Start-ups, like other business establishments, are required to follow certain bare minimum legal requirements in order to be able to operate successfully in the country. Of all the compliances, those pertaining to the working conditions of the employees are the most important.
Labour Regulations Should my Start-Up: Despite the pandemic wobbling the Indian economy, the spirit of entrepreneurship has not been dampened in the country. The changing times demanded change in market demands and this paved way for the brigade of new startups. The fate of startups has always been controversial though. A few of them made it and a few of them sadly perished. Ideally, those entrepreneurs who knew how to make use of low-cost skilled labor, and funding from national and international investors clearly made it to the top. India is now providing one of the largest startup ecosystems in the world. The Make in India campaign has undoubtedly fueled several young minds to embark on the start-up journey.
While it might be exciting to launch a new startup it cannot be forgotten that like other business entities, startups also must adhere to a few legal compliances. Just because these businesses are newbies to the market, they do not get exempted from such responsibilities. Further, adherence to such compliances would only help the startups to stay stronger and more stable in a volatile market. For instance, labor regulations are one of the most crucial requirements that must be met in new businesses.
This would also ensure the safety and well-being of employees. Knowing in detail about the labor laws would be helpful to run the organisation without any legal allegations. The Ministry of Labor & Employment has recommended the States, Union territories and Central Labor Enforcement Agencies for a compliance regime that is purely based on self-certification. It also urged that the regulation of the start-ups be in consonance with the existing Labor Laws.
The advantage of sticking tight to these regulations is that those start-ups that furnish a self-declaration for compliance under the stipulated labour laws, within the first year from the date of commencing the business, shall not be inspected under the respective legislations.
Exemptions Bestowed on Startups:
The start-ups have been given the lenience of being exempted from inspection for up to three years from the date of beginning the business, provided the company furnishes a self-declaration for compliance with the labor laws. Further start-ups that fall under the ‘white category’ with respect to environmental laws would only be given random checks occasionally.
Labour Law Regulations that Startups Need to Provide Self Declaration for:
- The Building and Other Constructions Workers’ (Regulation of Employment and Conditions of Service) Act, 1996
- The Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979
- The Payment of Gratuity Act, 1972
- The Contract Labor (Regulation and Abolition) Act, 1970
- The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
- The Employees’ State Insurance Act, 1948.
Compliance of Labour Laws:
Ensuring compliance under labor laws enables start-ups to avoid unnecessary legal hassles and harassment. The start-ups must guarantee statutory compliance under the following labor laws:
The Building and Other Construction Workers (Regulation of Employment & Conditions of Service) Act:
The Act is concerned with governing the employment and conditions of service of construction workers. It predominantly concentrates on the safety measures that must be adopted for the welfare of the workers
Inter-State Migrant Workmen Act, 1979:
The Act was formulated to overview the conditions of interstate laborers. The Act’s intention is to protect and safeguard the workers who offer their services outside their native states. The Act serves two main purposes. Firstly, to protect the interests of migrant interstate workers and secondly enables employers to hire workers outside the state when there is a shortage of skilled or unskilled labor within the same state
The Payment of Gratuity Act, 1972:
A gratuity payment is issued to an employee when the services of the employee are terminated. It is a lump sum amount paid as a token of appreciation for the services rendered by the employee towards the employer. The gratuity payment has to be made within 30 days from the last date of employment of the employee
Minimum Wages Act:
The main purpose of the Act is to secure just and adequate living wages for laborers. The provisions of the Act ensure that the workers get to live a decent and respectable life in society. The Act directs the State or the Central government, as the case may be, to fix and revise the wages payable to the employees in respect of the Scheduled Employment within a given time period
Contract Labour Regulation & Abolition Act, 1970 or CLRA:
The Act aims to regulate the employment conditions of laborers who work on a contractual basis in factories and industries. The Act also discourages harmful working conditions and aims to abolish the same. The Act directs the principal employer to provide the employees with various facilities like canteens, restrooms, sufficiently lighted and ventilated spaces for employees who are required to halt at night in the work site, separate latrines and urinals for men and women, first-aid facilities etc
Employee State Insurance Act, 1948:
The Act guides employees during circumstances of sickness, injury, or period of maternity. The Act is applicable to factories that employ more than ten employees at any given point in time. The insurance here is contributed both by the employer and the employee. The employer contributes 4.75% and the employee bears 1.75% of the total wages to gather the insurance fund. The Act was applicable to employees whose monthly wages were less than ₹15,000 but now it has been increased to ₹20,000
Industrial Employment (Standing Orders) Act, 1946:
The Act directs the employers in factories and industrial establishments to officially define and lay out the employment conditions and furnish the draft standing order to the certifying authority for certification. The intention of the Act is to make the employees aware of their working conditions
Trade Unions Act, 1926:
The Act’s purpose is to ensure the safety and well-being of the workers. This would assure the long-term employment of the workers, and avoid retrenchment and lay-offs. The Act urges trade unions to get legally registered and oversees the laws related to such unions. The Act directs that the workers be provided with fair wages along with adequate opportunities for promotion and training. It seeks to improve the working and living conditions of workers employed in trade unions
Industrial Disputes Act, 1947:
The objective of the Act is to obtain industrial peace and harmony by providing adequate procedures and fitting mechanisms for the settlement of industrial disputes by alternate dispute resolution methods. The act ensures a balance between labor and industry welfare by dispute resolution methods such as arbitration, conciliation, negotiation and adjudication. The Act also regulates payment of compensation to the workers while discouraging unfair labor practices demonstrated by the employer or the trade unions
Although the start-ups must mandatorily comply with the provisions above, the companies are given an exemption for the initial 3 years, in order to motivate the businesses and to lift any additional pressure they might suffer through statutory compliances.