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A Study On Statutory Compliance and awareness of Labour laws

At Heavy Engineering Corporation, IBM,& USHA MARTIN India Ltd.,




DECLARATION I hereby declare that this project report titled Statutory Compliance AND awareness of Labour laws in HEAVY ENGINEERING CORPORATION,IBM,& USHA MARTIN, which is being submitted towards completion of the project work in the 2nd Trimester of P.G.D.P.M., Human Resource Management (HRM-1), at Xavier Institutevv of Social Service (XISS), Ranchi, is an authentic record of my original work pursued under the guidance of Prof. Ignatius Xaxa(faculty XISS) I have not submitted the matter embodied in this project for the award of any other degree, associate ship, fellowship or any other similar titles. Place : Ranchi Date:07-12-11

ACKNOWLEDGEMENT Apart from my own efforts, the success of any project depends largely on the encouragement and guidelines of many others. I take this opportunity to express my gratitude to those people who have been instrumental in the successful completion of this project. I am grateful for their constant support and help. First and foremost, I would like to show my greatest appreciation to my project guide, of Mr.Amit Ranjan Sinha, A.M. - HR & SS(USHA MARTIN) and Mr. Nagesh Jha(HEC)Without their encouragement, guidance and valuable suggestions, this project would not have materialized. Finally, yet importantly, We would like to express our heartfelt thanks to our beloved parents for their blessings, our friends for their help and wishes for the successful completion of this project.

TABLE OF CONTENTS Chapters Page No. 1. Introduction 1 Introduction to the topic 2 Significance of the topic 18 Objective of the Study 19 Research Methodology 20 2. Company Profile 22 a. HEAVY ENGINEERING CORPORATION,IBM,& USHA MARTIN in India 25 3. Analysis and Interpretation 29 4. Suggestion and Conclusion 41 5. Bibliography and Annexure 44 Page | 1


CHAPTER I INTRODUCTION The onset of GLOBALISATION has rendered the employment structure all over the world and in the Indian economy, especially in the organized sector to undergo changes. In order to adapt to the rapidly changing world and compete effectively in a globalised market, organized sectors require flexibility in relation to capital or bureaucracy and especially in managing labour. Presently the labour sector is quite restrictive as it is governed with the various Labour Laws which ensure social security as Heavy Engineering Corporation,IBM,& Usha Martin as the Heavy Engineering Corporation,IBM,& Usha Martin being of employees and workers. The law relating to labour and employment in India is primarily known under the broad category of "Industrial Law". Industrial law in this country is of recent vintage and has developed in respect to the vastly increased awakening of the workers of their rights, particularly after the advent of Independence. Industrial relations embrace a complex of relationships between (Heavy Engineering Corporation,IBM,& Usha Martin) the workers, employers and government, basically concerned with the determination of the terms of employment and conditions of labour of the workers. Escalating expectations of the workers, the hopes extended by Heavy Engineering Corporation,IBM,& Usha Martin uncertainties caused by tremendous structural developments in industry, the decline of authority, the waning attraction of the work ethics and political activism in the industrial field, all seem to have played some role. Historical Background The history of labour legislation in India is naturally interwoven with the history of British colonialism. The industrial/labour legislations enacted by the British Heavy Engineering Corporation,IBM,& Usha Martinr primarily intended to protect the interests of the British employers. Considerations of British political economy Heavy Engineering Corporation,IBM,& Usha Martinre naturally paramount in shaping some of these early laws. The earliest Indian statute to regulate the relationship between employer and his workmen was the Trade Dispute Act, 1929 (Act 7 of 1929). Provisions Heavy Engineering Corporation,IBM,& Usha Martinre made in this Act for restraining the rights of strike and lock out but no machinery was provided to take care of disputes. The original colonial legislation under Heavy Engineering Corporation,IBM,& Usha Martin substantial modifications in the post-colonial era because independent India called for a clear partnership between labour and capital. The content of this partnership was unanimously approved in a tripartite conference in December 1947 in which it was agreed that labour would be given a fair wage and fair working conditions and in return capital would receive the fullest co-operation of labour for uninterrupted production and higher productivity as part of the strategy for national

economic development and that all concerned would observe a truce period of three years free from strikes and lockouts. 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. The labour enactments in India, is divided into 5 broad categories, viz. Working Conditions, Industrial Relations, Wage, welfare and Social Securities. The enactments are all based upon Constitution of India and the resolutions taken in ILO conventions from time to time.Page | 3

