LABOUR LAW IN INDIA: STRUCTURE AND WORKING

INTRODUCTION

".Labour law also known as employment law is the body of laws, which deals with the legal
rights of, and restrictions on, working people and their organizations. labour law has a significant
role in developed as well as developing economies. It is an important instrument of welfare state.
Indian labour law makes a distinction between people who work in "organised" sectors and
people working in "unorganised sectors. it mediates many aspects of the relationship between
trade unions, employers and employees. In other words, Labour law defines the rights and
obligations as workers, union members and employers in the workplace. Generally, labour law
covers: Industrial relations – certification of unions, labour-management relations, collective
bargaining and unfair labour practices, Workplace health and safety, Employment standards,
including general holidays, annual leave, working hours,unfair,dismissals, minimum wage,
layoff procedures and severance pay. There are two broad categories of labour law. First,
collective labour law relates to the tripartite relationship between employee, employer and union.
Second, individual labour law concerns employees' rights at work and through the contract for
work. Labour rights have been integral to the social and economic development since the
industrial revolution. Labour law, especially industrial relations law can also be seen as an
instrument of maintaining balance between incomes of people and medium of securing dignity of
work life to working people. Most of nations view labour rights as fundamental for ensuring
fairness in the carrying out of the labour process. labour rights reflect some kind of compromise
between notions of productivity, efficiency and freedom of contract on the one hand and social
justice and labour standards on the other. A number of such laws were enacted with the active
role of trade union leadership. India adopted a system of Five-Year plans for planning its
economic development. The Indian judiciary has played a salutary role in progressive
interpretation of these laws. The structure of Indian labour law in the overall context of the
notion of social and economic justice as enshrined in the Constitution of India. It also focuses on
the working of the labour law framework in terms of its stated goals as also the changing needs
of a globalizing economy. It deals with questions, among others: the constitutional context of
labour law; the structure and functioning of different branches of labour law i.e. law of working
conditions, labour relations law, law of wages and monetary benefits, law of social security; and
a review of the working of these laws. The realization of labour law objectives can be made more
realistic from the view point of the constitutional promise of socio-economic justice, as also the
changing context of the employer and employees’ power and position.
1.History of Labour laws

Labour law arose due to the demands of workers for better conditions, the right to organize, and
the simultaneous demands of employers to restrict the powers of workers in many organizations
and to keep labour costs low. Employers' costs can increase due to workers organizing to win
higher wages, or by laws imposing costly requirements, such as health and safety or equal
opportunities conditions. Workers' organizations, such as trade unions, can also transcend purely
industrial disputes, and gain political power - which some employers may oppose. The state of
labour law at any one time is therefore both the product of, and a component of, struggles
between different interests in society. International Labour Organisation (ILO) was one of the
first organisations to deal with labour issues. The ILO was established as an agency of the
League of Nations following the Treaty of Versailles, which ended World War I. Post-war
reconstruction and the protection of labour unions occupied the attention of many nations during
and immediately after World War I. In Great Britain, the Whitley 4 Commission, a
subcommittee of the Reconstruction Commission, recommended in its July 1918 Final Report
that "industrial councils" be established throughout the world. The British Labour Party had
issued its own reconstruction programme in the document titled Labour and the New Social
Order. In February 1918, the third Inter-Allied Labour and Socialist Conference (representing
delegates from Great Britain, France, Belgium and Italy) issued its report, advocating an
international labour rights body, an end to secret diplomacy, and other goals. And in December
1918, the American Federation of Labor (AFL) issued its own distinctively apolitical report,
which called for the achievement of numerous incremental improvements via the collective
bargaining process. As the war drew to a close, two competing visions for the post-war world
emerged. The first was offered by the International Federation of Trade Unions (IFTU), which
called for a meeting in Berne in July 1919. The Berne meeting would consider both the future of
the IFTU and the various proposals which had been made in the previous few years. The IFTU
also proposed including delegates from the Central Powers as equals. Samuel Gompers,
president of the AFL, boycotted the meeting, wanting the Central Powers delegates in a
subservient role as an admission of guilt for their countries' role in the bringing about war.
Instead, Gompers favored a meeting in Paris which would only consider President Woodrow
Wilson's Fourteen Points as a platform. Despite the American boycott, the Berne meeting went
ahead as scheduled. In its final report, the Berne Conference demanded an end to wage labour
and the establishment of socialism. If these ends could not be immediately achieved, then an
international body attached to the League of Nations should enact and enforce legislation to
protect workers and trade unions. The British proposed establishing an international parliament
to enact labour laws which each member of the League would be required to implement. Each
nation would have two delegates to the parliament, one each from labour and management. An
international labour office would collect statistics on labour issues and enforce the new
international laws. Philosophically opposed to the concept of an international parliament and
convinced that international standards would lower the few protections achieved in the United
States, Gompers proposed that the international labour body be authorized only to make
recommendations, and that enforcement be left up to the League of Nations. Despite vigorous
opposition from the British, the American proposal was adopted. The Americans made 10
proposals. Three were adopted without change: That labour should not be treated as a
commodity; that all workers had the right to a wage sufficient to live on; and that women should
receive equal pay for equal work. A proposal protecting the freedom of speech, press, assembly,
and association was amended to include only freedom of association. A proposed ban on the
international shipment of goods made by children under the age of 16 was amended to 5 ban
goods made by children under the age of 14. A proposal to require an eight-hour work day was
amended to require the eight-hour work day or the 40-hour work week (an exception was made
for countries where productivity was low). Four other American proposals were rejected.
Meanwhile, international delegates proposed three additional clauses, which were adopted: One
or more days for weekly rest; equality of laws for foreign workers; and regular and frequent
inspection of factory conditions. The Commission issued its final report on 4 March 1919, and
the Peace Conference adopted it without amendment on 11 April. The report became Part XIII of
the Treaty of Versailles. (The Treaty of Versailles was one of the peace treaties at the end of
World War I. It ended the state of war between Germany and the Allied Powers. It was signed on
28 June 1919.) The first annual conference (referred to as the International Labour Conference,
or ILC) began on 29th October 1919 in Washington DC and adopted the first six International
Labour Conventions, which dealt with hours of work in industry, unemployment, maternity
protection, night work for women, minimum age and night work for young persons in industry.
The prominent French socialist Albert Thomas became its first Director General. The ILO
became a member of the United Nations system after the demise of the League in 1946.

II. CONSTITUTIONAL FRAMEWORK AND LABOUR LAW

 The Constitution of India guides all legislative, executive and judicial actions in the country.
The Seventh Schedule of the constitution envisages distribution of legislative powers between
central and state legislatures on different matters. The Schedule contains three lists – Union List
(List I), State List (List II) and Concurrent List (List III).Matters contained in List I only
Parliament, the Central Legislature, can enact a law; matters specified in List II only the State
Legislature concerned can enact a law; and matters contained in List III, both Central and State
Legislatures can enact a law. Legislative powers between central and state legislatures on
different matters. But in case such legislation is submitted to the President for his assent, and
which is duly accorded, then the State law will prevail over the central law.

Most labour matters find place in List III (Concurrent List). Among others, these includes: trade
unions; industrial and labour disputes; social security and social insurance; employment and
unemployment; welfare of labour including conditions of work; provident funds; employers’
liability; workmen’s compensation; invalidity and old age pensions; and maternity benefits.
However, regulation of labour and safety in mines and oilfields is the exclusive domain of the
Central Legislature as these matters are specified in list I. Likewise, relief for the disabled and
unemployable is under the exclusive jurisdiction of the State Legislatures as these matters are
specified in list II. Since most labour matters fall in the Concurrent List, Parliament has enacted
labour laws in almost all these matters. However, states have made amendments in the central
Acts as per their local requirements and have obtained the President’s assent to the changes
made. Perhaps the most important parts of the Indian Constitution are provisions of Chapters III
and IV. The former is titled, the Fundamental Rights and the latter, the Directive Principles of
State Policy. The Fundamental Rights are modeled after the American Bill of Rights. Their
violation can be challenged though the writ jurisdiction of the Supreme Court and the High
Courts. These rights limit the power of the legislature to enact laws. Among others, the
Fundamental Rights pertain to right to equality before law, along with rights to particular
freedoms. These particular freedoms include speech; association; movement throughout the
territory of India; residence; profession, trade and business; protection of life and personal liberty
and religion. The Constitution confers a fundamental Right on children, as per which it prevents
employment of children below 14 years of age in hazardous employments. It also prevents traffic
in human beings and employment of forced labour. The Preamble of the Constitution is also an
important source of power to the legislature for enacting laws for the protection of labour. It
promises to secure to the people “justice, social, economic and political; liberty of thought,
expression, belief, faith and worship; equality of status and of opportunity ….” The Directives
Principles of State Policy as envisaged in Part IV of the Constitution are not enforceable in any
court of law. But they have been held by the Supreme Court of India to be ‘nevertheless
fundamental in the governance of the country. And, the judiciary in general has time and again
expressed its advice to the legislature to apply them in making laws. It has often taken the
support of this chapter in holding the constitutional validity of many labour laws. Part IV of the
constitution and its Preamble helps to know the basic philosophy of the Constitution Some of these
directives relate to promotion of welfare of people including minimizing inequalities,directing
the State’s policy towards securing fulfillment of certain minimum needs,right to work,
education, and to public assistance in certain cases, provision of just and humane conditions of
work and maternity relief, living wage, participation of workers in management of industries; 8
free and compulsory education for children, and to improve public health. This part in a way
legitimizes the labour’s demands raised through demand charters submitted to managements.
While delivering many judgments, the judiciary has often reminded the executive and the
legislature to enact legislations that provide for basic needs of the people and to enforce them as
per the spirit in which they have been created. The directive principles are considered so
important that some jurists have described them as the “soul of the Constitution”. Premised in the
framework of the directive principles, labour legislation in the country provides a large number
of central labour statutes. These laws can be classified into mainly four categories: conditions of
work; labour relations; wages and monetary benefits; and social security. Since labour is a
subject in the concurrent list of the Constitution, the 29 states and 6 union territories comprising
the Indian federation have in some cases enacted their own labour legislation.

In fact, India is often being viewed as a society where labour is overprotected through law .
However cases of labour law violation are too many; so much so that often when one sees the
working conditions of the unorganized labourers, one would wonder whether any labour law
exists at all for them. In all, over 60 major central labour legislations have been enacted by the
central legislature. Similarly, about over 150 labour legislations have been enacted by the state
legislatures; each of these legislations is specific to the needs of the state concerned. Some of the
central labour legislations in India that are considered to be important are as follows:

 Workers (Conditions of Employment) Act, 1966

 Building and Other Construction Workers (Regulation of Employment Service) Act, 1996

 Child Labour (Prohibition & Regulation) Act, 1986.

 Contract Labour (Regulation & Abolition) Act, 1970

 Employers' Liability Act, 1938

 Equal Remuneration Act, 1976

 Factories Act, 1948

 4 Industrial Disputes Act, 1947

 Industrial Employment (Standing Orders) Act, 1946.

