Labour Laws: Overview and Scope

Labour legislation is a body of laws, enactments and administrative rulings relating to the legal
rights of working people with respect to their organizations. Labour laws generally cover areas
such as industrial relations, workplace health and safety, collective bargaining, unfair labour
practises, employment standards such as wages, social security, working hours,
retrenchment, etc. Labour Laws are relevant owing to their fulfilment of the following three
important roles:

• They establish a legal system to facilitate productive individual and collective employment
relationships
• They promote harmonious industrial relations based on workplace democracy by providing
a framework within which employers, workers and their representatives can interact with
regard to work-related issues
• They provide a framework for guaranteeing, implementing and enforcing socially accepted
fundamental principles and rights at work

History of Labour Laws in India

The earliest Indian statute to regulate the relationship between employers and workmen was
the Trade Dispute Act, 1929. Provisions were made in this Act for restraining the rights of
strike and lock out but no machinery was provided to take care of disputes. Ultimately the
Industrial Disputes Act (the Act) brought into force on 01.04.1947 repealing the Trade Disputes
Act 1929 has since remained on statute book.

During the post-independence period, labour laws in India were shaped by the views of
important nationalist leaders, debates of the Constituent Assembly and provisions of the
Constitution and the International Conventions and Recommendations. Over time, Indian
labour laws have also been influenced by important human rights and the conventions and
standards emerging from the United Nations such as right to work of one’s choice, right against
discrimination, prohibition of child labour, just and humane conditions of work, social security,
protection of wages, redress of grievances, right to organize and form trade unions, collective
bargaining and participation in management. Indian labour laws have also been subsequently
influenced by the deliberations of the various Sessions of the Indian Labour Conference and
the International Labour Conference and the recommendations of the various National
Committees and Commissions such as First National Commission on Labour (1969), National
Commission on Rural Labour (1991), Second National Commission on Labour (2002) etc. and
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 judicial pronouncements on labour related matters specifically pertaining to minimum wages,
bonded labour, child labour, contract labour etc.

In India, labour is a concurrent subject in the Constitution of India implying that both the Union
and the State Governments are competent to legislate on labour matters and administer the
same. Based on jurisdiction, Indian labour laws can be classified as under:

1. Labour laws enacted and enforced by the Central Government

2. Labour laws enacted by Central Government and enforced both by Central and State
Governments
3. Labour laws enacted by Central Government and enforced by the State Governments
4. Labour laws enacted and enforced by the various State Governments

According to recent estimates, there are around 52 Central Labour Laws in the country in
addition to various state laws. Besides their jurisdiction, labour laws cater to different aspects
of labour namely, industrial relations, occupational health, safety, employment, conditions of
employment, wages, compensation to workmen who suffer injuries, contract labour, women
labour and child labour, industrial disputes, employees’ social security, regulating the working
conditions of specific categories of workmen such as plantation labour, beedi workers etc.

List of Central Labour Laws in India based on Jurisdiction and Classification

Enacted and Enforced by Enacted by Centre and Enacted by Centre and

Centre Enforced by Centre and States Enforced by States
1. Industrial Employment
(Standing Orders) Act, 1946
2. Industrial Disputes Act, 1947
3. Labour Laws (Exemption
Industrial 6. Trade Unions Act, 1926
from Furnishing Returns &
Relations
Maintaining Registers by
Certain
4. Establishments) Act, 1988
5. Apprentices Act, 1961
7. Payment of Wages Act, 1936
8. Minimum Wages Act, 1948
Wages 9. Payment of Bonus Act, 1965
10. Working Journalists (Fixation
of Rates of Wages) Act, 1958