Indian labour law refers to laws regulating employment. There over fifty national laws and many more state-level laws. Traditionally Indian Governments at federal and state level have sought to ensure a high degree of protection for workers through enforcement of labour laws. While conforming to the essentials of the laws of contracts, a contract of employment must adhere also to the provisions of applicable labour laws and the rules contained under the Standing Orders of the establishment. Indian labour laws divide industry into two broad categories: 1. Factory Factories are regulated by the provisions of the Factories Act, 1948 (the said Act). All Industrial establishments employing 10 or more persons and carrying manufacturing activities with the aid of power come within the definition of Factory. The said Act makes provisions for the health, safety, working hours and leave of workers in factories. The said Act is enforced by the State Government through their Factory inspectors. The said Act puts special emphasis on health and safety of workers. The said Act is instrumental in strengthening the provisions relating to safety and health at work, providing for statutory health surveys, requiring appointment of safety officers, establishment of canteen, crches, welfare committees etc. in large factories. The said Act also provides specific safe guards against use and handling of hazardous substance by occupiers of factories and laying down of emergency standards and measures. 2. The Shops & Establishment Act The Shops and Establishment Act is a state legislation act and each state has framed its own rules for the Act. The object of this Act is to provide statutory obligation and rights to employees and employers in the unauthorized sector of employment, i.e., shops and establishments. This Act is applicable to all persons employed in an establishment with or without wages, except the members of the employers family. This Act lays down the following rules: Working hours per day -over, rest interval, opening and closing hours, closed days, national and religious holidays, overtime work.

The main central laws dealing with labour issues are given below: Minimum Wages Act 1948 The Minimum Wages Act prescribes minimum wages for all employees in all establishments or working at home in certain employments specified in the schedule of the Act. Central and State Page | 4

Governments revise minimum wages specified in the schedule. The Minimum Wages Act 1948 has classified workers as unskilled, semi-skilled, skilled; and highly skilled. Payment of Wages Act 1936 Under the Payment of Wages Act 1936 the following are the common obligations of the employer: employees. The employer should fix the wage period but in no case it should exceed one month; of any person is being terminated, those wages should be paid within two days of the date of termination; and rent coins or currency . wages may also be paid either by cheque or by crediting in employees bank account after obtaining written consent.


Applicability of the Act & Scheme:

Is extended in area-wise to factories using power and employing 10 or more persons and to nonpower using 21manufacturing units and establish-ments employing 20 or more person upto Rs.7500/- per month w.e.f. 1.4.2004. It has THE ESI SCHEME TODAY also been extend-ed upon shops, hotels, restaurants, roads motor transport undertakings, equip-ment maintenance staff in the No. of implemented Centres 677 hospitals. Employers covered 2.38 lacsC No. of

To be deemed as wages Basic pay Dearness allowance House rent allowance City compensatory allowance Overtime wages (but not to be taken into account for determining the coverage of an employee) Payment for day of rest Production incentive Bonus other than statutory bonus Night shift allowance Heat, Gas & Dust allowance Payment for unsubstituted holidays Meal/food allowance Suspension allowance Lay off compensation Children education allowance (not being reimbursement for actual tuition fee)

No. of Insured Persons 85 lacs

CoverageBeneficiaries 330 lacs wages uptoESI SCHEME TODAY No. of of employees: Drawing THE Rs.15000/- per month engaged either directly or thru contractor. Rate of Contribution of the wages: Employers- 4.75% Employees- 1.75% Manner and Time Limit for making Payment of contribution The total amount of contribution (employees share and employers share) is to be deposited with the authorised bank through a challan in the prescribed form in quadruplicate on ore before 21st of month following the calendar month in which the wages fall due.

WAGES FOR ESI CONTRIBUTIONS Registers/files to be maintained by the employers NOT to be deemed as wages Contribution paid by the employer to any pension/provident fund or under ESI Act. Sum paid to defray special expenses entailed by the nature of employment Daily allowance paid for the period spent on tour. Gratuity payable on discharge. Pay in lieu of notice of retrenchment compensation Benefits paid under the ESI Scheme. Encashment of leave Payment of Inam which does not form part of the terms of employment. Washing allowance for livery Conveyance Amount towards reimbursement


Benefits To the employees under the Act Medical, sickness, extended sickness for certain diseases, enhanced sickness, dependents maternity, besides funeral expenses, rehabilitation allowance, medical benefit to insured person and his or her spouse.

No. of implemented Centres 677 No. of Employers covered 2.38 lacsC No. of Insured Persons 85 lacs No. of Beneficiaries 330 lacs No. of Regional Offices/SROs 26 No. of ESI Hospitals/Annexes 183 No. of ESI Dispensaries 1453 No. of Panel Clinics 2950

Contribution period 1st April to 30th September. 1st October to 31st Contribution period If the person joined insurance employment for the first time, say on 5th January, his first contribution period will be from 5th January to 31st March and his corresponding first benefit will be from 5th October to 31st December.

