Are These Employee Benefits Legally Required for Companies with Over 20 Employees?

Dear fellow colleagues,

I would like to know if there are any legal issues involved in case of the following benefits:

1. PF
2. ESI
3. Gratuity
4. Pension
5. Leave Structure: Is it legally defined?
6. Leave encashment

Is it legally mandatory for every company having more than 20 employees to provide the aforementioned benefits to the employees, or is it at the company's discretion?

Regards,
Meenakshi

Hi Meenakshi,

I would like to know whether your company is a manufacturing unit or registered under the Factories Act. As far as PF, ESI, and gratuity are concerned, if you go through the respective acts, it is clearly stated. If there are any other issues, please let us know.

All the best,
Gopi

Dear Gopi,

My company is a service provider. We prepare students for entrance examinations.

Regards,
Meenakshi

Dear Meenakshi,

All the things you have mentioned, i.e.:

1. PF
2. ESI
3. Gratuity
4. Pension
5. Leave Structure: Is it legally defined?
6. Leave encashment

are covered under concerned labor laws. Whether you are registered under the Factories Act or Shop & Establishment Act, once you touch or cross the limit of employees as mentioned, at the same time you come under the Act, and it becomes mandatory to comply with the provisions applied to you.

As far as the leave structure of the organization's Act is concerned, these are governed under the National Holidays Act and Negotiable Instrument Act. The leave encashment can be referred from the Factories Act.

To clarify the related concepts, I am attaching a PPT on various Acts.

Regards,

Ashok Kumar
09818646314
hr_ggn@lumaxmail.com

Hi Ashok,

I think the PowerPoint presentation should be helpful. However, I am still confused. All the acts mentioned refer to industrial workers. Now, since we are in the service sector, are they applicable to us as well?

Dear Meenakshi,

All the things you have mentioned, i.e.,
1. PF
2. ESI
3. Gratuity
4. Pension
5. Leave Structure: Is it legally defined?
6. Leave encashment
are covered under concerned labour laws. Whether you are registered under the Factories Act or Shop & Establishment Act, once you touch or cross the limit of employees as mentioned, at the same time you come under the Act, and it becomes mandatory to comply with the provisions applied to you.

As far as the leave structure of the organization's Act is concerned, these are governed under the National Holidays Act and the Negotiable Instrument Act. The leave encashment can be referred to from the Factories Act.

To clarify the related concepts, I am attaching a PPT on various Acts.

Regards,
Ashok Kumar
09818646314
hr_ggn@lumaxmail.com

Hi Ashok,

Can you help me in making an Employee Manual? I am not able to find Leave Structure and Leave Encashment in your presentation. I think I missed something. Please highlight it.

Thanks a ton!!
Gunjan

Dear Ashok,

What a wonderful handbook of LL! It's really worth it to have it and to know. As far as the service sector is concerned, there is no separate act. However, it depends on whether you are registered under the Shops & Establishments Act or the Factories Act.

Once again, thanks.

Hi Meenakshi,

No need to be confused. All our labor acts concern factories and other manufacturing sectors, but yours is a service sector. So, when you reach 50+ employees, you need to be worried about this. As far as I am concerned, if it is an LTD company, they have to implement these statutory requirements. So, don't worry. Try to practice the best HR measures until then.

All the best,
Gopi

Dear Gopi,

Thanks a ton for the advice. Just one more question: Do we have any legal implications on leave structure and holidays, or is it as per the company's wish.

Hi Meenakshi,

Regarding leave and holidays, all business entities are supposed to provide one day off per week, which can be any day of the week. This information should be recorded in an employee register or master roll.

When it comes to holidays, employees must be granted leave on government-recognized holidays. If they work on these holidays, they should be compensated with an alternative day off.

All the best,

Gopi
09443659045
Pondicherry

Hi Ashok,

I am Rajkumar Jaiswal, also located in Gurgaon. I work at Vatika Group, a real estate developer. Please share some information about yourself. By the way, I found your presentation to be very good and informative.

You can reach me at rajkumar@vatikagroup.com.

Looking forward to your reply.

