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Posts Tagged ‘labour law’

House Rent Allowance (HRA) – Common Issues

February 19, 2013 9 comments

House rent allowance is one of the key components of wages paid to an employee. The object of payment of HRA is to enable an employee to meet the expenses incurred by him for hiring an accommodation at his place of work. Some frequently asked doubts about HRA are addressed below

1) Is it compulsory to pay HRA as part of wages to an employee?

No. It is not compulsory for an employer to pay certain sum as HRA as part of the wages unless there is a statute (law) in that state making payment of HRA at certain minimum rate as compulsory.

2) Is there any statute making payment of HRA as compulsory?

Certain states like Maharashtra have enacted law namely the Maharashtra Workmen’s Minimum House Rent Allowance Act 1983 where by an employer covered under the Act, is required to provide HRA at minimum rate to workmen. Therefore one needs to check with regard to one’s state about the existence of any such law.

3) Is there any specified formula in fixing the quantum of HRA in the industry?

Except where there is a statutory provision in states like Maharashtra, there is no prescribed formula for fixing the quantum of HRA.

4)  Whether HRA can be uniform for all places?

No.HRA cannot be uniform for all places in order to be realistic. For example, a company fixes HRA at Rs.1500/- for an employee working in a small city. However the same amount cannot be said to be realistic for an employee working at a lage city, where he is compelled to hire accommodation at far higher rates.

5) In the absence of any fixed formula or rule, what are the factors that are relevant to fix the quantum of HRA?

The following are the factors that can be considered as relevant.

i) HRA shall be linked to the place of work/posting of an employee but not to the place of the residence of his family. For example an employee is working at Nasik but his family is staying at Mumbai for education of his children. He is eligible for HRA at the rates fixed for Nasik town but not at the rate fixed for Mumbai.

ii) It shall bear reasonable relationship to the rental values prevailing at his place of work.

iii) It shall be commensurate with the status, roles and levels of the employees. For example the HRA drawn by a junior officer and a Senior Manger cannot be the same. The company needs to have a pragmatic formula, having regard to the size of accommodation which it considers as adequate for each class of employee.

6) What are the sources that can be looked for guidance in deciding the quantum of HRA?

On can look for the following sources
i) The statute, if any prevailing in any state providing for payment of HRA
ii) The HRA paid across  the industry or the companies of similar nature and size, located in the same region in which the company in question is located, can also be adopted as a norm.

7) Is HRA and house rent reimbursement the same?

NO. HRA is paid as part of salary every month as any other regular allowance like dearness allowance. Whereas in the scheme of house rent reimbursement, no HRA is paid and an employee is required to produce rent receipt or some evidence, prescribed by the company for having incurred the expenses towards the rent of his accommodation upon which the company reimburses him the said amount.

8) Is HRA also payable as part of wages when employee is also claiming reimbursement of house rent?

No. The employee is either eligible for HRA or for house rent reimbursement.

9) Is HRA also to be deducted when an employee is on leave without pay?

Yes. When HRA is paid as part of salary, it is to be deducted when an employee is on leave without pay.

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This is a Guest post by Sai kumar, an HR professional with three decades of experience in the field of labour laws and industrial relations in a public sector as well as in a reputed labour law firms. 

Sai Kumar has been  involved  extensively in research on labour law issues and case-law  on subjects such as the Industrial Disputes Act, the Standing Orders Act, the Factories Act, the Contract Labour Act, the P.F Act, the ESI Act  and the Gratuity Act etc.

The opinions expressed in the various blog posts on this site are those of the respective authors and are not necessarily endorsed by Talentmoon Human Capital Solutions LLP ( ” Talentmoon”)  or its Partners.  The guest posts on the various Labour laws and acts are only intended to present these laws in simplified language and they are not to be construed as legal interpretations or legal advice. The replies to various comments & queries on these blogs are based on the understanding of these Acts and laws, by the guest Author and the reader is advised to use his discretion and take appropriate legal opinion before acting on these posts & comments.

Talentmoon is not a law firm and none of its partners are legal practioners

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Is a software company a factory?

January 28, 2013 3 comments

The judgment of the Honorable Bombay High Court in Asst. Director E.S.I.C  Vs  Western Outdoor Interactive Pvt. Ltd, pronounced in July 2012, has become a hot subject for discussion in the I.T industry particularly in Mumbai which  is a hub of many a I.T and ITeS business. The anxious question that throws the I.T industry in dilemma is if an industry dealing with software development or applications in it’s business is a factory, whether the Factories Act 1948 will also be applicable to it?

The dispute arose out of a demand notice issued by the Employees  State Insurance Corporation to two companies of which one is engaged in software development, maintenance of software and content management, creation and maintenance of designs, integration and development of applications for in-flight entertainment system including development of games to be used in in-flight entertainment system. The other company carries on the business of providing stock market services to it’s traders and in the process, uses computers in recording, storing and transmitting share market data to it’s clients.

