reforms, we can see changes that will empower the worker and at the same time make it easier to do business in India. Human Resources Management teams have to be alert to the ever-changing rules and regulations, and they have to be fully prepared to update these changes as and when they occur.

GetifyHR has been supporting its clients across the country in handling all the relevant laws. With our hugely successful Payroll Outsourcing module, we have been able to handle these laws across industries and have assisted our clients to be fully compliant, always. Our cloud-based outsourcing module is a fully integrated package that can handle all aspects of Payroll including the generation of Payslips, Managing Leave and Attendance, Statutory Compliance requirements, and Recruitment. We are fully prepared to support existing clients and prospective clients in handling the new Labour Codes once the Government implements them. Contact us for more information.

Maternity blog

The Maternity Benefit (Amendment) Act, 2017

Introduction

The Maternity Benefit Act, 1961 was enacted to protect women employees during the maternity period.  The legislation entitles women employees maternity benefit of full paid wages during pre pregnancy and post pregnancy periods.  According to the Act, a woman employee is entitled to 12 weeks maternity benefits.

This has now been amended by the Maternity Benefits (Amendment) Act, 2017 passed by parliament on March 09, 2017.

Maternity Benefit (Amendment) Act, 2017

The provisions of the Maternity Benefit (Amendment) Act, 2017 is effective from April 01, 2017.  The Act is applicable to all establishments that include factories plantations, mines, Government establishments, shops & establishments or any other establishment as may be notified by the Central Government.  Any such establishments that employ 10 or more employees are liable to follow this Act.   As per the amendment, the maternity benefit period has been raised to 26 weeks from the previous 12 weeks.

Eligibility: 

To be eligible to avail the benefit of this Act, a woman must have been employed in an establishment for a period of at least 80 days in the past 12 months. 

The Key Highlights

Increase in Maternity Benefit period

The period of paid maternity leave which is the benefit provided by the Act has been increased from 12 weeks to 26 weeks.  Prior to the amendment, a pregnant woman could avail the benefit for 6 weeks before the date of expected delivery.  Through this amendment, this has been increased to 8 weeks.  The balance 16 weeks can be availed after delivery.

Benefit for 3rd delivery

As per the Amendment the paid maternity period of 26 weeks is only available for the first two children.  Any deliveries beyond the 2nd child will be eligible for only 12 weeks of Maternity Benefit of which not more than 6 weeks can be availed before the date of expected delivery.

Rules pertaining to Adoption or Surrogacy

In the case of a woman employee who adopts a child below the age of 3 months or a commissioning mother (a biological mother who uses here egg to create an embryo implanted in a surrogate mother) will be entitled to Maternity Benefit for a period of 12 weeks from the date the child is handed over to the adopting mother or the commissioning mother.

Establishing a Creche facility

As per the Act, it is mandatory for every establishment have 50 or more employees to have a crèche facility either separately or along with the other common facilities.  The crèche premises should be located within the prescribed distance from the establishment.  The beneficiary woman is allowed 4 (four) crèche visits per day and this includes the interval for rest allowed to her.

Work from Home

Given the present situation where work from home has become the norm, the employer may allow the beneficiary to work from home post the period of Maternity Benefit.  The terms of working can be mutually agreed to between the employer and the woman employee.

Keep the employee informed

The Act requires the employer to provide the woman employer all the relevant information about the maternity Benefit Act during the initial period of appointment.

Conclusion

The Maternity Benefit (Amendment) Act, 2017 is an enactment that provides protection for women employees to exercise here rights to continue with her profession during the maternity period.  This right is guaranteed under the Indian Constitution.  GetifyHR provides excellent consultation to companies regarding all aspects of the Maternity Benefit Act and Amendments.  Our outsourcing package is been perfectly modified to handle all the changes brought on by the amendment and is also future ready for any more changes.

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The government has released four new Labour Codes

The much-discussed New Labour Codes which were to be implemented on 1st July 2022 has been postponed as of now. These 4 Labour Codes are an amalgamation of the 29 Labour laws. According to the Ministry for Labour and Employment, only 23 states and UTs have released the draft rules under the Code of Wages.

The introduction of the new Labour Codes brings about much-needed reforms in the working conditions of employees in the country. They bring about changes relating to wages, social security, labour welfare, health, safety, and working conditions of employees.

Let us now delve into a few takeaways from these new codes when they are implemented by the Government.

Capping of Daily Working hours

The new labour codes allow the capping of daily working hours from the current 8 to 12 hours. However, the weekly work hours remain capped at 48 hours. This means that if any employee prefers a 4-day work week, he or she can increase the daily working hours to 12 and generate the required working hours for the week.