 Mines Act, 1952

 Minimum Wages Act, 1948

 Motor Transport Workers Act, 1961

 National Commission for Safai Karamcharis Act, 1993

 Payment of Bonus Act, 1965

 Payment of Gratuity Act, 1972

 Payment of Wages Act, 1936

 Trade Union Act, 1926

 Weekly Holidays Act, 1948

 Workmen's Compensation Act, 1923

Legislation is only one of the sources of labour law. Almost each labour legislations is
supplemented by a commensurate secondary legislation, which consists of Regulations and Rules
made by the appropriate Government,Central as well as state,to give effect to the legislations or
to administer them.The Supreme Court and various High Courts are also a very important source
of labour law. Thousands of such decisions have been delivered,many of them have been
overruled to bring in fresh perspectives of the legal position concerned. Further, terms and
conditions of a labour contract could be derived from a collective bargaining contract or an
individual contract between employer and employee. International standards laid down by bodies
like International Labour Organization (ILO) too sources of labour law in appropriate
situations.have been referred by especially the higher judiciary to support its decisions.

III. THE LAW OF WORKING CONDITIONS

There are several classes of work organization where people are employed. These include:
factories, establishments, shops, mines, plantations, etc. Agriculture too is a major activity,
which employs the largest number of workers in India; but most parts of agricultural operations
are not regulated through law. The issue of conditions of employment needs state attention in
case of contract workers; they are normally made to work in difficult work environment. Inter-
state migrant workers and child workers too are highly susceptible to exploitation. Indian state
has enacted legislation for regulating conditions of work of such categories of workers. Most of
the provisions of laws regulating conditions of work relate to health, safety and welfare of
workers. The judiciary has often expanded the scope of these provisions by giving them liberal
interpretation. In doing so, it has repeatedly referred to the Directive Principles of State the
previous section.

The Factories Act, 1948

It regulates the work conditions of most workers employed in the organized manufacturing
sector in India. The first legislation on factories in India dates back to 1881. Ten years later it
was replaced by the Indian Factories Act, 1891. Soon after independence the Factories Act, 1948
was enacted to further humanize the conditions of work in factories. The word ‘factory’ has been
defined as premises or precincts where a manufacturing process is carried on by 10 or more
workers with the aid of power or by 20 or more workers without the aid of power. The word
manufacturing process has been given a very wide definition; and includes even processes such
as repairing of movable things for the purpose of sale or disposal; and pumping of oil, water, etc.
The word worker too has a wide definition and includes all persons involved in the
manufacturing process; the scope of this definition was further widened in 1976 to include
workers employed through or by contractor. This legislation mainly deals with the following:
provisions related to health, welfare, and safety; working hours for adults and children; and
protection to women and children against certain hazards. The Act also provides for registration
and licensing of factories; obtaining the approval of factory sites; obligations of occupier of a
factory; and provision of annual leave with wages to workers. The Act provides a maximum of
nine hours of work per day with a rest interval of at least half an hour after five hours of work.
Also provided is a daily spread over of not more than ten and a half hours. Overtime work in a
factory has to be paid double the rate. The Act provides for a weekly holiday. Children below 14
years of age are not permitted to be employed in any factory. The health provisions deal with,
among others, issues like cleanliness, disposal of wastes, ventilation, dust and fumes, artificial
humidification, overcrowding, drinking water, latrines and urinals and spittoons. Provision has
also been made for welfare facilities like washing, storing and drying of clothes, places of sitting,
rest shelters and lunch rooms, first aid appliances, canteens and crèches. Safety provisions
include, among others, detailed specification of space to be provided for every person working;
installations of and working on machines; hoists, lifts, lifting machines, chains, ropes, etc.; pits
sumps, opening in floors; carrying of weights; precautions in case of fire. In 1984, the Bhopal
Gas disaster took place at a factory of the Union Carbide Ltd. in Bhopal, Madhya Pradesh. This
led to killing of nearly 8000 people and disabling several thousand. This tragedy showed holes in
the safety provisions of the Factories Act, 1948. This led to an amendment in the Act in 1987.
Consequently, chapter IV-A was added to the Act which has been titled: Provisions Relating to
Hazardous Processes. This chapter provided new sections from 41-A to 41-H. Two new
schedules were added to the Act in the form of the First Schedule and the Second Schedule. The
First Schedule provides a list of 29 industries that involve hazardous processes. The Second
Schedule provides the permissible levels of certain chemical substances in work environment.
Provisions of the new chapter IV-A relate to, among others, constitution of site appraisal
committees, compulsory disclosure of certain information by the occupier, permissible limits of
exposure of chemical and toxic substances, workers’ participation in safety management, and
rights of workers to be warned against imminent danger. The amended Act also gives a right to
every worker (section 111-A) to obtain from the occupier information related to workers’ health
and safety at work and get trained in health and safety matters at the expense of the employer. 6
Certain authorities like inspectors, welfare officers, certifying surgeons have been provided, who
are expected to ensure the implementation of the Act. Penalties for violation of the Act have
been substantially hiked by the 1987 amendment to the Act. For example, the general penalty for
offences can be imprisonment up to two years and a fine of Rs. one hundred thousand.

The Mines Act, 1952

It contains provisions for measures relating to the health, safety and welfare of workers
employed in mines. According to the Act, the term 'mine' means any excavation where any
operation for the purpose of searching for or obtaining minerals has been or is being carried on
and includes all borings, bore holes, oil wells and accessory crude conditioning plants, shafts,
opencast workings, conveyors or aerial ropeways, planes, machinery works, railways, sliding,
workshops, power stations, etc. or any premises connected with mining operations and near or in
the mining area. Among others, the Act provides for supply of drinking water, conservancy, and
medical appliances. There is provision also for giving notice to appropriate authorities in case of
accidents and certain diseases. Over time rate has been provided to be twice the daily wage both
for workers working above and below the ground work. Women workers are not allowed to work
below the ground. A person below the age of 18 years is not allowed to work in a mine. But
apprentices and other trainees not below the age of 16 years may be allowed to work under
proper supervision by the manager. Provision has also been made for annual leave with wages.
Such leaves are to be calculated at the rate of one day for every fifteen days’ work. The Act is
administered by inspectors and certifying surgeons. Since it is fully under the central jurisdiction,
the central Ministry of Labour and Employment through the Directorate General of Mines Safety
(DGMS) has been entrusted the responsibility for administering this law. DGMS conducts
inspections and inquiries, and issues competency tests for the purpose of appointment to various
posts in the mines. It also organizes seminars/conferences on various aspects of safety of
workers. Also, there is provision for supply of umbrellas, blankets and rain coats. Employers are
obliged to provide and maintain necessary housing accommodation for every worker (including
his family) residing in plantation; and for every worker and family residing outside the
plantation, who has put in six months of continuous service in the plantation and has expressed a
desire to reside in the plantation. Children under 12 years of age are prohibited for employment
in any plantation. Children of workers between the age of 6 and 12 have to be provided free
educational facilities. The Act regulates working hours, provides for a weekly holiday, and leave
with wages. It also provides for appointment of suitable inspecting, medical or other staff for the
purpose of securing compliance with various provisions of the Act. The Act is administered by
inspectors and certifying surgeons.

The Contract Labour (Regulation & Abolition) Act, 1970.

It was enacted to regulate employment of labour employed by contractors so as to provide some

sense of security to workers working with them. It also regulates the conditions of work of such
workers. The Act provides for registration of all employers covered by the Act, and licensing of
contractors and sub-contractors. It requires payment of wages by the contractor in the presence
of the representative of the principle employer, who has to certify that correct payment has been
made in his presence. There is provision for constitution of Central and State Advisory Boards
for advising the appropriate government for administering the CLA. Chapter V of the CLA
provides for certain welfare and health measures for contract labour. In case 100 or more
contract labourers are employed a canteen has to be provided. Where contract labour is supposed
to halt at night, rest rooms have to be provided. First-aid facilities have to be readily made
available. Other welfare facilities to be provided include: wholesome drinking water; sufficient
number of latrines and urinals; and washing facilities. The Act is implemented both by the
Centre and the State Governments. The Central Government has jurisdiction over establishments
like railways, banks, mines, etc. and the State Governments have jurisdiction over units located
in that state.

The Inter-State Migrant Workmen (Regulation of Employment & Conditions of Service) Act,
1979

It was enacted to protect the rights of migrant workers, and thus safeguard their interest. It
regulates their employment and provides for minimum conditions of work for this category of
workers. It applies to every establishment and the contractor that employs five or more inter-state
migrant workmen. Among others, it provides for compulsory registration of principal employers
and licensing of contractors. The Act fixes responsibility on the contractor and the principal
employer for payment of wages. It is provided that all liabilities of migrant labourers are deemed
to be extinguished after the completion of the period of employment. The Act has provision for
issue of Pass-Book to every inter-state migrant workman with full details, payment of
displacement allowance, payment of journey allow allowance including payment of wage during
the period of journey, suitable residential accommodation, medical facilities and protective
clothing, payment of wages, equal pay for equal work irrespective of sex, etc. The Act fixes the
responsibility of wage payment on the contractor as well as the principal employer. The Act is
administered by inspectors.
Child Labour (Abolition and Regulation) Act 1985

No enlightened society can allow its children to be subjected to work at a tender age. World over
child labour is a serious issue for human right activists. There is considerable pressure on states
for its complete abolition. Indian situation on employment of child labour is quite bad. the Indian
Parliament passed the Child Labour (Prohibition and Regulation) Act 1985. This Act banned the
employment of children below the age of 14 years in hazardous occupations; which among
others, include glass and glassware, fireworks and matchmaking, and carpet weaving. The Act
regulates the work of children where they are permitted to work. It fixes the number of hours for
child work. It is provided that the total spread over of child’s work shall not exceed 6 hours.
There is a provision of weekly holiday. There are provisions for health and safety of children
employed or permitted to work in any establishment. It lists 24 areas in which governments are
expected to frame rules for the protection of child labour. These, among others, include
cleanliness, disposal of wastes, lighting, drinking water, safety issues, maintenance of buildings,
etc. The Act provides stringent punishment for violation of the Act.

IV. INDUSTRIAL RELATIONS LAW

The individual contract of employment is known to favour the employer, who is a stronger side
in the employment relationship. The common law envisages some strong managerial
prerogatives for employers that they exercise over workers. This gives rise to the need to allow
labour to unite, form collectives, and thus struggle to seek workplace justice on its own.
Unionization and collective bargaining lie at the root of most labour relations issues.
Interestingly, Article 23 of the Universal Declaration of Human Rights adopted by the United
Nations Organization as a common standard of achievement for all people in all nations
recognizes the legitimacy of union rights. It provides, among others, for everyone “the right to
form and to join trade unions, for the protection of his interests”. The constitutional guarantee
provided by Article 19 (1) (c) of the Indian Constitution, envisages provision of
association/union rights to citizens in general. The IR law provides a framework to
operationalize the spirit behind this fundamental guarantee. The disputant parties also need to be
made available a system of effective industrial dispute resolution. In India, the industrial dispute
resolution law can be found in the Industrial Disputes Act, 1947.

