Terminal Benefits of Construction Labour

Dear Readers,

Even though, the construction industry is the second largest employer in India, after agriculture. The casual nature of jobs in the unorganized construction sector can lead to poor working conditions, low salaries, and less job security. Construction projects are often located in remote sites, can be unpredictable, and there is a high chance of encountering unforeseen problems like weather. 

Terminal benefits are final entitlements of an employee upon termination of an employment contract. It is nothing but Money paid to an employee whose employment has been terminated because of a closedown or downsizing. 

Below Table shows the industrial practice of Terminal benefits for construction Workmen. A contingency has been included, which will be tailored to your requirements.

Please note that, if you leave the company on your own accord before the expiry of the notice period, you will not be eligible for retrenchment compensation as per the retrenchment notice already issued.

For costing, estimating, or rate analysis purposes, terminal benefit calculations are crucial to avoid significant crises. Calculating necessary cost provisions periodically and maintaining them can prevent financial crises and last-minute surprises.

For More Details about Basic Wages Click ABW

For More Details about Man Day & Man Hour Click Here

For More Details about Labour Welfare Click Here

For More Detail about Labour Law in India Click Here

Gratuity Act

Dear Readers,

Wish You a Happy May Day-2024

Gratuity is one of the many retirement benefits offered by a company to an employee. It is a lump sum amount that employers pay their employees as a sign of gratitude for the services provided. However, only those employees who have been employed by the company for five years or more are given the gratuity amount. It is governed by the Payment of Gratuity Act, 1972.

All central and state government departments, defense, and local governing bodies are covered under this act. Private organizations can come under its purview subject to fulfilment of certain conditions.

Gratuity Act shall be applicable to

(a)    Every factory, mine, oilfield, plantation, port and railway company.

(b)    Every shop or establishment to which Shops & Establishment Act of a State applies in which 10 or more persons are employed at any time during the year end.

(c)     Any establishment employing 10 or more persons as may be notified by the Central Government.

(d)    Once Act applies, it continues to apply even if employment strength falls below 10.

To receive the gratuity, you must meet the following eligibility criteria:

You should be eligible for superannuation.

You should have retired from service.

You should have resigned after continuous employment of five years with the company.

You on disablement on account of a sickness or an accident.

In case of your death the gratuity is paid to the nominee.

However, the condition of completion of continuous service of five years shall not be necessary in case the termination of the employment of any employee is related to their death or disablement. In this case, ‘completed year of service’ would refer to as continuous service for one year and an employee shall be said to be in continuous service for a period if he/she has been in uninterrupted service, including service which may be interrupted on account of sickness, accident, leave, absence from duty without leave, lay off, strike or a lock-out or cessation of work not due to any fault of the employee.  There is a judgment by the Madras High Court, which states that an employee would be eligible for gratuity even in case he/she has completed 4 years 240 days.

In addition to above, in the case of death or incapacitated, the employer is mandated by law to pay gratuity to the now ex-employer or his nominee/legal heir, as the case may be, irrespective of the number of years of continuous service.

The law further states that in case the nominee of the employee is a minor, then the assistant labour commissioner shall invest the money in nominee’s name in a term deposit with the State Bank of India or a nationalized bank for the minor’s benefit until he/she becomes a major.

Formula for gratuity calculation is G=S*N*15/26

  Gratuity (G)= Last Drawn Salary(S) × No. of Years of Service(N)× 15/26

  The ratio 15/26 represents 15 days out of 26 working days in a month.

  S = Last drawn salary = (Basic Salary + Dearness Allowance).

  N = Years of Service are rounded down to the nearest full year. 

If the number of years you have worked in the last year of employment is more than six months, then it will be rounded to the nearest figure. Suppose your tenure of service is 16 years 7 months, then you receive the gratuity for 17 years. Otherwise, it’s for 16 years if it happens to be 16 years 4 months.

The tax treatment of the gratuity amount depends on the type of employee who has to receive the gratuity.

