Chapter 1…

Introduction

Contents …

1.1 Introduction

1.2 Meaning of Employer and Employee

1.3 HR Policy: Meaning and its Importance

1.4 Legal Issues Related to HR in an Organization

• Exercise

Learning Objectives…

After studying this chapter, the student should understand:

To study and explain rights of employees at work place.

The legal issues related to HR in an organization.

"You must treat your employees with respect and dignity because in the most automated

factory in the world, you need the power of human mind. That is what brings in innovation.

If you want high quality minds to work for you, then you must protect the respect and dignity."

− Mr. N.R. Narayana Murthy, Chairman Emeritus, Infosys Ltd.

“Our progress as a nation can be no swifter than our progress in education. The human

mind is our fundamental resource.”

− John F. Kennedy (35th President of the United States)

1.1 Introduction

The Ministry of Labour and Employment is one of the oldest and important Ministries of

the Government of India. The main responsibility of the Ministry is to protect and safeguard

the interests of workers in general and those who constitute the poor, deprived and

disadvantage sections of the society, in particular, with due regard to creating a healthy

work environment for higher production and productivity and to develop and coordinate

vocational skill training and employment services. Government’s attention is also focused on

promotion of welfare and providing social security to the labour force both in organized and

unorganized sectors, in tandem with the process of liberalization. These objectives are

sought to be achieved through enactment and implementation of various labour laws, which

regulate the terms and conditions of service and employment of workers.

Under the Constitution of India, Labour is a subject in the Concurrent List where both
the Central and State Governments are competent to enact legislation subject to certain

matters being reserved for the Centre.

Legal Aspects in Human Resource Introduction

1.2

1.2 Meaning of Employer and Employee

Employer: An employer is the authority which employs and pays employees for their

labor. It may be an individual person or it may be a company representing many people.

Within the relationship between employers and their employees, the employer is the party

which will typically define the terms of employment and write the contract. They are then

obligated to provide the agreed-upon compensation to workers for any labor they perform

that is contained within the terms of their contract. An employer is also the party legally

liable for work conditions, maintaining labor laws and handling any legal action an

employee may pursue.

Employee: An ‘employee’ is a term for workers and managers working for a company,

organization or community. These people are the staff of the organization. In general, any

person hired by an employer to do a particular job in exchange for payment is an employee,

but there are different kinds of employees.

In other words, any individual who works part-time or full-time under a contract of

employment, whether oral or written, express or implied, and has recognized rights and

duties is called as employee/ worker.

Employment

Agreement

Right Against

Discrimination

at Workplace

Maternity

Benefit

Provident

Fund Gratuity

Fair Salary

and Bonus
for

Employees

Appropriate

Working

Hours and

Overtime

Right to

Leaves

Prevention of

Sexual

Harassment

at Workplace

Fig. 1.1

During the course of employment, all employees are entitled to certain fundamental

duties and rights. These basic rights are proportional to an employer’s duty to make the

workplace as comfortable and employee-friendly as possible. Employment law covers all

rights and obligations within the employer-employee relationship, including not only current

employees but also former employees and job applicants.

Indian Employment laws lay down several provisions to safeguard the interest of

employees, some of which are not applicable to all the employees working in different

sectors. E.g.: There are no specific laws that govern the rights and obligations of employees

working in the private sector.

Legal Aspects in Human Resource Introduction

1.3

However, there are certain rights applicable to all employees in India, namely:

• Right to have an Employment Agreement: It is a written document containing

terms and conditions of employment and establishes the rights and obligations of

the employer and employee. A well-written agreement can prevent any unforeseen

dispute between the employer and employee.

• Right to Leave: An employee is entitled to leaves and holidays. Generally, there are 4

types of leaves available to an employee in India: Casual leave, Paid leave, Sick leave
and other leaves.

• Right to be protected against sexual harassment, discrimination and harassment.

• Right to fair and timely remuneration and bonuses for work performed, after

making the requisite deductions like TDS, Provident Fund, etc.

• A female employee is entitled to Maternity leave as per the Maternity Benefit Act,

1961.

• Right to gratuity- It is a retirement benefit under the Payment of Gratuity Act, 1972

paid to an employee at the time of retirement, termination, resignation or

employee’s death. It is paid in recognition of service to the company, to employees

who have completed at least 5 years of continuous service.

• Right to Provident Fund: Under the Employees’ Provident Funds & Miscellaneous

Provisions Act, 1952, employees have the option to keep a part of their salary

invested in EPF, which is transferred directly by the employer in the PF accounts. The

contribution by employer and employee are maintained by the Employees Provident

Fund Organisation (EPFO).

• Notice Period: In case the employer wishes to terminate the employment of an

employee, then a notice has to be served to the employee to prepare them for such

termination. An employer cannot terminate an employee without giving a notice

period. Employee shall get an opportunity of being heard.