The Industrial Employment (Standing Orders) Act 1946

It provides that every employer should make available to its employees just and fair terms of
employment. Perhaps, the most crucial aspect of labour laws in any country is the law of
industrial relations. As per this thinking, the state should so evolve a legal framework of IR that
it is able to play the role of a neutral referee. If the state is able to ensure this, then the parties can
develop some kind of bilateral bargaining framework to carve out rules of workplace working.
The principal IR legislations in India are: the Trade Unions Act( 1926); the Industrial
Employment (Standing Orders) Act 1946; and the Industrial Disputes Act( 1947). These laws
have been enacted by the central legislature. The framework of these laws can be discussed as
follows: The Trade Unions Act, 1926 (TUA) is one of the oldest labour legislations in India.
The early enactment of the TUA and the constitutional provision of guaranteeing freedom of
association have helped trade unions to legitimize their existence and operations. It envisages the
procedure for 10 registration of unions. A union can be organized by workers employed in
industry; however, the definition of worker is wide enough to include even managers. A trade
union can be registered by any seven or more members. But this is subject to a minimum of 10
per cent of workers employed in an industry or 100 whichever is less. When registered, a trade
union gains the status of a legal entity distinct from the members of the union. The TUA
specifies their rights and obligations, including conferring certain immunities on a registered
trade union against certain actions which otherwise could violate civil and criminal law. The Act
provides the minimum rates of subscription for union membership in rural, unorganized and
organized industries, which are Rs. 1, 3, and 12 per annum respectively. It also contains rules
relating to constitution of “general fund” and “political fund” of a trade union, and the objectives
in furtherance of which they could be spent. Provision has been made for filing of annual returns
by a trade union to the registrar of trade unions. Outsiders are permitted to become special
members of a union; the number of such persons is different in organized and unorganized
sector. This is expected to promote insider leadership. The TUA confers on workers the
immunity against civil and criminal liability for taking industrial action for certain acts done in
furtherance of an industrial dispute. It was so provided to acknowledge the necessity of
collective bargaining for securing dignified and lasting peace. The Industrial Disputes Act 1947
(IDA) is the main law for processing of industrial disputes in India. Technically, the structure of
the IDA is such that an industrial dispute can be espoused by a substantial number of persons.
The Supreme Court has held about 20 per cent or more of the workforce can constitute
substantial number of persons in this regard. Thus, collective bargaining and collective industrial
dispute espousal in India are possible without forming a trade union. In actuality, however, it
rarely so happens. The TUA provides only for registration and not recognition of trade unions.
However, provision for union recognition was made in the TUA by way of amendment in 1947.
But this has not been enforced till date. Today, recognition can be gained by a union only
through show of its strength.

The Industrial Employment (Standing Orders) Act, 1946

It envisages framing of standing orders by the employers to whom this legislation applies. It
applies to industrial establishments employing 100 or more workers. But its applicability can be
extended by the appropriate government to establishments employing 50 or more workers. The
Act is administered by the appropriate government, the definition of which is more or less the
same as in case of the IDA. The IESOA provides for certification of standing orders by a
certifying officer, who is a government officer. Standing orders are the conditions of
employment related to matters given in the schedule to the Act that have been so certified. When
certified, each standing order is deemed to form part of a worker’s contract of employment.
Contract of employment is known to be a relationship between unequals (Kahn-Freund, 1977: 1)
and therefore the weaker side needs to be protected. The IESOA recognizes this. The Act
requires employers in industrial establishments to define with sufficient precisprecision the
conditions of employment and make them known to the workers employed by them.

The IESOA provides that the draft standing orders are submitted by the employer to the
certifying officer. The certifying officer is supposed to invite workers’ representatives to discuss
the draft and take into view their point of view before certifying the draft. After certification,
they are entered into the register of standing orders. The employer is supposed to post them on
the notice board. Some of the issues that are mentioned in the schedule, among others, are
classification of workmen, discipline, shift working, attendance and late coming, conditions for
applying for leaves, termination of employment, and means of redressal of grievances. The Act
also provides for suspension allowance to be paid to a worker while s/he remains suspended for
disciplinary action. While certifying the standing orders, the certifying officer is obliged to
satisfy himself that they are “just and fair.” There is a provision of appeal against the decision of
the certifying officer. The Act provides penalty for violating the Act.

The Industrial Disputes Act, 1947

It is the principal industrial relations law in India, which deals with machinery for industrial
disputes resolution. It provides a conciliation-arbitration-adjudication model of collective as well
as individual disputes resolution. It envisages seven forums for processing of industrial disputes.
There is provision for constitution of works committee in every industry employing 100 or more
workers. This committee consists of representatives of employer as well as workers, and is
expected to promote amity and good relations especially in the shop floor working. The
conciliation machinery consists of conciliation officer (CO) and board of conciliation (BOC).
COs are government officers, who are trained in promoting negotiation among disputant parties.
There is a provision of constitution of a court of inquiry by the appropriate government for
determining matters connected with an industrial dispute. The adjudication of industrial disputes
can be done by labour courts, industrial tribunals, or a national tribunal, depending upon the
nature of the dispute. Adjudication is not automatic but depends on reference of the dispute by
the appropriate government to an adjudicatory body. Reference is discretionary on the part of the
government. There are two important schedules to the Act: the second schedule and the third
schedule. The former enumerates rights matters, which fall in the jurisdiction of a labour court,
and the latter contains interest matters, which normally are in the jurisdiction of an industrial
tribunal. The central as well as state governments have been designated as appropriate
governments under this law in different sets of employments. In case a dispute is of national
importance or involves workers in more than one state, such a dispute can be referred by the
central government to a national tribunal. An adjudicatory body delivers an award, which has to
be published in government’s official gazette before it becomes enforceable. Even though
entering into conciliation in a dispute is discretionary on the part of the conciliation officer (CO),
in actuality it is usually done in all disputes. If a dispute is settled before the CO, he has to
register a settlement12. In case the CO fails to resolve the dispute, he has to send a failure report
to the appropriate government. On receipt of the failure report, or on its own motion, the
appropriate government can refer the dispute to a labour court or an industrial tribunal, which are
adjudicatory bodies under this Act. This process is technically called “reference”. The awards of
adjudicatory bodies are sent to the appropriate government which is obliged to publish them in
the official gazette within a period of 30 days from the receipt of the award. The award is
enforceable after the expiry of another 30 days from the date of is publication. The IDA also
provides for arbitration of industrial disputes. An arbitrator is appointed by the disputant parties.
He is supposed to give award after holding the arbitration proceedings. Ironically, however,
arbitration is almost dead in India as parties – especially workers – often fear that they can be
influenced by the employers. The IDA also regulates strikes and lock outs in public utilities and
non-public utilities. The government interventions in strikes and lock outs are believed to be
indeed quite excessive. Under section 10 (3) of the IDA, the appropriate government can prohibit
the strike that was in existence in case it decides to refer the dispute for adjudication. It is
believed that the law of strikes and lockouts in India is so structured that a legal strike/lockout is
almost impossible S. This Act prohibits lawyers to appear before COs. And, there are restrictions
on their appearance before labour courts and tribunals as well. However, with the passage of
time, the presence of lawyers in adjudication proceedings has become a reality in most cases.
Penal provisions have been made for violation of awards and settlements. Working of the IR
Laws The three IR laws have played a key role in creating working class consciousness about
their collective and individual labour rights. Progressive interpretation of these laws by the
judiciary heightened the clash between workers’ aspiration and employers’ willingness to grant
benefits. During the 1960s and 1970s, the personnel managers in India were seen as children of
the IDA; for their main work involved maintenance of peaceful industrial relations—a sphere
where labour law played the key role. At the same time, being a labour surplus economy, the
country’s labour market realities helped the employers to make cheap labour available to them.
The situation was such that it led them to violate minimum employment standards by colluding
with the labour bureaucracy, and in many cases with brief-case union leaders. Thus, the IR
system has so worked that employers have learnt to subvert the legal requirements through
various means. A large number of labour relations consultants provide legal and extra legal
advice to facilitate this process. The IDA model has played the key role in shaping the IR
environment in India. This model could not be replaced or even diluted despite a 55-year debate
on its fate. The influence of the adjudication system envisaged in the IDA has been so strong that
arbitration as a method of industrial disputes resolution is almost dead, except to some extent in
the Mumbai-Thane-Pune industrial belt, where it is still resorted to. Especially in the private
sector most employers make widespread use of the legal institutions to dilute the efficacy of
unions than indulging in genuine collective bargaining. Variegated unfair labour practices
(ULPs) are seen as being committed by both sides but more by the employers as they are a
stronger party. Research has revealed that the compulsory adjudication system for industrial
dispute resolution has kept the trade unions week. The adjudication system has reflected: undue
delays in its working ,lack of accessibility from especially the viewpoint of workers as they
perceive its working as unjust. The powers of the COs under the IDA appear small as they
cannot impose their own views on the disputant parties. But the working of the IDA shows that
these powers have been 13 abundantly misused including at the instance of the political
executives under whose overall direction they work . Due to widespread presence of the IDA in
the dispute process, a large number of trade union leaders are running consultancy services for
workers by representing them before these bodies; in actuality, they have become brief-case
union leaders , and hardly involve themselves in any labour organization process. So far as
unionization in the country is concerned, it saw rapid growth in the organized sector in the
country (both private and public) during 1950s and 1960s. But unionization started declining
after the famous Bombay Textile Strike in 1982, which lasted more than a year. Thus unions
have become defensive in their fight against perceived unfairness. This has brought a sea change
in the concept of collective bargaining, which is now less and less on industry basis and more on
unit basis . The recent signals from the judiciary in the labour field have further depressed the
union power. Lately, some of the recent labour judgments in India reflect the belief that the
judiciary is more sympathetic with the employers and realizes their susceptibilities in the new
environment. The number of strikes resorted to is much less than the lockouts. So, the objective
of the industrial relations laws are far from realized as per the projections made.

