Employment Laws largely remain untouched by the successive governments, despite the legal and regulatory changes in the other areas. This is mainly because of the socio-economic-political reasons.
There are strong trade unions which lobby against any radical changes in the existing labour laws.
There are around 154 labour laws meant to ensure welfare of workers. Majority of these laws affect the workers in the organized sector who constitute around thirty million, out of the total workforce of about 400 million.
Currently there is a lot of demand for high quality technicians, skilled and semi-skilled workers. The demand and supply position is gradually pushing the salaries and wages to higher levels, but it is still much below the international levels.
Our attempt herein is to give you a bird’s eye view on the laws relating to engagement of personnel.
HIRE & FIRE
Broadly, the Industrial Disputes Act, 1947 (“IDA”) categorizes private sector employees into:
- Workmen, and
- Non-workmen
Workmen - All employees who are employed to do any manual, unskilled, skilled, technical, operational, clerical or supervisory (supervisory personnel drawing less than INR 1600 per month (although some states have increased this limit)) work for hire or reward, whether the terms of employment be expressed or implied, are workmen.
Hire & Fire of workmen is regulated by the IDA and other labour legislations. Any violation of the provisions of IDA can lead to industrial disputes.
Industrial disputes are referred to and adjudicated by Conciliation Officers, Labour Courts and Tribunals.
IDA deals with various aspects of employment and the rights and liabilities of workmen, on retrenchment/ termination, layoff, strike, lockout, transfer of undertaking, unfair labour practice, change in service conditions etc.
Labour/industrial courts can order reinstatement, with back wages and compensation if the termination of service is illegal, unjustified or by way of excessive punishment for misconduct.
Non-workmen consist of managerial or administrative and supervisory personnel drawing more than INR 1600 per month (subject to higher limits in some States). Please note that the categorization on the basis of salary i.e. INR 1600 per month is only applicable to supervisory staff.
Despite a designation of an employee, the actual categorization (workman/non-workman) will be determined by the duties assigned to him/her.
Hire & Fire issues of Non-workmen are regulated purely by the contract of employment (which may include appointment letters and other general terms and conditions given in the general rules pertaining to HR/personnel adopted by the management).
Non-workmen can be fired as per contract of employment. They may be entitled to notice with compensation, if any, stipulated in the contract of employment. They may also be entitled to certain statutory terminal benefits like gratuity.
In the event of termination of employment of Non-workmen, courts cannot direct the employer to re-employ them, even if such termination is illegal.
In illegal termination, Non-workmen’s right is to claim reasonable compensation and if a notice period is stipulated and if the termination letter is not making any unsubstantiated allegations, the compensation may be limited to the pay during the notice period, if not already paid.
If any unsubstantiated unjustifiable allegation is made which affects the future prospects of the employee, the court may award compensation.
EMPLOYMENT LAWS
There are a plethora of “labour laws” applicable to industries in general, as well as certain industry/ sector specific laws.
Most of the private sector employment laws are federal/ central enactments.
Various States (India consists of 28 states and 7 union territories) have adopted these enactments with or without modifications, and in certain cases legislated separately.
The enforcement authorities are mostly at the State level, who act according to the rules and regulations framed under the respective legislations.
Applicability of these enactments is determined on the basis of various stipulations contained in each of them e.g. the number of employees employed during a specific period, the industrial sector in which the employer is engaged etc.
Also, in many enactments power is vested with the appropriate government to extend the enactment to any other establishment which is not original within the purview of a legislation. In some enactments an option may be available to the employer to opt for the applicability of the enactment.
A non exhaustive list of Labour enactments is given below:
- The Industrial Disputes Act, 1947.
- The Industrial Employment (Standing Orders) Act, 1946.
- The Trade Unions Act, 1926.
- The Contract Labour (Regulation and Abolition) Act, 1970.
The Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979. - The Child Labour (Prohibition and Regulation) Act, 1986.
- The Labour Laws (Exemption from Furnishing Returns and Maintaining Registers by Certain Establishments) Act, 1988.
- The Payment of Wages Act, 1936.
- The Minimum Wages Act, 1948.
- The Payment of Bonus Act, 1965.
- The Equal Remuneration Act, 1967.
- The Factories Act, 1948.
- The Workmen's Compensation Act, 1923.
- The Maternity Benefit Act, 1961.
- The Payment of Gratuity Act, 1979.