The new code also allows an increase in maximum overtime hours from 50 hours (as per the Factories Act) to 125 hours in any quarter across industries. The law will enable companies to adopt the 4-day week and employ workers on the weekend, if necessary.

However, the 4 day week could also be a double-edged sword. On the one hand, the employees would benefit from a more extended rest period, but on the other hand, it entails longer working hours during the weekdays which may negatively affect the workers’ health. In the same vein, the increase n overtime may enhance the earnings but it will be at the expense of longer working hours or probably working on weekends as well.

Changes in take-home salary

The take-home salary may get reduced especially for employees of the private sector. On implementation of the new codes, the basic salary would be capped at 50% of the gross salary. However, it proposes to increase the PF contributions of both the employees and employers. The changes will also bring about an increase in the retirement corpus and gratuity amounts. This will be beneficial to all employees during their retirement days.

Changes in leave availed

The new codes hope to rationalize the leave an employee can avail of during the course of their employment, carry-forward of leave to a succeeding year, and encashment of leave during the period of employment. The new labour codes have reduced the eligibility requirement for leave from 240 days of work to 180 days of work in a year.

The effect on the unorganized sector

The New Labour codes allow workers of all sectors including the unorganized sector to avail the benefits of the ESIC scheme. A national database of workers in the unorganized sector will be created through registration on a portal under the new labour codes. This will provide medical care to the employees and their family members who work in the unorganized sector.

The ESIC infrastructure that includes the hospitals, dispensaries, and branches is being expanded up to the district levels. On implementation, all 740 districts will get this facility.

Any worker engaged in hazardous work would be given the benefit of ESIC.  Similarly, gig workers engaged in new technology will also become eligible to become ESIC members. Plantation workers will also be eligible for its benefits. Institutions involved in hazardous work have to compulsorily register for ESIC.

Conclusion

These reforms hope to empower the workers in the organized and unorganized sectors. This will herald a major change in labour laws in the country and bring in the much-needed changes that have been discussed about for decades.

GetifyHR is fully prepared to guide our valued clients about all aspects of the new labour codes as and when they are implemented.  Our professional team is fully knowledged about these changes and is capable of providing immediate solutions to any doubts and queries regarding these laws.  Our outsourcing payroll package will also be able to support these changes so that our associates can be fully compliant during the proposed changeover to the new laws.

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EPF & ESI – Companies that are eligible? How to Register? What documents are required?

Introduction:

The constitution of India ensures social-economic justice to the people and establishing of a Welfare State.  The inequalities in the society were slowly being dismantled by regulations brought in by the government.  One such regulation was to introduce a long-term savings scheme for employees, especially in the Private sector, that would support them in retirement or superannuation.  This regulation is the Employees Provident Fund & Miscellaneous Provisions Act, 1952.

With the view to provide further security to the employees in times of adversity like ill-health or accidents, the government introduced the Employees State Insurance (ESI) scheme in the year 1948. Both these acts have gone a very long way in supporting the employees in the organized sector when they are out of job and in times of adversity.

The EPF Act

EPF Act:  the EPF act ensures that all employees have to contribute a percentage of their basic salary to the EPF every month.  An equal is contributed by the employer towards the fund. The amount so contributed would earn interest and can be withdrawn under certain conditions.  The scheme is managed by the Employees Provident Fund Organization (EPFO).

Eligibility – for Employer

Any organization that has 20 or more employees is required to register with the EPFO and contribute towards EPF.  However, subject to certain conditions even organizations employing less than 20 employees are permitted to register and contribute to the fund.

Eligibility – for Employee

Any employee drawing a monthly salary of less than ₹15,000/- has to compulsorily become a member of the EPF.  If any employee drawing a monthly salary more than ₹15,000/- desires to become a member he may do so subject to getting the approval from the Asst. PF Commissioner and the Employer.

How to Register?

EPF Registration is mandatory for all organizations that meet the eligibility criteria of 20 or more employees.  The registration must be obtained within one month of the attaining the minimum strength.  Failure to register will attract penalties.

The registrations can be made offline or online through the official website of the Employees Provident Fund Organization.  Online registration is an early process when you have all the required documents/information readily available, the registration form can be downloaded from www.epfindia.gov.in.

The following information has to be furnished:

Name and address of the Organization

Details of Head Office and Branches if any

Date of Incorporation/Registration of Firm

Details of ownership:  Designation and address of Directors or Partners

PAN details

GST details

Contact details:  email ID and mobile number of authorised person

Name of contact person, Address, Date of Birth, Gender, PAN, Designation and date        of joining

In addition to these, details regarding the type of company have to be furnished.

