CUTS capacity Building Programme 21st September 2018

FINANCIAL BENEFITS TO EMPLOYEES

EMPLOYEES PROVIDENT FUND & MISC PROVISIONS ACT 1952

EMPLOYEES STATE INSURANCE ACT 1948 PAYMENT OF GRATUITY ACT 1972 EMPLOYERS’ RESPONSIBILITY NOT INVOLVING FINANCIAL BENEFITS SEXUAL HARRASSMENT ACT RIGHT TO INFORMATION ACT

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PF Act is applicable to entire India, except J&K, which has a separate PF scheme.

Applicable on all establishments with 20 or more employees, irrespective of format, i.e. company, partnership, sole-proprietorship, etc.

Once registered, Act will continue to apply even if employees < 20. Voluntary registration is also allowed but once registered must continue. S. 16 exempts following type of organisations, mainly cooperative societies,

organisations under the control of central / state govt., where other contributory schemes are applicable. Till 2015 there was a circular which entitled non-profit societies to be exempt, but it has expired. Hence applicable to all NGO organisations which become eligible.

Type of employees covered – all employees whose Basic + DA is upto Rs 15000 pm (effective 1-9-14). However once an employee included, needs to continue even after salary goes above Rs 15000.

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FINANCIAL BENEFITS Employees PF and MP Act 1952 is the basic act which is meant for saving by

employees in Govt /Public / Private sector. It provides mainly 3 benefits – Contributory PF, Pension benefits to

employees & their families & insurance covers to members. Originally it only provided for PF and came into effect on 1-11-1952. Effective 1-3-1971 scheme also provided for Family Pension Scheme to

provide for distraught family after demise of the employee (often only bread-earner). Amended in 1995 to cover even employees retiring in the age group of 50 +.

EDLI Effective 1-8-1976, the Act was amended to provide for Insurance or

Employees Deposit Linked Insurance Scheme (from min of Rs 2.5 lakh to a max Rs 6 lakh) – Amended in 2016. This is payable on Death of an employee during Working Life of the Employee. Insurance premium is payable by Employer and not employee.

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PF contribution Notes:

1. New female employee cont. 8%. Employer cont. of 12% to be reimbursed by Govt. applicable for first 3 years.This is applicable for new employees recruited during FY 2018-19.

2. PF Adm. Charges reduced from 1.1% to 0.5% effective 1st Jun 2018 subject to min. Rs 500/- Rs 75 functional/non-functional org.

3. EDLI charges waived off effective 1 Apr 2017.

Employee Cont. 12% (note 1) entire amount to PF scheme

Employer Cont. 12% (Note 1) -8.33% to pension scheme (max 541/-) - Bal to PF scheme

PF Adm Charges 0.5% (Note 2) Payable by employer

Employee Deposit Linked Insurance 0.5%

Payable by employer

EDLI Insp. Charges 0.01% (Note 3) Payable by employer

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Employee : Any person who receives wages from an employer directly or indirectly for any kind of work for the establishment and includes (1) persons employed through a contractor or (2) or even engaged as an apprentice (except apprentice defined under Apprentices Act 1961).

SC has generally taken a broader view in favour of employees when deciding cases of PF (Andhra Univ vs RPFC 1985).

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All Saints Home vs Smt Chaya P Pardeshi & Anr. (Bombay HC – 7th June 2001) conclusions even NGOs would be classified as Industry under Industrial Dispute Act 1947. All labour legislations, incl PF Act is applicable to NGOs. Labour Laws\6-PF materials-work shop\1-EPF and Mp act-reading materials.doc

An employer cannot reduce salary for its PF contribution PF Com. Banglore vs Harihar Ployfibre 1991

Employees PF amounts cannot be attached under any decree in respect of debt Karnataka PF Commissioner vs Puttamma 1991

A notification issued in 2010 exempted certain NGOs from PF, but the same has also expired. http://blog.srr-foundation.org/?p=2606#comments

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Entire EPFO office and PF management since computerized, incl. deposit of PF dues.

Registration applications need to be filed online. Status of application can also be verified online.

All PF returns to be filed online. UAN allotted to each employee. Each employee has to fill

up a KYC details, including Adhar & PAN. Helps get online information/transfer of funds, etc.

Withdrawal of Rs 30,000 or more, if 5 years not complete is subject to TDS.

No affixing of Rs 1 stamp required while making payments through NEFT against claims.

Effective Feb’16, grace period for payment of PF dues has been removed.

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Each employee has to have a 12 digit UAN No. This is unique and helps in: Employee can download complete details of

transactions in her PF a/c. Helps in monitoring if correct balance trfd

when changing jobs. Get EPF balance using missed call / SMS. Changes in KYC details allowed. PF withdrawal made easier.

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Welfare legislation for providing health benefit to employees in case of sickness, maternity and employment injury. This is to comply with various provisions under Constitution. (Art. 41, 42, 43)

Legislation was enacted by Central Govt initially covering only non-seasonal power using factories employing 10 or more employees. It also empowered states to extend the scheme to other class of establishments.

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Today most state govts have extended the scheme to all shops, hotels, restaurants, cinemas, motor transport undertakings and newspaper establishments employing 10 or more persons. Mahrashtra & Chandigarh still continue with a limit of 20 employees. Scheme not applicable in Arunachal Pradesh & Lakshadweep.

Shops basically would mean a commercial place where goods are traded, in case an NGO undertakes such activities, they would be covered.

Establishments as per Delhi Shop & Establishment Act refers to establishments which are undertaking commercial activities as defined in the Act.