Regards,
Rajkumar

Hi Ashok Kumar,
Could you please forward me the PPTs on the acts? To brief me about myself, I'm an MBA with 4 months of experience and currently working as an HR executive with a startup IT company. I shall be thankful to you if you could forward the above to me.

Regards,
Ramesh K
9880804822

I have one question regarding the amount to be paid to an employee leaving the organization.

We have many people leaving the company on short notice while our notice period is 3 months. So when a person wants to leave after 1 month, we deduct his 2 months' basic salary in the final settlement.

What is the law that states you can't deduct his entire salary for 2 months and restricts it to basic salary?

Regards,
Rajesh

Hi Meenakshi,

Yes, it is mandatory for the company to follow and not the company's wish. In case the statutory authorities come to know that the same is not being followed, then the management will get into trouble. I will write a detailed email pertaining to the same later.

Regards,
Sadashiv Rao :)

Dear Meenakshi,

As far as PF is concerned, your company is coverable under the provisions of the EPF & MP Act, 1952. The reason behind this is that yours is a company providing educational expert services to candidates for appearing in exams. That means yours is an educational institution in a broader sense, and EPF is applicable to educational institutions.

Regarding ESI, the scheme is applicable to the notified areas by ESI authorities, and the type of establishment should be under the scheduled head. Presently, educational establishments are not under the purview of the scheme.

Gratuity is applicable to educational institutes but not to teachers; it is only applicable to support staff.

Leave rules are applicable under the Shop and Commercial Establishment Act, which is a statutory requirement.

The leave policy depends on the philosophy of an organization towards its employees. You are a better judge in this case. Statutory provisions always speak of the minimum requirement, giving more than that is discretionary.

Hope this will help you.

Anil Anand

anand_anl@yahoo.com

Hello Minakshi,

In case of any concern where more than 20 employees are employed, Provident Fund and E.S.I. are mandatory. However, the limit for E.S.I. is Rs. 7500 per month salary and for P.F., it is Rs. 6500. Above Rs. 6500, it is at the discretion of the management to contribute to the EPF.

Regarding pension, it is a part of P.F. as 8.33% of the employer contribution goes to the Family Pension Fund. The limit for this contribution is Rs. 6500 as salary, which means Rs. 541 is the limit for the contribution to the FPF.

As for leave, it is suggested that, apart from the weekly off, one privilege leave should be given after every 20 working days. Additionally, as per the National and Festival Holidays Act, a minimum of 8 leaves should be granted, with 7 leaves as casual leaves annually.

Leave encashment is not mandatory during the course of employment; however, it should be done at the time of retirement, resignation, or retrenchment.

I hope you find the above information in order and will reach out for further clarifications.

Regards,

V.S. Yadav

Dear Meenakshi,

Please check the definition of salary for PF and ESIC payments. PF salary includes Basic+DA. There are two parts in PF: one is pension, which is 8.33% or a maximum of Rs. 541. Over and above this amount is the transferred employer's Provident Fund contribution, i.e., 3.67%. There are 5 accounts, namely:
- A/c 1 (Employee's 12% + Employer's 3.67%)
- A/c 2: PF admin charges (1.1% of PF wages)
- A/c 10: Employer's pension contribution (8.33%)
- A/c 21: EDLI contribution (0.5% of EDLI salary, max Rs. 6500/-)
- A/c 22: EDLI admin charges (0.01% of EDLI salary).

Various returns include:
- Monthly: Form 12A, Form 5, and Form 10
- Annual: Form 3A & 6A

ESIC salary includes, apart from Basic+DA, conveyance and HRA. Please refer to the act for more details.

Attached herewith is a checklist for your understanding prepared by my colleague, Mr. Amit Lingayat.

Regards,
Anuradha Zingade

Hi,

I am preparing an Industrial Handbook for a manufacturing unit in Gujarat and was wondering if anyone can share a draft of such a handbook or a list of all the applicable laws that will be applicable.

Thanks

If the minimum wage is Rs. 5,278.00, please advise how to bifurcate the salary for Provident Fund deduction. What will be the minimum basic amount? The Provident Fund Act is silent.