For Proprietorship Firm

Registration of Firm with date of registration

Name of the Employer

PAN details

Identify proof

Address of the Proprietor (Official)

Address of the Proprietor (Residential)

Contact Number

For Co-operative Societies (Trusts/Societies)

Certificate of Incorporation

Memorandum of Association

Articles of Association

PAN

Address Proof

For Partnership Firm

Name and address

Identity proof of Partners

Certificate of Registration

Details of Partners

For Limited Liability Partnership firm (LLP)

Certificate of Incorporation

Identify proof of Directors

Details of all Directors

Address Proof and ID Proof of all Directors

Memorandum of Association

Article of Association

Other Businesses

If Factory, then the Factory license and date have to given

First Sale Bill

First Purchase Bill towards machinery

Bank name, account Number, IFSC, address

Salary details

Employee details

Number of employees employed, Gender, Type of work

Salary details

Documents Required for ESI Registration

  1. Company Pan Card (Scan Copy & Hard Copy)
  2. Partners/Directors Pan Card (Scan Copy & Hard Copy)
  3. Current Account Cancelled Cheque Leaf (Scan Copy & Hard Copy)
  4. Company Registration Copy (ROC / Partnership Deed)
  5. Partners Details (Name, DOB, Father Name, Partnership starting date)
  6. Employees Aadhaar Card Copy
  7. Employees Bank Passbook Copy
  8. Digital Signature of Authorized Signatory
  9. Specimen Signature
  10. EPF & ESI Application forms
  11. GST Registrations Copy
  12. Rental/Lease Agreement

Steps for Online Registration

Be prepared with all the required documents

Login to the EPF website @ epfindia.gov.in

Read the instructions thoroughly

Fill in the required information

A Digital Signature Certificate of the Authorised Signatory – Proprietor/Partner/Director

Verify their correctness and then submit the form online

Type in the CAPTCHA code and click on “GET PIN” option

Enter the PIN that you receive on your registered mobile or email ID

Click on the SUBMIT button

Download the PDF

Save and take a printout of the PDF

This has to be submitted to the EPF Office.

The ESI Act, 1948

The Employees State Insurance (ESI) scheme is a welfare scheme for the benefit of employees in the organized sector.  The scheme was introduced by the Government under the ESI Act, 1948 with the objective of providing social-economic protection to employees during adverse situations brought on by ill-health or accidents.  The funding for the scheme comes from the contribution from the employee and employer.  Under this scheme, the employer contributes 3.25% of the monthly salary + dearness allowance, whereas the employees contribute only 0.75% of the salary.  Any establishment employing more than 10 employees (20 in some states) have to register with the Employees State Insurance Corporation (ESIC), an autonomous body under the Ministry of Labour & Employment, Government of India.

Eligibility

Any organization that employs 10 or more (20 or more in some states) is required to register with the ESIC and contribute towards ESI.  The Act however applies for both the employer and the employee.  In case the wage of the employee is less than Rs:176/- per day then the employee is exempted from contributing to the fund.  All employees whose salary does not exceed Rs:21,000/- are eligible to be beneficiaries to the scheme.

The ESI Act covers the following establishments:

  • Shops, Road Transport organizations, Cinema Houses/Theatres, Newspaper Establishments, Non-seasonal Factories, Hospitals & Medical Institutions, Educational Institutions, Restaurants & Hotels. If any of these establishments employ 10 or more persons, they have to register with ESIC.

How to Register?

Registration can be manual or online.  However, now the ESIC registration is fully online.  The steps involved in online registration are given below:

Step 1:  Here you have to login to the ESIC portal @ www.esic.in.  Click on the “Employer Login” option on the home screen.  On the next page click on “Signup” button and fill in the details called for and then submit the form.

Step 2:  The employer will receive a confirmation mail to the email address and mobile number provided earlier at the time of sign-up.  This email will contain the username and password details for registering as an employer under the scheme.

Step 3 :  In this step you have to fill-up the Registration Form-1.  For this you have to login to the ESIC portal and click on the “Employer Login” option and enter the User name and password received in your email or mobile.  You will get redirected to the “New Employer Registration” option.  Click on the option and you will be asked to select the “Type of Unit” from the dropdown list and click on the “Submit” button.

The Employer Registration Form_1 will appear on the screen and all the details required have to be filled in.  The details include Employer details, establishment details, and employee details.  Once this is completed, click on the “Submit” button.

