In this article Aditya Shrivastava, Content Marketing Manager talks about the 13 laws that every HR should know about along with extremely relevant resources which can help you up your game.
HR managers have a big role in shaping how a company grows. Right from recruiting, inducting, training and development and later to performance assessment and grievance resolution, they are responsible for performance, retention and satisfaction level of employees.
Law has a very important role to play in what any HR manager does in a day, though it may not be always apparent. For instance, hiring is accompanied by contracts and possible negotiation. Firing may require one to follow provisions of different contracts, ensure that any intellectual property created by an employee or a consultant is protected and secured in favor of the company and that proper disciplinary proceedings took place if someone is being fired for a breach in the code of conduct, sexual harassment etc. Many HR managers perform these tasks without having any inkling about the legal underpinnings of these functions, especially at a junior level. This can be quite risky from the company’s perspective.
This is one of the primary reasons why every HR course needs to have a legal module. However, this is usually covered in the way that very scared patients go through a root canal. You close your eyes through the ordeal and try to forget the experience as soon as it is over. With exceptions, of course, most fresh candidates who have specialized in HR have precisely little practical knowledge about labor and employment laws, or any other law that may be relevant to their work.
However, as you go up the chain, legal knowledge becomes indispensable. Let’s say you are drafting a leave policy for a company, and fail to check the relevant Shops and Establishments Act of the state, you will almost certainly get it wrong. The consequence can be paying heavy fines by the company if an inspector comes visiting, a potentially negative report in the media, and your bosses being very cross at your lack of relevant technical knowledge thereafter.
Let’s take another example. If an organization has more than 25 or more employees, Employment Exchange (Compulsory notification of vacancy) Act, 1959 mandates a private establishment to give a public notification to certain employment exchanges. Most HR managers have no clue about this law and their employers may have to end up paying big fines and dealing with legal hassles because of non-compliance.
Human resource personnel are often the first ones to register or discover internal turmoil, decline in productivity of individuals, unhealthy leadership, retention failures, even corruption and nepotism. Most of such issues have various legal implications and angles that need to be considered at a senior level to be addressed. When disastrous and expensive legal proceedings are assessed retrospectively, it is often found that the root was in unaddressed concerns. A good HR can see these concerns ahead of time and address them, therefore saving the resources of the company in a big way.
Let’s take an example. Let us imagine that in a company’s employment agreement there is a poor or unenforceable non-compete clause. This means that over a period of time employees will figure out that the company is not in a position to enforce non-compete and many may join competitors, leak sensitive data and lead to major brain drain for a company.
This can be very well avoided by a smart and legally aware HR manager who fixes that clause, ensures that there is a bankable arbitration procedure to enforce the clause and create awareness amongst employees about how serious the company is about enforcing the non-compete obligation.
India Inc is suffering from the lack of exactly this ability. There are too few HR managers who have the skills of this kind. Nipun Bhatia, AVP Legal League Consulting is very positive about the need of legal training for HR managers, “Collaboration of law with HR training is one of the most sustainable solutions. It leads to a workspace which has effective policies eventually leading to more productivity and sustainability.”
If you are an HR manager, here is a list of statutes and regulations you could learn about and help your organization succeed:
1. Sexual Harassment (Prevention, Prohibition and Redressal) Act, 2013
The 5 year old act has taken private business sector by the storm over the last few years. In most of the cases, HR managers are the first recipient of a sexual harassment complaint. They are also actively involved in drafting of Sexual Harassment Policies and formation of Internal Complaints Committee. HR managers are also responsible for the performance of the Internal Complaints Committee. What if the committee completely botched up a hearing? Would that reflect well on the company or the HR manager? Hence, even if the HR manager is not part of sexual harassment committee, he or she should have a good understanding of the law, compliances and procedures involved.
Here is a quick test to see if you know enough about the sexual harassment law. It is a basic question. Answer it for yourself. Which of the following people are not covered by sexual harassment act?
- Women consultants
- Women customers
- Women contract workers
- Women interns
- Women visitors to the office who do not belong to any of the above categories
What did you choose? Well, all of those people are covered by the sexual harassment act.
If you could answer that correctly, you probably already know about the hairy issues that arise out of this act. If you didn’t know, please note that this lack of information could lead to serious problems, as many HR managers have been discovering.
