Showing posts with label Labour Laws. Show all posts
Showing posts with label Labour Laws. Show all posts

Thursday, November 27, 2025

Labour Codes 2025 — Part 2: Procedural Guidelines, Lawful Structuring & Employer Compliance Roadmap

 By CA Surekha S Ahuja

“Compliance is not just adherence to rules — it is the strategic foundation of workforce stability, operational scalability, and business resilience.”

Introduction

The Labour Codes 2025, effective from November 21, 2025, consolidated 29 legacy laws into four unified frameworks:

  1. Code on Wages, 2019

  2. Industrial Relations Code, 2020

  3. Code on Social Security, 2020

  4. Occupational Safety, Health & Working Conditions (OSH) Code, 2020

Applicability:

  • All establishments across India

  • Specific thresholds: ≥10 employees for registration, ≥50 employees for creche/OSH facilities

  • Existing employees: wage restructuring effective from April 1, 2026

  • New hires: post-November 21, 2025, must comply immediately

This post provides a 360° procedural roadmap for lawful restructuring, digital registration, return filing, OSH compliance, social security obligations, and phased employer implementation.

Wage & Compensation Structuring

Principle: Basic + DA ≥50% of CTC; allowances above this threshold form part of wages.

Steps:

  1. Extract all employee CTCs.

  2. Audit allowances exceeding 50% of CTC.

  3. Reclassify HRA, special allowances, variable pay.

  4. Update payroll: PF, ESI, gratuity recalculation.

  5. Issue revised appointment letters including wage breakup, gratuity, leave entitlement, termination clauses.

  6. Conduct actuarial valuation (Ind AS 19).

  7. Communicate changes to employees.

Outcome: Audit-ready payroll, retirement benefits compliance, wage transparency.

Employee Classification & Contract Compliance

  • Categorize workforce: permanent, fixed-term, contract, gig/platform, supervisory roles

  • Align contracts with Labour Code obligations

  • Fixed-term employees: gratuity after 1 year

  • Gig/fixed-term workers: register on e-Shram for social security

Digital Registration & Return Filing

Applicability: All units with ≥10 employees

1. Shram Suvidha Portal Registration

  • One PAN-based registration, valid 5 years → Labour Identification Number (LIN)

  • Steps: register establishment, provide PAN/TAN, officer details, scanned MOA/CIN, obtain LIN

2. Returns & Filing Obligations

Compliance TypeFrequencyPlatform / Forms
Annual Return (CTC/Wages)AnnualUnified return replacing Forms 5,7,12
Muster Roll / AttendanceMonthly/QuarterlyForms I-II
Wage RegisterMonthlyForms III-IV
Standing OrdersOnce / updateForm V
Contractor Labour ReturnsMonthlyForms VI-VII
Social Security ContributionsMonthlyPF/ESI portals linked to LIN
Gig / Fixed-Term Worker RegistrationOnboardinge-Shram portal, UAN-linked

Tips:

  • Retain digital records for 8 years

  • Reconcile payroll with PF/ESI portal monthly

  • Auto-deemed approvals require internal timestamp documentation

Occupational Safety, Health & Women Compliance

  • Draft standing orders: 8 hours/day, 48 hours/week, flexible schedules

  • Creche for ≥50 employees

  • Night shift SOPs: CCTV, transport logs, consent records

  • Annual health check-ups: employees ≥40 years

  • Maintain digital evidence for audits

Social Security & Gig Worker Compliance

  • Register gig/fixed-term workers on e-Shram

  • Allocate 1–2% of turnover to aggregator fund

  • Enable UAN & Aadhaar portability for PF

  • Monthly compliance tracking

Penalty Avoidance Matrix

ViolationFine / PenaltyPrevention
Missing appointment letter₹50K–2LIssue Day-1, maintain digital record
Wage delay12% interest + ₹1LAuto bank transfers & payroll calendar
PF/ESI shortfall25% damagesQuarterly reconciliation
Creche absence₹2–5L + closureSelf-certify + portal audit
Standing orders missing₹1–2LDigitally file & update
Gig/social security default1–2% turnoverMonthly aggregation & e-Shram update