Step 4 :  In this step you have to make the Payment for Registration.  Once the Registration Form is submitted, the “Payment of Advance Contribution” page will be open.  Fill in the amount to be paid and select the payment mode.  Payment of advance contribution for 6 months is required to be remitted.

Step 5 :  This is where you will be sent a system generated “Registration Letter”.  This will contain a 17 digit Registration Number and is a valid proof of registration of the employer under the ESI Scheme.

Documents Required for ESI Registration

The following documents have to be scanned and uploaded

  1. Company Pan Card (Scan Copy & Hard Copy)
  2. Partners/Directors Pan Card (Scan Copy & Hard Copy)
  3. Current Account Cancelled Cheque Leaf (Scan Copy & Hard Copy)
  4. Company Registration Copy (ROC / Partnership Deed)
  5. Partners Details (Name, DOB, Father Name, Partnership starting date)
  6. Employees Aadhaar Card Copy
  7. Employees Bank Passbook Copy (If Gross is below 21 thousand)
  8. Digital Signature of Authorized Signatory
  9. Specimen Signature
  10. EPF & ESI Application forms
  11. GST Registrations Copy
  12. Rental/Lease Agreement

These two Acts have provided the employees and their dependents in the organized sector solace during times of adversity like ill-health and accidents and when they are in retirement.  They have been a great boon for such employees.

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Risks of Non-Compliance and How to Avoid Compliance Penalties?

Compliance is a generalized term that indicates adherence to varying rules and laws passed by the Government. Statutory Compliance is complying with or adhering to rules and laws about labour and human resource.

Organizations that employ people are required to follow a set of guidelines that fall under statutory compliance. Penalties include fines and in some cases imprisonment if companies fail to fully comply with these rules and regulations. Following these rules and laws is, therefore, very important for the organization if it needs to function smoothly. In this article, we will discuss how companies can avoid compliance penalties.

What are the risks of non-compliance?

Statutory compliance is vital for any company and their HR teams have to be on their toes to frequently update the new regulations and see that the company is fully compliant. Let us first understand the consequences of failing to comply with the rules and regulations.

Fines

The first risk of non-compliance is the possibility of fines.  Governing bodies have put in place stringent penalties to compel companies to comply with the rules and regulations, and fines are their first line of penalties.  Thousands of rupees are collected as fines for non-compliance and the amounts would vary based on the seriousness of the offense. This entails that you not only have to pay the fines but will also have to spend for legal costs.

Imprisonment

For very serious lapses in complying with the Statutory Compliance rules and regulations, imprisonment of up to 6 months with or without fines is enforced.

Loss of Reputation

One of the serious outcomes of non-compliance is the loss of reputation suffered by the company and this, in turn, will amount to a loss of customers.

Dissatisfaction of Employees

When penal action is taken against a company for non-compliance it also brings in dissatisfaction within the employees as non-compliance of any degree would also affect them. This would in turn bring about unwanted tension and would provide enough fodder for potential employees to stay away from joining the company. Employee retention would suffer and it also curtails the entry of new employees. Overall this would harm the company’s working.

Loss of Productivity

Non-compliance would also result in loss of production due to the stoppage of production brought about by unscheduled inspections and audits by the authorities. This would lead to a waste of time and money. In cases where non-compliance is serious, the authorities can even order companies to suspend operations.

What are the Acts businesses have to comply with?

Before we venture into the penalties of non-compliance with Statutory Compliance rules and regulations, let’s have a look at what these Acts are that all businesses have to comply with.  We can divide these Acts into 5 sections.  They are:

  1. Acts that control Wages
  2. Acts that provide for Social Security
  3. Acts that control Industrial Relations
  4. Acts to benefit Women and
  5. Acts that control other aspects of the employees

1.  Acts that control Wages

1.1  Payment of Wages Act, 1936

1.2  Minimum Wages Act, 1948

1.3  Payment of Bonus Act, 1965

1.4  Equal Remuneration Act, 1976

2.  Acts that provide for Social Security

2.1  Employees’ Provident Fund Act, 1952

2.2  Employees’ State Insurance Act, 1948

2.3  Payment of Gratuity Act, 1972

2.4  Labour Welfare Fund Act, 1965

3.  Acts that control Industrial Relations

3.1  Industrial Disputes Act, 1947

3.2  Industrial Employment (Standing Orders) Act, 1946

3.3  Trade Unions Act, 1926

3.4  Factories Act, 1948

3.5  Shops and Establishment Act, 1947

3.6  The Industrial Establishment Act, 1963

4.  Acts for the benefit of Women

4.1  Equal Remuneration Act, 1976

4.2  Maternity Benefit Act, 1961

4.3  Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

5.  Other Acts

Apart from these a group of Acts is in force to take care of other aspects of the employee that does not find representation in the above mentioned Acts. They are:

