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· Labor laws give rights to employees to
form trade unions, and most wages in the organized sector are
governed by trade union agreements.
· Retrenchment of a permanent labor force
is difficult and expensive.
· Minimum wages in the organized sector
are regulated by legislation.
· Employers must contribute to social
security and medical insurance.
· There is a visa requirement for foreign
nationals.
· A work permit as such is not required
for foreign nationals working in India, but permission to sty is
required from the government. Reserve Bank permission is no
longer required to employ foreigners.
India has a large pool of skilled,
semiskilled and unskilled labor. There is an adequate supply of
office staff in most parts of the country. A considerable number
of applicants for management and supervisory posts have
qualifications from recognized professional institutions and
Indian universities.
The Industrial Disputes Act seeks to
regulate industrial relations in the country. Its main objective
is to provide for a just and equitable settlement of disputes by
negotiation, conciliation, mediation, voluntary arbitration, and
compulsory adjudication. However, in most cases
employer/employee relations are determined by direct collective
bargaining.
Reliable date on employer/employee
relations is available only for the "organized sector"
of India's economy. The organized sector embraces incorporated
enterprises and the other industrial and commercial operations
on which the government can collect statistics. It does not
include small lousiness establishments and agricultural
holdings. Most Acts passed by the government for the welfare of
workers relates to the workers in this sector. A number of
social security schemes are in operation for them as well. These
provisions include factory acts, wages acts and other schemes,
such as employees' state insurance, employees' Provident funds,
death relief, and family pension schemes for workers and
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their families.
Some acts and rules have also been frames for the
non registered sector. The Minimum Wages Act is also applicable for
many categories of workers in this sector.
The trade Unions Act 1926 provides for the
registration of trade unions. Current membership of registered trade
unions is estimated at over none million (source- Ministry of Labour).
Unions are found throughout the organized sector.
They enter into binding contracts and settlements with the employers
on behalf of the workers Wages in the organized sector are left to the
process of collective bargaining, conciliation, arbitration, and
adjudication.
Membership in a trade union is not obligatory,
but in practice most workers and office staff are enrolled as members
of a union. Most trade unions are connected with a political party,
and all leading political parties have sponsored trade union wings. In
recent years, it has become a common feature in large industrial
establishments to have more than one trade union, not necessarily
distinguished on a craft or trade basis, and this have given rise to
interunion rivalry.
Militancy in trade union activities is becoming
less frequent.
The existence and the active role of the various
types of conciliatory machinery set up by the government have helped
to contain confrontation between the employers and the unions and to
bring about conciliation and settlement.
Industrial establishments of both public and
private sectors and commercial organizations that are conscious of
the value of their human resources development provide training
facilities to supervisory, skilled and semi-skilled workers-either
through their own training and development departments or by
sponsoring employees selectively to programs conducted by the
professionally run institutes and organizations to meet specific
needs. Such training is undertaken at the initiative of the concerned
establishments, and the expenses are borne by them.
A scheme was introduced in 1975 for workers'
participation at the shop floor and plant levels in enterprises
employing 500 or more workers. The scheme was in the form of a
government resolution and did not have any statutory sanction.
Suggestions on the question of workers' participation in the
management of companies have been made in the reports of various
government committees, but so far the proposals have not received
any legal sanction and voluntary schemes of participative management
have not proven very effective.
Under the Industrial Disputes Act, industrial
establishment employing 100 or more workers may be required by the
government to constitute a works committee, comprising an equal
number of representatives of management and workers. Normally, such
committees are found in large industrial establishments.
The wages received by employees are
supplemented by payment of an annual lump sum called a bonus, which
is a type of profit sharing. But over the years, the concept of
bonus has changed from one of profit sharing to one of deferred
wages, so that a minimum amount is payable irrespective of the
profits. The bonus is regulated by the Payment of Bonus Act 1965,
which is applicable to every factory and other establishment
employing 20 or more persons on any day during an accounting year.
Newly set up establishments are not required to pay a bonus until
they derive profits or for five accounting years following the year
when they start selling their products on a regular basis,
whichever is earlier.
