Employment LawAn Insight into the Compliance of Employment Laws

February 18, 20220


The law with regards to labour and employment laws primarily fall under the ambit of “industrial law”. An obligation lies on the employer to function and act in compliance of the employment laws which are present in the form of legislations, notifications, directions enacted and released by the State and Central Government from time to time.

The objective behind enactment of employment legislations is to create uniformity in laws and to provide the space to the employer and employee where they can carry out the operations in a smooth and efficient manner. The same has been discussed in detail in our previous blog, here.

The roots of the labour laws can be found in the Constitution of India under the  Fundamental Rights and Directive Principles of State Policy. The constitutional drafters put the subject of labour law in the Concurrent list so that both Central and State Governments can make laws on it. However, there are certain laws as mentioned in entry no. 55, 61 and 65 of the Union List of the Constitution which makes the Central Government, the sole authority to make the laws.

Following are the certain legislations pertaining to employment law where both the Central Government and State Government are competent to make laws:

1. The Contract Labour Regulation and Prohibition Act, 1986

2. The Equal Remuneration Act, 1976

3. Industrial Disputes Act, 1947

4. Maternity Benefit Act, 1961

5. Minimum Wages Act, 1948

6. The Payment of Bonus Act, 1965

7. The Payment of Gratuity Act, 1972

8. The Payment of Wages Act, 1936

On the other hand,  there are certain acts where only the Central Government has the authority to enforce them namely; Employees’ State Insurance Act, 1948 and Employees’ Provident Fund and Miscellaneous Provisions Act, 1952.

This article gives a brief overview of the present legislations in respect to employment laws and the compliances required thereunder.



The Minimum Wages Act, 1948 (MW Act) came into force on 1948 and it seeks to provide for fixing of minimum rate of wages for employees working under the scheduled employment.  The MW Act states that the “appropriate government” is the empowered authority to fix the minimum wages and to revise them in every five years. It is pertinent to note that there is no uniformity amongst states on payment of minimum wages and it differs from state to state.

Mandatory Compliances:

  1. The MW Act mandates that wages are required to be paid in cash.
  2. Every employer is mandated to maintain the register of wages at workplace.
  3. The employer is required to affix a notice on the entrance in English and the local language.
  4. The employer is required to take thumb impression of the employees on wage book and wage slips.

Penalty: Imprisonment of five years or fine of Rupees 10,000 or both.


The Payment of Bonus Act, 1965 (PB Act)  provides provisions pertaining to bonus for the employees, who are working in certain employments. The bonus amount is required to be paid on the basis of profits or production etc. of the establishments.

 The PB Act is applicable on every establishment and factory where:

  • twenty or more workmen are employed on any day during an accounting year,
  • the employee is receiving the salary of ten thousand per month,
  • if he works for thirty days in that accounting year.

Mandatory Compliances:

  1. The employer is required to calculate and pay the bonus as given under the PB Act.
  2. The employer is required to submit an annual return in Form D to the Inspector, of bonuses paid by him to the employee in the said accounting year, within thirty days of the prescribed time limit.
  3. The employer is required to cooperate with the inspector with respect to inspection of documents and records.
  4. The employer is required to get his account audited as per the directions of concerned authority under the Act.

Penalty: Imprisonment of six months or fine of rupees 10,000 or both if provisions of the Act are contravened.


The Equal Remuneration Act, 1976 (ER Act) aims to curb discrimination and provides for equal remuneration to the men and women workers for the same work.  It defines “same work or work of a similar nature” in Section 2 (h) as a work in which the skill, effort and responsibility required are the same when performed under the similar conditions. The objective of the ER Act is to prevent discrimination on the grounds of gender  in reference to the matters of employment, recruitment and in reference to the matters connected therewith. The ER Act is applicable to all establishments.

Mandatory Compliances:

  1. Employer cannot discriminate on the basis of gender, for the same work, with regards to payment of remuneration.
  2. It is the duty of the employer to maintain register and documents of the employers employed by him.
  3. The employer is required to cooperate with the inspection officer to produce documents, muster rolls etc.

Penalty: If any employer contravenes the provisions of the ER Act, he can be punished with imprisonment or fine as prescribed under the said provision of  the ER Act.