5.1  The Professional Tax Act, 1975

5.2  The Child Labour (Prohibition & Regulation Act, 1986

5.3  The Contract Labour (Regulation and Abolition) Act, 1970

5.4  The Employment Exchange (Compulsory Notification of Vacancies) Act, 1959

5.5  The Apprentice Act, 19651

5.6  The Employees Compensation Act, 1923

5.7  The Interstate  Migrant Workmen (Regulation and Conditions of Services) Act, 1979

What are the penalties for non-compliance?

Statutory Compliance is a critical aspect of any business or organization. Failure to comply with these statutory requirements can pose immense problems. These include penalties in the form of fines and imprisonment when the non-compliance issue is serious. We shall briefly discuss the penalties under the various important Acts pertaining to Payment of Wages and Social Security in the following paragraphs.

1.  Penalty for non-compliance with the EPF Act, 1952

Any person who fails to pay the contribution towards EPF or makes false statements or representation is liable to be punished with imprisonment for a period that may extend up to 1 year or with a fine of ₹5000/- or with both. The Act also enforces penalties for non-payment of inspection charges or administrative charges. The penalty for such non-compliance is punishable with imprisonment for a period that is not less than 6 months and may extend up to 1 year and a fine of ₹5000/-.

However, if the employee contribution is also not paid then the punishment may extend to a term of 3 years but not less than 1 year and a fine of ₹10000/-.

The filing date for the Monthly EPF returns is 25th of each month, and for the Annual Return under Form 3A and 6A it is on or before the 30th of April every year. The Act also requires the filing of Form 2, Form 5, and Form 10 as and when required.

2.  Penalty for non-compliance with the ESI Act, 1948

Penalties for non-payment, delayed payment, or falsifying payments and returns include imprisonment for a period extending up to 2 years and a fine of ₹5,000/-. For non-payment, simple interest @ 12% per annum for each day of delay is collected.

Filing of return for the half-year from April to September is on or before 12th November, and for  the period October to March is on or before 12 May.

3.  Penalty for non-payment of Gratuity under the Payment of Gratuity Act, 1972

Failure to make the gratuity payment or providing false statement or giving false representation is punishable with imprisonment for a term which may extend to six months or with a fine of ₹1000/- or with both. As soon as the Gratuity is due, the employer shall determine the amount due to the employee. The amount has to be paid to the employee within 30 days from the date it becomes payable.

4.  Penalty under Labour Welfare Fund Act, 1965

In Tamilnadu, if any person who willfully fails to produce any document required by the Board or fails to furnish any information called for by the Board or fails to comply with any directions issued by the Board is liable to be imprisoned for a term or 3 months or with fine of five hundred rupees or with both.

The rules vary from state to state. The Labour Welfare Fund requires the filing of an annual return and the dates vary from state to state. In Tamil Nadu, the due date is 31st January of every year.

5.  Penalty for non-payment of wages under the Payment of Wages Act, 1936

Wages have to be disbursed to the employees on the dates mentioned in the state’s Payment of Wages Act. For non-payment of wages on time by the employer a penalty in the form of a fine not less than ₹1000/- that may extend to ₹5000 is enforced.  For subsequent convictions the fine will not be less than ₹5000/- and may extend up to ₹10000/-.

Similarly, for failing to maintain the register or not furnishing the required information or giving false information, the fine shall not be less than ₹1000/- and may extend up to ₹5000/-. For repeat conviction of non-payment of wages, imprisonment not less than one month which may extend up to 6 months, and fine not less than ₹2000/- and extendable up to ₹15000/- may be collected. There is also provision for collecting additional fine up to ₹100/- per day.

This is a state subject and therefore varies from state to state. In Tamil Nadu, an Annual Return in Form IV has to be filed with the Inspector within the jurisdiction of the factory or industrial establishment not later than 31st January of each year.

6.  Penalty for non-payment of minimum wages under the Minimum Wages Act, 1948

Non-payment of minimum wages as per the Minimum Wages Act, 1948 is punishable under section 22 of the Act by imprisonment up to 6 months or fine or both. This may differ from state to state. Incidentally, the Delhi Government has increased the fine from ₹500/- to ₹50000/- for non-payment of Minimum wages and the imprisonment has been increased from 6 months to 3 years.