Integrated 12-Week Compliance Roadmap (Gantt-Style)

WeekKey Focus AreaAction ItemsOutcome / Deliverable
1Wage Audit & RestructuringAudit CTC, reclassify allowances, update payroll, issue revised letters50% Basic compliance, audit-ready payroll
2Digital RegistrationRegister all units on Shram Suvidha, obtain LIN, upload Forms I–VIII, migrate old filingsPAN-based registration, portal compliance
3OSH & Women ComplianceDraft standing orders, creche setup, night shift SOPs, health checkupsSafety & women compliance readiness
4Social Security & Gig WorkersRegister on e-Shram, track aggregator fund, enable UAN portabilityFormalized gig/fixed-term workforce
5Payroll & Compliance AuditMonthly payroll reconciliation, PF/ESI audit, validate muster rolls & wage registersErrors & gaps corrected, audit-ready records
6Payroll & Compliance AuditContinuation & adjustments from Week 5Complete reconciliation
7Payroll & Compliance AuditContractor compliance trackingAll contractor obligations aligned
8Payroll & Compliance AuditFinal quarterly reviewCompliance assurance
9Monitoring & ReportingMonthly dashboard: wages, filings, OSH, social securityEarly detection of deviations
10Monitoring & ReportingBoard-level reporting on LIN, PF/ESI, OSHGovernance & strategic visibility
11Monitoring & ReportingInternal escalation & remediationRisk mitigation
12Monitoring & ReportingState-level amendments tracking, update policiesContinuous compliance & adaptability

Strategic & Analytical Impact

  • Financial: Short-term payroll rise 8–15%; long-term cost saving via reduced litigation & attrition

  • Legal: Audit-ready digital evidence reduces inspection & penalty risk

  • HR & Governance: Transparent contracts, structured payroll, workforce dispute prevention

  • Strategic: ESG compliance, investor confidence, scalable operations, formalized gig economy integration

Takeaway:

Labour Code 2025 compliance is strategic, lawful, and operationally essential.
Employers following this integrated roadmap achieve audit-ready payroll, structured workforce, digital governance, and long-term business resilience.



 

Tuesday, August 25, 2020

Labor Law Compliance in Haryana

The Haryana Labor Department's Portal can be accessed here. Your establishment should create an account on this portal for all eligible filing under various applicable laws online, and to access the latest notifications in their regard. The Ministry of Labor & Employment also has a Shram Suvidha Portal for all necessary information.



Applicability - For salaried employees with Basic Salary + Dearness Allowance less than Rs.15,000 per month, it is mandatory to open a PF account through the employer. Establishments with 20 employees or more are mandatorily required to register for the EPF scheme. Others can register voluntarily. Employees drawing a salary higher than Rs. 15,000 per month can also register voluntarily.

The employer's contribution is calculated as 12% of  Basic + DA. An equal amount is contributed by the employee as well. Out of the employer’s contribution of 12%, 8.33% is directed to Employees’ Pension Scheme. This amount is calculated on the salary of Rs 15,000. Thus, for every employee receiving a Basic amount equal to Rs 15,000 or more, Rs 1,250 each month is invested into EPS. The amount in addition to 8.33% is retained by the EPF scheme. On retirement, the employee receives his entire share plus the share retained to his credit. 

Registration - Online on the EPF Portal. The process for registering is given here and here. Employees have to obtain a UAN through their employers, which is their registration number with the EPF Scheme.

Returns - The amount is paid monthly before the 15th of the subsequent month through a challan online on the portal after logging in.

Forms - All other forms and processes are given on the official EPF website.

Penalty - Late payment invites interest @ 12% p.a. for every single day of delay. Further, penalty from 5% to 25% may be levied depending on the number of months of delay.