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 13. Merchant Shipping Act, 1958
14. Contract Labour (Regulation
26. Factories Act, 1948
and Abolition) Act, 1970
27. Plantation Labour Act, 1951
15. Sales Promotion Employees
28. Working Journalists and
Act, 1976
Other Newspapers
16. Inter-State Migrant Workmen
Employees (Conditions of
(Regulation of Employment
Service) and
and Conditions of Service)
29. Miscellaneous Provisions
17. Act, 1979
Act, 1955
18. Building and Other
30. Motor Transport Workers
Constructions Workers’
Act, 1961
(Regulation of Employment
31. Beedi and Cigar Workers
and Conditions
11. Mines Act, 1952 (Conditions of Employment)
Conditions 19. of Service) Act, 1996
12. Dock Workers (Safety, Act, 1966
of 20. Building and Other
Health and Welfare) Act, 32. Weekly Holidays Act, 1942
Employment Construction Workers Cess
1986 33. Employment Exchange
Act, 1996
(Compulsory Notification of
21. Cine Workers and Cinema
Vacancies) Act, 1959
Theatre Workers (Regulation
34. Sales Promotion
of Employment) Act, 1981
Employees (Conditions of
22. Dangerous Machines
Service) Act, 1976
(Regulation) Act, 1983
23. Dock Workers (Regulation of
Employment) Act, 1948
24. Dock Workers (Regulation of
Employment) (Inapplicability
to Major Ports) Act, 1997
25. Private Security Agencies
(Regulation) Act, 2005
35. Employees State
Insurance Act, 1948
36. Employees’ Provident
Fund & Miscellaneous
43. Workmen’s Compensation
Provisions Act,1952
Act, 1923
37. Beedi Workers Welfare
44. Payment of Gratuity Act,
Cess & Fund Acts, 1976
1972
38. Cine Workers Welfare
45. Employers’ Liability Act,
Fund & Cess Acts, 1981 42. Unorganized Workers Social
Social 1938
39. Iron Ore Mines, Security Act, 2008
Security 46. Personal Injuries
Manganese Ore Mines
(Compensation Insurance)
and Chrome Ore Mines
Act, 1963
Labour Welfare Fund &
47. Personal Injuries
Cess Acts, 1976
(Emergency Provisions)
40. Limestone and Dolomite
Act, 1962
Mines Labour Welfare
Fund Act, 1972
41. Mica Mines Labour
Welfare Fund Act, 1946
49. Bonded Labour System
Deprived 48. Child Labour (Prohibition and (Abolition) Act, 1976
Sections Regulation) Act, 1986 50. Children (Pledging of
Labour) Act 1938
Equality & 51. Maternity Benefit Act, 1961
Women 52. Equal Remuneration Act,
Rights 1976

Apart from these, there are also numerous State Labour Laws enacted and enforced by
various State Governments.

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List of Compliances under Various Labour Acts
Establishments are required to mandatorily meet various statutory compliances and maintain
records, submit returns, registers, etc. under various Acts. This is a significant compliance
burden, especially for MSMEs. A checklist of various compliances under some major Labour
Acts is as follows:

Name of Act Objectives & Applicability Compliance Requirements

Factories Act , The Act provides for the health, safety,
1948 welfare, service conditions and other
aspects of workers in factories. It covers all
workers employed in factory premises
directly or through an agency.
Industrial This Act provides for machinery and
Disputes Act, procedure for the investigation and
1947 settlement of industrial disputes for
industrial establishments carrying on
business, trade, manufacture, etc.
• Licensing and renewal of license
• Provision of safety measures
• Provision of welfare measures
• Payment of wages and overtime wages
• Maintenance of registers
• Submission of returns
• Prevention of unfair labour practises
• Prior permission from regulatory bodies
for retrenchment and closure
• Payment of wages on account of
retrenchment or closure

Industrial This Act requires employers to define and • Formulation of service rules and obtaining
Employment publish standing orders and to make them of approvals
and Standing known to workmen employed by them • Display of standing orders in a prominent
Orders place
Act , 1946

Minimum Wages This Act provides for fixing minimum rates • Provision of minimum rates of wages
Act, 1948 of wages in certain employments • Maintenance of registers
• Submission of returns

Payment of The Act provides for payment of bonus to • Payment of bonus

Wages Act, 1965 persons employed in certain • Submission of returns
establishments

Apprentices Act , The Act provides for regulation and training • Appointment of apprentices
1961 of apprentices and mandates employers to • Submission of returns
hire apprentices in certain designated • Maintenance of registers
trades as notified by the Government

