Labour Audit : Industrial and Labour Law CS Executive
Audit under the Labour and Employment laws is an effective tool for compliance management of labour, employment and Industrial laws. Audit helps to detect non – compliance of labour and employment laws applicable to a business and take corrective measures to avoid any unwarranted legal actions by the regulators against the business and its management.
Though Labour Law Audit is not compulsory, but it is highly recommendatory to conduct this audit. Audit helps to detect non – compliance of labour and employment laws applicable to a business and take corrective measures to avoid any unwarranted legal actions by the regulators against the business and its management.
Scope of Labour Audit
The Labour law auditor must cover all labour legislations applicable to an Industry/Business or any other commercial establishment, wherein audit is being conducted by the Labour Law Auditor. In case a particular piece of labour law is not applicable to a specific business, the same should distinctly be disclosed in the report of an Independent Professional. Scope of labour law audit will certainly differ from business to business.
For example, if the establishment does not employ 20 or more persons on any day during the accounting year than the provisions of “Payment of Bonus Act, 1965” are not applicable. Similarly, certain factories in remote areas may not have the facilities of Employees State Insurance Corporation. In such cases, there is no need to ensure compliance of ESI Act.
Methodology of Conduct of Labour Audit
At the commencement of audit, the Independent Professional like Company Secretary in Whole Time Practice should define the scope of his audit. The scope will certainly differ from employer to employer. Accordingly, if the employer does not own a factory, the provisions of the Factories Act, 1948 will not be applicable. Similarly, certain factories in remote areas may not have the facilities of Employees State Insurance Corporation. In such cases, there is no need to ensure compliance of ESI Act.
As stated Independent Professional like Company Secretary in Whole Time Practice should identify various Central and State Acts and Rules that are applicable to an employer. Based on such identification, he should commence scrutinising the compliance of provisions of various Acts/Rules. It will be in the fitness of things that the Report is drafted in the same manner as PCS do for Compliance Certificate under the provision to Section 383A(1) of the Companies Act, 1956. Checklist for compliance of each legislation has to be formulated before commencement of his audit.
Benefits of Labour Audit
Though Labour laws audit a newly introduced concept, there are number of benefits available to the various stakeholders, which is summarized below:
Benefits to the Labour/Employee
- Boost the morale of the workers/employees to a large extent;
- It increases social security of workers/employees;
- It helps to inculcate on workers/employees a sense of belongingness towards their employers;
- It ensures timely payment of wages, gratuity, bonus, overtime, compensation etc of the workers;
- Timely payment of entitlements certainly reduces the absenteeism in the establishment.
Benefits to Employer
- It helps to increase productivity in view of lower absenteeism in the establishments. Higher the productivity, higher will be the profits;
- Employer reputation in the Industry/business world certainly increases;
- Strict compliance of labour legislations is ensured by every establishment, which, in turn, reduce or even eliminate penalties/damages/fines/ that may be imposed by the government;
- Co-operation and good understanding improves labour relations. The Congenial atmosphere is indispensable for good corporate governance;
- It also helps in preventing strikes, lock outs etc.
Benefits to Government
- Reduction in the number of field staff for inspection of Industries/Factories/Commercial Establishments as most of their work will be done by an Independent Professional;
- Compulsory Labour Audit will ensure compliance of past defaults;
- In case the Government seeks to introduce filing fees for Compliance Report under Labour Legislation, the revenue of the Appropriate Government will rise phenomenally;
- India’s image before the International Labour Organization will certainly improve as a country will negligible non-compliance of labour legislation.
Labour Law Audit is a process of facts findings and it is a continuous process. Labour Law Audit will ensure a win – win situation for all the stakeholders. It is expected that in near future Labour Law Audit will be made applicable for certain class of establishments, as Central Government is receiving many representations from Professional Institutes such as ICSI and other industry associations.
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