V. THE LAW OF WAGES AND MONETARY BENEFITS

Wages and monetary benefits are perhaps the most important issues of conflict between
employer and employees. Mostly, IR issues centre around wages and bonuses. There are four
important laws that fall in this branch of labour law. They are: the Minimum Wages Act 1948;
the Payment of Wages Act, 1936 (POWA); the Payment of Bonus Act, 1965 (POBA); and the
Equal Remuneration Act, 1976 (ERA). It is interesting to note that the definition of the term
‘wage’ is not uniform under all these laws. Also, coverage of workers under these laws is also
different. POWA has a wage limit of Rs. 6,500 for its application. POBA covers employees
getting upto Rs. 3,500 per month. It has a further limit of Rs. 2,500 for the purpose of calculation
of bonus amount. Since its coverage limit is so low, most workers remain out of the Act. The
ERA has universal application, and covers all categories of employees irrespective of the
functions they perform and the wages they get. The MWA provides only the minimum wage
payable; the actual wages are fixed as per collective bargaining agreement in the unionized
sector or by wage boards in some sectors like steel or unilaterally by the employer. We may
discuss the broad features of these laws as follows:

The Minimum Wages Act, 1948

It seeks to provide a comprehensive machinery for fixation and revision of wages in certain
industries. These are especially those industries which employ sweated labour. The central as
well state governments are appropriate governments for fixing minimum wage rates in their
respective jurisdictions. The Act is applicable to persons employed in those employments that
are provided in the schedule to this Act, which consists of two parts. Part I lists a number of
industries including woolen carpet making, rice mill, flour mill, construction and maintenance of
roads, municipality, public motor transport, docks and ports, and most of the mines. Different
state governments have made amendments to the schedule to list additional set of industries. Part
II includes employment in most of agricultural activities. Taking work from workers against
payment of less than the minimum wages has been held by the Supreme Court to be violative of
article 14 and article23 of the constitution and thus forced labour. It has been held by the
Supreme Court of India that “no industry has a right to exist unless it is able to pay its workmen
at least a base minimum wage.” Wages under the Act can be fixed in the form of a time rate or a
piece rate (with a guaranteed time rate) and an overtime rate. The law provides that different
rates of wages can be fixed for different employments in the Schedule. And, different rates can
be fixed for adults, adolescents, children and apprentices. They can even be different for
different localities. It has been held by the Supreme Court that no employer has the right to carry
on his industry if he pays wages that are below those fixed under the Act. However, the judiciary
has tried to provide some broad guidelines to them. A wage rate can be fixed per hour or per day
or per month or any longer wage period. The minimum wage rates can be fixed by any of the two
methods-

1) the committee method: under this method the appropriate government appoints a committee
that studies the issue of desired minimum wage and also takes advice of the Advisory Boards; or

2) gazette notification method:

under this method the appropriate government gives a gazette notification of the proposed
minimum wage rates that it wishes to fix and later on invites objections to them, if any, from the
employers and the employees, before finalizing the minimum wage rates. The Act is
administered by inspectors. It also envisages appointment of a quasi-judicial authority to hear
and decide claims related to payment of less than the minimum wage and making delayed
payment of minimum wage. Penal provisions have been made for violating this Act. Penalties
and procedures for violation of the provisions of the Act have been specified. The rule-making
powers have been vested in the appropriate government. The Payment of Wages Act, 1936 In the
initial stage of industrialization, some of the common malpractices adopted by employers
weredelayed payment of wages and undue deduction from wages. On the recommendation of the
Royal Commission on Labour 1931, the Payment of Wages Act, 1936 (POWA) was passed so as
to overcome such practices. The main objective of this law is to ensure that wages are paid to the
workers on time, in current coins or currency and without impermissible deductions. The Act
applies to factories, railways and other establishments. The responsibility of payment of wages is
of the employer. In addition, the person who is responsible to the employer for supervision and
control has also been made responsible. The Act requires that a wage period can not be more
than one month. Wages must normally be paid before the expiry of the 7th day from the last day
in the wage period. It contains a list of permissible deductions that the employer can make from
the employees’ wages. Some of the permissible deductions that can be made from wages are:
fines; absence from duty; damage or loss of goods entrusted to employed person;
accommodation and service; recovery of advance; recovery of loans; income tax, etc. Employers
are obliged to maintain registers and records. The Act is administered by central as well state
governments in their respective jurisdictions through inspectors. Employers have been obliged to
display a notice containing abstracts of the Act and the rules made there under. 15 Like the
minimum Wages Act, 1948 this legislation also envisages the constitution of a quasi-judicial
authority to hear and decide claims related to non-payment of wages. An employee can approach
the prescribed authority within a period of 6 months for claiming unpaid or delayed wages. There
is provision for appeal against the decision of the authority. Penalty has been prescribed for
violating the provisions of the Act. The Payment of Bonus Act, 1965 The Payment of Bonus Act
1965 (POBA) extends to the whole of India, and applies to every factory as defined under the
Factories Act, 1948; and every other establishment wherein 20 or more persons are employed on
any day during the accounting year. The Act seeks: 1) to impose a statutory liability upon every
establishment covered under this legislation to pay bonus to its employees; 2) to define the
principle of payment of bonus according to the formula prescribed under this Act; 3) to provide
the payment of minimum and maximum bonus and link the payment of bonus with the scheme of
set off and set on; and 4) to provide a machinery for enforcement of the payment of bonus
liability under the Act. The Act does not define the term bonus, nor does the term bonus exist in
any other Act. The bonus formula provides that first of all the gross profit for the bonus year has
to be determined as per the relevant entries given in the second schedule of the Act. From the
gross profit so derived certain deductions have to be made. These deductions have been
envisaged under sections 5, 6 & 7 of the Act. These include the notional normal depreciation,
development rebate, investment allowance and development allowance, the direct tax, and such
further sums as are specified in the 3rd schedule. The bonus has to be paid from the resulting
allocable surplus. Every employee is entitled to bonus provided he has worked for not less than
30 days in a year. And, an employee shall be disqualified to receive bonus if he is dismissed
from service for: fraud; or riotous or violent behaviour while on the premises of the
establishment; or theft, misappropriation or sabotage of any property of the establishment. In
case in an accounting year the allocable surplus falls short of the minimum bonus, the minimum
bonus will have to be paid according to section 10. And if the allocable surplus permits, bonus
should be paid up to the maximum bonus prescribed under section 11. In any case the principle
of set on and set off comes into play. The purpose of set on and set off principle is to envisage
payment of a minimum bonus to the workman even in the cases of losses. POBA also provides
for machinery for enforcement of the Act. Qualifications and disqualifications of employees
entitled to receive bonus has also been prescribed. POBA envisages payment of minimum annual
bonus even in situations of loss. So bonus under the Act is a deferred wage in certain situations,
for Indian realities are not considered similar to those of the developed countries where there is
no such system of payment of bonus. But in the first five years of the setting up of the
establishment, bonus is payable only if it has allocable surplus. The Act provides that the
employer and employees can agree to devise their own scheme of bonus that is linked to
production or productivity in lieu of bonus based on profits as envisaged under this Act. 16 The
Act is administered by the appropriate government through inspectors. Imprisonment as well as
fines is provided for violation of the Act. In case there is a dispute about payment of bonus, it is
considered as an industrial dispute under the Industrial Disputes Act, 1947. The Equal
Remuneration Act, 1976 It was during 1975––the international year of the women––that India
promulgated the equal remuneration ordinance to give effect to Article 39 of the Constitution,
which envisages equal remuneration for men and women. Later on, the ordinance was replaced
by the Equal Remuneration Act 1976 (ERA). The Act applies to all establishments,
employments––public and private––including domestic service. The Act puts a duty on every
employer to pay equal remuneration to men and women workers for doing same work or work of
similar nature. In order to warrant payment same remuneration, the work done by a female and
male employee need not be identical. Broadly, the skill, efforts, and responsibilities required are
to be the same when performed under similar conditions. The ERA also prohibits discrimination
between men and women while making recruitment for the same work or work of a similar
nature. However, this provision will be inapplicable to any priority or reservation in favour of
Scheduled Castes or Scheduled Tribes, ex-servicemen, retrenched employees or any other class
of persons. The Act provides for constitution of advisory committees for giving advice in matters
of providing increasing employment opportunities for women. The appropriate government may
appoint authorities for hearing and deciding complaints regarding contravention of the Act and
claims arising out of non-payment of equal wages. The Act is administered by the appropriate
government through inspectors. Penalties in the form of fines and imprisonment have been
provided for various violations of the Act. VI. THE LAW OF SOCIAL SECURITY The
Directive Principles of State Policy as enshrined in the Constitution of India recognize the right
to social protection for all citizens. Following these directives, the Indian state has provided for,
or reinforced the existing provisions of, some measures of social protection through legislation
and policy. Collective agreements in the formal sector between employers and unions also reflect
provision of social security measures by the employers. At the global level, social security
consists of two forms of protections: social insurance and social assistance. The Indian system of
social security in the organized sector can be divided into five broad types, namely: creation of
employer’s unilateral liability; social insurance; provident fund; social assistance; and welfare
funds. The most usual type of Indian social security with widest coverage envisages creation of
employer’s unilateral liability. Four laws can be said to fall under this heading: Workmen’s
Compensation Act 1923 (WCA); Maternity Benefit Act 1961 (MBA); Payment of Gratuity Act
1972 (PGA); and Industrial Disputes Act 1947 (IDA). The key law falling in the category of
social insurance laws is the Employees’ State Insurance Act 1948 (ESIA). Countries in South
Asia including India have a unique system of social protection called the provident funds. They
are envisaged, among others, by laws such as the Employees Provident Funds (and
Miscellaneous Provisions) Act, 1952 (EPFA). The state Governments also provide for some
amount of social protection, especially to senior citizens and disabled people. This falls in the
category of social 17 assistance. In some spheres of employment—like bidi making, film
production, etc.––welfare funds have been created by the Central Government for protecting the
employees concerned. The Workmen’s Compensation Act 1923 India had no social security
system before the British Indian Government enacted the Workmen’s Compensation Act 1923
(WCA). This Act symbolizes the beginning of social security in India. It was passed in 1923 on
the model of a similar Act in Britain. It provides for payment of compensation unilaterally by the
