1. What are the consequences for Delayed Gratuity?
If an employer fails to pay gratuity within 30 days from the date it becomes payable (such as on retirement, resignation, or death), the following consequences apply under the Payment of Gratuity Act, 1972:
• Interest Penalty: The employer must pay simple interest on the delayed amount, calculated from the date the gratuity became payable until the date it is actually paid. The interest rate is notified by the Central Government and is subject to change. As of recent rulings, courts have ordered interest rates as high as 10% per annum for delayed payments.
• Legal Action: The employee can file a complaint with the controlling authority, who can order the employer to pay both the due gratuity and the applicable interest. Persistent non-payment may lead to further legal recourse, including recovery of the amount as arrears of land revenue.
• Additional Penalties: Failure to comply with orders may result in fines and, in some situations, imprisonment for the employer according to Section 9 of the Act. Penalties can include a minimum of 3 months’ imprisonment (which may extend to 1 year) or fines ranging from ₹10,000–₹20,000.
• Reputational Damage: Besides legal penalties, organizations delaying gratuity payments may suffer reputational harm, affecting their ability to attract and retain talent.
Note: The requirement to pay interest does not apply if the delay is due to the employee’s fault and the employer has obtained permission from the controlling authority.
In summary, delayed payment of gratuity not only incurs financial penalties but can also result in serious legal and reputational consequences for employers. Ensuring timely gratuity payments is essential for compliance and good employer-employee relations.
2. Whether a principal employer need to file both Form U under S&E and Form XXV under CLRA?
yes, a principal employer is generally required to file both Form U under the Shops and Establishments (S&E) Act and Form XXV under the Contract Labour (Regulation & Abolition) Act (CLRA), but these forms serve distinct purposes and apply under different circumstances.
↔ Form U under Shops & Establishments Act
• This is an annual return required to be filed by establishments registered under the Shops and Commercial Establishments Act (such as in Karnataka).
• Form U includes details about the establishment’s registration, employment particulars, such as number of employees employed directly, leaves given, and welfare provisions.
• The return consolidates data about employees working and separated and covers statutory compliance under the Shops Act.
• In some states like Karnataka, filing Form U is mandatory every year, typically by mid-January or the prescribed deadline.
• Filing Form U is required irrespective of whether contract labour is employed or not, as a record of the establishment’s employment status and benefits.
↔ Form XXV under Contract Labour (Regulation & Abolition) Act
• Form XXV is the annual return of the principal employer under the CLRA and must be submitted to the Registering Officer.
• It provides detailed information on contract labour employed by the establishment, including the number of days contract labourers were employed, man-days worked, security deposits, and contracts with agencies.
• It is mandatory for all principal employers who engage contract labourers in their establishments.
• The annual return must be submitted by February 15 (or the specified date) for the preceding year ending December 31.
• This form focuses exclusively on compliance related to contract labour and labour regulations under CLRA.
↔ Summary Comparison
↔ Key Points• A principal employer who has contract labourers must file both forms to remain compliant — Form U for general labour/statutory compliance under S&E, and Form XXV for contract labour details under CLRA.
• Some states may allow consolidated or online filing portals for ease, but legally both returns remain mandatory within their respective frameworks.
• Non-filing or delayed filing of either return may result in penalties and legal notices from labour authorities.
3. Whether the Establishment Registered in the Middle of Half Year is Required to File Half-Yearly Return for ESIC?
Yes, an establishment that registers with the Employees’ State Insurance Corporation (ESIC) in the middle of a contribution period (half-year) is required to file the Return of Contributions (RC) for the portion of that half-year during which it was liable.
Key Points (as per ESI Act and Rules)• Applicability: As soon as an establishment becomes liable under the ESI Act—usually when employing 10 or more eligible employees—it must register with ESIC and comply with contribution and return filing requirements.
• Half-Yearly Return Periods & Due Dates:
Under Regulation 26 of the ESI (General) Regulations, 1950, the employer must file the Return of Contributions within 42 days from the close of the contribution period:
1. April 1 – September 30 → Due by November 11
2. October 1 – March 31 → Due by May 12
• Partial Period Coverage:
For the first half-year after registration, the return should reflect only the actual period of coverage — from the date of registration or from when employees became insurable till the end of that half-year.
• Contribution Payments:
Contributions must be deposited monthly (by the 15th of the following month). The half-yearly RC is a consolidated report of all contributions paid.
• Late Filing Consequences:
Failure to file the RC before the statutory due date may attract penalties and interest under the ESI Act.
Example
If an establishment registers with ESIC on November 10, the October–March contribution period applies. The return for this first period will cover November 10 to March 31 and must be filed by May 12.
Summary:
Even if registered midway, an establishment must file the Return of Contributions for the portion of the half-year covered. For ESIC, the filing deadlines are November 11 and May 12, which are fixed as per the 42-day rule from the close of each half-year contribution period.
