Small Manufacturing Units and Factory Registration: What Changes When You Hit 10 Employees?

Hello, a manufacturing unit employs fewer than 10 workers and uses approximately 80 HP of power. Is it mandatory for them to apply for factory registration and a license? What will happen when they cross 10 employees?

Thanks in advance for your response.

Factory License Requirements

Factory license is mandatory, but the licensing authority only changes. If you take the license with fewer than 10 employees, it will be possible to obtain it from the district officer. However, if you apply for registration with more than 10 employees, you will have to get it from the state headquarters.

Regards,
Madhu.T.K

At present, you are not governed by the FA Act, but once you have 10 workers and start production, you have to take a license under the Act.

Regards,
[Name Removed For Privacy Reasons]

Notification of Factories Act Application

The State Government can extend, by notification, the application of the Factories Act to any manufacturing unit, irrespective of the fact that they employ fewer than ten workers. Therefore, verify whether any such notification is in force in your state. In that event, you need to obtain a license and registration under the Act.

Regards,
B. Saikumar
HR & Labour Law Advisor
Mumbai

I think you are confused with the Factory Licence and Factory Permit. The Factory Licence is under the Factories Act 1948. It is applicable if you engage 10/20 or more workers in the manufacturing process as defined. The Factory Permit is permission from a local authority, such as a Municipal Officer or District Officer, to run any workshop or factory, irrespective of the number of employees.

Clarification on State Government Provisions

According to my knowledge, there is no provision in the Factories Act which states that the State Government can extend, by notification, the application of the Factories Act to any manufacturing unit, irrespective of the fact that they employ fewer than ten workers. Please correct me if I am wrong.

Regards,

You can always contact the SSI or MSSI (Micro Small Scale Industries) office and inquire about the registration and legal formalities. Many exemptions are provided to Small Scale Industries and Micro Small Scale Industries. Since yours is a very small manufacturing unit, I feel you will come under SSI or MSSI. Please consult any expert in your city for more clarifications.

Dear Keshav Ji, Section 85 of the Factories Act grants the power to the State Government to extend the application of the Factories Act to certain premises where the manufacturing process is carried on. It reads as follows:

1) The State Government may, by notification in the Official Gazette, declare that all or any of the provisions of this Act shall apply to any place where a manufacturing process is carried on with or without the aid of power or is ordinarily carried on, notwithstanding that:

i) the number of persons employed there is less than ten if working with the aid of power and less than twenty if working without the aid of power, or

ii) .................................................. ...........

To give an example, in exercise of the powers conferred by the above Section, the Government of Maharashtra extended the Factories Act to premises where the handling and processing of hazardous chemicals are carried on, irrespective of the number of persons employed in such a manufacturing process (Notification No. FAC-1085/(9782)Lab-4 dated 9th July 1985).

Thanks for clarifying the distinction between a factory license and factory permit.

Regards,
B. Saikumar
Mumbai

Thank you very much for your quick response and for correcting me on the fact of the law. This is the way we all learn by actively participating in this forum. I admire you.

Regards

Factory License Requirements Under the Factories Act of 1948

Under the Factories Act of 1948, a factory is defined as precincts: "Whereon ten or more workers are working, or were working on any day of the preceding twelve months..." Clause "m" of Section 2.

If you anticipate an increase in your workforce to 10 or more workers within the meaning of the above definition, then you might as well complete all the related formalities and apply for a Factory License under the Factories Act.

Best Wishes,
Vasant Nair

Dear [Email Removed For Privacy Reasons], I appreciate your participation. Factory licenses and factory permits are statutory obligations, whereas registration under SSI or MSSI is, according to me, not statutory. The main purpose of registration under SSI or MSSI is to maintain statistics and a roll of such units for the purposes of providing incentives and support services.

The Micro, Small and Medium Enterprises Development Act, 2006

There is another enactment called The Micro, Small and Medium Enterprises Development Act, 2006. The object of this enactment is to facilitate the promotion, development, and enhancing the competitiveness of micro, small, and medium enterprises and for matters connected therewith or incidental. Under this Act, a micro or small enterprise or a medium enterprise engaged in providing or rendering services may file the memorandum to the authority at discretion.

I am not an expert in this area, but I tried to share the knowledge that I have.

If it is clear that you employ 10 or more workers in a day (24 hours) and use power for any manufacturing activity, you need to register under the Factories Act. There are certain judgments from the High Court and Supreme Court. If needed, I can share them with you.

Dear Sir,

In our company, above 10 workers and below 20 workers have worked, and we are Registered in SSI. Can we register in the factory act? Kindly suggest.

Warm Regards,
Pappu Sharma

For registration under the Factories Act, it is immaterial whether it is an SSI unit or not. The latter depends on investment, whereas the former depends on the number of employees employed. Therefore, you should get Factory Registration.

In some industries, like chemical, paints, etc., the number of employees to make it obligatory to get a Factory license is even less than 10.

Madhu.T.K