The amount of gratuity received by any government employee (whether central/state/local authority) is exempt from the income tax.

Any other eligible private employee whose employer is covered under the Payment of Gratuity Act. The maximum amount of gratuity specified is Rs 20 lakh, irrespective of the number of years of service. Please note that in your entire working life, the maximum tax-exempt gratuity amount you may claim, cannot go beyond Rs 20 lakh. Any excesses would be treated as ex-gratia and liable for tax as per the tax bracket.

Gratuity paid to the widow or legal heir of an employee will be exempt of tax – Upon an employee’s demise, the gratuity that is paid to his widow or legal heir will be exempt from tax. Any ex-gratia payment made to an employee or his legal heir on account of an injury caused will also be tax-free.

Forfeiture of gratuity- According to the Payment of Gratuity Act of 1972, when the employee has been terminated due to disorderly conduct wherein, he/she tries to physically harm individuals during his/her employment, an employer holds the right to forfeit their gratuity payment, either wholly or partially despite the employee having completed 5 and more years of service in a company.

Employees' State Insurance Act (ESI Act)

 Dear Readers,

Wish You a Happy May Day - 2023

The Employees State Insurance Act, 1948 is beneficial and social legislation. Its main aim is to provide economic security to people who work in certain factories and establishments. 

The ESI scheme provides complete medical care to the employees registered with the ESIC during the period of his/her incapacity and working capacity. It also provides financial assistance to compensate for the loss of wages of the employee during the period of his/her abstention from work due to sickness, maternity and employment injury. The ESI scheme provides medical care to family members of the employee also. The Act contains several important definitions and provisions that regulate these workers.

At present, the ESI scheme is applicable to all factories and other establishments as defined in the Act with 10 or more persons employed in such establishment and the beneficiaries’ monthly wage does not exceed Rupees twenty-one thousand (Rs 21,000) are covered under the scheme. In future this limit may change subject to government policy.  Whether the employer has employed 10 or more employees, all employees employed by the employer, agnostic of the salary are reckoned. The applicability of the scheme is explained through a flow chart below:

Please take a note that Construction Industry does not cover under ESI if it is a green field project. For the similar benefits Construction Industry used to follows BOCW Cess Act. However, it may differ for brown field project hence follow the principle employer guidance.

Establishments that are covered under the ESI Scheme

The Central Government issued a notification that all factories where 10 or more persons are employed are covered under the ESI scheme mandatorily. The following establishments employing 10 or more persons are also mandatorily covered under the ESI scheme:

1). Shops.

2). Hotels or restaurants not having any manufacturing activity, but only engaged in ‘sales’.

3). Cinemas, including preview theatres.

4). Road motor transport establishments.

5). Newspaper establishments.

6). All private educational institutions and medical institutions.

Benefits of the ESI Scheme

Broadly, the benefits under this scheme are categorized under two categories:

Cash benefits (which includes sickness, maternity, disablement (temporary and permanent), funeral expenses, rehabilitation allowance, vocational rehabilitation and medical bonus) and,

Non-cash benefits through medical care.

Complete medical care and attention are provided by the scheme to the employee registered under the ESI Act, 1948 at the time of his incapacity, restoration of his health and working capacity.

During absenteeism from work due to illness, maternity or factories accidents which result in loss of wages complete financial assistance is provided to the employees to compensate for the wage loss.

The scheme provides medical care to family members also.

In case a worker under the Act dies during employment, the ESI Corporation pays some money to his dependents. According to the Act, dependents are certain relatives of a deceased worker. These include his widow, a son below 25 years of age, an unmarried daughter and his widowed mother. A son/daughter above 25 years can also be a dependent if he/she is wholly dependent on the worker.

Pregnancy which leads to the birth of a living child is called “confinement” under this Act. It can also mean the birth of a child (living or dead) after 26 weeks of pregnancy.

The ESI Act contains a few categories of disablements for which employees can claim compensation. These may be either permanent or temporary. Permanent disablements may further be either partial or total.

