Is Labour Laws in India Applicable to a Start-Up Company?

Is labour laws in India applicable to a Start-Up company?

Start-ups are framed as growth engines for the economy, these are driven by passionate entrepreneurs who are focused on catering more superior jobs to the talented youth than self-seeking collar jobs for themselves. After the introduction of the Startup India initiative, several innovative ideas took the shape of reality and brought new avenues for growth to Indian youth.

Way concerning more revenues and profits in contracts, these ventures on the other side lack compliance diligence to government referring to one or the other laws applicable to them.

Other than considering – aspirations of employees for more and more remunerative work options, customer retention, market analysis, and cost issues, start-ups also have to take care of certain laws and regulations that are industry-specific for the smooth functioning of business operations. From making their By-laws and Founder Agreements‘ to ‘Chain level documents with employees’, all such practices have to be considered with utmost care.

Here are some essential Industrial and labour laws that like any other business venture applies straight on Startups and are to be compiled well before any new action plan or contract of work is opted for business.

  • Labour Welfare Fund Act (of respective States)
  • Shops & Commercial Establishment Act (of respective States)
  • The Employee’s Compensation Act, 1923
  • Trade Unions Act, 1926
  • Payment of Wages Act, 1936
  • Weekly Holiday Act, 1942
  • Industrial Employment (Standing Orders) Act, 1946
  • Industrial Disputes Act, 1947
  • Minimum Wages Act, 1948
  • Employees’ State Insurance Act, 1948
  • Factories Act, 1948
  • The Plantation labour Act, 1951
  • The Mines Act, 1952
  • Employees Provident Fund & Miscellaneous Provisions Act, 1952
  • Maternity Benefit Act, 1961
  • Payment of Bonus Act, 1965
  • Contract Labour (Regulation & Abolition) Act, 1970
  • Payment of Gratuity Act, 1972
  • Equal Remuneration Act, 1976
  • Bonded Labour System (Abolition) Act, 1976
  • Inter-State Migrant Workmen (Regulation of Employment & condition of service) Act, 1979
  • Child Labour (Prohibition & Regulation) Act, 1986
  • Building & Other Construction Workers (Regulation of employment & condition of service) Act, 1996
  • Sexual Harassment at Work Place (Prohibition, Prevention, Redressal) Act, 2013.


Exemptions to Startups

While startups accommodate new venture activities and promote innovation & development of economy, the Ministry of Labour laws and Employment has spelled numerous exemptions and compliance benefits for startups.

A special regime for these entities for self-declaring their compliance following of labour laws, entities registered as startups have to self certify and regulate inspections and only have to submit certain declarations to the enforcement agencies.

Some other exemptions proposed for start-ups include :

> Startups have been sufficed with liberty from manually registering under provisions of 9 (Nine) labour and environmental laws for the first year beginning from the incorporation date of the start-up by self-certifying and submitting required declarations.

> No inspection for up to 3 years shall be made by the labour inspectors if a self-declaration (through a mobile app of labour department) is provided by Startup owner for compliance following nine labour laws being ;

1.The Industrial Disputes Act 1947;

  1. The Trade Unions Act 1926;
  2. The Building and Other Construction Workers’ (Regulation of Employment and Conditions of Service) Act 1996 (“BoCW Act”);
  3. The Industrial Employment (Standing Orders) Act 1946;
  4. The Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act 1979 (“ISMW Act”);
  5. The Payment of Gratuity Act 1972 (“Gratuity Act”);
  6. The Contract Labour (Regulation and Abolition) Act 1970 (“CLRA”);
  7. The Employees’ Provident Funds and Miscellaneous Provisions Act 1952 (“EPF Act”);
  8. The Employees’ State Insurance Act 1948 (“ESI Act”).

> For environmental laws, startups falling under ‘White’ category would be entitled to self certify and will only be selected for random checks once in a while by officers.

> Startups might get inspected under violation of any law only if a complaint is filed in writing and approved by at least one senior-level officer in concern to the inspecting officer.

> While self-certification is a compliance option for 1st year for startups, for the second year they have to only furnish compliance returns for the purpose. Such entities would only be entitled to get inspected only if a further complaint is made in writing with obtaining prior permission from high-level authorities.


To Conclude :

Like other small and big entities, even Startups have to equally oblige for Industrial labour laws. For the time being the compliance obligations for labour and environment laws for Startups didn’t mean to be harsh for their early days of incorporation by government.

However, the exemptions provide a definite period to these startups to understand and streamline the basic of these laws and the terms which will relate to their industry of work in the future.

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