4. Whether A1 Form required to be submitted under LWF in Maharashtra?
Yes, Form A1 is mandatory for employers in Maharashtra under the Maharashtra Labour Welfare Fund Act, 1953. It is a statutory requirement for establishments employing five or more employees to submit this form.
Key Points about Form A1 Submission in Maharashtra:
• Form A1 is a statement of contribution that every employer must file with the Maharashtra Labour Welfare Board.
• The form should be submitted half-yearly, along with payment of both employee and employer contributions.
• The relevant periods and due dates for submission are:
• For the half year ending June 30, the form and contribution must be submitted by July 15 to July 31.
• For the half year ending December 31, the form and contribution must be submitted by January 15.
• The contributions collected include employee deductions and employer contributions, and these depend on the wage slabs (different rates apply based on wages and the nature of work).
• Employees working in managerial or supervisory capacities and those drawing wages above ₹3,000 per month are generally exempted from contributions.
• The form must include details such as the total number of employees registered, amount of contributions paid, penalties (if any), and other prescribed information.
• Payment can be made via cheque or demand draft drawn in favor of “Maharashtra Labour Welfare Fund,” payable at Mumbai.
• Failure to submit Form A1 on time can attract penalties and interest on delayed payments.
Summary:
Form A1 is a crucial compliance document under the Maharashtra Labour Welfare Fund rules. Employers must diligently file it every six months along with the required contributions to avoid legal penalties and ensure conformity with state labour welfare laws.
5. Can the employer provide gratuity amounts of more than 20,00,000 Lakhs to employees ?
Yes, an employer can pay gratuity amounts exceeding ₹20,00,000 to employees. There is no statutory upper limit on the gratuity amount that an employer may choose to pay.
Important Clarification: Lifetime Limit on Tax Exemption• The ₹20,00,000 tax exemption limit under the Income Tax Act is a lifetime limit for gratuity received by an employee. This means that across the employee's entire career, irrespective of changes in employment, the total tax-exempt gratuity amount cannot exceed ₹20,00,000.
• If an employee changes jobs and has received gratuity from the previous employer(s), the new employer must consider the cumulative gratuity amounts already paid to ensure proper tax compliance.
• Therefore, it is advisable that employers ask the employee to provide details of all previous gratuity payments received before onboarding.
• The new employer needs to factor previous gratuity amounts when calculating tax exemption on subsequent gratuity payments, as any excess over ₹20,00,000 in total gratuity received will be taxable in the hands of the employee.
Summary of Key Points:• Employers can pay gratuity above ₹20,00,000 as a benefit with no legal cap under the Payment of Gratuity Act.
• The tax exemption cap of ₹20,00,000 applies cumulatively over the employee’s lifetime, not per employer.
• Employers should collect information about prior gratuity payments from employees to ensure accurate tax compliance.
• Amounts paid beyond the cumulative ₹20,00,000 exemption limit will be subject to income tax for the employee.
6. Whether Form Q shall be maintained as per the Karnataka S&E Rules or the establishment’s own appropriate format ?
Form Q, which is the Appointment Order format under the Karnataka Shops and Commercial Establishments Act and Rules, must be maintained as prescribed in the Karnataka S&E Rules, 1963.
Key Points:• The Karnataka Shops and Commercial Establishments Rules specify the format and contents of Form Q to ensure uniformity and compliance with the law.
• Employers are required to follow the prescribed format for appointment orders to keep legally valid and audit-proof records.
• Using an establishment’s own format may lead to non-compliance if it does not include all mandatory details outlined in the Karnataka Rules.
• The prescribed Form Q typically includes details such as employee name, designation, wages, working hours, and employment conditions.
• Maintaining Form Q as per the official Rules helps during inspections, audits, and dispute resolution.
In summary: To comply with Karnataka labour regulations, establishments should maintain Form Q strictly as per the Karnataka Shops and Commercial Establishments Rules and not substitute it with a customized format unless the custom format fully adheres to the statutory requirements. This ensures legal conformity and avoids potential penalties.
7. Till what duration the Establishment should retain the Statutory documents?
Establishments are required to retain statutory documents for specified periods as mandated by various laws and regulatory bodies. The retention period varies depending on the type of document and the applicable legislation, such as company law, labour laws, and tax regulations.
The key retention periods that establishments in Karnataka and India generally need to follow for maintaining statutory and labour-related documents are consolidated below:
Karnataka Shops and Commercial Establishments Act, 1961 (and Rules, 1963)• Registers, records, and notices relating to any calendar year must be maintained until the end of the next calendar year. This means records for one year are retained through the following year, generally about 1.5 to 2 years in practice.
• Examples include attendance registers, leave records, and wage registers.
• Registration certificates for establishments are valid for 5 years, with renewal required before expiry.