employer to his workmen in certain cases. Compensation under this Act is also payable to the
dependants in case of death of the employee. Certain categories of occupational diseases too are
covered. Injuries by accident also include contracting of some diseases in certain circumstances.
The WCA applies to any person who is employed, otherwise than in a clerical capacity, in
railways, factories, mines, plantations, construction, electricity generation, cinemas, circus, and
other hazardous employments as specified in Schedule II of the Act. The Act excludes those who
are covered by the Employees’ State Insurance Act 1948 (ESIA). Interestingly, the employer’s
liability is not based on any negligence on the part of the employer. However, cases covered
must have a rational nexus with the employment. The accident resulting in injuries or death must
normally take place during the working hours and at the employer’s premises, except where the
premises are notionally extended. Compensation is payable for death or disablement (temporary
or permanent) resulting from accidents “arising out of and in the course of employment.” Thus,
the WCA overrides the common law rule of voluntary assumption of risk under which the
employer was mostly not responsible to pay damages to his employees as they were presumed to
be working subject to the risk involved in the work. “The facts and circumstances of each case
will have to be examined very carefully in order to determine whether the accident arose out of
and in the course of employment of a workman, keeping in view at all times the theory of
notional extension [of employer’s premises]”17 All persons covered by the definition of
workman are entitled to compensation in the event of specified contingencies. But there is wage
ceiling of Rs. 4000 per month for the purpose of calculation of compensation. Compensation
depends on wage and the relevant factor as specified in Schedule IV of the Act. The relevant
factor depends on the age of the worker concerned. In case of death the compensation payable is
an amount equal to 50 per cent of the monthly wages of the deceased workman multiplied by the
relevant factor; or an amount of eighty thousand rupees, whichever is more. Where the worker
suffers permanent total disablement, he is paid 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. In case the permanent disability is not total, then the workman is
given that percentage of the compensation payable for total disablement as is the reduction in the
earning capacity. In case of temporary disablement, the compensation is paid fortnightly at the
rate of around 25 per cent wages per fortnight. The WCA is administered by the state
government; it has a unique method of administration. The administrative and adjudicatory
powers are vested in the same person called the commissioner. The functions of the
commissioner include: settlement of disputed claims; deciding cases of injuries involving death;
and revision of periodical payments. In exercise of his adjudicatory powers, the 18 commissioner
distributes the amount of compensation to the dependents as defined under the Act in his
discretion. In case of persons under legal disability, the commissioner may invest the money the
way he likes. The commissioner also advises the workers about the available course of action to
a workman in different situations. The Act does not allow contracting out. In case the employer
does not pay compensation as per the Act, the workman concerned can make an application to
the commissioner within a period of two years from the date of the accident. The commissioner
can recover the amount due to a worker as arrears of land revenue. The Employees’ State
Insurance Act 1948 The key social insurance law in India is the Employees’ State Insurance Act
1948 (ESIA), which envisages an employees’ state insurance scheme (ESIS) administered by the
Employees’ State Insurance Corporation (ESIC) created by this Act. The ESIA applies in the
first instance to factories employing 20 or more persons. The provisions of the Act have been
gradually extended to smaller power-using factories employing 10 to 19 persons, shops, hotels
and restaurants, and cinemas. It applies to workers getting salary up to Rs. 7,500 per month. It
also covers administrative staff. The ESIS is contributory in character whereby employers,
employees and to a little extent the State contribute to a fund, out of which various types of
benefits are provided to the beneficiaries. The amount of benefit is usually proportionate to the
average daily wage of the employee concerned. The present rates of contribution to be made by
the employer and the employee are 4.75 per cent and 1.75 per cent of the employee’s monthly
wages respectively. Employees whose average daily wages are below Rs. 40 per day are
exempted from making any contribution. The responsibility of the employer is to pay
contribution in respect of his own employees as well as of contract labour. He can deduct
contract labour’s contribution from his bills. In case of default: Employer has to pay 15 per cent
interest per annum. In addition, the ESIC may impose damages, not exceeding the arrears due.
These contributions are deposited in the ESI Fund, which is administered by the Employees State
Insurance Corporation (ESIC), which is an autonomous institution. The State Governments
contribute only a portion of the expenditure on the provision of medical care, whose share
presently is one-eighth (12.5 per cent) of the medical expenditure of the ESIC. The Standing
Committee of the ESIC looks after its working. The Act envisages sickness and extended
sickness benefit, maternity benefit, disablement benefit, dependents’ benefit, reimbursement of
funeral expenses, and medical benefit. Sickness benefit is payable in case of certified sickness at
the standard daily benefit rate (SBR), which is roughly 50 per cent of wages. This is specified in
the Standard Benefit Table. The maternity benefit is payable for 12 weeks at twice the SBR. The
extended sickness benefit is payable for 309 days in two consecutive benefit periods. The rate of
extended sickness benefit is about 25 per cent more than the ordinary SBR. The disablement
benefit is payable at SBR plus 40 per cent of it per month. If injury suffered is not given in the
schedule, the disablement is determined by the Medical Board. Theredelayed payment of wages
and undue deduction from wages. On the recommendation of the Royal Commission on Labour
1931, the Payment of Wages Act, 1936 (POWA) was passed so as to overcome such practices.
The main objective of this law is to ensure that wages are paid to the workers on time, in current
coins or currency and without impermissible deductions. The Act applies to factories, railways
and other establishments. The responsibility of payment of wages is of the employer. In addition,
the person who is responsible to the employer for supervision and control has also been made
responsible. The Act requires that a wage period can not be more than one month. Wages must
normally be paid before the expiry of the 7th day from the last day in the wage period. It contains
a list of permissible deductions that the employer can make from the employees’ wages. Some of
the permissible deductions that can be made from wages are: fines; absence from duty; damage
or loss of goods entrusted to employed person; accommodation and service; recovery of
advance; recovery of loans; income tax, etc. Employers are obliged to maintain registers and
records. The Act is administered by central as well state governments in their respective
jurisdictions through inspectors. Employers have been obliged to display a notice containing
abstracts of the Act and the rules made there under. 15 Like the minimum Wages Act, 1948 this
legislation also envisages the constitution of a quasi-judicial authority to hear and decide claims
related to non-payment of wages. An employee can approach the prescribed authority within a
period of 6 months for claiming unpaid or delayed wages. There is provision for appeal against
the decision of the authority. Penalty has been prescribed for violating the provisions of the Act.
The Payment of Bonus Act, 1965 The Payment of Bonus Act 1965 (POBA) extends to the whole
of India, and applies to every factory as defined under the Factories Act, 1948; and every other
establishment wherein 20 or more persons are employed on any day during the accounting year.
The Act seeks: 1) to impose a statutory liability upon every establishment covered under this
legislation to pay bonus to its employees; 2) to define the principle of payment of bonus
according to the formula prescribed under this Act; 3) to provide the payment of minimum and
maximum bonus and link the payment of bonus with the scheme of set off and set on; and 4) to
provide a machinery for enforcement of the payment of bonus liability under the Act. The Act
does not define the term bonus, nor does the term bonus exist in any other Act. The bonus
formula provides that first of all the gross profit for the bonus year has to be determined as per
the relevant entries given in the second schedule of the Act. From the gross profit so derived
certain deductions have to be made. These deductions have been envisaged under sections 5, 6 &
7 of the Act. These include the notional normal depreciation, development rebate, investment
allowance and development allowance, the direct tax, and such further sums as are specified in
the 3rd schedule. The bonus has to be paid from the resulting allocable surplus. Every employee
is entitled to bonus provided he has worked for not less than 30 days in a year. And, an employee
shall be disqualified to receive bonus if he is dismissed from service for: fraud; or riotous or
violent behaviour while on the premises of the establishment; or theft, misappropriation or
sabotage of any property of the establishment. In case in an accounting year the allocable surplus
falls short of the minimum bonus, the minimum bonus will have to be paid according to section
10. And if the allocable surplus permits, bonus should be paid up to the maximum bonus
prescribed under section 11. In any case the principle of set on and set off comes into play. The
purpose of set on and set off principle is to envisage payment of a minimum bonus to the
workman even in the cases of losses. POBA also provides for machinery for enforcement of the
Act. Qualifications and disqualifications of employees entitled to receive bonus has also been
prescribed. POBA envisages payment of minimum annual bonus even in situations of loss. So
bonus under the Act is a deferred wage in certain situations, for Indian realities are not
considered similar to those of the developed countries where there is no such system of payment
of bonus. But in the first five years of the setting up of the establishment, bonus is payable only
if it has allocable surplus. The Act provides that the employer and employees can agree to devise
their own scheme of bonus that is linked to production or productivity in lieu of bonus based on
profits as envisaged under this Act. 16 The Act is administered by the appropriate government
through inspectors. Imprisonment as well as fines is provided for violation of the Act. In case
there is a dispute about payment of bonus, it is considered as an industrial dispute under the
Industrial Disputes Act, 1947. The Equal Remuneration Act, 1976 It was during 1975––the
international year of the women––that India promulgated the equal remuneration ordinance to
give effect to Article 39 of the Constitution, which envisages equal remuneration for men and
women. Later on, the ordinance was replaced by the Equal Remuneration Act 1976 (ERA). The
Act applies to all establishments, employments––public and private––including domestic
service. The Act puts a duty on every employer to pay equal remuneration to men and women
workers for doing same work or work of similar nature. In order to warrant payment same
remuneration, the work done by a female and male employee need not be identical. Broadly, the
skill, efforts, and responsibilities required are to be the same when performed under similar
conditions. The ERA also prohibits discrimination between men and women while making
recruitment for the same work or work of a similar nature. However, this provision will be
inapplicable to any priority or reservation in favour of Scheduled Castes or Scheduled Tribes, ex-
servicemen, retrenched employees or any other class of persons. The Act provides for
constitution of advisory committees for giving advice in matters of providing increasing
employment opportunities for women. The appropriate government may appoint authorities for
hearing and deciding complaints regarding contravention of the Act and claims arising out of
non-payment of equal wages. The Act is administered by the appropriate government through
inspectors. Penalties in the form of fines and imprisonment have been provided for various
violations of the Act.