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Scheme does not cover mines covered by Mines Act 1952 & railway sheds.

In most states educational institutions have also been covered.

Even if this limit is covered even by single day in a whole year, the Act becomes applicable.

Eligible employees who will be covered are persons who are drawing Rs 21,000 or less of total wages, including various allowances.

For count of 10/20 all employees considered irrespective of this salary limit.

Even full-time directors in a company are considered for the count. But sole-proprietor / partners in a business not considered.

Contractor / apprentices not considered.

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Financial contribution by an employee 1.75% (1%) of the salary. Employer contributes 4.75% (3%) (Reduced cont. for first 2 years, where scheme is recently implemented).

Nil contribution by person earning less than Rs 70/- per day.

Schemes bars employees to make claim from employer for any employment injury under any law. Internal Management & Statutry Compliances of HR by Subhash Mittal

Full medical coverage including surgical & obstetric. It covers OPD & hospitalisation.

It also covers medicines, pathological and radiological investigations, ambulance services, etc.

Cash benefit to compensation for loss of wages during illness, disablement, maternity.

Artificial limbs, hearing aids, spectacles, wheel chairs, etc.

Vocational training to find alternative employment.

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Employee & family members get full medical coverage, employer need not provide for any.

Relieved from payment of compensations [Workmen’s Compensation Act (though still payable if negligence proved), State Maternity Benefit Act].

Contribution tax exempt. Indirect benefits of having healthy employees

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PF is applicable to all NGOs and hence while making CSR payments these aspects need to be borne in mind.

ESI is not applicable to NGOs, except for educational institutes or entities undertaking commercial activities. However considering beneficial nature of ESI at a reasonable cost, NGOs may consider registering for the same.

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Earliest concept of gratuity, came with Working

Journalists (Conditions of service) & Misc. Prov. Act 1952 – still in use

A few State Govts started enacting legislations providing for Gratuity ▬Kerala Industrial Employees Payment of Gratuity

Act 1970 ▬West Bengal Employees’ Payment of Compulsory

Gratuity Act 1971. ▬Even some labour courts had awarded Gratuity

awards. Central Govt promulgated Payment of Gratuity Act in

1972

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Act is applicable to every factory, mine, oilfield, plantation or port and railway company in the whole country, except J&K, where plantation & ports not covered.

It is also applicable on Shops & Establishments as specified by the State Govt. employing more than 10 persons. NGOs do not fall in the definition of Shops & Establishment, if they do not undertake sale / purchase. However if they have sale / purchase, from the outlet / establishment then they would fall within this definition and the Act would become applicable.

Any other class of Shops & Establishments employing more than 10 persons specified by central Govt. Using this power, central Govt has made Act applicable to ▬ all educational institutions employing 10 or more employees ▬ all registered trusts & societies employing 10 or more persons (this has

since been confirmed by a court decision) – Even temples are covered (Jagannath Temple Puri - 1992)

▬ Motor transport undertakings ▬ Clubs, Lawyer’s offices employing 10 or more persons ▬ Chamber of commerce & industry

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Govt can issue exemption certificate, where it is proved that establishment has a scheme which is not in any way less favourable than this scheme

Panchayats, local bodies not covered. In fact a court case of MCD stated that it was

covered, subsequently in 2005 Govt issued notification exempting such bodies.

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Eligibility Gratuity is payable to an employee who at the

termination of employment has served 5 years’ of continuous service.

Termination could be due to superannuation, retirement, resignation or even removal. However if a person is removed on grounds of theft, fraud, dishonesty, behaviour amounting to moral turpitude (assault, rape, sexual abuse, etc.), then Gratuity can be withheld.

5 years’ service condition not applicable in case of death / disablement due to accident / disease. Internal Management & Statutry Compliances of HR by Subhash Mittal

Continuous Service Absence from duty because of sickness, accident,

leave, layoff or strike, lockout, stoppage of work for which the employee is not at fault will not be considered to be an interruption or break in service.

Employee has put in 240 days' work in 12 calendar months preceding the date of calculation, or 190 days if the establishment works less than 6 days a week or the employee works below ground in a mine.

Employees in a seasonal establishment need to work for minimum of 75 per cent of the required attendance

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15 days wages for every completed year. A month to comprise of 26 days. Formula : (Basic+DA ) of last drawn salary x

15/26 x No. of years completed service Maximum Gratuity payable is Rs 20 lakhs (S.

4(3)) Tax exemption upto max. amount is

exempted from tax. Internal Management & Statutry Compliances of HR by Subhash Mittal

Time served with an employer cannot be transferred to another employer. Confirmed by courts NS Krishna vs BHEL (1995)

Section 4A authorises central Govt to make it compulsory to buy an insurance policy in this regard. However Govt has not used this power so far.

Generally employers have started subscribing to LIC policy in this regard.

All employees covered irrespective of their salary level. This entitlement is irrespective whether employer is in

profits / losses. In case of dispute, employer will need to deposit gratuity

payable with relevant labour authority.

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In 1990s Bhanwari Devi in Rajasthan was gang raped. SC laid down Guidelines to tackle sexual harrassment at

workplace called Vishakha Guidelines. In 2013 Vishakha Guidelines were replaced by Sexual

Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act 2013.

All employers having more than 10 employees to have a ‘Internal Committee’ for receiving complaints on Sexual Harassment. Such a Committee to be formed at each administrative Unit or Office.

Committee to be presided by a Senior Women Employee of the unit/location, 2 employees with experience in social work, one member from an NGO.

At least one half of the members of Internal Committee to be women.

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Questions ?

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