Labour laws in India

All you need to know about Labour Laws in India

Significance of labour

A nation’s development is significantly depended on its labour force. By the term “nation’s development” we mean the GDP of a nation. Gross domestic product (GDP) is the monetary value of all the finished goods and services produced within a country in a specific time period. Thus, we see that GDP is related to production of goods and services. Production is undertaken with the aid of resources which are categorised into land, labour,   capital and entrepreneur.  Of these, labour and entrepreneur are the factors which decide the success of an organization as the entrepreneur is the decision maker and the labourers are the ones who execute the work.

Thus, it becomes important to see that the interest of the labourers is also protected. This is done by enacting effective labour laws. These laws are framed to protect the basic financial pay of the labourers, health conditions while working, provision of compensatory benefits in case of injury to labourers, and such other conditions. Thus, the contractor or the employer of an unorganized work cannot take undue advantage of the labourers as these laws also provide for punishments in the form of imprisonments and monetary fines.

Following are the basic labour laws in India that one must know:

1. Minimum Wages Act, 1948

This Act provides for fixation of minimum wages of workers engaged in  unorganized sectors. The Central Government has the jurisdiction  over organizations indulged in railways, mines, major part of corporation controlled by the Central Government or oilfields. The rest are under the jurisdiction of State Governments. Also, the respective governments can review and revise the amount of such wages if it deems fit. (The amount of minimum wages can be accessed at the website of labour ministry

Payment of wages

The amounts of such wages are usually to be paid in cash but the government can approve any other method like partly wages in cash and kind. The worker is also entitled to overtime payment if he/she is working in excess of normal working hours (i.e. more than 8 hours in a day). Section 18 of the act makes it mandatory for the the employer to maintain registers and records containing  various particulars of employees under his employment (for example the work performed by them and such other particulars as may be prescribed.)

The employer must also issue wage slips to all its employees in respect of each of the wage period.If the services of any employee are terminated for any reason whatsoever, the wages are paid within two working days from the date of such termination. The employer can’t make any unauthorized deduction from the wages of its employees. Where the employer imposes any fine or deducts wages on account of damages caused by any employee, such employee must be given an opportunity of being heard. Section 22 of the Act provides punishment for a term which may extend to 6 months or with fine which may extend to 500 rupees or with both, for employers who pays less than the minimum  wages fixed for that employee’s class of employment or less than the amount due to him under the provisions of this Act.

2. Payment of Wages Act, 1936

This enactment secures timely payment of wages for employees working in certain establishments, without any unauthorized deductions. The wage period cannot exceed 1 month i.e. it can be daily, weekly, fortnightly and monthly and nothing more than a month (S 4). All payments of wages shall be mandatorily made on a working day.

Time for making payments (Section 5)

Railway factory or other establishments where less than 1000 persons are employed.Before the expiry of the 7th day from the date which the payment is due.
Persons employed in any other railway factory or other establishment.Before the expiry of the 10th day, after the last day of the wage-period in respect of which the wages are payable.
Person’s employment is terminated by or on behalf of the employer.The wages earned by him shall be paid before the expiry of the 2nd working day from the day on which his employment is terminated.
Person’s employment in organisations is terminated due to the closure of the organizations.The wages earned by him shall be paid before the expiry of the 2nd day from the day on which his employment is so terminated.

As per section 6 of the Act, all wages are to be paid in current currency or coin, or by cheques or by crediting the wages in the employee’s bank account. Section 13A provides that every employer has to maintain prescribed registers and records giving specified particulars of persons employed, work performed by them, wages paid to them, the deductions made from their wages, and such other particulars in prescribed form. Every records and registers required to be maintained have to be preserved for a period of three years after the date of the last entry made in it.

3. The Equal Remuneration Act, 1976

According to article 39 of Constitution of India, the State shall direct its policy towards securing equal pay for equal work for both men and women. To give effect to this constitutional provision, the Parliament of India enacted the Equal Remuneration Act, 1976. 