Wednesday, August 12, 2020

Compliance Calendar [August 2020 - March 2021]


Month   Due Date   Particulars   Head
Aug-20 03.08.2020 GSTR-1 Quarterly for Apr-Jun 2020 GST
05.08.2020 GSTR-1 Monthly for Jun 2020 GST
07.08.2020 TDS Deposit for Jul 2020 TDS
11.08.2020 GSTR-1 Monthly for Jul 2020 GST
14.08.2020 FLA Return for Foreign Liabilities & Assets as on 31.03.2020 FEMA
15.08.2020 Issue of TDS Certificates to employees in Form 16, others in 16A TDS
15.08.2020 PF & ESI Payment and Return for the previous month's salary Labor
20.08.2020 GSTR-3B for Jul 2020 (turnover > 5 crore) GST
31.08.2020 ITC-04 up to Jun 2020 GST
31.08.2020 GSTR-4 Quarterly for Apr-Jun 2020 (Composition) GST
31.08.2020 GSTR-6 of Mar-Jul 2020 for ISD GST
31.08.2020 GSTR-7 of Mar-Jul 2020 for TDS GST
31.08.2020 GSTR-8 of Mar-Jul 2020 for E-Commerce Operators GST
Sep-20 07.09.2020 TDS Deposit for Aug 2020 TDS
10.09.2020 GSTR-7 of Aug 2020 for TDS GST
10.09.2020 GSTR-8 of Aug 2020 for E-Commerce Operators GST
11.09.2020 GSTR-1 Monthly for Aug 2020 GST
12.09.2020 GSTR-3B of May 2020 for SS1* (turnover < 5 crore) GST
12.09.2020 Interest @9% starts on May GSTR-3B upto 30.09.20 SS1 (turnover < 5cr) GST
12.09.2020 Form PAS-6: Reco of Share Capital Audit Report (Unlisted Public Cos.) MCA
13.09.2020 GSTR-6 of Aug 2020 for ISD GST
15.09.2020 GSTR-3B of May 2020 for SS2* (turnover < 5 crore) GST
15.09.2020 2nd Installment for Advance Tax AY 2021-22 Income Tax
15.09.2020 Interest @9% starts on May GSTR-3B upto 30.09.20 SS2 (turnover < 5cr) GST
15.09.2020 PF & ESI Payment and Return for the previous month's salary Labor
15.09.2020 Financial Results filing with SEBI FY 2019-20 (Listed Cos.) SEBI
20.09.2020 GSTR-3B of Aug 2020 (turnover > 5 crore) GST
23.09.2020 GSTR-3B of Jun 2020 for SS1 (turnover < 5 crore) GST
23.09.2020 Interest @9% starts on Jun GSTR-3B up to 30.09.20 SS1 (turnover < 5cr) GST
25.09.2020 GSTR-3B of Jun 2020 for SS2 (turnover < 5 crore) GST
25.09.2020 Interest @9% starts on Jun GSTR-3B up to 30.09.20 SS2 (turnover < 5cr) GST
27.09.2020 GSTR-3B of Jul 2020 for SS1 (turnover < 5 crore) GST
27.09.2020 Interest @9% starts on Jul GSTR-3B up to 30.09.20 SS1 (turnover < 5cr) GST
29.09.2020 Interest @9% starts on Jul GSTR-3B up to 30.09.20 SS2 (turnover < 5cr) GST
29.09.2020 GSTR-3B of Jul 2020 for SS2 (turnover < 5 crore) GST
30.09.2020 ITR Filing for AY 2019-20 Income Tax
30.09.2020 Form DIR-3 KYC: Directors KYC for Companies MCA
30.09.2020 Form DPT-3: Return of Deposits for balance as on 31.03.2020 MCA
30.09.2020 Form MSME-1: Outstanding to MSME over 45 Days as on 31.03.2020 MCA
30.09.2020 Form BEN-2: Beneficial Owners Declaration in Companies MCA
30.09.2020 All pending MCA Forms for Companies without Additional Fees MCA
30.09.2020 Form LLP-11: Annual Return of LLP MCA
30.09.2020 E-Verification of ITRs pending verification since AY 2015-16 Income Tax
Oct-20 01.10.2020 New procedure follow for registration of not for profit entities Income Tax
07.10.2020 TDS Deposit for Sep 2020 TDS
01.10.2020 Interest @18% starts on GSTR-3B up to Aug 2020 SS1 (turnover < 5 cr) GST
01.10.2020 GSTR-3B of Aug 2020 for SS1 (turnover < 5 crore) GST
03.10.2020 GSTR-3B of Aug 2020 for SS2 (turnover < 5 crore) GST
03.10.2020 Interest @18% starts on GSTR-3B up to Aug 2020 SS2 (turnover < 5 cr) GST
07.10.2020 Equalization Levy payment for Jul-Sep 2020 TDS
