Facing Labor Compliance Challenges in IT: Do We Really Need All These Documents?

Dear Seniors,

I am working as AM - HR in a mid-size IT Company in Gurgaon (Haryana). Last week, a labor officer visited our premises and asked for the labor inspection. He requested various documents related to labor compliance, such as Leave registers, Wages registers (with salary slips and employees' signatures), and Register of deductions. However, we are not maintaining these registers.

Queries Regarding Labor Compliance

I have some queries regarding the same:

1. Is it necessary for an IT company to maintain these documents and registers?

2. My company has been established since 2005, but we are not registered under the Shop and Establishment Act of Punjab and Haryana. Is registration mandatory for every company?

3. Concerning this inspection, we have hired a consultant who is charging around 20K for the settlement, which includes his fees and out-of-pocket expenses. Is this the only way we can settle this inspection? It is impossible for us to prepare data and registers from the beginning of 2005.

Please provide clarification on the same.

Regards,
Parul

Immediately register yourself with the Shops & Est Dept. As per the old Act, it is mandatory to maintain manual records in the prescribed form. However, through a special application for exemption, you can be exempt from maintaining manual records. You can then maintain records electronically. Complying with this is extremely important.

Also, which department did this labor officer belong to? Was it the Shops & Est Dept, the labor dept, or any other? Accordingly, you will have to approach that department to address and close this issue.

I am based in Mumbai, and the consultants usually charge the same. However, you can ask for quotes from 3-4 consultants and make a decision. There's no need to manually maintain the registers if you have applied for an exemption.

Compliance Requirements for IT Companies

These are the basic and mandatory compliance requirements, i.e., registration under the Shops & Commercial Establishment Act, and maintenance of records under the Act, in addition to compliance with the Payment of Wages Act, Minimum Wages Act, Leaves, and Payment of Bonus Act. If you resolve the issue without adhering to the legal mandates, it may recur. I trust that you are already ensuring legal compliance with all the provisions, so why not maintain the prescribed records? You have the option to seek exemption from maintaining manual registers and transition to computerized ones. Additionally, you can reach out for our assistance in managing these records, registrations, and settlements.

Regards,
P K Sharma

I understand that IT companies do not enjoy any special status to claim exemption from any labor laws as applicable. There are a number of laws governing labor legislation, such as the EPF & MP Act, The Factories Act, the ESI Act of 1948, the Contract Labor Act, and the Shop & Commercial Establishment Act, etc.

Main Question: Applicability of Labor Laws to IT Companies

The main question arises: which of the labor laws/Acts and rules/regulations framed thereunder are applicable to the IT company of the HR official who started this thread?

The Shop & Commercial Establishment Act is only one Act. If using power for the manufacturing process, are IT companies not covered under The Factories Act, ESI Act, EPF, and other similar Acts? The number of employees in the said company has also not been indicated.

I think the above issues will also arise as and when the officials/inspectors from other Labor Laws departments visit the unit for verification of records.

Recommendation for HR Officials

In my opinion, HR officials should first see and explore which of the Labor Laws are applicable to their unit, keeping in view the number of employees, nature of manufacture, etc. To restrict the maintenance of the records and compliance under the Shop & Commercial Establishment Act will, in my opinion, be of no use if it is found later on that the said IT company is coverable under The Factories Act and other related legislations as mentioned above.

Thank you for clearing my doubts. My first step will be getting registered under the Shop & EST Act. We have 25 employees in the company. We already have PF registration, and we are submitting LWF annually. Please let me know what other labor compliance is applicable to my company.

You mentioned that you have obtained PF Registration and LWF registration. I am sure you are already registered under the Shop and Commercial Establishment Act. You need to request the Registration Certificate under the Shop and Commercial Establishment Act from your management and ensure its timely renewal. Additionally, records and registers such as the wage register as per the Minimum Wages Act, Muster Roll, Leave Register, Bonus Register, Bonus Annual Return, and a copy of the salary slip as per the wage register need to be maintained. I recommend consulting your labor law consultant as they will assist you with these matters.

Regards,
Dilip Nandanwar
For Vidarbha Industries (Labor Law Auditing, Consulting, Statutory/Legal Compliance, Payroll Outsourcing & Management, Manpower/Staffing, and Government/Railway Contracting)
Navi Mumbai Branch Office - LGF-69, Sanskritik Sankul, Zansi Rani Square, Sitabuildi, Nagpur.
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