The Payment of Wages Act, 1936 (PW Act)  casts a responsibility upon the employer to make the payment of all wages required to be paid under the PW Act to the employees employed by him in factories or other  industries or establishments.

 The PW Act  applies to the persons who are employed for the wages which does not exceed the prescribed limit of earnings per month as given under the PW Act and which can be revised by the Central Government in every five years.

Mandatory Compliances:

  1. It is the duty of the employer to maintain records and documents of the payments of wages made by him to the employee or the deductions made, if any, or any such particulars.
  2. An action can be taken against the employer if he unreasonably deducts the wages and for that the employee can file an application before the respective authority.
  3. It is the responsibility of the employer to afford all the facilities to the inspector for making an entry, supervision, inspection etc.

Penalty: If an employer contravenes the provisions of the Act, or unlawfully deducts the wages or does not provide facilities to the inspector to make inspection, he can be punished with the penalty and imprisonment as per Section 20 of the PW Act.

LAWS RELATING TO SOCIAL SECURITY                                                                          


The Employees State Insurance Act, 1948 (ESI Act)  provides certain benefits to the employees in the case of sickness, maternity, and employment injury and matters related thereto.

 The ESI Act applies to all the factories including the Government factories, other than seasonal factories. For the purpose of the ESI Act, a ‘factory’ as defined under Section 2 (12) are premises or precincts where ten or more persons are employed on any day of the preceding 12 months.

Mandatory Compliances:

  1. The employer is required to register the factory and establishment
  2. All contribution paid under the ESI Act shall be paid to a fund called Employee’s State Insurance Fund.
  3. There shall be an annual audit by the Comptroller and Auditor General of India
  4. Correct accounts of the income of expenditure to be maintained.

Penalty: Those who contravene the provisions of the ESI Act are shall be punished as per Section 84, 85, 85 A of the ESI Act.


The Employees Provident Fund and Miscellaneous Provision Act, 1952 (EPF Act) aims to provide for the provisions of pension funds, provident funds and deposit linked insurance funds for the employees covered under the EPF Act. The EPF Act applies to all the factories and establishments where twenty or more people are employed.

Mandatory Compliances:

The employer is required to furnish details regarding the ownership and individuals in position of responsibility of the establishment, joining and leaving dates of members, details of employees and other details as required under form 3A/6A at the end of the financial year.

Penalty: Imprisonment extending up to six months or fine of Rs. 5,000 for contravention of the provisions of the EPF Act.


The Payment of Gratuity Acy, 1972 (PG Act)  seeks to provide a scheme of payment of gratuity for the people who are employed in factories or other establishments. Every person is entitled to receive gratuity if he has rendered the continuous service of five years or more years on his superannuation, resignation and or on death or disablement due to employment injury. the PG Act is applicable to the factories and establishments where ten or more people are employed in the 12 preceding months.

Mandatory Compliance

  1. Every employer other than Government employers are required to obtain compulsory insurance.
  2. If he fails to make the payment of premium towards the employees, he shall be liable to pay that amount to the respective controlling authority.

Penalty: Imprisonment extended up to one year or fine up to Rs. 20,000,  or both.


The Workmen’s Compensation Act, 1923 (WC Act)  provides relief to the worker or to his dependents in the case of injuries arising out of and in the course of employment, resulting in death or permanent or temporary disablement of the worker. Such compensation and relief shall be provided only to ‘workmen’, which Is defined under Section 2(n) of the WV Act.

Mandatory Compliance:

  1. The employer is required to pay compensation when the injury is caused in and during the course of employment.
  2. The employer shall submit the returns in respect of the compensation paid by him to the employees who sustained injuries

Penalty: In the event the employer fails to pay the compensation within one month, then the commissioner may impose an interest of six percent on the amount, and charge an additional amount of 50,000.


The Maternity Benefit Act, 1961 (MB Act) seeks to provide benefits to pregnant women before and after child birth. The MB Act is applicable to every establishment, factories, mines, and plantations, including the ones owned by the Government.

Mandatory Compliance:

  1. The Employer shall not knowingly employ a woman during the six weeks immediately following the day of miscarriage or delivery.
  2. The Employer is liable to pay maternity benefits for the period of a woman’s absence before or on the day of delivery or after its six weeks.
  3. The employer should also provide medical bonus.