This is state-specific and varies from state to state. In Tamil Nadu, filing of an Annual return in Form III is mandatory, and the Government will notify the dates.

7.  Penalty for non-compliance with the Payment of Bonus Act, 1965

If any person does not comply with the provisions of the Bonus Act 1965 or any rule made thereunder or fails to meet the direction or requisition, shall be punishable for a term which may extend up to 6 months or with a fine of ₹1000/- or with both. However, if there is a dispute and the employer and employees are not in agreement with the terms, then the issue comes under the purview of the Industrial Disputes Act.

The annual return under Form D for payment under the Bonus Act has to be filed for every calendar year before 1st February of the following year irrespective of the financial year that an employer follows.

8.  Penalty for non-compliance with the Equal Remuneration Act, 1976

If an employee contravenes the provisions of the Act by not paying equal remuneration to men and women workers for the same work or work of similar nature, or discriminates between men and women, he shall be punishable with a fine which shall not be less than ₹1000/- which may extend to ₹ 20000/- or with imprisonment for a term which shall be not less than 3 months but which may extend for 1 year or with both. For subsequent offenses, the imprisonment may extend to two years.

If the employer omits or fails to maintain any registers or other documents, or fails to produce when called for, or refuses to produce the same, he will be punishable with simple imprisonment for a term which may extend to one month or with a fine which may extend to ₹ 10000/- or with both.

The Act does not require the submission of any return. However, the employer has to maintain a Register of employed in Form D that has to be produced before the Inspector appointed under the Act.

How do you avoid the risks of non-compliance?

Payroll is a vital part of any organization that employs people. Businesses generally maintain their payroll function in-house either manually or by relying on a do-it-yourself payroll application. Whether you perform this task manually using a desktop with customized software or an online solution, there are serious issues especially when it comes to statutory compliance. Doing it in-house may not be able to keep you fully updated on the changes and this would pose serious problems in the working of the business.

Payroll and Statutory Compliance tasks are time-consuming and complicated. Any mistakes in payslip generation or filing the compliance reports would have serious consequences. The best option is to outsource this task to a reputed concern whose payroll module and expertise in statutory compliance would help to drastically reduce the burden and the risks.

The present crop of high-tech firms offers a lasting solution to this vexing problem. This would not only help to reduce the in-house workload but also help to generate the regular reports more accurately and in full compliance with the rules and regulations. The present-day payroll packages using cloud technology provide the ideal solution.

Outsourcing to a company like GetifyHR helps the organization to mitigate risks and lessens the in-house workload. This can help the company to regularly identify compliance obligations and act accordingly. GetifyH, with its vast experience in managing Payroll and Statutory Compliance issues, has the right tools and trained professionals to handle this task with ease. This will enable the company to focus fully on developing the business.

Conclusion

Statutory Compliance is a highly complicated function and companies should be on their toes to keep themselves fully updated on the changes in rules and regulations. When you get the assistance of professional service providers, you get the required expertise to guide you and keep you fully updated. You will not only be able to mitigate the risks but would also be able to:

  • Identify the compliance obligations and keep abreast of the changes.
  • Meet all compliance rules and regulations.
  • Ensure filing of returns, and remittance of dues to the department on time, without any mistakes.
  • Ensure that the employees get their share of remittances regularly under prevailing rates.
  • Streamline the workflow and help the HR team to focus more on managing the staff and employees.
  • Storing the information in an organized manner for future use by the accounts department.
  • Providing adequate security to vital data.

Failure to comply with government rules and regulations can endanger your profitability. As an employer, you are duty-bound to comply with these rules and regulations and the best option is to outsource these operations to a company like GetifyHR. You not only reduce your stress levels but will also be able to free time for your HR teams in particular. This will help you to focus more on business development.

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Understanding the EPF Act, 1952, and EPS & EDLI Schemes

Employees’ Provident Fund Act, 1952

The Directive Principles of State Policy enshrined in the Constitution of India aims at ensuring socio-economic justice to the people and in establishing a Welfare State.  Private sector Employees’ who retired found themselves in trouble to earn a normal livelihood.

The government passed a legislation to introduce a long-term savings scheme that would support them in retirement or superannuation.  This gave them a life of dignity and a strong social security cover. This legislation is the Employees’ Provident Fund & Miscellaneous Provisions Act, 1952.

As a follow-up, in the year 1976, the government introduced the Employees’ Deposit Linked Insurance Scheme (EDLI) as a part of the EPF Act. This paved the way for the nominee of the policy to receive a lump-sum payment in the event of the death during the period of service, of the person insured.