10.10.2020 GSTR-7 of Sep 2020 for TDS GST
10.10.2020 GSTR-8 of Sep 2020 for E-Commerce Operators GST
11.10.2020 GSTR-1 Monthly of Sep 2020 GST
13.10.2020 GSTR-6 of Sep 2020 for ISD GST
14.10.2020 Form ADT-1: Auditor's Appointment (within 14 days of AGM date) MCA
15.10.2020 PF & ESI Payment and Return for the previous month's salary Labor
18.10.2020 GSTR-4 of Jul-Sep 2020 for Composition Dealer GST
20.10.2020 GSTR-3B of Sep 2020 GST
25.10.2020 ITC-04 of Jul-Sep 2020 GST
29.10.2020 Form AOC-4 for FY 2019-20 (within 30 days of AGM) MCA
29.10.2020 Form MR-3: Secretarial Audit (if paid-up cap > 50 cr; turnover > 250 cr) MCA
30.10.2020 Form LLP-8: Statement of Account & Solvency of LLP MCA
30.10.2020 GSTR-1 Quarterly of Jul-Sep 2020 GST
31.10.2020 Filing of Tax Audit Report AY 2020-21 Income Tax
31.10.2020 Form MSME-1: Outstanding to MSME over 45 Days as on 30.09.2020 MCA
Nov-20 07.11.2020 TDS Deposit for Oct 2020 TDS
10.11.2020 GSTR-7 of Oct 2020 for TDS GST
10.11.2020 GSTR-8 of Oct 2020 for E-Commerce Operators GST
11.11.2020 GSTR-1 Monthly of Oct 2020 GST
13.11.2020 GSTR-6 of Oct 2020 for ISD GST
15.11.2020 PF & ESI Payment and Return for the previous month's salary Labor
20.11.2020 GSTR-3B of Oct 2020 GST
28.11.2020 Form MGT-7: Annual Return FY 2019-20 (within 60 days of AGM) MCA
28.11.2020 MGT-8: CS Certificate (if listed, or paid up cap>10 cr, or turnover>50cr) MCA
30.11.2020 Filing of ITR AY 2020-21 Income Tax
30.11.2020 Payment of Bonus for FY 2019-20 Labor
Dec-20 07.12.2020 TDS Deposit for Nov 2020 TDS
10.12.2020 GSTR-7 of Nov 2020 for TDS GST
10.12.2020 GSTR-8 of Nov 2020 for E-Commerce Operators GST
11.12.2020 GSTR-1 Monthly of Nov 2020 GST
13.12.2020 GSTR-6 of Nov 2020 for ISD GST
15.12.2020 3rd Installment for Advance Tax AY 2021-22 Income Tax
15.12.2020 PF & ESI Payment and Return for the previous month's salary Labor
20.12.2020 GSTR-3B of Nov 2020 GST
31.12.2020 Application for Vivad Se Vishwas Scheme Income Tax
Jan-21 07.01.2021 TDS Deposit for Dec 2020 TDS
07.01.2021 Equalization Levy payment for Oct-Dec 2020 TDS
10.01.2021 GSTR-7 of Dec 2020 for TDS GST
10.01.2021 GSTR-8 of Dec 2020 for E-Commerce Operators GST
11.01.2021 GSTR-1 Monthly of Dec 2020 GST
13.01.2021 GSTR-6 of Dec 2020 for ISD GST
15.01.2021 PF & ESI Payment and Return for the previous month's salary Labor
18.01.2021 GSTR-4 of Oct-Dec 2020 for Composition Dealer GST
20.01.2021 GSTR-3B of Dec 2020 GST
25.01.2021 ITC-04 of Oct-Dec 2020 GST
30.01.2021 GSTR-1 Quarterly of Oct-Dec 2020 GST
31.01.2021 Annual Return/Form III under Minimum Wages Act Labor
Feb-21 07.02.2021 TDS Deposit for Jan 2021 TDS
10.02.2021 GSTR-7 of Jan 2021 for TDS GST
10.02.2021 GSTR-8 of Jan 2021 for E-Commerce Operators GST
11.02.2021 GSTR-1 Monthly of Jan 2021 GST
13.02.2021 GSTR-6 of Jan 2021 for ISD GST
15.02.2021 PF & ESI Payment and Return for the previous month's salary Labor
20.02.2021 GSTR-3B of Jan 2021 GST
Mar-21 07.03.2021 TDS Deposit for Feb 2021 TDS
10.03.2021 GSTR-7 of Feb 2021 for TDS GST
10.03.2021 GSTR-8 of Feb 2021 for E-Commerce Operators GST
11.03.2021 GSTR-1 Monthly of Feb 2021 GST
13.03.2021 GSTR-6 of Feb 2021 for ISD GST
15.03.2021 4th Installment for Advance Tax AY 2021-22 Income Tax
15.03.2021 PF & ESI Payment and Return for the previous month's salary Labor
20.03.2021 GSTR-3B of Feb 2021 GST
31.03.2021 TDS Returns for Apr-Dec 2020 TDS