The Payment of Bonus Act specifies a detailed
method for computation of the bonus. Only employees drawing up to
Rs 3,500 per month are entitled to a bonus under the Act, but the
bonus is calculated on the maximum salary of Rs 2,500 per month for
a salary between Rs 2,500 and Rs 3,500. The amount payable varies
from 8 percent (minimum) to 20 percent (maximum) of annual salary.
However, the normal practice is to pay, ex gratia, some amount to
employees drawing above Rs 3,500 per month also.
Wages vary from industry to industry and are
determined on the basis of collective bargaining in each industry
or in each enterprise. Basic wages are fixed by legislation in
accordance with the category of employee, which depends on the
nature of work or skill required. An unskilled worker earns
between Rs 2,000 and Rs 3,500 per month, while a highly skilled
worker earns between Rs 3,000 and Rs 5,000. Office clerical staff
are paid between Rs 2,000 and Rs 5,000 per month. A cost-of-living
index is compiled every month by the Commissioner of Labour's
office in the various industrial regions. Where none is locally
compiled, the amount of the employee's cost-of-living allowances
is often linked with the cost-of-living index of the nearest
industrial center.
Salaries and wages in general are often
comparable in the public and private sectors, but senior
management salaries and some middle management salaries tend to be
significantly higher in the private sector.
In addition to monthly salary or wages,
various fringe benefits are also available to employees. Fringe
benefits contribute significantly to the cost of hiring an
employee. In general, it may be said that they represent
approximately 50 percent of the monthly salary. The compulsory
fringe benefits are as follows.
1. Annual bonus, as discussed above.
2. Monthly contribution to a provident fund
at 8 to 10 percent of basic salary and dearness (cost-of-living)
allowance (in most cases 10 percent).
3. Terminal gratuity at 15 days' salary for
each year of service.
4. Four percent of the salary as
contribution toward the employees' state insurance scheme.
In some states, there are acts providing for
payment of a house rent allowance to workmen (5 percent of wages
earned).
The Factories Act Prescribes a 48-hour week
for adult workers; in offices, a workweek is generally 35 to 40
hours. Hours worked in excess of the standard hours are
generally paid at one and one-half to two times the hourly
wages.
There are between 10 and 20 paid public
holidays in a year for factory and office workers, depending on
the state. For a list, see "Hints for the business
Visitor". Provisions is also made for annual earned leave
and casual and / or sick leave with full and half pay to the
employees.
The Equal Remuneration Act 1976 prohibits
discrimination between men and women either in the matter of
recruitment or payment of wages wherever their jobs are
identical, except when the employment of women in certain
types of work is prohibited or restricted by law.
The provisions of the Factories Act
ensure that protection of the health and safety of workers in
all industries is maintained. Since it is a statutory
obligation, both employers and employees are required to
observe the safety and protection requirements. Noncompliance
with these requirements would call for penal action from the
concerned government authority.
The Industrial Disputes Act provides
strict rules for layoff, retrenchment and compensation. No
employee in any industrial establishment who has worked for
more than one year may be retrenched without being given one
month's notice in writing indicating the reasons for
retrenchment. The employee is also entitled to compensation
equivalent to 15 days' pay for each year of service
completed. The dismissal of workers may be contested through
a petition to the government and can lead to a
time-consuming process of negotiation. In practice,
retrenchment of employees is rare except for cases of proven
theft or embezzlement of company funds.
The government has activated the
National Renewal Fund (for rehabilitation and retraining of
workers displaced from such units) on a nonstatutory basis.
Tax concessions have been extended to
beneficiaries under approved Voluntary Retirement Schemes (VRSs)
of private-sector companies and employees of an authority
established under a central, state or provincial act or
local authority that meet the guidelines framed for this
purpose.
Earlier, the concession of complete
exemption from tax of all monentary benefits under VRS was
applicable only to employees of public-sector companies.
Social security system
Several legislative acts provide
social security to workers in India. The more important
ones are as follows.
· Employees' Provident Fund and
Miscellaneous Provisions Act.