For More Details about BOCW Cess Click Here
For More Details about Rules and Regulations Click Here 
For More Details about Labour Law's of Construction Industry Click Here
For More Details about Labour Welfare Fund Click Here

Rules and Acts of Labour Welfare in India

Dear Readers,

As You may agree that without Labour workforce Industrial growth will not be achieved. Construction Industry depends on Labour. 

We should know the Acts and Rules for Labour welfare. It is governed by Indian Government. Following Acts and rules are made by Indian government.

1.      Unorganised Workers Social Security Rules, 2009

2.      The Unorganised Workers Social Security Act 2008

3.      The Bonded Labour System (Abolition) Act, 1976

4.      The Cine Workers’ Welfare Fund Act, 1981

5.      The Cine Workers Welfare Cess Act, 1981

6.      The Cine Workers and Cinema Theatre Workers (Regulation of Employment) Rules, 1984

7.      The Cine Workers and Cinema Theatre Workers (Regulation of Employment) Act, 1981

8.      The Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979

9.      The Contract Labour Regulation Rules

10.  The Contract Labour (Regulation & Abolition) Act, 1970

11.  The Beedi & Cigar Workers (Conditions of Employment) Act, 1966

12.  BEEDI WORKERS WELFARE CESS ACT 1976

13.  THE BEEDI WORKERS WELFARE FUND ACT, 1976

14.  The Employment of Manual Scavengers and Construction of Dry latrines Prohibition Act, 1993

15.  The Iron Ore Mines, Manganese Ore Mines & Chrome Ore Mines Labour Welfare Fund Act, 1976

16.  The Limestone & Dolomite Mines Labour Welfare Fund Act, 1972

17.  The Mica Mines Labour Welfare Fund Act, 1946

If any other rules are missed please send us through your comments or email us

Source :- https://labour.gov.in/labour-welfare

Labour Welfare Fund

Dear Readers,
Wish You a Happy May Day - 2018

Labour welfare fund is a statutory contribution managed by individual state authorities. Every State has made its own Act & Rules. Contribution period & its amount may differ from State to State. You should go through your state Labour Welfare Fund Act & Rules for having knowledge of the definition of employee, contribution period & the rate of contribution to be deducted, method of deposit of amount, format for sending the detail of contribution if any & to whom & when it is to be submitted.

In order to provide social security to workers, the government has introduced the Labour Welfare Fund Act. This act has been implemented only in 15 states out of 34 states including union territories.

LWF implemented States are Andhra Pradesh , Chandigarh, Chhattisgarh, Delhi ,Goa ,Gujarat ,Haryana ,Karnataka ,Kerala ,Madhya Pradesh ,Maharashtra ,Odisha ,Punjab, Tamil Nadu ,Telangana and West Bengal

LWF is not Applicable States are Andaman and Nicobar Islands , Arunachal Pradesh ,Assam , Bihar, Dadra and Nagar Haveli ,Daman and Diu ,Himachal Pradesh ,Jammu and Kashmir ,Jharkhand ,Manipur ,Meghalaya ,Mizoram ,Nagaland ,Pondicherry ,Rajasthan ,Sikkim ,Tripura ,Uttar Pradesh and Uttaranchal

The Labour Welfare Fund Act is not applicable to all category of employees working in the establishment. It depends upon the wages earned and designation of the employee. The applicability of the Act based on the number of employees may differ depending upon state specific Act.

The contribution in the Labour Welfare Fund may be made annually, half yearly or monthly. The frequency may differ depending upon the state specific Act. Further, if the frequency is half yearly the period of deduction shall be divided into two consecutive periods as per the date mentioned in the state specific Act. The employer needs to make the deduction from the salary of the employee and submit the same to the Labour Welfare Fund board in the prescribed form before the due date.

The Fund will be utilised for welfare of workers/Labour in following manner (It may vary state to state)

1). Community and social education centres including reading rooms and libraries;

2). Educational facilities for the children of the workers.( Educational scholarship, Educational incentives  & Book allowance)

3). Transport facilities to the workers for commuting to work.