• Any change in business details must be reported within 15 days.
Minimum Wages Act, 1948 (and Central Rules, 1950)• Employers must maintain wage registers, muster rolls, and records for a period of 3 years after the date of the last entry made in them.
• This applies to all wages-related records, including registers under the Minimum Wages Act and Payment of Wages Act.
• Inspectors can request records from the previous 3 years during audits or inspections.
Other Labour Laws Common Retention Periods• Labour laws such as the Contract Labour (Regulation and Abolition) Act, Payment of Bonus Act, Equal Remuneration Act, and Building and Other Construction Workers Act generally mandate maintenance of records for 3 to 5 years from the date of last entry or after completion of employment.
• Payroll, provident fund, ESIC, and attendance records are typically required to be retained for at least 5 years to ensure compliance and for audit purposes.
• Financial and accounting records under company law and Income Tax Act are generally retained for 8 years.
• Important corporate documents (e.g., incorporation, meeting minutes) require permanent preservation.
Important Notes• These retention periods are minimum statutory requirements; in case of ongoing litigation, inspections, or audits, documents must be retained until the issue is resolved.
• Digital preservation of records is permitted as long as the authenticity and accessibility are ensured.
• State-specific rules, like Karnataka Shops Rules, may have slightly different requirements, but the above is generally followed.
• Non-compliance in maintaining prescribed records may lead to penalties and legal complications.
8. Whether the Establishment should provide paid holiday for the election being conducted in other jurisdictions?
Yes, establishments must provide a paid holiday to employees who are entitled to vote in elections—even if those elections are conducted in another jurisdiction (i.e., outside the place of their work).
Legal Basis• Section 135B of the Representation of the People Act, 1951 mandates that every person employed in any business, trade, industrial undertaking, or other establishment and entitled to vote at an election to the House of the People or a State Legislative Assembly must be granted a paid holiday on the day of the poll—even if their place of work is in a different state or district than their place of voting.
• This provision applies to all categories of employees (permanent, temporary, casual, daily wage, and shift workers).
• No deduction from wages is permitted for this holiday; employees must receive their regular pay for that day.
• Employers who fail to comply may be penalized with a fine, and employees may lodge complaints with the Election Commission or labour authorities.
Important Clarifications• The obligation exists even if the election is not in the location of the establishment, but in the jurisdiction where the employee is a registered voter (for example, a person working in Bengaluru must be granted a paid holiday if registered to vote in Chennai, on the Chennai polling date).
• The only exception is for employees whose absence may cause danger or substantial financial loss to the employer (such as critical maintenance staff)—as per Section 135B(4) of the Act.
• Employees should inform employers in advance and may need to furnish proof (like their voter ID and details of the polling date).
In Practice• States regularly publish circulars/notifications reminding employers to grant such holidays, specifying that paid holidays are not just for local elections but also for employees who must travel to their home constituency to vote.
• These rules are reiterated for each election by the Election Commission and labour departments across India.
9. Whether establishment’s IC Committee is required to be mandatorily registered with SHE Portal? What is the process that is required to be followed for registration ?
Yes, it is now mandatory for establishments to register their Internal Committee (IC) on the SHe-Box (Sexual Harassment Electronic Box) portal. Recent directives—both from the Central Government and various state authorities—require all organizations, including private sector companies with 10 or more employees, to complete this registration as part of their compliance with the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (POSH Act).
Key Points:• Legal Requirement: All private and public establishments with 10 or more employees must constitute an Internal Committee (IC) and register it on the SHe-Box portal as part of mandatory PoSH compliance.
• Scope: This requirement applies not only to companies in major cities but across India, as reinforced by Supreme Court judgments and public notices from states such as Delhi, Maharashtra, and Rajasthan.
• Penalties for Non-Compliance: Failing to register the IC can attract penalties—up to ₹50,000—and repeat violations may even lead to suspension of business licenses.
• Registration Process: Organizations must:
• Register their head office and nominate a Nodal Officer (NO) on the SHe-Box portal.
• Enter details of all branches and IC members.
• Ensure the NO is not a member of the IC to avoid administrative issues.
Why Registration Matters• Centralized Compliance: The SHe-Box portal acts as a centralized system for recording IC details, filing workplace sexual harassment complaints, and ensuring statutory compliance with the PoSH Act.
• Facilitates Redressal: Registration allows for prompt and official electronic transmission of complaints to the relevant IC for action.
Current Status• Government notifications and recent court orders have made registration a legal obligation—not just a recommended best practice.
• Several states have set clear deadlines (such as May 15, 2025, for Mumbai and June 12, 2025, for Delhi) for organizations to comply with the IC registration requirement.
In summary: All qualifying establishments must register their IC on the SHe-Box portal to remain compliant with the law and avoid penalties. This is now monitored strictly by both central and state authorities.