Principles of Entrepreneurship Unit-5

FACTORIES ACT, 1948

 In Great Britain, the second half of the 18th century, there was a rapid growth of industrial
towns & factories.
 As it was started without planning, they employed the women as well as their children in
factories who needed to work for more than 12 hours a day.
 Some of the employees took initiative to implement labour legislations, Factories Act came
into existence in 1819.
 After some modifications, the final amended of Factories Act took place in 1948.

FACTORIES ACT IN INDIA:

In India, the First factories Act was passed in 1881. This Act was basically designed to protect children
and to provide few measures for health and safety of the workers.

This law was applicable to only those factories, which employed 100 or more workers. In 1891 another
Factories Act was passed which extended to the factory’s employee 50 or more workers.

FACTORIES ACT INCLUDES:

 Health
 Safety
 Welfare
 Working Hours of Adults
 Annual Leave With wages

Factory” is defined in section 2(m) of the Act. It means any premises including the precincts thereof-
a) Whereon 10 or more workers are working, or were working on any day of the preceding 12
months, and in any part of which a manufacturing process is being carried on with the aid of
power, or is ordinarily so carried on; or
b) Whereon 20 or more workers are working, or were working on any day of the preceding 12
months, and in any part of which a manufacturing process is being carried on without the
aid of power, or is ordinarily so carried on.
But does not include a mine subject to the operation of the Mines Act, 1952 or a mobile unit
belonging to the Armed forces of the Union, a railway running shed or a hotel, restaurant or eating
place.

“Manufacturing process” means any process for-

a) Making, altering, repairing, ornamenting, finishing, packing
, oiling, washing, cleaning, breaking up, demolishing, or otherwise treating or adapting any article or
substance with a view to its use, sale, transport, delivery or disposal ; or
b) Pumping oil, water, sewage or any other substance; or
c) Generating, transforming or transmitting power; or
d) Composing types for printing by letter
press, lithography, photogravure or other similar process or
book binding
e) Constructing, reconstructing, repairing, refitting, finishing or breaking up ships or vessels;
f) Preserving or storing any article in cold storage;

 DAY: means a period of 24 hours beginning at midnight;

  WEEK: means a period of 7 days beginning at midnight on
Saturday night
 CALENDAR YEAR: means the period of 12 months beginning with the first day of January in
any year
 POWER: means electrical energy, or any other form of energy which is mechanically
transmitted and is not generated by human or animal agency
PRIME MOVER: means any engine, motor or other appliance which generates or otherwise provides
power;

PROVISIONS REGARDING HEALTH:

1) Cleanliness
2) Disposal of Wastes & Effluents
3) Ventilations & Temperature
4) Dust & Fumes
5) Artificial Humidification
6) Overcrowding
7) Lighting
8) Drinking Water
9) Latrines & Urinals
10) Spittoons

PROVISION REGARDING SAFETY:

1) Fencing of Machinery
2) Work on or near Machinery in motion
3) Employment of Young Persons on Dangerous Machines
4) Striking Gear and Devices for cutting off power
5) Self Acting Machines
6) Casing of New Machinery
7) Prohibition of Employment of Women & Children near Cotton openers
8) Hoists, lifts, Lifting Machines and others
9) Revolving Machinery
10) Pressure Plant
11) Floors, Stairs & Means or Access
12) Pits, Sumps, Opening in Floors and others
13) Excessive Weights
14) Protection of Eyes\precautions against Dangerous Fumes, Gases & others
15) Precautions Regarding use of portable electric light
16) Explosive or Inflammable Dust, Gas
17) Precautions in case of fire
18) Specifications of Defective Parts or Tests of Stability
19) Safety of Buildings and machines
20) Safety officers

PROVISIONS REGARDING WELFARE OF

1) Washing Facilities
2) Facilities for Storing & Drying clothing
3) Facilities for Sitting
4) First Aid facilities
 5) Canteens, Shelters, Rest Rooms & Lunch Rooms
6) Creches
Welfare Officers