- The Employees Provident Fund and Miscellaneous Provisions Act, 1952.
- The Employees State Insurance Act, 1948.
- The Shops and Establishments Acts (State legislation).
A non exhaustive list of Industry/sector specific laws:
- The Coal Mines Provident Fund and Miscellaneous Provisions Act, 1948.
- The Mines Act, 1952.
- The Working Journalist (Fixation of Rates of Wages) Act, 1958.
- The Dock Workers (Regulation of Employment) Act, 1948.
- The Dock Workers (Safety, Health & Welfare) Act, 1986.
- The Plantation Labour Act, 1951.
- The Merchant Shipping Act, 1958.
- The Motor Transport Workers Act, 1961.
- The Sales Promotion Employees (Conditions of Service) Act, 1976.
- The Building & Other Construction Workers (Regulation of Employment & Conditions of Service) Act, 1996.
- The Dock Workers (Regulation of Employment) (inapplicability to Major Ports) Act, 1997.
- The Mica Mines Labour Welfare Fund Act, 1946.
- The Limestone & Dolomite Mines Labour Welfare Fund Act, 1972.
- The Iron Ore Mines, Manganese Ore Mines & Chrome Ore Mines Labour Welfare Fund Act, 1976.
Broadly, the purposes of these legislations include:
- Regulating hours of work, weekly holidays, annual leave, sick leave etc.
- Stipulating working conditions, protecting workers from unfair retrenchment.
- Ensuring payment of minimum stipulated wages, timely payment of wages, bonus and other employment benefits.
- Stipulating welfare measures, depending upon the industry.
- Medical benefits including maternity benefit, sickness benefit.
- Social Security - Injuries, death, disability compensation/ Insurance.
- Industrial Relations etc.
Employers Obligations
- Ascertain which of the laws are applicable to the establishment.
- Maintenance of records, filing of returns etc.
- Deposit of amounts payable to welfare funds and other statutory financial obligations.
- Registration of the establishment under various statutes, wherever stipulated.
- Provide stipulated working conditions.
- Timely disbursement of wages, bonus etc as per stipulation.
- Not to indulge in unfair labour practices.
Breach of employer’s obligations
Contravention of the obligations may expose the employer, its directors, senior officers, or nominated persons who are in charge of the company, to:
- prosecution, which can lead to imprisonment, fines and/or penalty. However, imprisonment is rarely awarded.
- Financial claims.
- Litigation with employees/ Trade Unions/concerned departments.
- Trade Union actions such as strike.
Contracting-out
Contracting out of a statutory obligation is not generally permitted. However, an employer can contract with an employee to give better terms and conditions than statutorily stipulated.
HIRING OF FOREIGN NATIONALS / TECHNICIANS
No permission is necessary for hiring of foreign technicians and no application needs to be made for this purpose.
Foreign exchange for the payment of remuneration will be released by the Authorised Dealers in accordance with the Foreign Exchange Management (Current Account Transactions) Rules, 2000 and other Regulations issued by the Reserve Bank of India.
A private limited company is not subject to any restriction under the Companies Act on appointing foreign nationals in key managerial positions.
Appointment of foreign nationals as full time director or managing director in a public limited company is subject to the provisions of Section 269 of the Indian Companies Act read with Schedule XIII to that Act, which defines qualifications for appointment and ceiling limits of remuneration.
RESIDENTIAL STATUS OF FOREIGN NATIONALS
A foreign national could have different residential status under the Companies Act, Foreign Exchange Management Act and the Income Tax Act.
The varied residential status in these laws has different legal effects concerning employment, repatriation and taxation.
Determination of residential status is very important since certain benefits, privileges and obligations are attached to the residential status of a person. E.g under the income tax act, if a person who is “resident in India”, both foreign and Indian income will be taxed in India, subject to the Double Taxation Avoidance Agreements, if any, between India and the relevant country.
Residential Status under the Income Tax Act, 1961
The residential status of individual/taxable entity is very relevant and has to be checked for each year,
Individual- An individual can be a ‘resident and ordinarily resident’ or ‘resident but not ordinarily resident’ or ‘non-resident’. An Individual is said to be resident in India if:
he has been in India for a period of 182 days or more during the previous year, or
he has been in India for a period of 60 days or more during the previous year and 365 days or more during 4 years immediately preceding the previous year.