VI. THE LAW OF SOCIAL SECURITY

The Directive Principles of State Policy as enshrined in the Constitution of India recognize the
right to social protection for all citizens. Following these directives, the Indian state has provided
for, or reinforced the existing provisions of, some measures of social protection through
legislation and policy. Collective agreements in the formal sector between employers and unions
also reflect provision of social security measures by the employers. At the global level, social
security consists of two forms of protections: social insurance and social assistance. The Indian
system of social security in the organized sector can be divided into five broad types, namely:
creation of employer’s unilateral liability; social insurance; provident fund; social assistance; and
welfare funds. The most usual type of Indian social security with widest coverage envisages
creation of employer’s unilateral liability. Four laws can be said to fall under this heading:-

 Workmen’s Compensation Act 1923 (WCA);

 Maternity Benefit Act 1961 (MBA);
 Payment of Gratuity Act 1972 (PGA); and
 Industrial Disputes Act 1947 (IDA).

The key law falling in the category of social insurance laws is the Employees’ State Insurance
Act 1948 (ESIA). Countries in South Asia including India have a unique system of social
protection called the provident funds. They are envisaged, among others, by laws such as the
Employees Provident Funds (and Miscellaneous Provisions) Act, 1952 (EPFA). The state
Governments also provide for some amount of social protection, especially to senior citizens and
disabled people.In some spheres of employment—like bidi making, film production, etc.––
welfare funds have been created by the Central Government for protecting the employees
concerned. The Workmen’s Compensation Act 1923 India had no social security system before
the British Indian Government enacted the Workmen’s Compensation Act 1923 (WCA). This
Act symbolizes the beginning of social security in India. It was passed in 1923 on the model of a
similar Act in Britain. It provides for payment of compensation unilaterally by the employer to
his workmen in certain cases. Compensation under this Act is also payable to the dependants in
case of death of the employee. Certain categories of occupational diseases too are covered.
Injuries by accident also include contracting of some diseases in certain circumstances. The
WCA applies to any person who is employed, otherwise than in a clerical capacity, in railways,
factories, mines, plantations, construction, electricity generation, cinemas, circus, and other
hazardous employments as specified in Schedule II of the Act. The Act excludes those who are
covered by the Employees’ State Insurance Act 1948 (ESIA). Interestingly, the employer’s
liability is not based on any negligence on the part of the employer. However, cases covered
must have a rational nexus with the employment. The accident resulting in injuries or death must
normally take place during the working hours and at the employer’s premises, except where the
premises are notionally extended. Compensation is payable for death or disablement (temporary
or permanent) resulting from accidents “arising out of and in the course of employment.” Thus,
the WCA overrides the common law rule of voluntary assumption of risk under which the
employer was mostly not responsible to pay damages to his employees as they were presumed to
be working subject to the risk involved in the work. “The facts and circumstances of each case
will have to be examined very carefully in order to determine whether the accident arose out of
and in the course of employment of a workman, keeping in view at all times the theory of
notional extension [of employer’s premises]”17 All persons covered by the definition of
workman are entitled to compensation in the event of specified contingencies. But there is wage
ceiling of Rs. 4000 per month for the purpose of calculation of compensation. Compensation
depends on wage and the relevant factor as specified in Schedule IV of the Act. The relevant
factor depends on the age of the worker concerned. In case of death the compensation payable is
an amount equal to 50 per cent of the monthly wages of the deceased workman multiplied by the
relevant factor; or an amount of eighty thousand rupees, whichever is more. Where the worker
suffers permanent total disablement, he is paid 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. In case the permanent disability is not total, then the workman is
given that percentage of the compensation payable for total disablement as is the reduction in the
earning capacity. In case of temporary disablement, the compensation is paid fortnightly at the
rate of around 25 per cent wages per fortnight. The WCA is administered by the state
government; it has a unique method of administration. The administrative and adjudicatory
powers are vested in the same person called the commissioner. The functions of the
commissioner include: settlement of disputed claims; deciding cases of injuries involving death;
and revision of periodical payments. In exercise of his adjudicatory powers, the 18 commissioner
distributes the amount of compensation to the dependents as defined under the Act in his
discretion. In case of persons under legal disability, the commissioner may invest the money the
way he likes. The commissioner also advises the workers about the available course of action to
a workman in different situations. The Act does not allow contracting out. In case the employer
does not pay compensation as per the Act, the workman concerned can make an application to
the commissioner within a period of two years from the date of the accident. The commissioner
can recover the amount due to a worker as arrears of land revenue. The Employees’ State
Insurance Act 1948 The key social insurance law in India is the Employees’ State Insurance Act
1948 (ESIA), which envisages an employees’ state insurance scheme (ESIS) administered by the
Employees’ State Insurance Corporation (ESIC) created by this Act. The ESIA applies in the
first instance to factories employing 20 or more persons. The provisions of the Act have been
gradually extended to smaller power-using factories employing 10 to 19 persons, shops, hotels
and restaurants, and cinemas. It applies to workers getting salary up to Rs. 7,500 per month. It
also covers administrative staff. The ESIS is contributory in character whereby employers,
employees and to a little extent the State contribute to a fund, out of which various types of
benefits are provided to the beneficiaries. The amount of benefit is usually proportionate to the
average daily wage of the employee concerned. The present rates of contribution to be made by
the employer and the employee are 4.75 per cent and 1.75 per cent of the employee’s monthly
wages respectively. Employees whose average daily wages are below Rs. 40 per day are
exempted from making any contribution. The responsibility of the employer is to pay
contribution in respect of his own employees as well as of contract labour. He can deduct
contract labour’s contribution from his bills. In case of default: Employer has to pay 15 per cent
interest per annum. In addition, the ESIC may impose damages, not exceeding the arrears due.
These contributions are deposited in the ESI Fund, which is administered by the Employees State
Insurance Corporation (ESIC), which is an autonomous institution. The State Governments
contribute only a portion of the expenditure on the provision of medical care, whose share
presently is one-eighth (12.5 per cent) of the medical expenditure of the ESIC. The Standing
Committee of the ESIC looks after its working. The Act envisages sickness and extended
sickness benefit, maternity benefit, disablement benefit, dependents’ benefit, reimbursement of
funeral expenses, and medical benefit. Sickness benefit is payable in case of certified sickness at
the standard daily benefit rate (SBR), which is roughly 50 per cent of wages. This is specified in
the Standard Benefit Table. The maternity benefit is payable for 12 weeks at twice the SBR. The
extended sickness benefit is payable for 309 days in two consecutive benefit periods. The rate of
extended sickness benefit is about 25 per cent more than the ordinary SBR. The disablement
benefit is payable at SBR plus 40 per cent of it per month. If injury suffered is not given in the
schedule, the disablement is determined by the Medical Board. There is appeal against the
Board’s decision which can be made to the Medical Appeal Tribunal The medical benefit
consists of restricted medical care, expanded medical care, and full medical care. The State
Governments are obliged to provide to the insured persons (i.e. the employees covered under the
Act) and their families in the State reasonable medical, surgical and obstetric treatment through
dispensaries, hospital and diagnostic care centers run by it. However, it may with the 19 approval
of the ESIC arrange for their medical treatment at clinics of private medical practitioners. The
State Government also enters into an agreement with the ESIC in regard to the nature and scale
of the medical treatment that should be provided by it to the insured persons and their families.
Cash benefits payable under the Act are not liable to attachment in relation to payment of any
debt by the employee. Any dispute under the provisions of the Act can be decided by the
Employees’ Insurance Court and not by any civil court. The Act provides for penalties and
imprisonment for various offences. The Employees’ Provident Fund (and Miscellaneous
Provisions) Act 1952 Along with the ESIA, the Employees’ Provident Fund and Miscellaneous
Provisions Act 1952 (EPF Act) too is a key social security legislation in India. It applies to any
factory relating to any industry specified in Schedule I to the Act in which 20 or more persons
are employed, and also to other establishments employing 20 or more persons which may be
specified by the central government by a notification in this regard. As on 31 March 2005, this
includes 180 industries; and covers 41.11 million workers under the Employees’ Provident Fund
Scheme (EPFS) both in exempted and unexampled sectors. An all, 408,831 establishments are
covered under this Act. The Act covers employees getting salaries up to Rs. 6,500 per month.
For workers employed in coal mines, the relevant law is the Coal Mines Provident Fund and
Miscellaneous Provisions Act 1948. The EPF Act provides for creation of three important
schemes. These are: the Provident Fund Scheme; the Deposit-linked Insurance Scheme; and the
Employee Pension Scheme. The Employees’ Provident Fund Scheme (EPFS) is a kind of savings
and pension scheme in which the employees as well as their employers pay regular contribution
into a fund. Such contributions are credited to the accounts of the subscribers concerned. The
fund is invested as per the norms laid down in this regard. Annual interest is credited to the
account of the employee on the total amount of provident fund (PF) deposit in his/her account.
When an employee superannuates or dies or seeks retirement, the balance standing to the account
is refunded. The Employees’ Pension Scheme 1995 (EPS) provides for pension on
superannuation, retirement, permanent total disablement and death. The Employees’ Deposit-
Linked Insurance Scheme 1976 (EDLIS) provides an insurance cover to the persons covered
without payment of any premium for this purpose. The insurance cover has been linked to the
average balance in the provident fund account of the deceased during 12 months preceding his or
her death subject to a ceiling. The Employees’ Provident Fund Scheme (EPFS) is financed
through contributions from employees with matching contributions from employers. The normal
rate of contribution to the provident fund by the employees and the employers prescribed under
the EPF Act earlier was 10 per cent of wages for unnotified industries and establishments. This
rate has been hiked to 12 per cent of wages for employees working in notified18 industries and
establishments employing 50 or more persons. The EPS derives its financial resource from and
out of the contributions payable by the employer in each month under the EPF Act and the rules
framed under it. Contribution representing 8.33 per cent of the employees’ pay has to be remitted
by the employer to the pension fund The Central 20 Government also contributes to the Pension
Fund at the rate of 1.6 per cent of the employee’s pay. Neither the employer nor the employee is
required to make any additional contribution. The Act is administered by the Employees
Provident Fund Organization, which works under the overall supervision and direction of the
Central Board of Trustees and Committees. The Central Provident Fund Commissioner (CPFC)
is the Chief Executive Officer of the Organisation. The Board of Trustees (BOT) is a body
corporate having perpetual succession and a common seal. Unlike the ESIC, however, the Board
of Trustees of the EPFO enjoys much less autonomy; the control of the Central Government in
its working is much stronger. CBOT is empowered to appoint such officers and employees as it
may consider necessary for the efficient administration of the schemes under the Act. These
officers have been conferred quasijudicial powers. Thus, they conduct inquiry as they deem
necessary to determine the liability of the employer and make order on the basis of the inquiry so
conducted. These authorities under the Act have a statutory duty to see that the provisions of the
Act are complied with. Maternity Benefit Act, 1961 The Maternity Benefit Act, 1961 (MBA)
seeks to regulate the employment of women workers in certain establishments for certain period
before and after child birth. This law provides that all women employees shall be paid maternity
benefit in case of child birth, miscarriage or sickness arising out of pregnancy. A worker when
governed by the ESI Act cannot claim maternity relief under the Maternity Benefit Act. This Act
also envisages a unilateral responsibility of the employer and the scheme contains no insurance
element in it. It applies to factories, mines, circus, plantations, and shops and establishments
employing 10 or more persons. However, in case a women employee is covered by the ESI Act,
then this Act does not apply to her. The application of this legislation can be extended to other
establishments by a State government after the prior approval of the central government. The
central government is responsible for administering this Act in mines and circuses, and the state
governments are responsible for its administration in factories, plantations and other
establishments. The central Act has been adopted in nearly all the states in the country except
Manipur, Nagaland19 and Sikkim. The maximum periods for which the maternity benefit is
available to any woman worker is 12 weeks of which not less than six weeks shall precede the
date of her expected delivery. In case of miscarriage, a woman is entitled to leave with wages at
the rate of maternity benefit for a period of six weeks immediately following the day of her