Notes

Specified States under GST
SS1 Chhattisgarh, Madhya Pradesh, Gujarat, Maharashtra, Karnataka, Goa, Kerala, Tamil Nadu, Telangana, Andhra Pradesh, Daman & Diu and Dadra & Nagar Haveli, Puducherry, Andaman and Nicobar Islands, Lakshadweep
SS2 Delhi, Haryana, Uttar Pradesh, Chandigarh, Punjab, Rajasthan, Himachal Pradesh, Uttarakhand, Bihar, Sikkim, Arunachal Pradesh, Nagaland, Manipur, Mizoram, Tripura, Meghalaya, Assam, West Bengal, Jharkhand, Odisha, Jammu and Kashmir, Ladakh
MCA Forms having due dates that may vary for each company
PAS-6 HY within 60 days of deployment of form
AOC-4 Within 30 days of AGM
MR-3 Submitted along with AOC-4
MGT-7 Within 60 days of AGM
MGT-8 Submitted along with MGT-7
ADT-1 Within 15 days of AGM or appointment of auditor
MGT-14 Within 30 days of GM
CRA-2 Earlier of 30 days from BM appointing Cost Auditor or within 180 days from 1st April
CRA-4 Within 30 days of receipt of Cost Audit Report
INC-20A Within 180 days of incorporation
BEN-2 Within 30 days of declaration in BEN-1
MCA - Original Due Dates
DPT-3 30th June
DIR-3 KYC 30th September
MSME-1 For HY ending 31st March, it is 30th April. For HY ending 30th September, it is 31st October.
LLP-11 30th May
LLP-8 30th October
FEMA Compliances - Original Due Dates
FLA 15th July
ECB 2 Monthly
FC-GPR Within 30 days of issue of capital instrument
FC-TRS Within 60 days of remittance of funds or transfer date, whichever is earlier
FDI LLP-I Within 30 days of receipt of consideration
FDI LLP-II Within 60 days of date of receipt of funds
Form DI Within 30 days from date of allotment of capital instrument

Tuesday, May 26, 2020

Reduced PF Rates from 12% to 10%

Rate Reduction: The rate of PF contribution of both employer and employee has been reduced from 12% of basic wages and dearness allowance to 10%

Eligibility:
- All class of establishments covered under the EPF & MP Act, 1952
- Not applicable to Public Sector enterprises or any establishment owned/controlled by the govt.
- Not applicable to establishments eligible for PMGKY benefits

Period: Wages for three months of May, June & July 2020

Effect: the Employee shall have a higher take home pay due to reduction in deduction from his pay on account of EPF contributions and employer shall also have his liability reduced by 2% of wages of his employees

Administrative Charges: No change in the EPF administrative charges (0.5% of EPF wages subject to minimum prescribed) and EDLI contributions (0.5% of wages), which continue to be payable by employers.