4). Marriage assistance.

5). Excursions, tours and holiday homes;

6). Medical facilities for both private and public-sector employers to facilitate medical facilities for their workers and their families.

7). Provide special treatment to the workers including assistance for artificial limbs, wheel chairs etc.

8). Home industries and subsidiary occupations for women and unemployed persons.

9). Recreational facilities in form of music, dance, drama, games, sports, paintings, etc. are usually offered to the employees to build a wholesome working environment.

10). Housing facilities under this scheme offer loans to industrial workers for constructing houses at concessional rates.

11). Funeral expenses

In practical most of these facilities are not aware to labour or not reached to concern.

BOCW Cess

Dear Readers,
 
Wish You a Happy May Day-2017

Following three industries where normally unskilled manpower are being deployed

·         Construction Industries –Applicable act is BOCW Act, 1996

·         Manufacturing Industries – Applicable act is Factories Act

·         Mining Industries – Applicable act is Mines Act

Now, let us discuss about BOCW act. It is short form of Building and Other Construction Workers' Welfare Cess Act, 1996

Normally in construction Industries, we used to follow the Contract Labour Act, 1971, and we take Labour License before commencement of Construction Job. In that Act, normally the details are given about the Contract Workforce, Obtaining Labour License Procedure, Welfare Measures, and all about the contract Workmen. The Government felt that the act is not having the uniqueness.

 

Hence in 1996, Indian government introduced the Building & Other Construction Workers Act, (in Short, BOCW Act), BOCW Rules and BOCW Welfare Cess Act, In BOCW Act & Rules it has given the direction about the Welfare measures to Workmen, Safety Precautions and many Technical Aspects about the Tools, Tackles, Instruments, Machineries, Lifting Appliances, its maintenance, inspection, etc. Medical Facilities required to be given to the injured workmen, Periodical Medical Checkup for drivers, operators, food handlers, etc., Pre-employment Medical Checkup for every workmen.

In this Act, for implementation purpose the Government needs fund. So they implemented the BOCW Welfare Act, which made the provision to collect 1% minimum and Maximum of 2% of the Cost of Construction / Works carried out during the Financial Year to be paid as BOCWW Cess to the BOCWW Cess Board.

Some of the Key Points are below.

·         Cess came into force on 26th March, 1998

·         This act is applicable immediately on commencement of Job

·         The Principal Employer and the contractors, both are liable for this Cess

·         The responsibility of Principal Employer to make the payment of Cess.

·         The BOCW Cess is payable to the Government (BOCW Welfare Commissioner of State)

·         Cess rate not exceeding two percentage, but not less than one percentage of the cost of construction incurred by an employer.

·         Cess shall not include the Cost of land and any compensation paid or payable to a worker or his kin under the Workmen's Compensation Act. 1923.

·         BOCW act does not include any building or other construction work to which the provisions of the Factories Act, 1948 (63 of 1948), or the Mines Act, 1952 (35 of 1952), apply.

·         Cess is not refundable in any case. However, the amount of compensation paid to the workers during that year, can be deducted from the Cess payable.

·         Cess shall be paid by an employer,

o   If the project duration is less than a year, within thirty days of completion of the construction project or within thirty days of the date on which assessment of Cess payable is finalised, whichever is earlier, to the Cess collector.

o   If the duration of the project or construction work exceeds one year, Cess shall be paid within thirty days of completion of one year from the date of commencement of work and every year thereafter at the notified rates on the cost of construction incurred during the relevant period.

·         Once Factories Act is implemented there the BOCW act will get ceased.

·         Once the Factory fencing is made excluding the expansion project then Factories Act is not applicable and only BOCW will be applicable to that expansion project.

·         If Construction area falls within the factory premises then BOCW Act cannot be applicable and only Factories Act will be applicable.

·         For Registration under BOCW Act is exempted for those who got covered by Factories Act and Mines Act and the construction work carried out for self and the cost is within 10 Lakhs.

