Umakanthan53
Labour Law & Hr Consultant
KK!HR
Management Consultancy

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Anonymous
Firm took license under factory act in 1999. It has 17 employees and 30 contract workers through a contractor. Is firms total employee strength 17 or 47?
I would like to know how is it decided whether firm is a factory or shop? What is the differentiating factor between factory, shop and establishment?
Also, firms maintains Shops act registers for wages, attendance, etc because of lack of knowledge. Will it be a problem for them in the future?
Attendance & leave registers should be maintained calendar year wise or Financial year wise?

From India, Bengaluru
The difference in factories lies in 'manufacturing process' being carried out in its premises and engaging ten or more workmen in case of use of power in the manufacturing process and otherwise 20 or more. So you have to examine the nature of activity being carried out and check it with respect to the definition of Factory as per the Factories Act 1948. The Act includes in its scope several activities which one may not think off as a manufacturing process like running cold storage, or mechanised cloth washing or sweet preparation, stitching of cloth etc.

As regards Shop/Establishment reference has to be made to the applicable state act in this regard. But as a general rule it can be said that the term establishment means a shop or a commercial establishment. "shop" means any premises where goods are sold, either by retail or wholesale of where services are rendered to customers, and includes an office, a store-room, go-down, warehouse or workhouse or work place for distribution or packaging or repackaging or finished goods is carried on; but does not include a shop attached to a factory where persons employed in such shop are allowed the benefits provided under the Factories Act, 1948; Commercial establishment is defined exclusively and is neither a factory nor a shop.

In case it is a factory, then keeping wages & attendance register as per Shop Act will not be sufficient compliance of the Act. Whether the registers are to be maintained calendar year or financial year wise is to be seen from the provision of the State Rules applicable.

From India, Mumbai
Dear friend,
(1) The self-stated details of your first query are themselves indicative of its answer. All the employees including managers, supervisors, permanent employees, outsourced contract labor, casuals engaged in the manufacturing activity are "workers" under the Factories Act,1948. If the no of workers inclusive of all such categories mentioned in the factory licence taken in 1999 and renewed thereafter annually remains less than 47 as of now, you have to get it suitably amended.
(2) Any establishment is decided as a factory or otherwise depending on the predominant activity carried on therewith. If the predominant activity is manufacturing, it would be a factory as defined u/s 2(m) of the FA,1948. The definition of " manufacturing process " as given u/s 2(k) of the Act covers a variety of separable activities concerned with the manufacturing process. Hence the application of the predominant activity test. For instance, we may take an automobile show room which normally comprises of sales and service of the automobiles and their spare parts. But here the activities of sales and service can be easily separated. Therefore, the part of the premises where the workshop is located would certainly be a factory u/s 2(m). The other part comprising of the show room where sales are conducted can be a shop. But if the factory licence is taken for the entire premises, the show room area would also be a factory and the sales personnel would also be workers under the FA,1948. And it is the normal practice adopted for the sake of managerial convenience and uniformity of compliance. Take the case of a sweet-meat shop where preparation of sweets and savories and their sales is done simultaneously in the same premises, it will be a shop only and cannot be a factory just because power is used for the preparation of the sweets. Yet another example is a tailoring shop where no sales are done but the clothes of the customers are stitched and delivered to them. Here the predominant activity becomes cutting and stitching of clothes may be with or without the aid of power. It would be a factory u/s 2(m)(i) or 2(m)(ii) of the FA,1948 depending on the satisfaction of the parameter of the no of workers employed therein. That's why in some states they are notified factories u/s 85 of the FA,1948.
(3) Coming to your third query. Service conditions of employees differ according to the types of establishment. Therefore, you have to maintain only the registers, notices etc., pertaining to the Act which applies to your establishment.

From India, Salem
Anonymous
@Umakanthan53 sir,
I did not understand your point 1.
What is meant be casuals engaged? Like painters, electrician who came for tiny repairs, etc?
Next, I did not understand the amended part? What should be amended now? After covid there are just 9 workers in total in the factory.

From India, Bengaluru
Dear friend,
By casuals, I mean daily wagers employed on and off on incidental works of the factory.
Amendment, if necessary is in respect of the licence on the maximum no of workers to be employed in the factory. The fact that the licence was initially obtained in 1999 and your query as to the inclusion of contract labor to the total no of workers led to such a suggestion.The important point is that the total no of workers employed on any day shall not exceed the maximum no mentioned in the factory licence already obtained.

From India, Salem
Anonymous
Sir, some more general queries:
Should the factory amend and reduce no of workers, since workers are less now from past 7 years? Also, if workers are below 10 now. Should factory change its license to Shops and Establishment?
Also, if someone gives a quotation and work taking charges for his/her services, are such people included in employees?

From India, Bengaluru
When the no of employees falls below maximum no mentioned in the licence, no need to amend it. But you cannot switch over to shops and establishment as long as your predominant activity is manufacturing.
Certainly such a person offering his services within the factory premises for hire would also be deemed as a worker of the factory for the purposes of the FA,1948.

From India, Salem
Anonymous
Understood sir, but if any person entering into the factory and doing work is employee. Then I think the factory has more than 70-80 employees, because some or the other person comes and does some kind of work in the factory.
From India, Bengaluru
Anonymous
What will be the acts to be complied in case of a petrol pump ?? Can the manager work 12 hrs shift?
From India, Ernakulam
For the purpose of Factories Act 1948, any person found in any premises where a manufacturing process as defined in the Act is carried is 'Workman', the connection with the occupier of the factory may be direct or indirect and with or without his knowledge. (Section 2(l) of the Act. Thus when 60-70 persons are working in the factory premises it would be obviously a factory under the Factories Act 1948 and all legal consequences would follow.

As regards the statutory compliances needed for Petrol Pump, it is storing highly hazardous and fire risk petroleum products, so the compliances called for in the License issued has to be fulfilled. All labour laws including the Factories Act 1948 would be applicable depending on the number of persons working there.

From India, Mumbai
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