Source: https://pib.gov.in/PressReleasePage.aspx?PRID=1625152

Wednesday, May 13, 2020

TDS Reduction | Income Tax Dates | MSME Definition & Loans

The Finance Minister announced relief measures for businesses yesterday as part of the GoI's package for Covid-19 related relief to the economy. Here's summarizing a few relevant measures under Income Taxes, MSME Definitions & Loans, and PF.

A. TDS/TCS Rate Reduction - You may have to pay Higher Advance Tax

1) 25% reduction in existing TDS rates for specified non-salary payments which are made to residents. Payment for transactions like contract, professional fees, interest, rent, dividend, commission, brokerage, will be eligible for reduced TDS rates.

2) TCS rates for specified receipts have also been reduced by 25%.

3) These reduced rates will apply till the end of the financial year i.e. 31st March, 2021.

4) However, also note that if you are someone who would normally not be eligible for income tax refund as your TDS would not necessarily cover your entire tax liability, you are required to pay Advance Tax in four installments during the year, and there is no change in those provisions.

5) No TDS reduction on salary payments, so that will continue as is.

B. Income Tax Due Dates Extended - ITR Filing & Assessments

1) Due date for all Income Tax Returns (ITRs) for FY 2019-20 has been extended from 31st July and 31st October to 30th November 2020.

2) Tax Audit due date has been extended from 30th September to 31st October 2020.

3) Date of Income Tax Assessments getting barred on 30th September has been extended to 31st December. Similarly, assessments getting barred on 31st March 2021 are extended till 30th September 2021.

4) Window for making payments under ‘Vivaad se Vishwas Scheme' without any additional amount has been extended till 31st December 2020.

5) Immediate release of pending Income Tax refunds to charitable trusts and non-corporate businesses like sole proprietorships, LLPs and cooperative societies.

C. MSME Definition Change & Documents for Registration

1) The definitions of Micro, Small & Medium Enterprises have changed to:
Micro: Investment in P&M < Rs. 1 crore AND Turnover < Rs. 5 crore
Small: Investment in P&M < Rs. 10 crore AND Turnover < Rs. 50 crore
Medium: Investment in P&M < Rs. 20 crore AND Turnover < Rs. 100 crore

We would urge any manufacturer or service provider who has not taken an MSME Registration yet to obtain it at the earliest.

2) The documents required for MSME Registration are:
1. Adhaar Card of the Promoter
2. PAN of the Enterprise
3. Incorporation Document such as Partnership Deed, Certificate of Incorporation with Memorandum of Association, etc.
4. Address Proof
5. Bank account details
6. Gross Value of Plant & Machinery invested
7. Last financial year's sales turnover
8. Phone No. & Email ID for Registration
9. No. of Employees

E. Bank Financing Relief for MSMEs - Please Contact Your Bankers Immediately to Know Their Plan of Action on This (Preferably PSU Banks)

1) Emergency Working Capital Facility:
- Additional working capital finance of 20% of the outstanding credit as on 29th February 2020
- Disbursed in the form of a Term Loan at a concessional rate of interest
- Available to units with up to Rs 25 crore outstanding and turnover of up to Rs 100 crore whose accounts are standard (not defaulting in bank payments)
- No additional guarantee or collateral to be provided.

2) Subordinate Debt for Stressed Borrowers or NPAs (Defaulting):
- Banks are expected to provide debt to promoters of stressed and defaulting MSMEs
- Loan amount would be equal to 15% of promoter's existing stake in the unit 
- Maximum loan amount of Rs 75 lakhs only.