·         Generally ESI Coverage is not applicable for Construction Industries and not for BOCW Act. But if your construction Activities are being done in the premises of Factories or your principal employer is covered under ESI, then obviously you also required to make payment of ESI as 1.75% Employee Share and 4.75% Employer Share.

The above views are my personal views from the study which I have made on this subject. There is a need to take up the ambiguities in this entire enactment

Labour Law's of Construction Industry

Dear Readers,

Wish you a Happy May Day-2015

Without labour nothing is possible in construction industry. Engineer Diary is proud to discuss about the labour law of construction industry in India 

In construction industry, normally the works are executed by labors engaged by contractor(s) / Sub-Contractor(s). The principal employer, contractor(s) as well as the Sub Contractor(s)  , they  are having certain duties and responsibilities under the applicable labor laws to them and liable jointly . Following list of minimum required compliances to be made by principal employer as well as contractor(s) are followed by list of act .

Below a list of some Act applicable to Construction Industry:

1. Workmen’s Compensation Act,1923 (now it is Employee Compensation Act)
2. Payment of Wages Act, 1936
3. Industrial Dispute Act, 1947.
4. Minimum Wages Act, 1948
5. Employees’ State Insurance Act, 1948 ( in certain conditions)
6. Employees’ Provident Fund Act, 1952
7. Maternity Benefit Act, 1961
8. Payment of Bonus Act, 1965
9. Contract Labour (Regulation & Abolition) Act, 1970
10. The Contract Labour (Regulation & Abolition) Act, 1970
11. Equal Remuneration Act. 1976.
12. Inter-state Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979
13. Inter-State Migrant Workers Act, 1979
14. Building and Other Construction Workers Act, 1996
15. Building and Other Construction Workers’ Welfare Cess Act, 1996
16. Child Labour Act, 1996.

By Principal Employer:

1. Obtain Registration Certificate under Contract Labour Act and amend it time to time whenever there is a change; 
2. Obtain Registration Certificate under BOCW Act for its own employees and renew/ amend it from time to time. Also Register Beneficiaries under BOCW Act; 
3. Obtain Registration under Inter-state Migrant Labour Act, if applicable; 
4. Maintain register of contractors;
5. Maintain all the registers and records in respect of own employees (as listed above in list of registers and records to be maintained by Contractors);
6. Maintain minimum rates of wages to own employees;
7. Maintain minimum HRA at 5 % of Basic + DA;
8. Make compliance of EPF, PT, MLW etc. in respect of own employees;
9. Cover own employees sufficiently under Employees Compensation;
10. Ensure that the contractors pay as per minimum rates of wages;
11. Ensure that the contractors make proper compliance of EPF, PT, MLW etc.;
12. Ensure that the contractors have Cover the employees sufficiently under Employees Compensation;
13. Submit annual return under Contract Labour Act and also under BOCW Act;
14. Maintain Health register and certificate of Medical Examinations etc.;
15. Maintain Testing Certificates of lifting appliances and machines etc.;
16. Ensure formation of Safety Committee and its functioning, appointment of Safety officer, Safety and Health written policy- its approval, Safety & Health audit etc.;
17. Ensure that the employees at work wear safety shoes, helmets, safety belts etc. 

By contractor(s) / Sub Contractor (s):

1. Obtain License under Contract Labour Act if employees are above 20 on any day and renew/ amend it from time to time;
2. Obtain Registration Certificate under BOCW Act if employees are above 10 on any day and renew/ amend it from time to time. Also Register Beneficiaries under BOCW Act;
3. Obtain license under Inter-state Migrant Workmen Act, if applicable
4. Maintain the minimum rates of wages as applicable;
5. Maintain min. HRA at 5 % of Basic + DA;
6. Make the compliance of EPF&MP Act;
7. Make the compliance of Profession Tax;
8. Make the compliance of MLW Fund;
9. Cover the employees sufficiently under Employees Compensation.
10. Maintain muster roll, wage register, other registers, records, notices, forms etc. as required under various applicable Acts, abstracts of various applicable Acts.