Apart from these rights, the employee also has the right to safe working place with basic

amenities, right to appropriate working hours, right to any incentive promised, etc.

1.3 HR Policy: Meaning and its Importance

According to Edwin B. Flippo, a Policy is a - ‘rule or pre-determined course of action

established to guide an organisation towards its objectives’. Thus, a policy guides the course

of future actions of the management.

Similarly, an HR policy also indicates the line of action or the attitude the management is

likely to adopt in future towards its personnel and their problems.

Legal Aspects in Human Resource Introduction

1.4

Armstrong has defined HR policies as follows:

“Human resource policies are continuing guidelines on the approach the organization
intends to adopt in managing its people. They define the philosophies and values of the

organization on how people should be treated, and from these are derived principles upon

which managers are expected to act when dealing with human resource matters.”

Need and Importance of HR Policies:

1. To Achieve the Objectives of the Organization: Policies guide the employees to

take action for achieving the objectives of the organization. Hence, they must be known and

well understood by everyone in order to concentrate efforts on the objectives.

2. To Bring Uniformity in Decisions: HR policies furnish the general standard on

which decisions are taken. Various line authorities take decisions in an organization keeping

in view the HR policies. Thus, uniformity of action is maintained in similar cases.

3. To Delegate Authority: HR policies make delegation of authority possible, which

means assigning the work to others and give them authority to do it. HR policies help

executives at various levels of decision taking to act with confidence without consulting the

superiors every time. HR policies give a manager liberty to choose the alternatives provided

and to decide upon the action.

4. To Achieve Better Control: HR policies specify relationships among organization,

management and workers. Therefore, each group works for the achievement of the larger

objectives of the organization without any policy conflicts. Thus, HR policies provide better

control.

5. To Evaluate Efficiency: HR policies serve as standards in execution of work.

Efficiency of a group may be evaluated by its performance in the light of the policy. After

assessing whether organization has achieved the desired results set in the policy, HR policy

may be amended or a new policy may be formulated in the light of the actual performance.

6. To Create Confidence among Employees: HR policies provide the workers a

security against exploitation and create confidence in employees who may know where they

stand in the organization.

7. To Motivate: HR policies introduce the employees to the objectives of the

organization. It guides the workers in achieving the objectives. They work enthusiastically

and with loyalty to achieve those objectives.

8. To Guide the Management: HR policies provide guidance to management in

relation to the HR problems. HR policies decide how to get the work done by the people or
how to behave with them.

1.4 Legal Issues Related to HR in an Organization

1. Confidentiality: The first great challenge that an HR professional faces is the need

to maintain confidentiality. Human beings are always willing to speak to people and

socialize. Therefore, it is difficult to keep a secret. Maintaining confidentiality in a workplace

Legal Aspects in Human Resource Introduction

1.5

is both an ethical as well as a legal responsibility. If you fail to maintain confidentiality, you

will not just lose your reputation but also lose your job. E.g.: personal addresses/ phone

numbers of employees, etc.

2. Verification: In many organizations, human resource professionals have to shoulder

the responsibility of verification. HR needs to carry out a background check of each

individual with respect to their social, economic and criminal background. A legal check of

this kind helps the organization to retain its reputation. It also helps to prevent the hiring of

drug addicts or individuals with a criminal background into the organization. This step in the

process of hiring must be dealt with by HR professionals with extreme care.

3. HR Violations Regarding Discrimination: HR departments are cautious about

avoiding discrimination in general. Nevertheless, this continues to be a prevalent problem.

In particular, this is because there are a number of “protected statuses” to be aware of.

The most obvious include gender, race, sexual orientation, and religion. At the same

time, you must also watch out for possible discrimination against marital and family status,

disability, and even veteran status.

Thus, it is incredibly important for HR departments to remain up-to-date on all of the

potential discrimination landmines around the workplace.

4. Workplace Policies on Different Health Issues: There are all sorts of people

looking out for job opportunities and this also includes individuals with certain special

medications.

The companies need to take these individuals into account while making decisions

regarding insurance, remuneration as well as work-related policies. In some cases, the

organization may need to make special considerations.

A human resource executive should be able to understand all such policies as well as
their implications. There are certain health conditions that are very different from the routine

health problems.

The HR professional should understand where which concessions should be applied and

who should get special health-related allowances.

5. Labour Rights and Implications: Every individual has certain labour rights that give

them security when they work in an organization. Every organization has to abide by these

laws and rules and make sure that the workers get their basic rights while working in an

organization.

An employee deserves a proper remuneration and a notice period of specified duration

before being removed from a job. The HR professional makes sure the organization makes

policies that abide by these laws.

Firms that plan not to abide by this need, specifies the facts in the joining letter so that

the employee is prepared for anything. An HR professional shoulders the responsibility of

dealing with such issues.

