Understanding the Labor Fund: Are Employees Really Benefiting from It?

Hi Folks,

Going through the post, it is clear that there is no need to pay labor fund contribution if the salary limit crosses Rs 3000. Whether it is Gross salary or Basic & DA. Even if you take Basic and DA and the minimum wages of any state for a month is almost more than this amount of Rs 3000, then every employee will be above the fixed amount of Rs 3000. What is the use of this labor fund process? Can anybody describe what are the benefits an employee can derive from this fund? Did any employee receive any benefits from this fund from your company? Kindly update.

Different states have different Labour Welfare Funds constituted for various categories of employees. For instance, in Kerala, there are separate Labour Welfare Funds established for beedi workers, handloom workers, construction workers, factory workers, and employees in shops and establishments, among others. In many cases, there is no salary ceiling as mentioned. The contribution, except for the Labour Welfare Fund for employees of Shops and Commercial Establishments, is minimal and payable on a half-yearly basis. Delving into the benefits that workers receive from these Funds could be contentious, especially when considering the fees and allowances of Board Members, such as their travel and dearness allowances, which may surpass the amount collected from both workers and employers. However, in principle, the scheme is intended to aid the workers.

Under the Labour Welfare Fund for Shops and Establishments workers, the contribution is Rs 20 per employee with an equal share from the employer, and there is no specified salary limit. Numerous welfare schemes have been introduced, including pensions after ten years of contributions at the age of 60, marriage loans, etc. Consequently, we cannot dismiss these schemes outright.

Regards,

Madhu.T.K

I believe if you have registered with ESIC and PF, you can seek an exemption from the LWF. Is this information correct?

In some Welfare Fund Acts, specific provisions exclude those covered by Provident Fund and pension schemes, but no exception can be availed on the ground of ESI coverage. For example, in Kerala, there is a welfare fund for motor workers, but the same is excluded for those employees who are covered by EPF.

Regards,
Madhu.T.K

Thank you for the information. I work with an IT company that is covered by EPF. Can I seek exemption from LWF, and if yes, how should I proceed with that? Who should I approach for the exemption? Thanks in advance.

I understand that you are working for an IT firm in Trivandrum. IT firms here are covered by the Kerala Shops and Commercial Establishments Employees Welfare Fund. Unfortunately, there is no provision in this Act that states that for employees covered by PF, no contribution is required. I have specifically mentioned that the Kerala Motor Workers Welfare Fund Act includes that provision. When this Shops Employees Welfare Fund was introduced, many firms had obtained injunctions from the courts. However, now everyone has started contributing because the Act is a social welfare one, and the court cannot nullify it. Simultaneously, the State government has seen this as a significant source of revenue!

Regards,
Madhu.T.K

I do agree with you. Moreover, the Shops Employees Welfare Fund of Kerala is applicable to Managers and even the VP level employees. That implies that they are also workmen!

There is no doubt that this is a good revenue for the government, and they are sure that nobody is going to claim a pension from the Fund. For other benefits also, there are a lot of conditions. For maternity benefit, the woman employee should not be covered by ESI, should have contributed for at least one year, and the benefit is available for two deliveries. Similarly, the maternity pay for 12 weeks is calculated on the minimum wages fixed by the government. Normally, those coming in that wage bracket will be covered by ESI, and then the benefit will not be available to them. For those who are not covered by ESI, the benefit is an additional sum they get.

Please find the attachment of benefits available under the Kerala Shops and Commercial Establishments Workers Welfare Fund.

Regards,
Madhu.T.K

I would like to say one more thing that in respect of an establishment to which a Central Act is applicable, the state Act with the same objective will not be applicable. The Kerala High Court has ruled in Kalyani V K Vs Executive Officer, Kerala Shops and Commercial Establishments Workers Welfare Fund Board that in respect of an establishment to which PF is applicable, the welfare fund cannot be demanded.