According to section 4 of The Act, equal remuneration should be paid to men and women workers for same work or work of similar nature without any discrimination and section 5 prevents discrimination against women employees while making recruitment for the same work or work of similar nature, or in any condition of service subsequent to recruitment. Section 3 of the Act provides that the provisions of the Act shall have overriding effect with respect to any inconsistency therewith contained in any other law or in any award, contract of service, whether made before or after the commencement of the Act.

Read more at:

4. Payment of Bonus Act, 1965

A bonus is a payment made in addition to the basic salary or wage of an employee. The main purpose of the Act is to maintain peace and harmony between employer and employees as payment of bonus by the employer shows care and in turn motivates the employees to work hard and be loyal.


Applicability (S- 1(2))

  • Every factory (as defined under S- 2(m) of  the Factories Act, 1948
  • Every other organizations where 20 or more persons are employed on any day during an accounting year.
  • The Government can make the Act applicable to any factory or establishment employing less than 20 but not less than 10 persons,  after giving 2 months notification in the Official Gazette.
  • However, it is important to note that according to section 32 of the Act, certain classes of employees are not eligible to receive bonus.
  • Likewise, such an employee should not be drawing wages more than rupees 21000/- per month and should not be an apprentice. But he can be a part time employee employed on permanent basis.


  • According to S-8 an employee is entitled to receive bonus payment if he/she has worked for not less than 30 working days of that year.
  • According to S-10, Minimum bonus is to be paid by employer at the rate of 8.33% of the salary or wages in a year or one 100 rupees, whichever is higher (subject to maximum of 20 percent).
  • According to S-9, if the employee is dismissed from service for fraud or riotous or violent behavior, or theft, misappropriation of any property of the establishment while on the premises of the establishment, he shall be ineligible to receive bonus.
  • The employer is bound to pay minimum bonus even if he suffers losses during the accounting year.
  • The bonus is to be paid within a period of 8 months from the closure of the accounting year.

5. The Payment of Gratuity Act, 1972

Gratuity is a sum of amount paid to an employee by the employer, on completion of his period of employment (at retirement or superannuation). The Act provides for the payment of gratuity to employees engaged in mines, factories, oilfields, railways, plantations, ports, shops or other establishments. , where 10 or more persons are or were employed, on any day of the preceding 12 months.

An employee is eligible to receive gratuity only if he has completed 5 years of continuous service. This condition is not necessary if the termination of the employment is due to death or disablement. Each employee shall nominate one or more member of his family, who shall receive the gratuity in the event of the employee’s death. The maximum amount of Gratuity payable is Rs. 20 lakhs.

Every employer shall pay the gratuity amount within 30 days from the due date. Simple interest at the rate of 10% p.a. shall be payable on the expiry of 30 days.

Formula for calculation of Gratuity = Last drawn salary (basic salary plus dearness allowance) X number of completed years of service X 15/26.

The time period in excess of period of six months is considered as one year.

6. The Employees’ Compensation Act, 1923

  • This enactment is a step towards securing social security of workmen.
  • It aims at providing financial compensation to the employees and their dependents (in the case of death of the employees) for injuries arising by industrial accidents including certain occupational diseases, arising out of and in the course of employment.
  • These injuries can be of temporary nature or permanent nature. The Act makes provisions for payment of compensation in case of such temporary or permanent injuries. These injuries are further listed out in parts of schedules to this Act.
  • Further, an employer and an employee cannot enter into any agreement whereby the right to compensation is relinquished.
  • The labour commissioner is the person who decides upon the matters regarding payment of compensation and settlements of disputes under this Act.
  • Any person who contravenes with the provisions of this Act shall be punishable with a fine upto rupees 5000/-

7. Labour laws regarding child labour

Child labor is a violation of the rights of children and is recognized as a serious social problem in India. Article 24 of the Constitution states that no child below the age of 14 years can be employed in any mines, factory or any hazardous employment. To ensure this, Child Labour (Prohibition and Regulation) Act, 1986 was enacted. Further, the Parliament in 2016 amended the Child Labour (Prohibition & Regulation) Act, and the enactment was renamed the Child and Adolescent Labour (Prohibition and Regulation) Act, 1986, as which came into force w.e.f.  1.9.2016. The Act also regulates employment of adolescent in certain non-hazardous processes and occupations.