Here are some resources that might be useful for you if you are trying to learn more about sexual harassment laws:
- An exemplary handbook on sexual harassment compliance
- How to identify the local level committee (government reporting body) and responsible district officer who implements the law
- How to conduct sexual harassment sensitization
- Important actions to take to comply with sexual harassment laws in India
- Drafting sexual harassment policy
- How to train internal complaint committee members and HR personnel
- How to implement sexual harassment laws at workplace course for HR managers
Case studies: 5 companies that went down due to sexual harassment
Implementing sexual harassment laws at the workplace can be quite a challenge. You can get to learn more about it and in fact, develop specific expertise regarding this issue as some women have successfully done. It would not just act as a huge advantage to your organization but would be of immense help to you personally. More and more companies look for HR professionals who are well equipped with the knowledge and skills to tackle sexual harassment at a workplace. You could be the ideal choice if you are specialized in such a rare skill.
2. The Factories Act, 1948
Factories are often equated with labour issues and inspector raj. Be it for numerous compliances or for or any regulations related to working conditions, knowledge of this act is necessary for HR managers. More and more large companies, especially MNCs are now approaching consultants and training institutes that can train their HR managers about Factories Act compliances, though it is not per for course for SMEs and family businesses yet. At iPleaders, we have worked with several large companies in this domain. If you work in an organization that deals with manufacturing or has factories, then it is important for you to know about this act whether your organization takes the initiative or not. Indiavidual HR managers who want to learn about Factories Act will be better off taking up a university certified labour law course. Some organizations like the Indian Railways even reward employees who earn a diploma or recognized certification in this area.
This act prescribes the basic rights and interests of the workers, and the guarantee to provide them with basic amenities like proper sanitation, ventilated work space, safety for using machinery etc. The maximum working hours are prescribed are not more than 48 hours in a week. Compliance with this act can act as a boon for this company as it can effectively avoid labour conflicts in the future.
Here are some useful resources for you regarding this law:
- Compliance checklist under factories act
- How to differentiate between factory workers and non-factory workers
3. The Employees Provident Fund Act, 1947
This act is aimed at providing a kind of social security to the industry employees. If you have an employee which is working in your factory or in association with the work of your factory, he is entitled to become a member of this fund. The benefits like retirement pension, medical care, housing, family obligations, education and benefits arising out of insurance, rights of older employees post retirement, are few aspects which are covered under this act. You can learn more about this act from these resources:
4. The Apprentices Act, 1961
Do you know what apprentices are?
What if your company hires apprentices and do not give them the required benefits?
Can an intern be an apprentices?
As per Oxford dictionary, an apprentice is a person who is learning from a skilled employer, having agreed to work for a fixed period of time. If your organization offers apprenticeship then you need to make the policies for them as per this act. The act allows you to take casual leave for 12 days, medical leave of 15 days and extraordinary leave of 10 days in a year. You can read more about Apprentices Act from these sources:
- All you need to know about Apprentices Act 1961
- An Analysis Of The Apprenticeship Act, 1961
- Novation Of Contract Of Apprentices
- A critical analysis of the Apprentice (Amendment) Act, 2014 : Will it create more employment opportunities for the youths?
- Labour laws related to Trainees in India
5. The Maternity Benefit Act,1961
Maternity benefits act is perhaps the most known act in this list. This act is aimed at providing full benefits and protection to the mother and the child during the time of maternity in the form of paid maternity leaves. However, let’s try to understand how much do you know about the provisions.
Do you know the number of days a pregnant woman should have worked in your organization to claim maternity benefits?
Do you know that she cannot resume with the same kind of work she used to do prior to pregnancy?
If a pregnant woman has worked in your organization for a period of 80 days, she is entitled to maternity benefits under the act. The act also provides for provision of light work, upto a period of 10 weeks, after she resumes work. There are some queries that an HR manager cannot help but know the answers to. You can find more resources here:
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- Everything you need to know about the recent Maternity Benefit Amendments
- Employer’s obligations under the Maternity Benefit Act, 1961
- Everything you need to know about the recent Maternity Benefit Amendments
- Maternity Benefits in Organized & Unorganized Sector
- All you need to know about employers obligations towards employee
6. The Workmen’s Compensation Act, 1923
If you are an HR you need to know the kind of liabilities your organization might have in case of any labour accident. Although, there are security departments in the factories which ensure that every individual is following the safety guidelines, however, as an HR it is your responsibility to ensure that the necessary tools and equipments are provided and complied with. You need to know that all of the regulations and guidelines are created in adherence to this act so that unnecessary future liabilities can be avoided.
So what is this act?
It is an act aimed to provide financial protection to the workers or their dependants, in case of an injury or accident at the time of work. It provides for financial compensation in the case of any such accident. In case of non-compliance, the employer is liable for a criminal offence. You can read more about it in the following sources:
- Can workmen be deemed as an Employee of the Principal Employer where there is no Registration or License under the CLRA Act in India?
- Employer’s Liabilities under Labor Laws in India
- Required Amendments in Workman’s Compensation Act
7. The Payment of Gratuity Act, 1972
Gratuity is a part of salary, received by the employees from their employers as a token of gratitude for the services performed by them during their employment tenure. It is one of the many retirement benefits that they are entitled to.