F. Provident Fund Relief

1) Government will contribute 12% of salary each on behalf of both employer and employee to EPF for another 3 months - June, July and August 2020.

2) Statutory PF contribution of both employer and employee reduced to 10% each from existing 12% each for all establishments covered by EPFO for next 3 months.

The entire press release can be accessed here. We also recommend waiting for the release of the official Notification effecting such changes to clarify on areas of mixed or unclear interpretations.

Wednesday, December 21, 2016

‘Ease of Doing Business’ & Business Startups - Government Effoorts

Government of India in its efforts to improve the business climate of the country and also improve country’s ranking in the World Bank’s report on Ease of Doing Business has given a   brief overview of the reforms undertaken recently and agreed to implement the suggested reforms by January, 2017. In this regard, each Department shall review the progress every week for carrying out the necessary reforms.
The major decisions taken during the aforesaid meeting were:
·         eBiz portal shall be mandated for starting a business – MCA work,  PAN and TAN, EPFO & ESIC  all will be done on same portal
·         MCA, CBDT, Ministry of Labour & Employment will work towards reducing the number of procedures & Start Business within 4 days.
·         Shram Suvidha Portal shall be the only portal for filing returns, challan and making online payment for EPFO & ESIC contributions as well as other filings and payments.
·         Department of Revenue and Ministry of Shipping shall work towards increasing the number of consignments and to ensure that the cost and time to export and import gets reduced.
·         MCA shall work so that the provisions under Insolvency and Bankruptcy Code are implemented through NCLT.
·         For improving the indicator ‘Getting Credit’, Department of Financial Services and Ministry of Corporate Affairs shall work towards integrating CERSAI database with ROC Registry of Charges to create a single registry of assets.
·         For improving ‘Enforcing Contracts’ the initiative of eCourts should be expedited for electronic filing of complaints, summons and payments especially in the Commercial Courts.
·         On ‘Construction Permit’, Ministry of Urban Development should explore the possibility of commencing the construction on architect’s certification and approval being granted only at the time of the occupancy of the building.
The next review of the progress to ensure their implementation within the time frame as agreed shall be done in the end of January, 2017.

Friday, August 26, 2016

The Payment of Bonus (Amendment) Act, 2015 - Whether retrospective for Financial Year 2014-15

The Payment of Bonus (Amendment) Act, 2015 received presidential assent on 31 December 2015. The Amendment Act provides for major changes in the eligibility limit and increase in ceiling for calculation of bonus of employees under the Payment of Bonus Act,1965. These amendments are made on the requests of trade unions but making it effective retrospective is very harsh and burdensome for employers.
The payment of Bonus (Amendment) Act, 2015 has three significant changes which have affected employers’ budgets for payment of salaries for financial year 15-16
1.       This Act may be called The Payment of Bonus (Amendment) Act, 2015. It shall be deemed to have come into force on the 1st day of April, 2014.
The provisions of the Payment of Bonus (Amendment) Act, 2015 shall be deemed to have come into force on the 1st day of April, 2014. 

2.       The Amendment in Section 2 for Increase in the Eligibility Limit :
 In section 2 of the Payment of Bonus Act, 1965 in clause (13), for the words ‘‘ten thousand rupees’’, the words ‘‘twenty-one thousand rupees’’ shall be substituted.

Effect  : The Payment of Bonus (Amendment) Act, 2015 has enhanced the eligibility limit under section 2(13) from Rs.10,000/- per month to Rs.21,000/- per month.
3.       Amendment in Section 12 for increase in Calculation Ceiling :

 In section 12 of the principal Act,—
(i) for the words ‘‘three thousand and five hundred rupees’’ at both the places where they occur, the words ‘‘seven thousand rupees or the minimum wage for the scheduled employment, as fixed by the appropriate Government, whichever is higher’’ shall respectively be substituted;

(ii) the following Explanation shall be inserted at the end, namely: ‘Explanation.—For the purposes of this section, the expression ‘‘scheduled employment’’ shall have the same meaning as assigned to it in clause (g) of section 2 of the Minimum Wages Act, 1948.’.