According to section 3, no child (below 14 years of age) shall be employed in any occupations or process except which helps his family in other than hazardous occupations, after his school hours or if the child works in audio-visual entertainment industry.

According to S-7 underage children cannot be allowed to work for more than 3 hours at a stretch. There should be a rest interval of 1 hour. And the total working hours per day should not be more than 6 hours. Further, such underage children cannot work between 7 pm. and 8.p.m. and there shall be no overtime for such underage children.

According to section 8, there should be a holiday/week and the day should be mentioned in the notice, which should be displayed at conspicuous place to all workers. Also, such a day once fixed cannot be changed for more than once in three months.

8. The Employees’ State Insurance Act, 1948

This Act provides for certain types benefits to employees in case of maternity, sickness, and employment injury and also makes provisions for certain other related matters. The provisions of this Act shall be applicable to employees who are drawing wages upto rupees 15000/- per month.

The Act covers factories, other than seasonal factories, belonging to the Government. Such factories need to get themselves compulsorily registered under this Act. The employers and employees have to contribute towards the insurance fund named Employees State Insurance Fund which shall be held and administered by the Employees State Insurance Corporation for administration, which is established under the Act for administration of the Employees State Insurance Scheme. It is also to be noted that if a person receives benefits under this Act, such a person is not entitled to receive any benefits under other enactments.

9. Laws related to Maternity Benefits

The Maternity Benefit Act, 1961 and The Maternity (Amendment) Act, 2017, an amendment to the Maternity Benefit Act, 1961, protects the interest of a woman by governing the employment of women in mines, factories, shops and other establishments, the circus industry or plantations employing 10 or more persons. However, the employees who are covered under the Employees’ State Insurance (ESI) are outside the ambit of the enactment.

To avail benefits under this Act, a woman must have worked for a minimum of 80 days in the previous 12 months before the date of her expected delivery.

The amendment Act of 2017 has increased the benefits for a woman.

  • The duration of paid maternity leave is 26 weeks (before the amendment, the duration was 12 weeks)
  • Of the above mentioned benefit, a maximum of 8 weeks leave can be availed by her before the date of expected delivery and the remaining after the date of delivery.
  • Maternity leave of 12 weeks is to be provided to commissioning mothers for children below the age of 3 months.
  • Also a provision of “Work from Home” is to be made for women after they resume work, post delivery, if the nature of work provides for the same.

10. Trade Unions Act, 1926

This Act deals with formation of trade unions, their registration, rights and responsibilities. In case of disputes. In many cases, an individual workman is not in a position to keep his demands in front of the employer. If such a workman is a part of the trade union, his demands can be fulfilled, provided such demands are in the interest of all the workmen and are genuine. Needless to say, this enactment prevents the employer to act in such a way as to exploit the workers and in turn the genuine demands of workers can be peacefully fulfilled.

A trade union with minimum of seven members can apply for registration. Such a trade union shall mandatorily follow the rules of the Act, pay the prescribed fees to the registrar, maintain the records of the trade union and send to the registrar, audited annual general statement of incomes and expenditures and assets and liabilities for the year ending on 31st December.

11. Other important labour laws

  • Factories Act, 1948- this is an Act which governs the working conditions of workers in factories. To ensure that the working conditions in the factories are safe from hazards, the Act imposes upon the owner or the occupier of such factories, certain obligations, to make sure that employment is in conditions conductive to their health and safety.
  • Industrial Disputes Act, 1947–  In an organization, there are disputes between the employees and employers. These disputes may take place in forms such as strikes, protests,  lock-outs, dismissal of workers, etc. The Act provides machinery for resolving of disputes in peaceful methods and to promote harmonious relations between employers and employees.
  • The Apprentices Act, 1961-  regulates and controls the training of apprentices and for other connected matters therewith. Every employer is under the obligation to provide the apprentice with adequate infrastructure for the training of apprentices in his trade in accordance with the provisions of the Act, and the rules made thereunder.

Read more related to labour law:

Share this post

Leave a Reply

Your email address will not be published.

Fill out this field
Fill out this field
Please enter a valid email address.

Top 10 IT Skills in Demand – 2019
20 Best Social Media Marketing Tools

Get industry recognized certification – Contact us