An employee is entitled to gratuity if he/she has completed one year of service in an organization. The HR manager is required to know about this act, so that in case of an unfortunate death of an employee who has completed one year of continuous service in a company, or in case of retiring individuals, basic gratuity is awarded. You can read more about gratuity here:
- All You Need to Know About Payment of Gratuity Act 1972
- What to do if your employer refuses to pay gratuity?
- Payment of Gratuity to contract labours in India
- Amendments to section 4 of the Payment of Gratuity Act
8. The Payment of Wages Act, 1936
As an HR it is your responsibility to see that the due wages are credited to the workers on a monthly basis and without unnecessary deductions. This act is a guide to ensure that any such discrepancies can be avoided. This act provides standards for assessing the remuneration of the employees and ensures that the salaries are governed as per the industry standard. This is an act meant to give you and your employee an equal bargaining powers. It is a must know to avoid any future conflicts. You can read more about the act here:
- The Payment of Wages Act 1936
- What are the instances under which an employee can sue his/her employer
9. The Industrial Disputes Act, 1947
Right from the cap on working hours to provision of conciliation between the company and its employees, this act has all of it covered.
With an aim to settle the employer-employee disputes amicably, it is a tool for peaceful resolution. It is utmost important for you to ensure that the employee is given at least a six weeks notice before getting fired. Mostly the issues such as wages, holidays, working hours etc, or anything that can cause a dispute, which must be adhered to form a part of the act. Can you imagine the kind of power that can vest with you if you know how to take care of these disputes? You can know much more about this act here. You can read these sources for more information:
- Industrial Dispute Settlement Machineries
- Right to strike under Industrial Dispute Act, 1947
- Provisions For General Prohibition Of Strikes And Lockouts
10. State Wise Factories and Establishments (National, Festival and other Holidays) Act, read with State wise Factories and Establishments (National, Festival and Other Holidays) Rules:
While deciding the leave policy, you are required to consciously comply to these rules. These rules decide the national and state leaves which are based upon the religious and cultural beliefs of a particular state. As an HR it is your responsibility to ensure that cultural sentiments of any employee is not hurt and their happiness quotient in your organization is on a constant high. You can read more here.
11. The Payment of Bonus Act, 1965
Do you know which employees are entitled for bonus?
Are the employees on higher pay scale entitled to more bonus than others?
How many times is an employee entitled to bonus?
As the name suggests, this act is aimed to provide bonus to the employees of certain industries and establishments. Every employee, irrespective of skilled or unskilled work is entitled to a bonus every accounting year if his salary is above 15,000 and he has worked for a minimum of 30 working days in a year. You can read more here:
- A Critical Analysis Of The Payment Of Bonus Act, 196
- Applicability of POBA
- What is the maximum ceiling for director’s remuneration? Also, which section of the companies act governs executive compensation?
12. The Employees State Insurance Act, 1948:
This statute acts as a self-financing security for every employee in India. The employer is required to contribute 4.75% of the 6.5% of insurance to all the employees who are earning 15,000 or less per month. This act provides health and medical benefits to all the employees and upto 6 dependents of the employees. In case of a tragedy, funeral, accident, medical contingency, injury, maternity and sickness, an employer is required to cover the expenses through an insurance as per this act. You can read more about it here :
- Employer’s Guide to Employee State Insurance Laws – concepts and compliance
- All you need to know about employers obligations towards employee
- All you need to know about Employees Deposit Linked Insurance (EDLI)
13. Child Labour Regulations (CLR)
One of the most important regulation, the government is more proactive than ever to ensure that child labor is completely banned in India. However, the latest amendment in 2016 has relaxed the guidelines a little. The employment of children below the age of 14 in all occupations and processes is prohibited. However, there are now certain exceptions to the law. If you are working in the entertainment industry or a non-hazardous industry, children above the age of 14 years can work after the school hours and if all the amenities under the law are provided to them. You can read more about CLR here:
- New Law Legitimizes Child Labour
- What are the Laws related to child labour in India
- Laws On Child Labour in India
- What Are The Laws For The Prevention Of Child LabourAn Overview Of The Amendments Brought Under The Child Labour Act
- Legal Framework In India To Curb Child Labour
Apart from all of the above mentioned laws, there is a list of laws, that a company needs to comply with, which are the sole responsibility of the HR managers. It is important that an HR manager is well aware and making significant contributions through various policies. Legal awareness and human resources if combined can produce a very inclusive workspace which could significantly enhance a company’s productivity. You can learn more about such laws and ensure that your company is free from all the future troubles.
Towards, making India a better workspace.
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