Legal Aspects of Compensation and Industrial Relations

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Indian labor laws are the laws that regulate employment. These are broadly divided into 5 categories: working conditions, industrial relations, wages, welfare and social securities. Under the Constitution of India, Labor is a subject in the Concurrent List where both the Central & State Governments are competent to enact legislation subject to certain matters being reserved for the Centre. The Ministry of Labor and Employment has the responsibility of protecting and safeguarding the interests of workers in general and those of the poor deprived and disadvantaged sections of the society, in particular. It also has the responsibility of creating a healthy work environment for higher production and productivity and to develop and coordinate vocational skill training and employment services. These objectives are sought to be achieved through enactment and implementation of various labor laws, which regulate the terms and conditions of service and employment of workers. HR began to play a significant role after the enactment of these employment or labor laws.

Here I have included all those acts which are slightly related to compensation, no matter which categories they are. Like Payment of Gratuity act is a social security act but as it is related to compensation later, I have included it. 1). Workers’ Compensation Act of 1923: Employee and their dependants receive compensation for injury due to accident out of or in the course of employment and resulting in disablement or death. Employees covered under Employee’s State Insurance Act, 1948 cannot claim under Worker’s Compensation act. The amount of compensation depends on the age, wage and nature of injury. 2). Payment of Wages Act 1936: This act ensures that wages will be paid to certain group of employees at regular intervals and with no unauthorized deductions. The intervals should not exceed one month and in the case of termination, wages should be paid within two days of the date of termination. 3). Minimum Wages Act 1948: This act ensures that a minimum rate of wages that vary from state to state will be paid to all those in wage employment. State and Union government periodically review the minimum wage rates. The Act classified workers as unskilled, semi-skilled, skilled and highly skilled. 4). Payment of Bonus Act 1965: This Act guarantees that a bonus is paid to employees who have worked for at least 30 working days in the year and have salaries of at least Rs.3,500 per month. The payment of a bonus is applicable to every establishment where 20 or more workers are employed, but there are exceptions. Employees who work in insurance corporations, educational institutions, hospitals, chambers of commerce, federal banks and social welfare institutions are not entitled to a bonus under the Act. Employers have to pay minimum bonus of 8.33% of the salary even if company is in losses. Bonuses do not have to be paid if the employee is dismissed from service for fraud or misconduct on the premises or for theft, misappropriation or like of the property of the organization. The law is quite controversial because employees want this bonus regardless of whether company is profitable or not; employers do not agree with this required entitlement. 5). Payment of Gratuity Act 1972: This act is applied to companies with at least 10 employees for the past 12 months. Companies will pay 15 days wages for every completed year of service (or part thereof in excess of 6 months) to the employees who have completed 5 continuous years of employment. The maximum limit of gratuity is 350000 Rs. In case of death or disablement, 5 years requirement is not needed and also if employment contract is terminated due to serious misconduct then gratuity will not be paid. 6). Employees Provident Funds and Miscellaneous Provisions Act 1952: This act is to provide financial support to employee when they or their...
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