Contract Labour The Act regulates the employment of • Working conditions of workmen
(Regulation & contract labour in certain establishments • Adequate facilities like drinking water,
Abolition) Act , and provides for its abolition in certain safety, etc.
1970 and Rules circumstances. • Maintenance of registers
• Submission of returns
Employee State The Act provides for provision of benefits • Remittance of monthly contribution
Insurance Act , to employees in case of sickness, • Maintenance of registers
1948 maternity, employment injury, etc. • Submission of returns

Employee's This Act provides for compulsory institution • Payment of monthly contribution
Provident of • Maintenance of registers
Fund and contributory provident funds, • Submission of returns
Miscellaneous pension funds and deposit linked
Provisions Act , insurance funds for employees
1952
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 Employment This Act provides for compulsory • Intimation of vacancy to the local
Exchanges notification of vacancies to employment employment exchanges when vacancy
(Compulsory exchanges arises
Notification of • Submission of returns
Vacancies) Act ,
1959
Payment of The Act provides for payment of wages in • Payment of wages without unauthorized
Wages Act, 1936 a particular form at regular intervals deductions
without unauthorized deductions to • Display of notice
employees engaged in factories, mines, • Maintenance of registers, fines, advances,
oilfields, plantations, shops, etc.
establishments, etc. • Submission of returns
Payment of The Act provides for payment of gratuity as • Payment of gratuity to eligible employees
Gratuity Act, a statutory retiral benefit for service over 5 • Display of notice
1972 years of service rendered by employees • Maintenance of registers
engaged in factories, mines, oilfields, • Submission of returns
plantations, shops, establishments, etc.
Equal This Act provides payment of equal • Maintenance of registers
Remuneration remuneration to men and women and
Act, 1976 prevents discrimination in matters of
employment, recruitment, etc.
Workmen’s The Act provides for compensatory • Provision of compensation
Compensation payments to workmen and their • Submission of returns
Act, 1923 dependents in case of accidents, injuries,
etc.

Labour Laws and Indian MSME Sector

The main characteristics of the large and growing Indian economy is one of a large number of
small units of production and services. With the passing of The Industries (Development and
Regulation) Act of 1951, the small enterprises sector in manufacturing received formal
recognition. It was only later, in the mid-1980s that formal recognition was accorded to the
small enterprises engaged in services. Barring the initial stages, the MSME sector has always
been defined in terms of capital investment. The most recent revision and categorization of
small enterprises is in the Micro, Small and Medium Enterprises Development (MSMED) Act,
2006. There is a parallel classification of enterprises in the Indian economy in terms of the
organized and unorganized sector enterprises based on an employment threshold.
Historically, this has followed the threshold given in the Factories Act of 1948, which makes it
mandatory for all enterprises with ten or more workers using power or 20 or more workers
without using power to register under this Act. Most MSMEs are self-owned and employ very
few workers. Therefore, meeting the compliance burden under the large number of labour
laws in the country is a big challenge for them. They are also not in a position to bear heavy
compliance cost by way of filing multiple returns etc. There is a definite case to provide relaxed
norms for these units.

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Significant Labour Law Challenges Faced by Indian MSMEs

Labour laws in India are perceived by trade and industry circles as complex, archaic and not
conducive to promoting the interests of the industry. Many laws are old and outdated, with a
few almost a century old. Consequently, they have lost their relevance with the changing
times. MSME units have been complaining of high compliance cost because of filing of multiple
returns, inspections and stringent penal provisions. They have been seeking exemption to this
sector from some of the major labour laws. Some of the major challenges faced by Indian
MSMEs with respect to labour laws in the country are summed up below:

1. Multiplicity and complexity of labour laws, rules and regulations

India has a very heavy dose of labour legislations, their number being more than one
hundred. There are significant differences in the applicability of central legislations,
minimum wages, national holidays, leaves, definitions, etc. across the country. Complying
with the provisions of labour laws is also complex. Moreover, there is considerable over-
lapping of several statutory provisions. A uniform labour code will greatly help in inviting
more investments into India.

