Understanding Labour Licenses: Which Businesses Need Them and What Laws Apply?

Hi All,

What kind of business organizations need to obtain a Labour License? Which type of workforce falls under the definition of 'labour'? Also, could you please elaborate on the laws that are generally applicable to a business operating under the title of a 'Pvt Ltd' organization?

Regards

The suffix behind the name of any business venture such as "Pvt Ltd" or "Public Ltd" denotes the constitution or type of the organization as incorporated under the Companies Act, 1956. As such, it has an existence as a separate legal entity distinct from its investors. Therefore, it is a juristic person or artificial person in the eyes of the law, subject to all legal rights and liabilities.

To me, your term "Labour Licence" is a bit vague. A license is a broader term indicating a permit issued by a statutory authority to own or use something, to do something, or to carry on a trade. Employment or labor in any activity, in general, would be called as such when people are hired for wages, reward, or compensation in consideration of the services rendered by them. The question of licensing in respect of the employment of labor depends on factors like the nature of the activity carried on, the type of the establishment, the number of people employed, and the duration of employment. For example, the contract labor system prevalent in all industrial establishments, employment of interstate migrant workmen in industrial establishments, building and other construction activities, factories, motor transport undertakings, shops, and other establishments, etc.

The terms "workman," "worker," and "employee" are used in labor laws depending on their respective purposes for the generic term "labor," if I am correct. However, my suggestion to appreciate and understand the inherent differences between such terms would be to refer to the concerned definition clauses of the terms used in the Employees Compensation Act, 1923, The Industrial Employment (Standing Orders) Act, 1946, The Industrial Disputes Act, 1947, The Factories Act, 1948, The EPF Act, 1952, The Payment of Bonus Act, 1965, The Payment of Gratuity Act, 1972, and various States Shops and Establishments Acts.

Regards

Thanks for the response, Mr. Umakanthan.

I understand my question is too general. To be more specific, this is relating to a company with a workforce of 100+ registered under the STPI Act and the Companies Act. Recently, someone suggested we need to have a Labour Licence too. I wanted to understand whether it is mandatory. Would the employees working here come within the definition of 'Labour' as required for the Labour Licence.

Would appreciate it if you could share your email ID.

Thanks & Regards

Understanding Labour Law Registration for Business Organizations

The concept of registration under any Labour Law, such as establishment-oriented laws like the Factories Act, Shops and Establishment Acts, or employment-related laws like the CLRA Act, 1970, and the BOCW Act, 1996, is based on effectively regulating the conditions of labor and ensuring certain welfare amenities, health, and safety in view of the peculiar or special nature of employments. If your establishment or the pattern of its employment falls within the purview of any such Labour Legislation having specific provisions for registration, it is mandatory that you abide by it. Your registration under the STPI Rules or the Companies Act has no relevance at all in the matter of registration under the Labour Laws applicable to both your establishment and the employees/workmen employed therein since the purposes of registration under the former are entirely different.

As IT and ITES establishments are covered by the respective State's Shops and Establishments Act, the employees are referred to as "Persons Employed" for the purpose of the Act and not as "labor" in the conventional or colloquial sense. At the same time, they are "workmen" for the purpose of the Industrial Disputes Act, 1947, and the Trade Unions Act, 1926, and "employees" for the purpose of the Payment of Gratuity Act, 1972, for instance. It is not the nomenclature of the designation, the salary paid, or the essential academic qualifications that determine the nature or status of employment of a hired person. There are other predominant parameters such as control, supervision, empowerment, or authority to make independent decisions on behalf of the employer in matters like hiring and firing of people. Concerning your IT industry, the quantum of compensation, and fancy designations like consultant, team lead, executive, software engineer, architect, etc., are deceptive parameters to determine the concerned person's status of employment.

Regards, Lexalumnus

Though Umakanth Sir has given a detailed explanation of your query, which seems to be general, if it is specific or related to you, then you should provide more details like the nature of your business, any contract, location/site, etc. I am considering it as a general query related to the Labour Licence.

Understanding Labour Licence

A Labour Licence is issued by the Deputy Labour Commissioner of the area under "The Contract Labour (R&A) Act, 1970." If any business entity (be it Proprietorship, Partnership, HUF, Company, etc.) deploys 20 or more contractual labour/personnel at a particular site/location/agreement, then the entity needs to obtain a Labour Licence against the deployment. There are further many laws, rules, and documentation which also need to be complied with.

Hope this will help you clarify your query. Fellow members can correct me or shed more light on the subject.

Regards