INDUSTRIAL DISPUTES ACT,

INDUSTRIAL DISPUTES ACT, 1947As per section 2 (k) of Industrial DisputesAct1947, Industrial Dispute
is defined as any dispute or difference between employers and employers or between employers and
workmen or between workmen and workmen which is connected with the employment or non-
employment or the terms employment or with the condition of labour of any person.
OBJECTIVES
 Promotion of measures for securing and preserving amity and good relation between the
employers and workers
 Investigation and settlement of industrial disputes
 Prevention of illegal strikes and lock– outs
 Relief to workmen in the matter of lay– off and retrenchment
 Promotion of collective bargaining
FEATURES
 This act extends to the whole of India including the state of Jammu and Kashmir
 It encourages arbitration over the disputes between employers and employees
 It provides for setting up of works committees as machinery for mutual consultation
between employers and employees to promote cordial relation
 This Act paved the way for setting up permanent conciliation machinery at various stages
having definite time limits for conciliation and arbitration
 This Act emphasis on compulsory adjudication besides conciliation and voluntary arbitration
of Industrial Disputes
 The Act empower the Government to make reference of the dispute to an appropriate
authority i.e., Labour court, Industrial tribunal and National tribunal depending upon the
nature of the dispute either on its own or on the request of the parties
 The right to strike by the workers and lock–out by the employees has been subjected to the
restriction as laid down in the Act
 The act prohibits strikes and lock–outs during the pandering of conciliation and arbitration
proceedings and in public utility service and it empowers government to take adequate
action

Employee State Insurance Act – 1948 (ESI)

Mission Statement
To provide for certain benefits to Employees in case of Sickness, Maternity and Employment
Injury and to make provisions for Related Matters.
The ESI Scheme is an integrated measure of “Social Insurance” come to the life through the
Employees' State Insurance Act - 1948, and is designed to complete the task of protecting
“Employees” as defined in the ESI Act – 1948, against the hazards of Sickness, Maternity, Disablement
or Death due to Employment injury and to provide full Medical care to insured persons and their
families.
Coverage in India:
No. of States/UTs covered:- 29
No. of implemented centers:- 787
No. of Employees:- 1.39 crores
No. of Insured Persons/Family units:- 1.43 crores No. Insured women:- 26.00 lakhs
No. of Beneficiaries:- 5.55 crores
No. of Employers covered:- 4.06 lakhs

Infrastructure in India:
No. of Regional/Sub-Regional/Divl. Offices:- 52 No. of Branch/Pay offices:- 798
No. of ESI Hospitals:- 148 No. of Hospital Annexes:- 42
Total No. of Hospital Beds:- 27,739
No. of ESI dispensaries:- 1388
No. of IMOs/IMPs/Specialists etc.:- 8925 No. of Para-medical staff:- 45000
At an average the ESI Corporation makes 40 lacs individual payments each year amounting to about
Rs. 300 crores through its wide spread network of branch Offices in implemented areas.

Applicability of the ESI Act

Under Section 2(12) The Act is applicable to the “Factories” employing 10 (Ten) or more persons
irrespective of whether power is used in the process of manufacturing or not.

Under Section 1(5) of the Act, the Scheme has been extended to Shops, Hotels, Restaurants, Cinemas
including preview Theatre, Road motor transport undertakings and Newspaper establishment
employing 20 (Twenty) or more persons.

Further, u/s 1(5) of the Act, the Scheme has been extended to Private Medical Institution and

Educational Institutions employing 20 (Twenty) or more persons in certain States .

The existing wage-limit for coverage under the Act, is Rs. 15,000/- per month (excluding
remuneration for overtime) w. e. f:- May 01, 2010.
AREAS COVERED
The ESI Act is applicable across the length and breadth of the India.

ESI Contribution
Employee’s ESI Contribution (1.75% Of Gross Salary) + Employer’s ESI Contribution
(4.75% Of Gross Salary) = Total ESI Contribution (6.5% Of Gross Salary)

Contribution Deposit and Due Date

 The amount of contribution (Employee’s and Employer’s share) is to be deposited with the
authorized bank (State Bank Of India) through Online Generated Challan, on or before 21 st
day of the Succeeding month, of month following the calendar month.

 Contribution can also be submitted Online, by selecting Online Payment Option during
Payment of the contribution, the process will take you the Payment page of SBI corporate
banking login to complete the payment & same will be competed in few minutes.