miscarriage. In case of illness arising out of pregnancy, delivery, premature birth of a child or
miscarriage, the woman is entitled to leave with wages at the rate of maternity benefit for a
maximum period of one month. A woman whose maternity benefit is improperly withheld may
make a complaint to the inspector. Inspectors have been conferred powers, including quasi-
judicial. If the inspector after making the inquiry is satisfied that the benefit was improperly
withheld, he may direct the payment of maternity benefit in accordance with his orders. An
appeal over the decision of the inspector lies to the prescribed authority in this regard. Any
amount payable under the Act is recoverable by the collector in the which the employer pays to
the employee on retirement out of gratitude for a long and meritorious same manner as an arrear
of land revenue. 21 The Payment of Gratuity Act 1972 Payment of gratuity is another important
social security benefit in India. Gratuity is a lump sum payment which is payable under the
Payment of Gratuity Act 1972 (PGA). Gratuity is believed to be an award service. It replaces at
least partly the loss of income at the time of superannuation, retirement or resignation, and death
and disablement due to accident or disease. The PGA applies to factories, mines, oilfields,
plantations, ports, railway companies, shops and other. establishments where 10 or more persons
are employed. Gratuity is a benefit payable by the employer for termination of service of an
employee. But it is also payable in case of superannuation, retirement, resignation, death or
disablement due to accident or disease. It is payable to every employee, other than apprentice,
employed in an establishment to which the provisions of the Act apply. It is payable at the rate of
15 days’ wages for every completed year of service or part thereof, in excess of seven months.
There is no wage ceiling for coverage under the Act. Ordinarily, for being entitled to gratuity, an
employee must have completed with the employer concerned at least five years of continuous
service. The maximum amount of gratuity payable under the Act was raised from Rs. 100000 to
Rs. 350000 with effect from 24 September, 1997. Gratuity can be forfeited wholly or in part to
the extent of loss if the service of an employee is terminated for an act or willful omission or
negligence causing damage or loss to employer’s property. Also, it can be forfeited if services of
an employee are terminated for riotous or disorderly conduct or other act of violence or for moral
turpitude in the course of employment. There is provision for compulsory insurance of his
liability on the part of the employer unless he constitutes an approved gratuity fund. Quasi-
judicial powers are vested in the “controlling authority” which decides matters related to any
disputes arising from non-payment. The Act is administered by central as well state governments
in their respective jurisdictions. Labour Welfare Funds In many work areas India has found it
difficult to reach contribution-oriented social security for various reasons. So a unique method
has been coined for protecting workers employed in certain specified employments. The concept
of “Labour Welfare Fund” was evolved to this end. Five welfare funds were set up under the
Ministry of Labour and Employment. These funds are aimed to provide housing, medical care,
water supply, educational and recreational facilities to workers employed in beedi industry,
certain mines and cine workers. Such funds are financed out of the proceeds of cess levied under
respective Cess/Fund Acts. The various legislation have been enacted to set up these funds.
These include: the Mica Mines Labour Welfare Fund Act, 1946; the Limestone and Dolomite
Mines Labour Welfare Fund Act, 1972; the Iron Ore Mines, Manganese Ore Mines & Chrome
Ore Mines Labour Welfare Fund Act, 1976; the Beedi Workers Welfare Fund Act, 1976; and the
Cine Workers Welfare Fund Act, 1981 (For details, see Saini, 2001). These Acts provide that the
fund may be applied by the Central Government to meet the expenditure incurred in connection
with measures and facilities which are necessary to provide the welfare of the workers
concerned. Chapter V-A and V-B of Industrial Disputes Act 1947 22 As such, India has no
system of providing social security in the contingencies of unemployment. This is so despite the
‘right to work’ having been provided for in the Constitution as a Directive Principle of State
Policy. Perhaps, the unemployment and the underemployment situation in the country is so acute
that no government has gone into the feasibility of introducing a system of unemployment
insurance. The Industrial Disputes Act 1947 (IDA) provides some semblance of unemployment
security in a limited sense under its provisions relating to lay off, retrenchment, closure, and
transfer of industrial establishments. The idea underlying the retrenchment and closure
compensation is to help the workers to maintain themselves until they are able to find alternative
jobs. Review of Social Security law It is noticeable that a large part of social security legislation
in India is in the form of creation of unilateral liability of the employer. However, it is important
to note that this form is also believed to be the most primitive and is sometimes described as the
“decaying form” of social security; for it does not contain any insurance or assistance element in
it. It merely involves a statutory liability of the employer in the event of certain contingencies so
as to provide certain protection to the employee. It is for this very reason that such laws are
prone to being violated by the employers. The employer has the option to insure its liability
under some of these laws or create a fund for meeting its liability. But despite this, the tendency
to avoid his/its liability is quite high. Therefore, a progressive social security system should
replace such schemes with professionally organized social insurance schemes. Further, there is a
strong need for extending the scope of the ESI Act. The ESIC needs structural reforms, as many
unions do not want to be covered by it, and seek exemption from its coverage so as to negotiate
for devising alternative schemes (Saini, 2001). At the same time, better enforcement mechanism
is needed for the Maternity Benefit At 1961. The incidence of violation of this Act is very high.
It should also be noted that protections envisaged in most of these schemes apply to the
organized sector. In effect, the informal sector employees enjoy very little or no social protection
through law. However, some sections of these employees in the informal sector are covered
under certain laws. For example, the Workmen’s Compensation Act, 1923 and the Minimum
Wages Act apply to many types of establishments in the unorganized sector. VII.
CONCLUDING REMARKS Post-independence India sought to implement the concept of
welfare state as envisaged in the Preamble of the Constitution of India and its chapter on the
Directive Principles of State Policy. A number of labour laws were enacted in all its four broad
categories. The Indian judiciary gave liberal interpretation to many provisions of these laws;
often rooting the liberal interpretation in the Directive Principles of State Policy in doing so. A
plethora of public interest litigation (PIL) was initiated in this sphere by public-spirited citizens
in the last 25 years or so. This also energized many non-governmental organizations (NGOs) in
the informal sector to play a more active role in labour law implementation. But cases of labour
law violation were still too many (Patel and Desai, 1995; Advani and Saini, 1995). Many strong
nexuses worked to neutralize the legislative intention by forging alliances to serve personal
interests. For example, almost negligible number of reinstatement 23 decisions of labour courts
and industrial tribunals were implemented (Saini, 1999, 1994). This included even some of the
Supreme Court and high Court decisions. The Indian labour law model, as also those of the
advanced Europe, was built on the basic postulates of the welfare state. The new economic
policy of India in 1991 promised reform, but they were never carried out due to lack of strong
central (federal) governments and fear of public reaction. Changes in labour policy were more at
the executive and implementation level than by amending the labour laws. Globalization
warrants laws promoting greater flexibility in the formal labour market. A study by Budhwar
found that a large percentage of Indian managers (61.5 per cent) believe that Indian national
labour laws influence their HRM practices the most. This study also found that their actions and
prerogatives are constricted by these laws. Employer would want more freedom in operating in
the labour market especially in view of the chaotic competition caused by the new dispensation.
Therefore, amendment in labour law framework is long overdue. In fact, Indian labour market
can be said to be characterized by a sharp dichotomy. It is understandable that labour law is
creating inflexibility for the organized sector which is difficult to sustain the era of globalization.
At the same time, a large number of establishments in the unorganized sector remain outside any
regulation, while the organized sector has been regulated fairly stringently. The organized sector
is believed to have provided too much of job-security for too long, resulting into inertia and
inefficiency, while the unorganized sector has provided too little to too many. In their present
form, many aspects of Indian labour laws do not suit the globalizing environment. These laws
apply only to the organized sector. Consequently, these laws have restricted labour mobility,
have led to capital-intensive methods in the organized sector and adversely affected the sector's
long-run demand for labour. Since labour is a subject in the Concurrent List in the Constitution
of India, state-level labour regulations are also an important determinant of industrial
performance. States like Kerala which have enacted more pro-worker regulations have lost out
on industrial production in general. Interestingly, countries like China learnt to adjust to the
environment much faster. With a history of extreme employment security, China has drastically
reformed its labour relations and created a new labour market, in which workers are highly
mobile. An enlightened society would like to enact labour laws that are relevant to the societal
values adopted in a particular country. But it is important that they change when new values are
adopted. But this has not happened in India. Especially the labour laws that fall in the category of
“industrial relations laws” need to be re-looked. The most talked-about provision in the Indian
industrial relations law is Chapter V-B of the IDA. This chapter requires all employers
employing 100 or more workers in factories, mines and plantations to seek permission from the
Government in matters of lay-off, retrenchment, and closure. It has been seen that this has led to
unnecessary bureaucratization and harassment of employers. The Indian bureaucracy has been
arbitrary in granting permission under this chapter; often extraneous considerations have
dominated in these decisions. Many times, organizations which have been perennially sick have
been refused permission under this chapter. Presently, a thinking is surfacing that the number of
workers for application of this chapter should be raised to 300, though at time it was sought. to
amend the chapter to make it applicable to industries emphasizing 1000 or more workmen.
Another area of controversy is section 9-A of the IDA. This section requires that a notice of 21
days should be given by the employer to workmen for effecting change in any of their service 24
conditions. This section has also resulted in workers’ resistance to flexibility needs of the
employers in this regard. When such a notice is given employee unions raise an industrial
dispute, which creates resistance for implementing the desired change. More and more
employers want to implement variable service conditions for different sets of workers.
Competency mapping is being used for creating a greater degree of differentiation amongst
workers. So find the Industrial Employment (Standing Orders) Act, 1946 (IESOA) to be
problematic. The labour laws in India are known to be very complex. Some of the problems in
this regard relate to applicability; definition of worker/employee, appropriate government,
wages; different administrative mechanisms; and different quasi-judicial bodies. This creates
confusion and dependency on lawyers. For example, the term “wages” has been differently
defined under different Acts. Some laws cover employees receiving monthly wages as low as
Rupees 3500 per month (e.g. the Payment of Bonus Act, 1965), others cover even clerical and
administrative employees (e.g. the Employee State Insurance Act 1948; the Employees’
Provident Fund Act, 1952; and the Gratuity Act 1972). For some there is no wage limit for
coverage (e.g. highly paid pilots are workmen under the IDA). A plethora of case law has been
delivered by the judiciary to clarify these complexities in variegated situations. This has made
the grasping of labour laws a very complex affair. In fact, labour law complexity has converted
union leaders into full time pleaders, who have set up labour law practice as a vocation .There is
a case for harmonization and unification of labour laws. This is an important area of reform, for
tremendous ambiguities have been caused by complexities of the labour legislation. The National
Labour Law Association (NLLA) has drafted a proposal to enact a National Labour Code 1994
(Draft), which has been appreciated as laudable. But if one looks at its contents, it is surely not
likely to be acceptable to employers as they will fear that their competitive position will be
adversely affected by extremely high rates of contribution that have been suggested in it. The
social security laws in the country reflect lack of a comprehensive vision about the future of
Indian society .The system caters to only less than 7 per cent of the workforce. The definition of
social security in developing countries including India is bound to be different as a large chunk
of population does not have access to basic minimum needs. There is a need to integrate social
security policy with anti-poverty policies. and Indian laws have to reflect this thinking.
Especially, there is a need to create low-cost group insurance scheme to meet the needs of self-
employed people in rural as well as urban areas. In a country like India, the executive branch of
the state has many constraints in performing its constitutional duties. There is a need for greater
degree of public interest litigation for enforcing minimum labour standards and developing some
basic postulates of sound labour relations. It can be a very useful instrument in the Indian
context. But this needs to involve people who are genuinely interested in poverty alleviation.
Globalization can not take away the need for labour law. The state needs to focus on better
implementation and ensure that these laws do not become a mockery.