· Employees' State Insurance Act.
· Industrial Disputes Act.
· Maternity Benefit Act.
· Maternity Benefit Act.
· Workmen's Compensation Act.
A newly set up company is exempt from
the Employees' Provident Fund and Miscellaneous Provisions
Act for the first three years of operation.
Certain other amenities, such as
canteens, rest shelters, first-aid centers, creches
(day-care centers for female employees' children), and
educational and recreation centers, are to be provided by
the employer in factories, mines and plantations. Large
industrial units outside the main cities sometimes provide
subsidized housing for their workers. Some states require
the setting up a welfare fund the contributions payable by
the employer, employees and the state government for
promoting activities connected with the welfare of labor.
Coverage
All the social benefits are available
to a worker irrespective of nationality. A worker is not
allowed to decline coverage. Foreign nationals employed in
India at a relatively higher level may not be covered,
depending on their terms of employment.
Contributions
Under the Employees' Provident Fund
and Miscellaneous Provisions Act, currently applicable to
employees earning up to Rs 5,000 per month as salary and
dearness (cost-of-living) allowance, the employer in most
cases in required to contribute a minimum of 10 percent of
basic wages and the cost-of-living allowance. The employee
makes a matching contribution by way of deduction from pay.
A small percentage of the wages or salary of the employees
covered under this Act is also paid by the employer toward
a deposit-lined insurance scheme.
A substantial percentage of the
contributions by the employer and employee go the Employees
Pension Scheme announced in November 1995. This scheme
provides for monthly pension to employees upon
superannuation, pensions to windows upon death after
superannuation, etc. The central also contributes a small
percentage to this scheme.
Under the Payment of Gratuity Act, a
terminal (retirement) benefit called a "gratuity"
is payable at the rate of 15 days' wages for each completed
year of service, subject to a maximum of Rs 100,000, at the
time of termination or retirement after five years of
service. The Act applies to employees drawing up to Rs
3,500 per month (basis Salary plus cost-of-living
allowance), but in practice all employees are paid the
gratuity.
Under the Employees' State Insurance
Act (applicable at present only to factories and
factory-attached office), all employees drawing a wage or
salary not exceeding Rs 3,000 per month must be insured
under the scheme. The rates of contribution by employee and
employer are 1.5 and 4 percent of the employee's wages,
respectively.
Benefits
The various social security schemes
provide retirement benefits in the form of a provident
fund, gratuity, and security against such contingencies as
ill health, industrial accidents and maternity. There is no
scheme providing for unemployment benefits.
Totalization agreements
No totalization agreement has been
concluded with any country
Payrolls costs, while significantly
lower than in developed (and many developing) countries,
may still be an important item in total production cost.
These generally vary from 10 to 25 percent of the total
production cost of an industrial organization, depending
on the type of industry. Instances of wage freeze or
curtailment of negotiated benefits are very rare in the
organized sector.
Work permits
Foreign nationals wishing to take up
employment in India need not obtain permission from the
reserve Bank even if they want to remit earnings made in
India. Normal visa requirements and the requirement to
obtain permission from the Home Ministry if the stay in
India is for more than three consecutive months continue
to be applicable.
Special arrangements or concessions
A foreign national may be entitled
to a special tax concession if certain conditions are
fulfilled.
Living conditions
The cost of living is moderate by
American or European standards. Rented housing is
available in all parts of the country. Rents are higher
in Mumbai and Delhi than in Calcutta, Chennai and
Banglore, had lower still in other cities.
Prior permission of the Reserve Bank
is necessary for a foreigner to lease any immovable
property for a period exceeding five years. No such
permissions required for monthly tenacies. Foreign
personnel may be accompanies by their families.
House rents for expatriates and
their families vary considerably from one city to
another. Domestic servants are available at about Rs
2,000 per month. A number of restaurants in each major
city serve western food. Good educational facilities with
instruction in English are found in major cities and some
hill stations provide courses of study similar to those
given by high schools in the United States.
Restrictions on employment
The government of India has not
introduced any legislation to provide for the
Indianization of employment.
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General Section