To provide further security, in the year 1995 the government introduced the Employees’ Pension Scheme (EPS) to ensure more support.

Who the Act is Applicable to?

The Act applies to both the Employer and the Employee.

The Employer

The EPF Act provides that any establishment having 20 or more Employees’ comes under the purview of the Act. However, even organizations with less than 20 Employees’ can opt to register for this scheme.

The Employee

The Act mandates that all Employees’ who draw a salary (Basic wages) that is less than INR 15,000/- should become a member under the scheme. For those drawing more than INR 15,000/-, you are given the option to either join or not join as a member. However, once an employee drawing more than INR 15,000/- has become a member, he cannot opt-out of the scheme at a later date.

All the 3 Schemes, EPF, EPS & EDLI are bundled as one package and there is no option to choose as per one’s discretion.

How to contribute?

Both the Employer and the Employee have to mutually contribute to the EPF. Employees’ contribute 12% of their basic salary towards this fund and the employer contributes an equal amount. The entire portion of the contribution of the Employee is allocated to the EPF A/c. This accumulated fund earns interest at a specific rate as declared by the government from time to time.

The Employer also contributes 12% out of which 8.33% of the salary is allocated to the Employees’ Pension Fund (subject to a maximum of INR1250/-) and the remaining 3.67% is allocated to the EPF A/c. In addition to this, the employer also contributes to the Employee Deposit Linked Insurance Scheme. This is 0.50% of the basic pay subject to a minimum of INR 75/- per month per employee.

Apart from this, the employer has to contribute 0.50% of the basic towards the PF Administrative charges subject to a minimum of INR 75/- per month for a non-functional organization without any contributory member and INR 500/- for other establishments.

As mentioned earlier, the three schemes EPF, EPS, and EDLI are bundled schemes with no option to contribute separately as per our choice.

Therefore, we must understand the key functions of the 3 schemes.

Employees’ Provident Fund

This is the main ingredient of the EPF Act 1952. The main purpose of this enactment is to provide security to the employee on retirement. The Employees’ Provident Fund Organization (EPFO) controls this scheme.

In this scheme, the Employee and Employer contribute to the scheme. The Employee contributes 12% of salary (Basic wages) and the Employer contributes 3.67% of basic salary from the 12% that he contributes. The Employees’ Pension Scheme and the Employees’ Deposit Link Insurance scheme share the balance 8.67%.

The EPF scheme is exempt under the Income-tax Act.  This is the EEE exemption. The First E indicates that this investment is exempt from tax; the Second E indicates that the interest earned on this investment is exempt from tax and the Third E indicates that the income generated from this investment will not be taxable at the time of withdrawal.

The Finance Act, 2020, has modified this rule.  The rule now states that if the funds contributed by the employer in any of the schemes go beyond 7.50 lakhs, then the interest income on the incremental contribution is taxable.

Penalty for late payment /non-payment

The Act mandates that the employer has to remit his part of the contribution along with the employee portion on or before the 15th day of every month without fail. In case of default of payment, the employer is liable to pay U/s.7Q of the Act, simple interest at the rate of 12% per annum for each day of the default.

Under Section 14B of the Act, late filing of EPF Challan and contribution will attract the following penalties.

5% interest p.a for a delay of upto 2 months

10% interest p.a for a delay of 2-4 months

15% interest p.a for a delay of 4-6 months

25% interest p.a for a delay of more than 6 months

The PF a/c’s of members will be credited the interest once the penal dues are realized and the employer will be charged penal interest to cover the interest dues and also has to pay a penalty in case the employer is declared bankrupt. This indicates that the EPF dues are more important than any other debts or dues. Non-payment of dues could also attract arrest proceedings. The EPFO has the right to attach the bank a/c of the employer for non-payment of these dues.

Interest Rate on EPF

The interest rate for EPF contributions was 8.5% for the fiscal year 2020-21 and this remains unchanged for the fiscal year 2021-22 also. The interest calculation depends on the monthly running balance and the rate announced by the government.

Employees’ Pension Scheme (EPS)

The Employees’ Pension Scheme is a social security scheme launched in the year 1995 by the Employees’ Provident Fund Organization. The scheme provides a pension to an employee of the organized sector after retirement at the age of 58. This is subject to the employee having being employed for at least 10 years (this need not be continuous years of service).

The following are the criteria to become eligible for the scheme.