2. Lack of Uniformity in Application and Definitions under Various Acts

A major drawback of our labour legislation is that it lacks uniformity as regards coverage
not only of the establishments but also of the employed persons, causing a lot of confusion.
The applicability also varies from one State to another in case of many Acts and Laws.
Further, there are great variations in the definitions of words and expressions used in
various labour laws. Even the basic terms like ‘employed person’ and ‘wages’ have been
defined differently in different labour laws. The definition of establishment, workman,
factories, etc. also vary under various Laws and Acts leading to confusion.

3. Redundant Provisions under labour legislations

Provision for compulsory insurance under Sec 4A of Payment of Gratuity Act was inserted
by Act 22 of 1987 and no notification has been issued by the appropriate government for
its implementation. But this provision continues on in the statute book. Similarly, under the
Employment Exchanges (Employment Compulsory Notification of Vacancies) Act, 1959,
the employer is under no legal obligation to recruit any person who is sponsored by the
Employment Exchange, though it is obligatory on his part to notify vacancies (Section 4)
submit quarterly and biennial returns (Section 5) and give access (Section 6) to authorized
Government Officers to records and documents. These provisions must be reviewed
based on their relevance in the present times and accordingly amended or deleted.

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4. Excessive Compliance Requirements

The need for registration and licensing is not clear under various statutes. Maintenance of
records is seen as a non-value added and hence can be dispensed with under multiple
statutes. Additionally, there is an urgent need for making necessary provisions to
implement online mechanisms for compliances.

5. Concerns Related to Contract Labour

Contract labour is justified because of effective manpower employment, uncertainly of

work and cost effectiveness for MSMEs. Section 10 of the Contract Labour (Regulation
and Abolition) Act, 1970 providing for abolition of contract labour should be deleted and
the regulatory provisions should be strengthened to ensure that contract labour is not
exploited. Further, difference in wages of the regular employees and contract labour is a
major issue of concern and is one of the main causes for several disputes because often
there is no difference in nature of the job between regular employee and contract labour.

6. Concern pertaining to obtaining nomination from workers under various labour

laws

Getting nomination is included in various labour legislations mainly to support the

employers in case of death of an employee. Procedural simplification by way of accepting
a single nomination under different Acts is recommended.

7. Requirement of Multiple Maintenance of Statutory Records

Almost every Act requires the employer to maintain a set of registers, submit periodic
returns and display certain notices near the main entrance of the establishment. There is
lot of duplication and overlapping of these paper work formalities. The industrial
establishments are gradually computerising records. But the officers insist on maintenance
on manual registers despite permission given under Information Technology Act (for
maintaining records as soft copies). It is suggested that maintenance of records and
submission of returns should be simplified and the requirement of notices to be displayed
near the main entrance of the establishment should be dispensed with.

8. Entry and Exit Barriers in right-sizing the workforce and in closing down the
industrial establishment

Chapter V-B of the Industrial Disputes Act provides for obtaining a prior permission of the
Government for lay-off, retrenchment or closure where the industry employees more than
100 workers. This promotes industrial sickness and hampers industry’s initiative to be
competitive and face global challenges. Entry and exit barriers for firms must be removed
for their competitiveness.
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 Recent Reforms in Indian Labour Legislation & Status of Implementation

S. No. Reforms Measure Key Features Status of legislation

Ease of Doing Business

1. Shram Suvidha
Operative in 4 Central • Operational
Portal Organizations – Employee • States have to integrate State laws
Provident Fund Organization, into the portal
Employee State Insurance
Corporation, Chief Labour
Commission & Directorate
General of Mines Safety

On-line registration of Units

Filing of Self-Certified &
simplified single on-line return
by the industry on 16 labour laws