Legal Aspects in Human Resource Introduction

1.6

6. Tax Laws of Organization: Every organization that runs in a nation has to abide by

the nation’s tax laws. The company is also subject to tax deductions just like all the

employees.

Making the best policies that help the organization as well as the employees, needs to

be supervised by human resource executives.

7. Laws of the Organization: While there are very few chances of legal implications of

the laws of the organization, one needs to consider the impact of the laws on the employees

as well as the management.

Some laws may displease the employees and if the displeasure increases, it will directly

impact the performance of an organization.

The laws of an organization also decide how long the employees prefer to stick to the

organization. On being an HR Executive, you are expected to assess the way in which each

organizational law affects employees.

The overall impact of the change in law and the ways to tackle the negative impacts

should be gauged by an HR professional. These may include trivial laws related to break
timings and leaves or serious laws regarding remuneration and bonuses.

The HR professional thus shoulders a very great responsibility while they work in an

organization. There are many HR professionals who fail badly in the task assigned to them

because they do not realize the gravity of the problem or the significance of the

responsibility they shoulder.

Exercise

Multiple Choice Questions :

1. Peace and harmony in organisation is very important for ……

(a) GDP (b) Economic Development

(c) Manpower (d) None of the above

2. Labour Law covers ……

(a) Industrial Relations (b) Workplace health and safety

(c) Employment Standards (d) All of the above

Answers

1. (b) 2. (d)

Short Questions:

1. Define employer.

2. Define employee.

3. Define Human Resource Policy.

✍✍✍

Chapter 2…

The Employees Compensation Act,

1923

Contents …

2.1 Wage and Salary Administration

2.2 Employees Compensation Act, 1923

• Exercise

Learning Objectives…
After studying this chapter, the student should understand:

The basic concepts of wage and salary administration.

The applications of the Workmen’s Compensation Act, 1923.

2.1 Wage and Salary Administration

Wage is remuneration to labour for the work done or the service rendered by it to the

employers. Wage payment is the most vital and important problem that an industrial worker

is confronted with. It is also one of the most difficult areas in our present industrial relations

system. The wages constitute the earning for the workmen, which, in turn determine his

standard of living and that of his family. They also determine the standard of his efficiency

and consequently, the level of productivity. Wage administration is also important to the

employer as it constitutes one of the principal items that enter into the cost of production of

the product. The government and the community at large are also vitally concerned with the

problem because of a large number of industrial disputes centre round the question of

wages and allowances. Therefore, evolution of a suitable wage structure and wage fixing

machinery is important for the prosperity of industry, for the well-being of labor and for the

economic development of the country. However, the problem of wage fixation in a modern

democratic society is by far the most difficult of all employer-employee relationship. A

number of institutions are involved in the determination of wages and working conditions.

These include collective bargaining, adjudication by Labour Courts and Tribunals,

government appointed pay Commissions and Committees and Industrial Wage Boards.

Legal Aspects in Human Resource The Employees Compensation Act, 1923

2.2

The parties concerned, namely, the employers, the workers and the consumers have

seemingly conflicting interests. A delicate balance has to be struck between wages paid to

the workers, the profits passed on to the shareholders, and the services rendered to the

community. It cannot also be considered in isolation from the larger economic and social

background prevailing in the country.

Definitions:

Wage: Wages are paid on an hourly rate and depend on how many hours the employee

works in a given pay period. The pay period is usually one or two weeks and there is no fixed

amount per annum. This means if you worked overtime one week and missed a shift the
next week your pay will reflect the changes.

Salary: A salary is a fixed amount paid to an employee over a 12-month period. An

employee usually receives their salary on a monthly basis or any other period as determined

by an agreement.

The most obvious difference between salaries and wages is that with a salary you know

how much you will receive per year. Whereas with wages, it all depends on how much you

work.

Objectives of wage and salary administration are:

(i) To ensure equity in respect of payment of salary/wages in terms of equal pay for

equal work.

(ii) To establish a system of job analysis so that job description and job specification

activities can be accurate and specific.

(iii) To create a pool of talented, skilled and dynamic work force, so that they can

deliver quality goods and services at reasonable cost.

(iv) To make employees aware of wage and salary policies, procedures, etc.

(v) To ensure effective control over all activities concerning wage/salary, welfare, social

security, fringe benefit, incentive, bonus etc.

(vi) To introduce a system for complying with provisions of law, statutes and for proper

implementation of agreements, settlement in respect of compensation of

employees.

(vii) To make evaluation of jobs so that there cannot be any dissatisfaction amongst

employees in respect of their wages / salaries and other benefits.

(viii) To develop mutual understanding, faith and confidence between employees and

management through introducing fair and attractive compensation package.

(ix) To ensure maintenance of internal equity, external equity and individual equity in

respect of providing compensation to employees.

Legal Aspects In Human Res