  • The employee should be a member of EPFO
  • He should have completed 10 years of service
  • The employee should be 58 years of age

The amount of premium is arrived at using the following computation:

Month Pension = Pensionable service x Pensionable salary /70

The maximum pensionable salary is INR15000/- per month

EPS funds don’t generate any interest.

Employees’ Deposit Linked Insurance (EDLI)

Introduced in the year 1976, the EDLI scheme provides the nominee a lump-sum amount in the event of the death of the person insured during the period of service.

Eligibility and other criteria

  • All EPF members get the benefit of the EDLI scheme
  • The plan is a term plan and the sum insured is variable as it depends on the remuneration of the person insured.
  • The Employer pays the premium amount.
  • The minimum assurance benefit for the scheme is INR 2.5 lakhs and the maximum is capped at INR 7 lakhs.

The Employees’ Provident Fund Act, 1952, the Employees’ Deposit Linked Insurance Scheme, 1976, and the Employees’ Pension Scheme, 1995 provide a strong social security cover to Employees’ in the private sector. These are a means of supporting the livelihood of such Employees’ once they retire from service. They are one among the pillars of a society that believes in being identified as a Welfare State.

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Aatmanirbar Bharat Rozgar Yojana (ABRY Scheme)

  • What is ABRY Scheme?.

ABRY Scheme ( Aatmanirbar Bharat Rozgar Yojana Scheme) is announced to incentivize the employers who registered with EPFO. Employer’s can avail this benefit by recruiting freshers or the employee’s who lost their job during the period (01/03/2020 – 30/09/2020).

Government will pay both Employee & Employer EPF contribution if the employer meets ABRY Scheme conditions.

What are the Scheme Conditions:

Fresh Employment – Employee who joined on or after 01/10/2020 and wages is less than Rs.15,000/- is eligible for ABRY Scheme.

Experienced Employment – Employee who resigned from previous employment during the period 01/03/2020 – 30/09/2020 and joined with present employer on or after 01/10/2020 is eligible for ABRY Scheme.

* Wages means on which contribution is payable in terms of section 6 of EPF & MP Act 1952.

Scheme Validity:

  • The scheme is valid for the joiners during the period 01/10/2020 – 30/06/2021
  • Again EPFO has extended the ABRY scheme registration date from 30-June-2021 to 31-March-2022.
  • Employees & Employers will get this benefit for next 2 years from the joining date.

Click here to know more about the scheme.

Feel free to call incase if any clarifications:

Name: Dinesh Ramakrishnan

Email: sales@getifyhr.com

Phone: 0422 2969666 (or) 3513520

Mobile: +91 97897 29394

payment of gratuity

Payment of Gratuity Act, 1972

Any shop or foundation with 10+ workers employed for the preceding 12 months is under the application of The Payment of Gratuity Act.

There is no definite percentage set by gratuity act for any employee. Based on a formula, an employer pays the gratuity to his employee.

Factors to consider

  • Last drawn salary
  • Years of service

There are 2 categories of non-government employees divided by The Payment of Gratuity Act to calculate the payable amount. Those are,

  • Employees covered under the Act
  • Employees not covered under the Act

Employees covered under the Act

     For the employees those who are covered under the act.

     Formula

                     (15 X Last Drawn Salary X Tenure of Working) / 26

            That is 15 days of last drawn salary for years of service.

 

Employees not covered under the Act

Though the employees are not covered under the act, there are no restrictions for paying the gratuity.

       Formula

                    (15 X Last Drawn Salary X Tenure of Working) / 30

                  half a month salary for each serviced years.

According to the portal of government pensioners, retirement gratuity is determined this way: one-fourth of a month’s compensation in addition to dearness stipend is drawn before retirement for each completed six mothy periods of qualifying service.

If there is an occurrence of death of an employee, the gratuity is paid depending on the service tenure, where the highest to procure is limited to Rs 20 lakh.

shops act 2

Shops & Establishment Act

The Shop and Establishment Act is to direct the employment state of labourers in shops and foundations. This encapsulates work hours, breaks, overtime, holidays, termination of service, and more.

Enrolment should be done in 30 days from the date of initiation of business. Regardless of the presence of the employee, the enterprise needs to get enrolled under this act.

An application must be submitted alongside the expense and the scanned copies of documents on the web. Once the documents are submitted, within 15 days, the registration is approved by the concerned department and the certificate of registration can be downloaded from the portal.

Upon completing 5 years, the registration should be renewed.

Change of address, status and partner intimation is supposed to be informed through online application within 30 days for which registration fee may be incurred depending upon the headcounts of employees and other metrics.

The yearly return ought to be documented online in Form U before 31st January of the forthcoming year.