2. Random Inspection
Computerized allotment of • Operational for Central sphere,

Scheme inspection sites to be generated States to adopt
randomly

Mandatory uploading of
Inspection Reports within 72
hours

Check on arbitrariness in
compliance mechanism

Simplification and Rationalization

3. Labour Laws
Exempt small industries with • Passed by Parliament
(Exemption from less than 40 workers from the
Furnishing Returns need to comply separately on
and Maintaining maintaining registers and
Registers by Certain furnishing returns with regard to
Establishments) Act 16 Acts
1988
In lieu of returns, file annual
return in Form I and In Lieu of
registers, maintain consolidated
register in Form II & III –
prescribed in the Act
4. The Small Factories
Proposes to exempt industries • Tripartite consultations completed.
(Regulation of with less than 40 workers from Bill yet to be tabled in Parliament
Employment and most labour laws, including
Conditions of Factories Act, Industrial
Services) Bill, 2014. Disputes Act, etc.

Ease the procedure of
registration and closure of small
factories – registration through
on-line application within 60
days of its commencement.

5. Labour Code on
Amalgamation of 3 Acts viz. • Tripartite consultations completed.

Industrial Relations Trade Union Act, Industrial Bill yet to be tabled in Parliament
Employment (Standing Orders)
Act and Industrial Disputes Act

Retrenchment : Proposes to
increase the limit to seek
permission for retrenchment
from 100 to 300

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Compensation on
Retrenchment : Propose to
increase compensation from 15
days of average pay per year to
45 days average pay

Re-skilling fund to be
established for retrenched
workers: Industry to pay
amount equal to wages of 30
days of every retrenched worker
to Reskilling fund.

Fixed Term Employment :
Proposes to re-instate Fixed
Term Employment

Formation of Trade Union: At
least 10% of workforce, working
in the establishment, are
required to join to form the trade
union.

Office Bearers of Trade
Union: All office bearers of
registered Trade Union shall be
persons actually employed in
the establishment.

Negotiating Agent: Trade
Union which has 50% members
will be the recognized as a sole
negotiating Agent. In case
nobody has 50%, then the next
2 / 3 who have maximum
number of members can
combine to form as negotiating
agent.

6. Labour Code on
Amalgamation of 4 Acts viz. • Tripartite consultations completed.

Wages Minimum Wages Act, Payment Bill yet to be tabled in Parliament
of Wages Act, Payment of
Bonus Act and Equal
Remuneration Act

Definition of Employee: The
definition of Employee under the
Code include supervisory and
managerial staff

Definition of Wages: The bill
takes the definition of Wages
from Payment of Wages Act –
since the Code is amalgamation
of 4 laws, same definition will
which may increase the cost to
employer.

Facilitator: Bill provides for an
appointment of Facilitator who
will exercise the powers under
the geographical limit of the
State – inspection, search,
seizure.

Minimum Wages Advisory
Board: Bill proposes to
constitute a Minimum Wages
Advisory Board which advise
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 State Govt. in fixation and
revision of Minimum Wages

7. Factories
Enhancing Over time limit: • One Bill on Amendment in

(Amendment) Bill The Bill proposes to enhance Factories Act is already in
the quarterly overtime limit to Parliament
100 hrs from the current 50 • Ministry has now come with a new
hours bill with features

Allowing Women in Night • One round of tripartite consultation
Shift: The Bill permits women to on the new bill concluded
work in night shift with adequate
safeguards.

Definition of Occupier : The
Bill proposes parity between
Public companies and private
enterprises by treating the
functional Head as Occupier

Occupational Safety and
Health Board of India
(OSHBI): Bill proposes to
constitute a OSHBI which will
consist of technical experts in
the field of safety to frame
guidelines to enhance the safety
inside the Factory


8. Employees’
Expansion in Coverage: • Tripartite consultations completed.
Provident Fund Act & Proposes to reduce threshold Bill yet to be tabled in Parliament
Miscellaneous limit to 10 workers from 20 in an
Provisions Ac organization to enhance the
EPF coverage.

Redefining the Wage
Definition for the purpose of
EPF: Proposes to re-define the
definition of wage for the
purpose of EPF – to include
certain allowances.