Different punishment have been prescribed for different types of offences in terms of Section 85: (I) (six months imprisonment and fine Rs.5000), (ii) (one year imprisonment and fine), and 85-A: (five years imprisonment and not less to 2 years) and 85-C(2) of the ESI Act, which are self explanatory. Besides these provisions, action also can be taken under section 406 of the IPC in cases where an employer deducts contributions from the wages of his employees but does not pay the same to the corporation which amounts to criminal breach of trust.


Employees Compensation Act, 1923


All over India


Coverage of Workmen All workers irrespective of their status or salaries either directly or through contractor or a person recruited to work abroad. Sec.1(3)

Employers liability to pay compensation to a workman On death or personal injury resulting into total or partial disablement or occupational disease caused to a workman arising out of and during the course of employment.

Amount of compensation Where death of a workman results from the injury An amount equal to fifty per cent of the monthly wages of the deceased workman multiplied by the relevant factor on an amount of eighty thousand rupees, whichever is more. Where permanent total disablement results from the injury. An amount equal to sixty per cent of the monthly wages of the injured workman multiplied by the relevant factor or an amount of ninety thousand rupees, whichever is more Procedure for calculation Higher the age Lower the compensation Relevant factor specified in second column of Schedule IV giving slabs depending upon the age of the concerned workman. Example : In case of death. Wages Rs.3000 PM Age 23 years Factor as schedule IV Rs.19.95 Amount of compensation Rs.329935 In case of total disablement Rs.395910. Sec. 4

PENALTY In case of default by employer Deposit of Compensation

When an employee is not liable for compensation

In respect of any injury which does result in the total or partial disablement of the workman for a period exceeding three 50% of the compensation amount + interest todays. be paid to the workman or his dependents asthe respect of any injury, not resulting in In case may be Within one month with the death or permanent total disablement Compensation Commissioner. caused by an accident which is directly attributable to The workman having been at the time thereof under the influence of drink or drugs, or Willful disobedience of the workman to an order expressly given, or to a rule expressly framed, for the purpose of securing the safety of workmen, or Willful removal or disregard by the workman of any safety guard or other device which he knew to have been provided for the purpose of securing the safety of workman.

When the monthly wages are more than Rs.4000 per month it will be deemed Rs.4000.

Sec.3(a) & (b)

Bar upon contracting out

Sec.4 Exh.b

Any workman relinquishing his right for personal injury not permissible. Sec.14

SIGNIFICANCE OF THE TOPIC To study the compliance and awareness of the Act and all the other related labour laws for building up of and maintenance of goodwill and reputation of the organization. Assessment of risks involved in the absence of adherence of the statutes and regulations of the Act. Existence of gaps between the ideal and the actual situation. Flexibility in business operations through contract labour being the main reason given for employment of contract labour should be balanced by the employees concern for statutory safeguard to prevent the abuse of the contract labour system. The compliance of the provisions and the minimum labour engagement standards or process need to be done otherwise the resultant deviant human resource practices would be viewed with contempt and repulsion. The end result being judiciary placing a heavy hand to make the employers behave themselves.

OBJECTIVE OF THE STUDY 1. Develop an understanding of the overall organizational working and culture at HEC,USHA MARTIN,IBM. 2. The main objective of this exercise is to examine and find out how far the provisions and stipulations of the security legislations are complied by the organisations. 3. The study also aims at finding out the probable gap areas existing in the implementation or compliance of the Act. 4. The other objective is also to find out and examine as to how far the benefits of the security legislations are complied by the organisations.

The other objectives that sought to be achieved are listed below: Understanding the security legislations and its proper execution. To find out the potential problems faced by the labourers To find out whether undue exploitation of the labourers

RESEARCH METHODOLOGY 1 Scope: The survey was conducted after ascertaining the population of employees and managers at HEC,IBM and USHA MARTIN.. 2 Sampling: Simple random sampling done for the employees and the employer on the basis of their strength . 3 Sample size: 30 a. Areas Covered: The main working areas of HEC,IBM,Usha Martin. i.e. b. Usage of Data Collection Tools: Questionnaire, Observations, Interviews. c. The survey was conducted with the help of a questionnaire consisting of 23 questions for labourers to assess the following: 4 Awareness about the main provisions of the Social Security Act. 5 Compliance of the provisions of the Act. 6 Compensation and Benefits given to the Labourers. 7 First the individual assessment of each question pertaining to the labourers has been done. The data obtained after interpretation has been expressed in simple percentage form. 8 The relevant individual questions of the labourers pertaining to awareness, compliance and compensation & benefits are then clubbed together to determine the effectiveness of the above said parameters. 9 A comparative analysis of the responses obtained from the labourers and the is then done to find out the probable gap areas existing or areas of improvement in each of the areas

