Compulsory issuance of
appointment letter: What does it
mean for employees?
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As per experts the code could also require the employer to communicate any change in the terms
of employment via addendum or by issuing fresh letter.
Synopsis
An appointment letter would provide a sort of documentary evidence and would help them claim their rights and benefits due to
employees. An employer would be required to mention details such as salary, working hours etc. in the appointment letter.
By Preeti Motiani, ET Online
May 15, 2020, 10:37 AM IST
6
The Finance Minister, Nirmala Sitharaman, has proposed
the compulsorily issuance of appointment letter to every
employee including those in the unorganised sector. As a
result, informal sector employees would be able to claim
some benefits similar to those available to workers in the
organised sector. This proposal was part of the package
announced yesterday to help labour hit by the coronavirus
related lockdown.
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Mandatory issuance of appointment letter is a requirement
under the Occupational Safety, Health and Working
Conditions Code, 2019. This Code was introduced in the Lok
Sabha on 23 July 2019. It was then referred to the Standing
Committee on Labour on 7 October 2019. The Committee has
submitted its report on the said Code on 11 February 2020.
The Code is pending to be passed by the Lok Sabha and is
not in force yet.
According to experts, an appointment letter would provide a
sort of documentary evidence of employment to an employee
especially those working in the unorganised sector. Currently,
there is no central law that requires mandatory issuance of
appointment letter. However, some states do have laws
which make it mandatory to provide details of employment in
the appointment letter. This would help them claim their
rights and the benefits due to them. As per the proposal
which is part of the code, the employer would be required to
mention details such as salary, working hours, amount of
leave available in a year etc. in a prescribed format in the
appointment letter.
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As per experts the code could also require the employer to
communicate any change in the terms of employment via
addendum or by issuing fresh letter.
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As per the definition of 'employee' in the Code, employee
would include anyone employed for wages by an
establishment to do any skilled, semi-skilled, unskilled,
manual, operational, supervisory, managerial, administrative,
technical or clerical work. This would normally include a
regular employee, individual hired on fixed term employment
contract, factory worker, etc.
ET Wealth Online spoke to different experts on what this
proposal could mean for employees and how they are likely
to benefit under the proposed law. Here's what they have to
say.
Puneet Gupta, Director, People Advisory Services, EY India
says, "As per the Bill on Occupational Safety, Health and
Working Conditions Code, 2019 introduced in the Lok Sabha,
every employer (covered under the Code) has to issue an
appointment letter to every employee on his / her
appointment in the establishment. The appointment letter
should contain such information as prescribed by the
appropriate Government. This will ensure that low-paid
employees cannot be paid less as their salary and benefits
may need to be provided in the letter. Currently, under some
Shops and Establishment Acts (which are specific for each
state), such as one applicable in Delhi and West Bengal,
there is a specific requirement to issue appointment letter
providing salary details. Under the Code, if the employee has
not been issued appointment letter before the
commencement of Code, he / she shall be issued
appointment letter within 3 months of the commencement of
the Code."
Anshul Prakash, Partner, Employment Labour & Benefits,
Khaitan & Co. says, "The mandatory issuance of appointment
letter emanates from Draft Code on Occupation Safety,
Health, and Working Conditions which is currently before the
Parliamentary Standing Committee. The mandatory issuance
of an appointment letter is intended to ensure that the tenet
of employer-employee relationships is recorded in writing for
all employees including those in the unorganized sector.
Currently, there is no central law that prescribes the
requirement of a written appointment letter. Further, to that,
the law will state the format in which terms of appointment
must be encapsulated. It is expected that any change in the
terms of the contract such as salary, benefits, etc. will have
to be communicated in writing as well to the employee, once
the Code is effective in the future."
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Dr. Suresh Surana, founder, RSM India says, "At present,
various labour laws lay down the conditions for working,
employment, statutory entitlements such as minimum
wage/provident fund/gratuity/bonus and other aspects. While
these are minimum legal requirements, in practice, the terms
of employment are agreed as contractual arrangement. In
the organized sector, the appointment letter or employment
contract read with the HR policies constitute the terms of
employment. In the unorganized sector, many businesses do
not issue any appointment letter. The announcement made
indicates that the government proposes that in the new
labour laws to be approved by the Parliament, there would be
a legal requirement for all the businesses irrespective of their
size to issue an appointment letter. This would particularly
benefit employees in the unorganized sector and informal
economy. This would increase the awareness amongst
employees about their entitlements and can be used to
resolve disputes or divergent views about the actual
arrangement. This would also ensure that the terms of
employment, to the extent inconsistent with law such as
minimum wage or statutory leave or working hours, will not
be legally enforceable."
Pooja Ramchandani, Partner, Shardul Amarchand Mangaldas
and Co. says, "A Compulsory Appointment letter would mean
a formal engagement in writing with all employees. The
appointment letter will typically contain conditions of
employment such as tenure, wages, benefits amongst others.
In cases of casual labour it is common not to have a formal
letter of appointment. Therefore this will especially benefit
this category. This will be an evidence of employment
engagement. A formalised engagement will enable
employees to demonstrate proof of employment and claim
employee benefits and rights."
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READ MORE ON
APPOINTMENT LETTERFINANCE MINISTERWORKING HOURSOCCUPATIONAL SAFETYNIRMALA
SITHARAMANEMPLOYEES
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