the which the employer pays to the employee on retirement out of gratitude for a long and
meritorious same manner as an arrear of land revenue. 21 The Payment of Gratuity Act 1972
Payment of gratuity is another important social security benefit in India. Gratuity is a lump sum
payment which is payable under the Payment of Gratuity Act 1972 (PGA). Gratuity is believed
to be an award service. It replaces at least partly the loss of income at the time of superannuation,
retirement or resignation, and death and disablement due to accident or disease. The PGA applies
to factories, mines, oilfields, plantations, ports, railway companies, shops and other
establishments where 10 or more persons are employed. Gratuity is a benefit payable by the
employer for termination of service of an employee. But it is also payable in case of
superannuation, retirement, resignation, death or disablement due to accident or disease. It is
payable to every employee, other than apprentice, employed in an establishment to which the
provisions of the Act apply. It is payable at the rate of 15 days’ wages for every completed year
of service or part thereof, in excess of seven months. There is no wage ceiling for coverage under
the Act. Ordinarily, for being entitled to gratuity, an employee must have completed with the
employer concerned at least five years of continuous service. The maximum amount of gratuity
payable under the Act was raised from Rs. 100000 to Rs. 350000 with effect from 24 September,
1997. Gratuity can be forfeited wholly or in part to the extent of loss if the service of an
employee is terminated for an act or willful omission or negligence causing damage or loss to
employer’s property. Also, it can be forfeited if services of an employee are terminated for
riotous or disorderly conduct or other act of violence or for moral turpitude in the course of
employment. There is provision for compulsory insurance of his liability on the part of the
employer unless he constitutes an approved gratuity fund. Quasi-judicial powers are vested in the
“controlling authority” which decides matters related to any disputes arising from non-payment.
The Act is administered by central as well state governments in their respective jurisdictions.
Labour Welfare Funds In many work areas India has found it difficult to reach contribution-
oriented social security for various reasons. So a unique method has been coined for protecting
workers employed in certain specified employments. The concept of “Labour Welfare Fund”
was evolved to this end. Five welfare funds were set up under the Ministry of Labour and
Employment. These funds are aimed to provide housing, medical care, water supply, educational
and recreational facilities to workers employed in beedi industry, certain mines and cine workers.
Such funds are financed out of the proceeds of cess levied under respective Cess/Fund Acts. The
various legislation have been enacted to set up these funds. These include: the Mica Mines
Labour Welfare Fund Act, 1946; the Limestone and Dolomite Mines Labour Welfare Fund Act,
1972; the Iron Ore Mines, Manganese Ore Mines & Chrome Ore Mines Labour Welfare Fund
Act, 1976; the Beedi Workers Welfare Fund Act, 1976; and the Cine Workers Welfare Fund Act,
1981 (For details, see Saini, 2001). These Acts provide that the fund may be applied by the
Central Government to meet the expenditure incurred in connection with measures and facilities
which are necessary to provide the welfare of the workers concerned. Chapter V-A and V-B of
Industrial Disputes Act 1947 22 As such, India has no system of providing social security in the
contingencies of unemployment. This is so despite the ‘right to work’ having been provided for
in the Constitution as a Directive Principle of State Policy. Perhaps, the unemployment and the
underemployment situation in the country is so acute that no government has gone into the
feasibility of introducing a system of unemployment insurance. The Industrial Disputes Act 1947
(IDA) provides some semblance of unemployment security in a limited sense under its
provisions relating to lay off, retrenchment, closure, and transfer of industrial establishments.
The idea underlying the retrenchment and closure compensation is to help the workers to
maintain themselves until they are able to find alternative jobs. Review of Social Security law It
is noticeable that a large part of social security legislation in India is in the form of creation of
unilateral liability of the employer. However, it is important to note that this form is also
believed to be the most primitive and is sometimes described as the “decaying form” of social
security; for it does not contain any insurance or assistance element in it. It merely involves a
statutory liability of the employer in the event of certain contingencies so as to provide certain
protection to the employee. It is for this very reason that such laws are prone to being violated by
the employers. The employer has the option to insure its liability under some of these laws or
create a fund for meeting its liability. But despite this, the tendency to avoid his/its liability is
quite high. Therefore, a progressive social security system should replace such schemes with
professionally organized social insurance schemes. Further, there is a strong need for extending
the scope of the ESI Act. The ESIC needs structural reforms, as many unions do not want to be
covered by it, and seek exemption from its coverage so as to negotiate for devising alternative
schemes (Saini, 2001). At the same time, better enforcement mechanism is needed for the
Maternity Benefit At 1961. The incidence of violation of this Act is very high. It should also be
noted that protections envisaged in most of these schemes apply to the organized sector. In
effect, the informal sector employees enjoy very little or no social protection through law.
However, some sections of these employees in the informal sector are covered under certain
laws. For example, the Workmen’s Compensation Act, 1923 and the Minimum Wages Act apply
to many types of establishments in the unorganized sector. VII. CONCLUDING REMARKS
Post-independence India sought to implement the concept of welfare state as envisaged in the
Preamble of the Constitution of India and its chapter on the Directive Principles of State Policy.
A number of labour laws were enacted in all its four broad categories. The Indian judiciary gave
liberal interpretation to many provisions of these laws; often rooting the liberal interpretation in
the Directive Principles of State Policy in doing so. A plethora of public interest litigation (PIL)
was initiated in this sphere by public-spirited citizens in the last 25 years or so. This also
energized many non-governmental organizations (NGOs) in the informal sector to play a more
active role in labour law implementation. But cases of labour law violation were still too many
(Patel and Desai, 1995; Advani and Saini, 1995). Many strong nexuses worked to neutralize the
legislative intention by forging alliances to serve personal interests. For example, almost
negligible number of reinstatement 23 decisions of labour courts and industrial tribunals were
implemented (Saini, 1999, 1994). This included even some of the Supreme Court and high Court
decisions. The Indian labour law model, as also those of the advanced Europe, was built on the
basic postulates of the welfare state. The new economic policy of India in 1991 promised reform,
but they were never carried out due to lack of strong central (federal) governments and fear of
public reaction. Changes in labour policy were more at the executive and implementation level
than by amending the labour laws. Globalization warrants laws promoting greater flexibility in
the formal labour market. A study by Budhwar found that a large percentage of Indian managers
(61.5 per cent) believe that Indian national labour laws influence their HRM practices the most.
This study also found that their actions and prerogatives are constricted by these laws. Employer
would want more freedom in operating in the labour market especially in view of the chaotic
competition caused by the new dispensation. Therefore, amendment in labour law framework is
long overdue. In fact, Indian labour market can be said to be characterized by a sharp dichotomy.
It is understandable that labour law is creating inflexibility for the organized sector which is
difficult to sustain the era of globalization. At the same time, a large number of establishments in
the unorganized sector remain outside any regulation, while the organized sector has been
regulated fairly stringently. The organized sector is believed to have provided too much of job-
security for too long, resulting into inertia and inefficiency, while the unorganized sector has
provided too little to too many. In their present form, many aspects of Indian labour laws do not
suit the globalizing environment. These laws apply only to the organized sector. Consequently,
these laws have restricted labour mobility, have led to capital-intensive methods in the organized
sector and adversely affected the sector's long-run demand for labour. Since labour is a subject in
the Concurrent List in the Constitution of India, state-level labour regulations are also an
important determinant of industrial performance. States like Kerala which have enacted more
pro-worker regulations have lost out on industrial production in general. Interestingly, countries
like China learnt to adjust to the environment much faster. With a history of extreme
employment security, China has drastically reformed its labour relations and created a new
labour market, in which workers are highly mobile. An enlightened society would like to enact
labour laws that are relevant to the societal values adopted in a particular country. But it is
important that they change when new values are adopted. But this has not happened in India.
Especially the labour laws that fall in the category of “industrial relations laws” need to be re-
looked. The most talked-about provision in the Indian industrial relations law is Chapter V-B of
the IDA. This chapter requires all employers employing 100 or more workers in factories, mines
and plantations to seek permission from the Government in matters of lay-off, retrenchment, and
closure. It has been seen that this has led to unnecessary bureaucratization and harassment of
employers. The Indian bureaucracy has been arbitrary in granting permission under this chapter;
often extraneous considerations have dominated in these decisions. Many times, organizations
which have been perennially sick have been refused permission under this chapter. Presently, a
thinking is surfacing that the number of workers for application of this chapter should be raised
to 300, though at time it was sought. to amend the chapter to make it applicable to industries
emphasizing 1000 or more workmen. Another area of controversy is section 9-A of the IDA.
This section requires that a notice of 21 days should be given by the employer to workmen for
effecting change in any of their service 24 conditions. This section has also resulted in workers’
resistance to flexibility needs of the employers in this regard. When such a notice is given
employee unions raise an industrial dispute, which creates resistance for implementing the
desired change. More and more employers want to implement variable service conditions for
different sets of workers. Competency mapping is being used for creating a greater degree of
differentiation amongst workers. So find the Industrial Employment (Standing Orders) Act, 1946
(IESOA) to be problematic. The labour laws in India are known to be very complex. Some of the
problems in this regard relate to applicability; definition of worker/employee, appropriate
government, wages; different administrative mechanisms; and different quasi-judicial bodies.
This creates confusion and dependency on lawyers. For example, the term “wages” has been
differently defined under different Acts. Some laws cover employees receiving monthly wages
as low as Rupees 3500 per month (e.g. the Payment of Bonus Act, 1965), others cover even
clerical and administrative employees (e.g. the Employee State Insurance Act 1948; the
Employees’ Provident Fund Act, 1952; and the Gratuity Act 1972). For some there is no wage
limit for coverage (e.g. highly paid pilots are workmen under the IDA). A plethora of case law
has been delivered by the judiciary to clarify these complexities in variegated situations. This has
made the grasping of labour laws a very complex affair. In fact, labour law complexity has
converted union leaders into full time pleaders, who have set up labour law practice as a vocation
.There is a case for harmonization and unification of labour laws. This is an important area of
reform, for tremendous ambiguities have been caused by complexities of the labour legislation.
The National Labour Law Association (NLLA) has drafted a proposal to enact a National Labour
Code 1994 (Draft), which has been appreciated as laudable. But if one looks at its contents, it is
surely not likely to be acceptable to employers as they will fear that their competitive position
will be adversely affected by extremely high rates of contribution that have been suggested in it.
The social security laws in the country reflect lack of a comprehensive vision about the future of
Indian society .The system caters to only less than 7 per cent of the workforce. The definition of
social security in developing countries including India is bound to be different as a large chunk
of population does not have access to basic minimum needs. There is a need to integrate social
security policy with anti-poverty policies. and Indian laws have to reflect this thinking.
Especially, there is a need to create low-cost group insurance scheme to meet the needs of self-
employed people in rural as well as urban areas. In a country like India, the executive branch of
the state has many constraints in performing its constitutional duties. There is a need for greater
degree of public interest litigation for enforcing minimum labour standards and developing some
basic postulates of sound labour relations. It can be a very useful instrument in the Indian
context. But this needs to involve people who are genuinely interested in poverty alleviation.
Globalization can not take away the need for labour law. The state needs to focus on better
implementation and ensure that these laws do not become a mockery.