The Shops and Establishment Act

Introduction

The economic development of a country can be correlated to the efforts they take for the welfare of the workers both in the organized and unorganized sectors. The need to protect the rights of the workers and ensure safe working conditions and regulate the actions of the employers regarding the workforce has resulted in various Labour laws being passed over the years. Since Independence, India has enacted several Acts to streamline and protect the rights of employees during the period of employment and also protect their interests post-retirement.

Accordingly, the Shops and Establishment Act was enacted by each state based on a common model code.  The Act has provisions to regulate the payment of wages, working hours, leave entitlements, holidays, terms of service, and other work conditions of workers in shops and commercial establishments.

The Shops and Establishment Act applies to all shops and commercial establishments namely, business centers, stores, offices, warehouses, hotels, eateries, theatres, amusement parks, and other entertainment centers throughout the country. This is a very important labour regulation and all establishments coming under the purview of the Act have to strictly comply with the rules and regulations.

Objectives of the Act

The Shops and Establishment Act’s main objective is to protect employees’ rights by defining the benefits to them, regardless of the industry and type of establishment they are employed in. The Act is designed to regulate the Payment of wages, fix the terms of service, leave entitlements, holidays, working hours, overtime work, maternity leave and benefits, and rules regarding the employment of women and children.

Scope of the Act

• The Labour Department governs the Shops and Establishment Act and regulates the premises wherein any trade, business, or profession is carried out.
• The Shops and Establishment Act regulates most of the trade and businesses in India.
• Separate Acts govern the 28 States and 9 Union Territories.
• The Act regulates working conditions in Shops, Commercial Establishments, and also residential premises that are run for business gain.

What are the areas that the Shops and Establishment Acts regulate?

• The Act regulates working hours and overtime.
• Rest intervals for employees
• Opening and closing hours are notified
• National and religious holidays and the days when the establishment remain closed
• Leave Policy; annual leave, Maternity leave, Sick leave, and Casual leave entitlement
• Schedule for Payment of Wages; time and conditions.
• Policies regarding wage deductions.
• Termination of employment.
• Cleanliness, lighting, and ventilation of the premises.
• Precautions to be taken against fire.
• Reporting accidents during working hours and maintaining the records.
• Maintenance of various Registers.
• Display of notices and Certificates in prominent locations.
• Rules for the employment of children.

Key Definitions

Shop

Shop refers to any premises where goods are sold, either by retail or wholesale, or where services are rendered to customers. An office, a store room, a godown, a warehouse, or a workplace whether in the same premises or elsewhere that is used to conduct such trade or business is also referred to as a shop.

Commercial Establishment

Any premises where trade, business, profession, or any other work is undertaken is considered a commercial establishment.

This may include a registered society or trust, a charitable trust, a journalistic or printing establishment, a contractor or auditor, educational institutions, premises where banking, insurance, stock, shares, and brokerage is undertaken, hotels & eateries, lodges, resorts, clubs, theatres and other places like amusement parks and entertainment halls.

Registration under the Shops and Establishment Act

• Since each State and Union Territory has its Shops and Establishment Act, they may follow separate regulations. The process of registration, registration-fee structure, and documentation required may be different in each state.
• Upon starting a shop or establishment one needs to apply for the Shops & Establishment registration within the stipulated period enacted by the state regulation.

The application is to be submitted to the Chief Inspector in the form prescribed in the state. The following details have to be furnished.

1. Name of the employee.
2. Name, address, and category of the establishment.
3. The number of employees.
4. Other relevant details as called for.
5. The registration fee is calculated based on the number of employees.

The Department of Labour of each state is authorized for the registration process. Most of the states are now following a 100% online registration process, leaving only a few states that still follow the manual filing of registration.

Documentation

Since every state has its specific requirements, the documents may slightly vary from state to state. However, the following documents are required across every state for registration under the Shops and Establishment Act.

• Certificate of Incorporation of the company/LLP
• List of Directors or Partners with ID and Address proof
• Partnership Deed in case of Partnership Firm
• Copy of PAN Card or Aadhar Card
• Address proof like on the electricity bill of the premises
• The registration fee as prescribed by the government

Procedure for closure of the shop or establishment

If for any reason the occupier decides to close the shop or establishment, the Chief Inspector should be informed, in writing within 15 days of the proposed date of closure. The Chief Inspector will cancel the registration and remove the name from the register.

Benefits of Registration

• Registration provides proof of legal entity and allows the conduct of business within the limits of that particular state.
• Since it provides proof of legal entity, it helps in opening a Bank Account.
• Registration helps to facilitate the Inspection process whenever the authorities inspect the premises.
• Can benefit under the various schemes of Central and State governments.

Self-Certification Schemes and how it enables ease of doing business?

• Many State governments have implemented Voluntary Compliance/Self-Certification Schemes to assist employers to overcome the complications due to the plethora of laws to be complied with, registers to be maintained, and returns to be filed.
• The employers are free to join the scheme at any time.
• They are motivated to comply with the rules and regulations of the Act without compromising the worker’s safety and social security.

Registration under the scheme enables automatic cover of a set of labour laws and the benefit of these laws can be availed. They include:

1. The Minimum Wages Act, 1948
2. Payment of wages Act, 1936
3. Payment of Bonus Act, 1956
4. Contract Labour (Regulation and Abolition) Act, 1970
5. Payment of Gratuity Act, 1972
6. Maternity Benefit Act, 1961
7. Equal Remuneration Act, 1976
8. Child Labour (Prohibition and Regulation) Act, 1986

All rules as per the Central Acts and their respective State rules will apply. Those registering for the scheme are exempted from surprise inspections under the various laws. One consolidated register is required to be maintained instead of multiple registers. Only a few annual returns need to be filed instead of several returns under the various labour laws.

Penalties

Complying with the rules and regulations of the Shops and Establishment Act is mandatory for all establishments. In case of failure in obtaining registration and non-compliance with the rules and regulations of the Act, the establishment would be liable to pay a fine. This varies from state to state. Repeat offenses could be liable for imprisonment and there is also the risk of receiving closure notices.

Conclusion

The Shops and Establishment Act is a vital piece of legislation to address the health and safety of employees. All registered establishments the Act have to strictly follow the rules and regulations. It is, therefore, important that these businesses are fully aware of the provisions of the Act and the changes that are brought in from time to time.

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