9. Employees’ State
Choice of Alternate Private • One round of tripartite consultation

Insurance Insurance Agency: The Bill concluded.
Amendment Act proposes to provide a one-time • Further detailed consultation with
choice of alternate Health Trade Union and States are in
Insurance Product recognized process
by IRDA

Choice of opting back: The bill
also provides 1 time option to
employees to opt back to ESI in
case they find the alternate
Health Insurance product not
beneficial.
10. Payment of Bonus
Increase the Eligibility Limit: • Passed by Parliament
Act Increased the eligibility limit
(salary / wage limit) to Rs.
21,000 per month from Rs.
10,000 per month

Increase in Bonus Ceiling:
Increased the monthly bonus
calculation ceiling from existing
Rs. 3500/- to Rs. 7000/- pm.

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11. Minimum Wages Act
Proposes to cover both • One round of tripartite consultation
organized and unorganized concluded
sector, irrespective of wage
ceiling

State Government to constitute
Minimum Wages Advisory
Board – representing employers
and employees + independent
person. State to consult
Minimum Wages Advisory
Board while revising the
minimum wages

12. Model Shops &
Proposes a model code for • Tripartite meeting scheduled for
Establishment bringing uniformity in the Act 5th January
(Regulation and across the country
Condition of
States are free to adopt the
Services) Bill model bill or make changes in
the bill and enforce
13. Employee’s
Provision of imprisonment for • 1st round of Tripartite meeting held
Compensation violation under Employees
(Amendment) Bill, Compensation Act
2015 and The
Enhance the maternity leave
Maternity Benefit with full benefits to 26 week from
(Amendment) Bill, the current 12 weeks under The
2015 Maternity Benefit Act

Provision for crèche facility in
establishment with more than 50
workers
Labour Reform Initiatives by Some States
14. Rajasthan
Rajasthan has enhanced the • President has given accent to the
limit to 300 under the Rajasthan amendments
Industrial Disputes Act • Amendments notified by the

Rajasthan Govt. has enhanced Rajasthan Govt. in the Gazette
the compensation package to 3
months average pay for every
completed years of service

Rajasthan has amended the
Trade Unions Act wherein only
Trade Unions with 30%
membership will act as the sole
Negotiating Agent

Under the Factories Act,
amendments were made in the
definition of 'factory' which will
now apply to those companies
(run with aid of power) where 20
people are employed instead of
10. For companies running
without power, the number has
been increased to 40 from 20.

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 15. Madhya Pradesh
Madhya Pradesh has also • President has given accent to the
proposed similar changes amendment
enhancing the limit to 300 and is • Amendments notified by the
pending with Central Govt. for Madhya Pradesh Govt. in the
Presidential approval Gazette

Madhya Pradesh has also
proposed to enhance the
compensation package to 3
months average pay for every
completed years of service

The Madhya Pradesh Govt. has
proposed an increase in the
quarterly overtime to 125 hours
from current provision of 75
hours with the consent of the
worker

16. Gujarat
Gujarat has eased hire and fire • The amendments passed by
provisions in special investment Gujarat Assembly
regions like DMIC and NIMZ
wherein firms are allowed
without prior permission,
irrespective of the size of the
factory

Gujarat has increased the
retrenchment compensation to
60 days average salary per year
of completion

Under the Factories amendment
Act proposed by Gujarat, Govt.
has proposed a compulsory
certification-cum-consolidated
annual return scheme for
factories, doing away with the
burden of submitting a large
number of annual returns.

CII Recommendations on Important Labour Laws and Acts Applicable to MSMEs

A. Single Labour Code by Simplification and Consolidation of Existing Acts:

A single labour code must be formulated having uniform definitions and applying to all
categories of employees. As per the suggestion of the 2nd National Commission on Labour,
labour laws should be consolidated in a few cognate groups to reduce multiplicity of laws for
better enforcement and more effective compliance and transition to a uniform labour policy on
common issues. This may be done as per the following:

I. Laws governing Industrial Relations can be consolidated into an Industrial Relations Act
consolidating the following Acts:

i) The Industrial Disputes Act, 1947

ii) The Industrial Employment (Standing Orders) Act, 1946
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