Are Executive Grade Employees Covered by Labor Laws? Seeking Clarity on Legal Protections

Dear All,

I have a different query related to grade-wise positions.

In my company, we have staff category employees in Grades S-1 to S-3, E-9, and FTC, while the Executive grade starts from E-8 onwards.

My confusion is whether those employees coming under the Executive category are covered under various labor laws, or simply put, is the executive cadre group governed by various labor laws or not.

An early response will be highly appreciated.

With warm regards,
Ranjeet

Dear Jeeni,

If you are talking about ESI, it covers only according to rules, no matter what the structure is.

In the absence of a proper definition of the word 'executive', it is difficult to answer your question. An employee who has substantial control over the affairs of the establishment shall be deemed to be part of management. Otherwise, he is an employee only.

Though the basic Acts have laid down some wage ceiling to define a workman, the same has been removed from many Acts. Therefore, it is not the salary that decides whether one is a worker or not, but it is the nature of his duties that determines whether he is an employee/worker and whether he is exempted from Labor Acts.

Regards, Madhu.T.K

Dear Madhu,

Thank you for your reply.

However, the company's policy is as follows:

For example, if they conduct a campus placement, they provide training to an individual for two years and assign the title of Assistant Manager to every role. Despite this, they still perform tasks such as recruitment or act as junior officials, handling responsibilities similar to those of regular employees. Although we provide statutory bonuses and other benefits to staff in other grades, those in the executive grade E-8 and above do not receive these benefits; instead, they are entitled to a performance bonus.

Their salaries are on the higher end, with additional benefits.

Please suggest what course of action to take.

Regards,
Ranjeet

Dear Madhu,

Could you provide me with the actual definition of "Workman" and "Executive," along with the reference to the relevant act?

With warm regards,
Ranjeet

Dear Ranjit,

It depends on the situation. The nature of the relationship and the degree of supervision will determine whether the employee will fall under the category of 'employee' or not. In fact, for the payment of a bonus, the salary (Basic + DA) will be the determining factor. For the payment of gratuity, there is no such restriction except that the total amount of gratuity should not exceed Rs 3.5 lakhs. Therefore, the designation shall not have any direct bearing in many cases. If the company's policy is to consider executives as 'supervisory staff,' the same can be followed. It does not mean that they should not perform any clerical work. It is not really the nature of work but the responsibilities undertaken and the position in the hierarchy that determine it. However, very often the salary will also influence the definition of an employee. For the payment of a bonus as per the Payment of Bonus Act, for example, the salary shall be considered. That would be accurate.

Regards,
Madhu.T.K

Dear Madhu,

Are trainees and apprentices entitled to provisions like bonus, gratuity, PF, and ESI? Can you tell me the difference between ex-gratia, statutory bonus, performance bonus, and production bonus? Where do these terms derive from?

Regards,
Ranjeet

Trainees other than those engaged as trade apprentices under the Apprentice Act, 1961, and those engaged as per provisions made in this regard in the Standing Orders of the company are eligible for bonus, ESI, and EPF. However, for EPF, a Supreme Court verdict stating that all trainees are exempted from EPF is in force. When calculating eligibility for gratuity, the period of training other than as per the Apprentice Act shall be considered the period of 'employment' unless the employer can prove that the employee was under training only.

Bonus payable following the provisions of the Payment of Bonus Act is statutory bonus. The bonus is payable at a rate of not less than 8.33% and not more than 20%, depending upon the availability of profits/surplus. On the other hand, performance bonus and production bonus are incentives based on production, sales, or performance. Any amount paid apart from these shall be classified as ex gratia.

Regards,
Madhu.T.K

Dear Madhu,

I came across a case where the court had given a verdict that trainees and apprentices are not entitled to any benefits. However, now I think in Delhi, in trades like stewarding, no apprentices are being taken. Despite this, we are providing them with a certificate from TAJ.

So, if an apprentice is hired in a factory, are they eligible for PF and other statutory benefits or not? Please suggest.

Regards,
Ranjeet

I have made it clear that trainees engaged following the Apprentices Act and those engaged as per Standing Orders are exempted from the operation of these Acts. There should be sufficient proof to say that they are getting trained in all respects with practical and theoretical classes under the guidance of a person appointed for this purpose by the management. It should not be just to deter any rights of employees.

If we follow the Apprentice Act, there is a procedure for the appointment and engagement of trade apprentices for one year under a contract jointly signed by the company with the apprentice and his parent. It is considered as part of his trade course, and he is supposed to report every week to the Related Instruction center of the concerned Government for theory sessions.

Similarly, with a view to grooming persons to take up employment within the organization or outside, trainees can be engaged if provided in the Standing Orders. In such circumstances also, they are treated as trainees, but in all other cases, the engagement of trainees will be viewed as a measure to take away the rights of employees conferred in Labor Laws.

Regards,

Madhu.T.K

Dear Madhu,

Thanks, but I had a query again. If we hired a trainee and they are doing the work of a regular employee, what procedures should be followed?

Regards,
Ranjeet

A trainee is not supposed to work independently on a regular basis. If he is to be called a trainee, he should be doing the work under the guidance of a regular employee. Otherwise, it will be regarded as an attempt to avoid the application of statutory benefits. Therefore, when engaging such trainees, they should be provided with at least the benefit of ESI. Following the Apex Court verdict on Campco's case, all trainees are exempted from EPF, but there is no such ruling to exempt trainees from ESI, except for trade apprentices. Moreover, ESI is an initiative to compensate for employment injuries, etc.

Regards,
Madhu.T.K

Dear Madhu,

Thanks!

Now, when I am dealing with these people, we are facing many problems in giving them a stipend or tracking leaves, etc. Can we add these people to our Muster Roll or create a name in the payroll software? Is there any legal obligation on us because they are not on our regular rolls?

Secondly, if we appoint an apprentice, is it necessary that we have to send them for classes, etc.? Can you give me the outline of this act because I have never come across it?

Regards,
Ranjeet

Names of such trainees are to be entered in the muster rolls. You can put their designation as trainee, but as I posted, since they are not actually trainees within the meaning given in the Apprentice Act or Standing Orders, they are entitled to benefits at par with any other employee. For more details, please verify the Apprentice Act, 1961, a brief of which is available in my presentation "Labour Legislations" on my blog.

Regards,
Madhu.T.K

Please find the attachment.

Regards, Madhu.T.K

Dear All,

Please send us the Workman Gradewise Wages chart with Grade/Designation/Minimum Qualifications/Experience/Basic/Other Allowances/ Gross Wages for Trainees to Senior Workmen from Grade 1 to Grade 6 or 7. If someone has worked on the same, please help me out. Anticipating an early reply.

Thanks,
Sorabh
09760695970

Madhu.T.K

Dear Sir,

Our company has given coffee for extra hours worked by ACT APPRENTICES. Is it correct, or do we have to pay overtime? As per the act, overtime is not allowed for Act apprentices. Please give your version.

Thanks,
ksv

As per the act, you are not expected to engage apprentices overtime without permission from the Apprentice Adviser. If you are engaging them overtime, you will be doing so out of the way only. If you do something out of the way, why worry about granting compensatory off as well?

Regards,
Madhu.T.K