Labour Law Compliances for Small Offices & Start-ups under the Shops & Establishment Act

Start-up and any other business type that requires establishing a small office entails more than building a product or getting a team. Adherence to the labour laws, particularly, the Shop and Establishment Act which governs the majority of commercial enterprises in India is one of the most important tasks. It does not matter whether you run a co-working office, a consultancy or an IT firm, or a retail unit you must comply with this Act.

This manual includes full compliances of labour laws that small offices and start-ups have to adhere to according to Shops and Establishment Act, as well as procedures, documents, time schedules, and penalties.

What is the Shops & Establishment Act?

The state specific labour law, Shops and Establishment Act regulates:

• Working hours

• Employment conditions

• Employee rights & welfare

• Wages & holidays

• Workplace status in business premises.

In India each state has its variant of the Act (e.g. Maharashtra S&E Act, Karnataka S&E Act, Delhi S&E Act), although there are some basic compliance requirements that are similar.

• Start-ups

• IT/Tech companies

• Freelance offices

• Co-working spaces

• Private offices

• Retail stores

• Service-based firms

Mandatory Registration Under the Shops & Establishment Act

• Who must register?

1. All start-ups or offices with at least one employee or in business should be registered.

• Deadline for registration

1. Usually 30 days after commencement of business (depends on state).

• Documents required

1. PAN Card of the employer
2. Aadhar Card of the employer
3. Evidence of rent or ownership of property.
4. List of employees
5. Business activity specifics.
6. Board decision (to companies)

• Registration is important because of the following reasons

1. Requirements when opening bank accounts
2. The government tender essentials
3. Proof of business existence
4. Avoidance of penalties
5. Other registrations required under the labour law

Key Labour Law Compliances Under the Shops & Establishment Act

• Working Hours & Overtime

1. Maximum number of working hours on days: 8-9
2. Maximum 48 hours per week
3. The overtime should be remunerated twice the regular salary
4. Weekly working hours with overtime normally 60 hours

• Weekly Holidays

1. One mandatory weekly holiday
2. Weekly off should be written in notice

• Opening & Closing Hours

1. State governments set the limits on permissible working hours
2. Most states (with conditions) permitted flexible timing of IT/ITeS

Employee Welfare & Working Conditions

• Leave Rules

1. Casual Leave (CL) -6 12 (variable by state) days
2. Earned/ Privilege Leave (EL/PL) -12-21 days
3. Sick Leave (SL) – 6–12 days
4. National Holidays/ Festival Holidays -7 days to 10 days

The unused earned leave should be carried forward (mostly, up to 45 days)

• Maternity Benefits

1. 26 weeks paid maternity leave
2. Telecommuting after maternity when possible
3. Workers with 50+ employees have Crèche facility

• Child Labour Prohibition

1. Children below 14 years
2. Teenagers working in risky professions

Health, Safety & Workplace Conditions

Start-ups must ensure:

• Sanitary premises and facilities

• Potable drinking water

• Effective lighting and air conditioning

• Fire safety equipment

• First-aid kits

• Men and women have separate washrooms

Employment Records & Registers to Maintain

Even small start-ups have to keep the following (physical or digital):

• Employee Register (Form A/B in accordance with the state)

• Muster Roll/ Attendance Register

• Wage Register

• Leave Register

• Overtime Register

• Working hours and weekly holiday Register

• Register of the personal details of employees

The majority of states permit online self-certifications and digital registers

Display Requirements

Each office should have posted on a high profile place:

• Registration certificate

• Weekly holiday notice

• Working hours

• Name of employer and place of establishment

• Abstract of the Shops and establishments act

• Emergency contact numbers

Intimation of Changes

Start-ups have to inform authorities in case there is a change in:

• Address

• Number of employees

• Ownership

• Nature of business

• Closure of establishment

The notification has to be filed within 30 days (depending on the state).

Penalties for Non-Compliance

Penalties vary state-wise and may include:

• Fines ranging from ₹1,000 to ₹1,00,000

• Penalties on further violation on a daily basis

• Shutting down of facility in extreme cases

• Repeat offence prosecution

Start-ups can be inspected physically or digitally to make sure that they are compliant.

Benefits of Complying with the Shops & Establishment Act

• Legal protection

• Improved work culture

• Professional brand image

• Smooth hiring & retention

• Escaping government fines

• Loan, registration and funds qualifications

Compliance gives operation stability which is a very necessary aspect in scaling.

Disclaimer

The information provided in this blog is purely for general informational purposes only. While every effort has been made to ensure the accuracy, reliability and completeness of the content presented, we make no representations or warranties of any kind, express or implied, for the same. 

We expressly disclaim any and all liability for any loss, damage or injury arising from or in connection with the use of or reliance on this information. This includes, but is not limited to, any direct, indirect, incidental, consequential or punitive damage.

Further, we reserve the right to make changes to the content at any time without prior notice. For specific advice tailored to your situation, we request you to get in touch with us.