The companies contended that their activities are commercial in nature and cannot be termed as manufacturing process within the meaning of Sec.2(14AA) of the ESI Act 1948 and further that the explanation to section –II to Sec.2(m) of the Factories Act which defines “Factory”, excludes a premises from the definition of factory merely because some computer units were installed on it if no manufacturing process is carried on such premises.

The High Court has considered the definition of  “factory” both under Sec.2(m) of the Factories Act as well as under Sec.2(12) of the ESI Act and also the definition of “manufacturing process” under Sec.2(k) of the Factories Act since the same was adopted by Sec.2(14AA) of the ESI Act. The High Court observed that the definition of “manufacturing process” in sec.2(k) of the Factories Act(which was borrowed by Sec.2(14AA) of the ESI Act) uses various verbs like making , altering, repairing,  ornamenting etc. to cover various activities like welding etc. within the ambit of manufacturing process though it does not specify such activities in the definition. Similarly though the activity of software development and applications are not specified under Se,2(k) of the Factories Act, they nevertheless fall within the definition of manufacturing process.

The High Court further observed that the definitions of  “factory” under the ESI Act and that under Factories Act are different and the same is wider under ESI Act than under Factories Act since Explanation –II to Sec.2(m) of the factories Act(which excludes the premises, having computer units from factories If no manufacturing process is carried on it) is not incorporated in Se.2(12 ) of the ESI Act and further the issue whether software development is a factory under Factories Act is still pending before the larger Bench of the hon’ble Supreme Court and has no relevance to the present case that since it arose under ESI Act.

Thus the implication of this judgment  will be that it terms a software development unit as factory only for the purpose of the ESI Act but not under Factories Act since that issue is pending before the larger Bench of the Supreme Court. It may not be much concern to I.T industries, if they are covered under ESI Act as factories since they will any how cannot avoid being covered under ESI on the basis of “shops” based on the judgment of Supreme Court in the case of Southern Agency, Rajahmundry Vs  ESIC 2000(7) SCALE 69o.

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This is a Guest post by Sai kumar, an HR professional with three decades of experience in the field of labour laws and industrial relations in a public sector as well as in a reputed labour law firms. 

Sai Kumar has been  involved  extensively in research on labour law issues and case-law  on subjects such as the Industrial Disputes Act, the Standing Orders Act, the Factories Act, the Contract Labour Act, the P.F Act, the ESI Act  and the Gratuity Act etc.

The opinions expressed in the various blog posts on this site are those of the respective authors and are not necessarily endorsed by Talentmoon Human Capital Solutions LLP ( ” Talentmoon”)  or its Partners.  The guest posts on the various Labour laws and acts are only intended to present these laws in simplified language and they are not to be construed as legal interpretations or legal advice. The replies to various comments & queries on these blogs are based on the understanding of these Acts and laws, by the guest Author and the reader is advised to use his discretion and take appropriate legal opinion before acting on these posts & comments.

Talentmoon is not a law firm and none of its partners are legal practioners.

 

Key Amendments to Workmen’s Compensation Act 1923

July 25, 2012 1 comment

In continuing with our effort to present the various labour laws in a layman’s language, a brief update is provided on Workmen’s Compensation act 1923.

S.NO Section Pre-amended position Post-amended position
1 Title Workmen’s Compensation Act 1923 Tile of the Act amended to “Employees Compensation Act 1923”.
2 Words and expressions Refer to the words ‘workman’ or ‘workmen’ in the Act They are substituted by the words ‘employee’ or ‘employees’ wherever they occur.
3 Schedule II Clerks were not covered for compensation under the Act. Clerks are now covered for compensation. Please refer to  schedule-II for specified employments.
4 Sec.4 (a) The minimum ceiling limit of compensation for death was Rs.80000/- Now it has been revised to Rs1,20,000/-
5 Sec.4(b) The minimum ceiling limit of compensation for permanent total disablement was Rs.90000/- Now it has been revised to Rs1,40,000/-
6 Sub-Sec.2A of sec.4 Non-existent This sub-section was added after sub-section(2).This entitles an employee to reimbursement of actual medical expenditure incurred by him for injuries caused during the course of employment.
7 Explanation II to clauses(a)&(b) of Sec.4 of Sec.4 Explanantion –II prescribes the maximum wage limit at Rs.4000/- p.m for the purpose of computing compensation for death and permanent disablement The Explanation was omitted and a new sub-section (IB) has been added after Sub-section IA of sec.4 whereby the maximum wage limit has been revised to Rs.8000/-p.m
8 Sub-sec.(4) of Sec.4 The existing limit of funeral expenses is Rs.2500/- It has been revised to Rs.Rs.5000/-
9 Sec.25A Non-existent A new section has been added which fixes 3 months time limit for disposal of claims from the date of reference.

 

This is a Guest post by Sai kumar, an HR professional with three decades of experience in the field of labour laws and industrial relations in a public sector as well as in a reputed labour law firms. 

Sai Kumar has been  involved  extensively in research on labour law issues and case-law  on subjects such as the Industrial Disputes Act, the Standing Orders Act, the Factories Act, the Contract Labour Act, the P.F Act, the ESI Act  and the Gratuity Act etc and currently advises Talentmoon and its clients.

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