 If the employee is drawing upto Rs.70/- as daily average wage, he is exempt from the
payment of his share of contribution. The employer is however to pay employer's share of
4.75% of the salary received by the employee.
  The State Govt. bears one-eight share of expenditure on medical benefits with in the per
capita ceiling of Rs. 1200/- per I.P. family per annum & all additional expenditure beyond
the ceiling.

Contribution and Benefit Period:

Employers covered under the Act, are required to Pay the Contribution towards the scheme on
a Monthly basis. There are two contribution periods each of Six months and two corresponding
benefit periods also of Six months duration as under.

Contribution Period Benefit Period

1st April to 30th Sep. 1st Jan to 30th June (of the following year)

1st Oct to 31st March 1st July to 31st Dec.

At an average the ESI Corporation makes 40 lacs individual payments each year amounting to about
Rs. 300 crores as cash benefits.

WORKMEN’S COMPENSATION ACT 1923

OBJECTIVE
The Workmen's Compensation Act, 1923, aims to provide workmen and/or their dependents some
relief in case of accidents arising out of and in the course of employment and causing either death
or disablement of workmen.

• The Act extends to the whole of India.

• The workmen whose occupation is hazardous should be included within the scope of this
Act.
It applies to workmen employed in factories, mines, plantations, transport establishments,
construction work, railways, ships, circuses, & other hazardous occupations & employments
specified in Schedule II to the Act.

• The Act does not apply to members of Armed Forces of the Union & those workers who are
insured under the Employees State Insurance Act 1948.
• The coverage of this act is also to cooks employed in hotels and restaurants.

Dependent[Sec.2(1)(d)
Dependent means any of the following relatives of a deceased workman, namely:
1. A widow, a minor legitimate or adopted son and unmarried legitimate or adopted daughter,
or a widowed mother.
2. If wholly dependent on the earnings of the workman at the time of his death, a son or a
daughter who has attained the age of 18 years and who is infirm.
3. And any of the following were wholly or partly dependent on the workman at the time of
his death—
a widower,
a parent other than a widowed mother,
a minor illegitimate son,
a unmarried illegitimate daughter or a daughter legitimate or illegitimate or adopted if
married & a minor or if widowed & minor,
 a minor brother or an unmarried sister or a widowed sister if a minor,
a widowed daughter-in-law,
a minor child of pre-deceased son & daughter where no parent of the child is alive & a
paternal grandparent if not the parent of the workman is alive.

Employer[Sec.2(1)(e)]
Employer" includes
 Any person or body of persons whether incorporated or not.
 Any managing agent of an employer.
 The legal representative of a deceased employer.
 A person to whom services of a workman are temporarily lent or let on hire.

Workman[Sec.2(1)(n)]
Workmen means any person who is:
 a railway servant as defined in clause (34) of section 2 of the Railways Act, 1989 (24 of
1989), not permanently employed in any administrative, district or sub-divisional office of
a railway and not employed in any such capacity as is specified in Schedule II.
 a master, seaman or other member of the crew of a ship, etc
 It does not include a person whose employment is of casual nature.
 A captain or other member of the crew on an aircraft.
 A person recruited as driver, helper, mechanic, cleaner or in any other capacity in
connection with a motor vehicle.
 A person recruited for work abroad by company as is mentioned in schedule ll.

Person to be treated as workmen

• There must be a contract of employment.
• There must be a relationship of master and servant between the employer and the
employee.
• The employment is for the purposes of employer’s trade or business.

Employer’s liability to pay compensation (Sec 3)

As per Section 3(1) of the act, the following conditions must necessarily be satisfied in order to
qualify for compensation:
1. He must be a workmen within the meaning of this act.
2. Personal injury must have been caused by accident.
3. The injury must have been caused by accident.
4. The accident must have arisen out of and in the course of employment.
5. The injury caused by the accident must have resulted in the workman’s death or permanent
total disablement or temporary disablement.

Accident arising out of & in the course of his employment

• The employer is liable to pay compensation in case of personal injury and occupational
disease.
• Personal injury includes physical/mental injury, strain or shock caused by excitement.
Incidental to his employment & injured, then arises out of employment

An injury could be held to have arisen out of employment if it is established that:

1. It must have resulted from some risk incidental to the duties of the service / inherent in the
nature of employment.
2. At the time of injury the worker must have been engaged in the business of the employer &
must not be doing something for his personal advantages.