The Calculation Ceiling under section 12 from Rs. 3500 to Rs.7000 or the minimum wage for the scheduled employment, as fixed by the appropriate Government, whichever is higher. 

Key amendments by the Payment of Bonus (Amendment) Act, 2015:
  1. Eligibility Wage Ceiling increased - under the provisions of the previous Act, an employee was eligible to receiving statutory bonus if he had worked for at least 30 days in an accounting year and drew a salary of  Rs.10,000/-  per month,.
 The amendment increases this eligibility limit to a salary threshold of  Rs 21,000/-per month.
  1. The Ceiling for Bonus Calculation increased - under the previous Act, if an eligible employee’s salary were more than Rs3,500/-  per month, for the purposes of calculation of bonus, the salary would be assumed to be limited to Rs.3,500 per month.
 The amendment increased  this wage ceiling from Rs.3500/- to Rs.7,000/- per month or the minimum wage notified for the employment under the Minimum Wages Act, 1948, whichever is higher.
  1. A Retrospective amendment - the amendment has been deemed to be enforced from April 1, 2014.
Old Provisions as per The Bonus Act , 1965 were as under:-
-The bonus payable is to be determined on the basis of profits or on the basis of production or productivity of the establishment.
-The Act is applicable to factories and establishments employing at least 20 persons, although in some Indian states, the Government has extended the applicability of the law by reducing the threshold to factories and establishments employing at least 10 persons.
-The Act requires an employer to pay to an eligible employee a minimum bonus at the rate of 8.33% of the salary earned by the employee during the accounting year.
- As per law, the maximum statutory bonus can be limited to 20% of the employee’s salary.
Reactions from various Industrial Associations on Retrospective Effect from Fin Year 2014-15
-          The retrospective amendments were opposed on the reasoning that the adequate time was not given to employers to plan for such increase in their salary costs. The major issue for retrospective amendment was that employers would not have provided for this expense in the previous financial year (2014-2015) for which the books of accounts were already closed and taxes also paid.
-          Such retrospective application from Financial year 14-15 would lead to financial stress, to the manufacturing sector where the number of workers is high or in case of  Micro, Small and Medium Enterprises.
Stay on Retrospective Effect from April 1, 2014
Upon representations from various industry bodies by way of writ petitions in various State High Courts challenging the retrospective effect from Fin Year 2014-15, several high courts have stayed the retrospective operation i.e Kerala High Court, Karnataka High Court, Madhya Pradesh High Court, Allahabad High Court, Gujarat High Court and Punjab & Haryana High Court have passed interim stay order in January and February, 2016. Thus, within a period of six months more than six states in India have already obtained a stay on the retrospective operation of the amendment from Fin Year 2014-15. In light of the above stay orders it may be taken that the amendment would take effect from the financial year 2015-16 onwards, and not 2014-15 as earlier stipulated. With the financial management of even private companies till date wait and watch policy is being followed but should be sorted out by the Central Government.
In the past history if we see whenever certain provisions were made applicable with retrospective effect in favor of labours, the employers could not succeed in challenging the same on various reasons and issues. Since the matter is currently sub judice, it is yet with the judiciary to balance the amendment. As for future the ceiling and amount of bonus has been increased but for retrospective how Central Govt will balance the welfare of employees with the interests of employers whereas in the past the Central Government has never decided in favour of employers and stay of court seems to the postponement of establishment of retrospective amendment this time too. The history repeats itself so may be this time again may repeat and favour the labour.
Accounting Treatment in Finalisation of Financial Statements for Financial Year 2015-16
1. Make additional provision of Bonus Due for Financial Year 2014-15
2. Make Provision for bonus for Financial Year 2015-16
3. Pay additional bonus if Central Govt decides in favour of labour and establishes the retrospective applicability from 01.04.2015
4. For the companies where they pay bonus @8.33% without considering the ceiling of salary or minimum wage they need not to provide for as such change is not effecting at all as they must have paid more than what is actually required to pay and no additional liability remains unpaid.