If he does not satisfy any of the conditions above, then he is treated as a non-resident for tax purpose.
Resident and Ordinarily Resident – If the individual has been in India for at least two years out of ten previous years immediately preceding the relevant previous year; and he has been in India for a period of 730 days or more during the seven years immediately preceding the relevant previous year. If either of the conditions is not satisfied then the individual is a ‘resident but not ordinarily resident’.
Residential Status under the Companies Act
`Resident', for the purposes of Part I of Schedule XIII (Companies Act) (Conditions to be fulfilled for the appointment of a Managing or whole-time director or manager without the approval of the Central Government, which is applicable to Public Company and subsidiary of public company) includes a person who has been staying in India for a continuous period of not less than 12 months preceding the date of appointment as a managerial person and who has come to India ( 1) for taking up employment in India, or (2) for carrying on a business or vocation in India. Appointment of any person who is not a resident in India requires the approval of Central Government. Most often, appointment of a foreign national as a managerial person may require the Central Government’s approval either because he is not a resident or his remuneration exceeds the limits prescribed under the Schedule XIII.
Residential Status under the Foreign Exchange Maintenance Act
In terms of Section 2(v) of FEMA, a person will be a resident in India only if he resides in India for more than 182 days during the course of the preceding financial year. However, an exception to this general rule is made for any person who comes to India for employment or business or other reasons indicating his intention to stay in India for an uncertain period. Such persons become resident immediately for the purposes of FEMA, no matter they have not stayed in India for 182 days. Thus, a foreign national seeking employment in India becomes a resident under exchange control law.
Deputation of Indian Personnel for Training Abroad
For deputing Indian personnel for training and other purposes abroad, the employer should approach the Authorized Dealers for release of foreign exchange as per the Foreign Exchange Management (Current Account Transactions) Rules, 2000 and other Regulations issued by the Reserve Bank of India.
IMMIGRATION LAW
Visas and permits
Visitors to India need visas to enter the country. Foreign nationals can secure the following types of visas depending on their purpose of visit to India. There may be restrictions on citizens of certain countries.
Persons of Indian Origin holding the citizenship of another country are also required to obtain visas before arriving in India unless they hold a Person of Indian Origin (PIO) card /Overseas Citizenship of India (OCI) issued by the GOI.
Visas must be obtained from the Indian embassy or consulate in the applicant's home country.
Type of visa include employment visa (Spouses and children will get coterminous visas), business visa, tourist visa, student visa. The period can vary depending on the purpose for which visa is issued.
Registration of Foreign Nationals
All foreign nationals are required to register with the local immigration authorities of the Foreign Regional Registration Office (FRRO) within 14 days from their date of arrival, if their visas are valid for longer than six months.
To register with the local registration office, certain prescribed documents must be presented.
The original passport and visa required at the time of filing the application with FRRO.
Registration is valid for the term of the visa and may be extended on application.
Failure to register may result in the immigration authority's refusal to allow the foreign national to leave the country.
Entry visas are issued to accompanying family members of individuals visiting India on business or for employment.
Spouses or dependents of working expatriates must obtain separate work permits to be employed in India.
Family members intending to reside with a working expatriate must register separately at the local registration office.
Children of working expatriates must obtain student visas to attend schools in India.
Bank Accounts & Tax
An expatriate employee employed by a Foreign Company and is resident in India may open and maintain a foreign currency account with a foreign bank.
The salary received for services performed in India may be paid into that account, subject to the following conditions:
- The amount paid into the foreign bank account not to exceed 75% of the salary. Should an employee wish to receive more than this percentage outside India, he must file a request with RBI.
- The remainder of the salary must be paid in rupees in India.
- Indian income tax must be paid on the entire salary.
- Foreign nationals receiving salary in India from Indian firms or companies allowed to remit their salaries to their home countries; or Open an Indian bank account. Proceeds from such account can be repatriated on retirement.
Drivers Permit
Foreign nationals are not allowed to drive in India using their home country driving licenses.
Must obtain an international driving license in their home countries, which are generally valid for a period of six months.
Alternatively, foreign nationals can go through the necessary procedures to obtain an Indian driving license.
CONCLUSION
Since, the law relating to personnel is largely compliance driven and employment laws are generally interpreted more in favour of the employees, appropriate attention in this area is required. Depending on the nature and size of the organisation competent legal support together with a strong but subtle HR management will be appropriate.
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