Disablement
Disablement means reduction in earning capacity. It may be partial or total disablement.
 Partial Disablement
 Temporary partial disablement
 Permanent partial disablement
 Total Disablement
 Temporary
 Permanent

Temporary partial disablement means that which reduces the earning capacity of the workmen in
the employment in which he was engaged at the time of accident.

Permanent partial disablement means that which reduces, for all time, the earning capacity of a
workmen in every employment in which he was capable of undertaking at the time.

Total disablement means whether of a temporary or permanent nature, which incapacitates a

workmen for all work which he was capable of performing at the time of accident.

Calculation of Compensation

In the case of Death

Amount of compensation = factor/Rs.80000 whichever is more.

Permanent Total Disablement

Amount of compensation = 60% of monthly wages × Relevant factor/Rs.90000 whichever is more.

Permanent Partial Disablement

Amount of compensation = 60% of monthly wages ×Relevant factor.

Temporary Disablement
Amount of compensation = 25% of monthly wages.

PAYMENT OF BONUS ACT 1965

INTRODUCTION PAYMENT OF BONUS ACT 1965
The practises of paying bonus in India appears to have originated during first World War when certain
textile mills granted 10% of wages as war bonus to their workers in 1917. In Certain cases of industrial
disputes demand for payment of bonus was also included. In 1950, the full bench of the labour
appellate Tribunal evolved of formula for determination of bonus, plea was made to raise that formula
in 1959
DEFINITION OF BONUS
According to the definition given in the New English Dictionary is “A boon or gift over and above
what is normally due as remuneration to the receiver and which is, holy to the good.”

AIMS OF THE PAYMENT OF BONUS ACT, 1965

The payment of Bonus Act 1965 aims at providing for the payment of bonus to the employees of
certain establishment, on the basis of profits or production or productivity and for matter connected
therewith.

APPLICABILITY
The Act applies to every factory and every other establishment employing not less than 20 persons
on any day during an accounting year. The Central/State Government can, however, extend its
provisions to any establishment employing less than 20 but more than 10persons.

The establishments covered under the Act shall continue to pay bonus even if the number of
employees falls below 10, at a later date.

ELIGIBILITY

Every employee (other than an apprentice) receiving salary or wages up to Rs.3,500 per month and
engaged in any kind of work whether skilled, unskilled, manual, managerial, supervisory, technical,
clerical , etc. is entitled to bonus for every accounting year, if he has worked for at least 30 working
days in that year.

Employees of the general insurance companies, LIC, Central/State Government establishments,

Indian Red Cross Society, Universities and Educational Institutions, Hospitals, Chambers of
Commerce, Reserve Bank of India, Industrial Finance Corporation of India, Unit Trust of India
, Social Welfare Institutions, Local Bodies, etc. are not entitled to bonus under the Act. What they are
paid as bonus, is ex-gratia payment.

MINIMUM BONUS
The minimum bonus which an employer is required to pay even if he suffers losses during the
accounting year or there is no allocable surplus (except in case of new establishments), is 8.33% of
the salary or wages of the employee during the accounting year. {Section 10}

Rs. 100 in case of employees above 15 years and Rs 60 in case of employees below 15 years,
whichever is higher

MAXIMUM BONUS

If in any accounting year, the allocable surplus exceeds the amount of minimum bonus, the employer
shall pay bonus in proportion to the salary or wages earned by the employee during that accounting
year, subject to a maximum of 20% of such salary or wages.

MODE AND TIME FOR PAYMENT OF BONUS

Bonus should be paid in cash and within 8 months from the close of the accounting year . Bonus is
payable only annually. ( Section 22 )
EMPLOYERS’ OBLIGATIONS
To calculate and pay the annual bonus as required under the Act.
To maintain the prescribed registers and file annual returns of bonus paid.

TIME LIMIT FOR PAYMENT

The bonus should be paid in cash within 8 months from the close of the accounting year or within one
month from the date of enforcement of the award or coming into operation of a settlement following
an industrial dispute regarding payment of bonus. However if there is sufficient cause extension may
be applied for.