Penalty: Imprisonment extendable up to three months or fine  up to 500 rupees or both.



The aim of the Factories Act, 1948 (Factories Act) is to ensure that factories have adequate safety measures for the workers to promote their health and welfare. The Factories Act is applicable to the factories having usage of power, and employing 10 or more persons, or to factories not using power and employing 20 more persons, on any day of preceding 12 months.

Mandatory compliance:

  1. Factories are required to be registered and licensed.
  2. The occupier of the factory is required to put notice at least 15 days prior to occupying the premises of the factory.
  3. The occupier has the duty to ensure that all practical measures are taken for the health, safety, and welfare of the workers.
  4. The Occupier should ensure that the wages are paid timely, and extra wages are paid in respect of overtime work under Section 59 of the Factories Act.
  5. A register of all the details pertaining to the workers, the payment of wages, etc. should be duly maintained.
  6. Returns to be submitted as per the rules made by the respective State Governments.

Penalty: It is to be imposed as per Chapter X of the Factories Act.


The Child Labour Prohibition and Regulation Act, 1986 (CLP Act) seeks to  eradicate and regulate employment of child labour  wherein the child is below 14 years of age.  The CLP Act is applicable to contractors and every establishment where workers employed are 20 or more on any day of preceding 12 months.

Mandatory Compliance:

  1. a) Work involving the making of bidi, carpet weaving, bagging of cement, manufacturing explosives and fireworks, etc., are prohibited under the CLP Act for children under the age of 14 years.
  2. b) No contractor or employer can employ a child below 14 years for occupations pertaining to transport of passengers and goods, working in slaughterhouses, construction work in railway stations, etc.
  3. c) The employer needs to inform the Factory Inspector in case he employs a child and further, the employer shall also furnish an age certificate for the same.

Penalty: To be imposed as per Section 24 of the Factories Act.




The Trade Unions Act, 1926 (TU Act)  provides for registration of Trade Unions in order to enable collective bargaining and to render lawful organization.

Mandatory Compliance:

  1. Trade Unions are required to be registered as per Section 5 of the Act.
  2. The Trade Unions should facilitate the Inspector in inspection of the records, as and when required.


 The Industrial Disputes Act, 1947 (ID Act) aims to secure industrial peace and therefore it provides the machinery and mechanism for settlement of disputes. the ID Act is applicable to the industrial establishments other than establishments wherein agricultural operation are carried out, hospitals or dispensaries, educational or research training institutions, etc.

Mandatory Compliances:

  1. It is the duty of the employer to ensure that there are no unfair labour practices
  2. The employer has the prior permission of the appropriate authority before it lays off or retrenches the workers, or before it closes down the industrial establishment.
  3. It is mandatory that the employer pays the compensation to the workers on account of closure or lay off or retrenchment.

Penalty: Penalties to be imposed as per Chapter VI of the ID Act.


The Industrial Employment Standing Orders Act, 1946 (IESO Act)  obligates the employer to clearly define the standing order and publish the same for the employees.

The IESO Act applies to all the establishment where 100 or more workers are employed on any day of preceding 12 months.

Mandatory Compliance:

  1. The employer should get the necessary approval of the standing orders from the concerned authority.
  2. It is the duty of the employer to publish the standing orders on the conspicuous place of the premises so that workers have the knowledge of them.

Penalties: to be imposed as per Section 13 of the IESO Act.


The abovementioned legislations provide for the compliances that are to be adhered to by the employer of factory, establishment and industries. In case of non-compliance, penal provisions are prescribed so that an employer can be punished with imprisonment or fine or both.

All these legislations have been designed with a common goal to benefit the workers and employees during or after their term of employment.

In the year 2017, Ease of Compliance Rules were released by the Ministry of Labour and Employment to mandate maintenance of registers which can now also be recorded in e-formats. Further, labour audit and labour consultancy are also incorporated in the present times to ensure that employers comply with the procedures, rules and regulations prescribed by the Central and State Governments.

-Team AMLEGALS assisted by Ms. Damini Chouhan (Intern)

For any query or feedback, please feel free to get in touch with chaitali.sadayet@amlegals.com or mridusha.guha@amlegals.com.

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