PROVISIONS Contribution to be paid Bonus Rate Welfare Provisions ESI EPF Employee Health Safety Safety Instructions Medical Benefits under ESI Dependent Benefit Occupational Diseases Sickness Benefits Modes of Recovery of Compensation YES 8 5 7 4 6 3 5 7 2 4 9 5 NO 2 2 2 4 4 6 5 1 7 2 1 2 Cant Say 0 3 1 2 0 1 0 2 1 4 0 3

70 60 50 40 30 20 10 0 HEC Usha Martin IBM

YES No Can't Say



70 60 50 40 30 20 10 0 HEC Usha Martin IBM

YES No Can't Say

USHA MARTIN PROVISION Contribution to be paid Bonus Rate Welfare Provisions ESI EPF Employees Health Safety Safety Instructions Medical benefits under ESI Dependents Benefit Occupational Diseases Sickness Benefit Modes of Recovery of Compensation YES 5 7 4 7 6 3 2 9 8 3 6 2 NO 1 2 6 2 1 3 3 0 1 7 1 2 Cant Say 4 0 0 1 3 4 5 1 1 1 2 6

IBM PROVISIONS Contribution to be paid Bonus Rate Welfare Provisions ESI EPF Employees Health Safety Safety Instructions Medical benefits under ESI Dependents Benefit Occupational Diseases Sickness Benefit Modes of Recovery of Compensation YES 4 5 2 8 6 7 5 7 4 5 8 4 NO 5 2 6 1 2 3 0 1 3 4 0 5 Cant Say 1 3 2 1 2 0 5 2 3 1 2 1


The probable gap areas or the areas requiring improvement are: 1. Efforts have not been initiated by the contractors or the principal employer to make the labourers aware of the structure of minimum wages and other benefits like provisions of PF, ESI, leave allowance, etc. which are being revised with the minimum wage circular on a six monthly basis. Hence, during personal interview on my survey visit none of the labourers were able to answer the rates that are prevailing. 2. Wage slip and the statement of accounts of their ESI and PF are not being provided by the contractors resulting which the economic planning towards security is not known by them. 3. All the labourers have their own ESI cards however the prompt action from the government authorities is not visualized instantly to meet their emergency as and when required. 4. ESI and PF challans for the labourers are not submitted timely i.e. by 15 of each month by the contractors which does not result in uniformity in the disbursement of wages on a regular basis. 5. Personal Protective Equipments (PPE) for all the labourers is mandatory for working in the area requiring the handling of inflammable and hazardous petroleum products which is not being taken care of by the contractors. 6. Contractors checklist needs to be maintained s


CHAPTER - IV ANALYSIS AND INTERPRETATION The main objective of the study is to find out whether the company is complying by the legal statutes of the social security legislations or not. This has been found out with the help of questionnaires and interview of two different groups of people i.e. the employers and the employees. The responses of these employers and employees have then been compared to find out the probable gap areas existing in the implementation of the act. It also helps in finding out the area where the exploitation of labourers is taking place, if any. For the purpose of analysis two different sets of questionnaires were prepared for the employers and employees wherein each questionnaire consisted of 11 and 15 questions . The questions along with the interview of the respondents give the data for interpretation. However the sample size of the employees is 30 which is a fair enough sample of the total population of employees of the three locations which have been taken for the study. Similarly the sample size of the employers is 8 which is 50% of the total population of the three locations where the study has been conducted. It may be noted that the sample size has been taken after finding out the total population of the three locations only where the core activities of the company takes place. The response of the employers4 too has been presented in a tabular manner for the purpose of easing the evaluation process. The individual questions, results of which has been expressed in percentage form will then be clubbed together to get the consolidated results for compliance. These consolidated results will then be compared with that of the employees to find the probable gap areas. The main purpose of clubbing the individual questions of the employees and the employers separately is to find out: th the employees and the employers regarding the main provisions of the Social Security Legislation Act,

As per the above tabulations the individual questions have been analyzed as per the main head of parameters that is awareness, compliance and compensation & benefits. Now the head of parameters are being tabulated in a consolidated manner to focus the overall status of contract

labour act implemented in above organisation. The evaluations have been done in a tabular manner which is as follows: I. Awareness of social security legislation Act Awareness implies as to how much the employees and the employers are aware about their duties and obligations. It also includes the awareness about their rights and privileges. This parameter assesses the awareness of both the employees as well as the employers. However, first the awareness level of the employees has been determined. 1. Awareness of the Social security legislation act in the Labour Category This parameter assesses the awareness of the labourers about the minimum standards of employment. However, the minimum standards of employment include the following main provisions: Minimum Wage Rates ESI Benefits Gratuity benefits Provident fund benefits Welfare Facilities Bonus Rates

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