Chapter 9 Industrial and Labour Laws Audit – CS Professional Labour Laws and Practice Notes is designed strictly as per the latest syllabus and exam pattern.
Industrial and Labour Laws Audit – CS Professional Labour Laws and Practice Study Material
Question 1.
Write a critical analysis of significance of role of Company Secretary in case of Labour Audit. (Dec 2021, 6 marks)
Answer:
In order to ensure sound corporate governance, company secretary professional could assist the companies in conducting due diligence to ensure compliance with applicable labour laws. Due diligence is one of the core competence areas of a practicing company secretary accordingly, practicing company secretaries could assist the companies in rectifying and correcting any lacunae which are highlighted upon conducting the due diligence exercise.
Labour audit covers all labour legislations applicable to an Industry/factory or other commercial establishments. Practising Company Secretaries can conduct such audits and make value addition to the business of the employer.
As stated above an Independent Professional like a Practising Company Secretary should identify various Central and State Acts and Rules that are applicable to an employer. Based on such identification, he should commence scrutinizing the compliance of provisions of the various Acts/Rules.
Labour Audit envisages a systematic scrutiny of records prescribed under labour legislations by an independent professional like Practising Company Secretary who shall report the compliance and non-compliance/extent of compliance and conditions of labour in the Indian industry/ Factory/ Other Commercial Establishments.
Question 2.
Comment on the significant role of Company Secretary in Labour Audit and how does it strengthen the industrial relations ? (June 2022, 6 marks)
Question 3.
What is Labour Audit?
Answer:
- Labour Audit is a fact finding exercise whereby scrutiny of all records of factories, industries and commercial establishment is undertaken.
- Scope of Labour Audit:
- Labour Audit ensures compliance of provisions of all labour laws.
- It helps to detect non compliance by the establishments.
- It also aids in suggesting remedial action, wherever required.
- Thus, scope of labour audit is very wide and it ensures compliance of provisions of labour laws.
- Labour Audit is therefore beneficial both for employer & employee.
Question 4.
What are the benefits of Labour Audit to employees?
Answer:
- Labour Audit ensures that all the labour laws are complied, which will provide social security to the employees.
- Lower absenteeism: Labour Audit results in lower absenteeism of the employees.
- Congenial atmosphere: Labour Audit helps in maintaining the congenial environment within an organisation which ultimately results in higher productivity.
- Labour Audit ensures that all benefits related to bonus, wages, gratuity, provident fund, leaves etc. are duly received by employees.
Question 5.
What are the benefits of Labour Audit to employers?
Answer:
- Reduces penalties: Labour audit helps to ensures that all the rules & regulations with regards to labour laws are adhered to and thus helps or saves the company from paying heavy interest & penalty for non compliance.
- Increases productivity: By audit, labour is satisfied that their rights & benefits are duly provided to them. Ultimately it helps in increasing the labour productivity.
- Increases belongingness: Labour Audit increases a sense of belongingness within an organisation.
- No threat of legal action/industrial dispute which may damage the reputation, image or goodwill of the corporation.
- It helps in ensuring smooth running of business.
- It helps in attracting & retaining talent by establishing healthy work environment.
- It helps in significant saving on legal fees paid to defend the corporation in various litigation.
- It results in better governance and caters to the interests of varied stakeholders.
Question 6.
What are the benefits of Labour Audit to Government?
Answer:
- Results in greater compliance and does away with fraud and default cases.
- Increases social welfare.
- Improves status before International Labour Organisation (ILO)
Question 7.
What is the methodology of conducting labour audit?
Answer:
- Labour Audit should preferably be conducted by Independent professional like Company Secretary in whole time practice.
- The methodology for conducting Labour Audit are as follows:
- Defining the scope of audit
- Identifying the applicability of various Acts and Rules.
- Preparing a compliance checklist.
- Conducting a scrutiny of compliance of each applicable Act/Rule as per the checklist.
- Preparing and finalizing a Labour Audit Report.
Question 8.
What is the Objections to be faced from the industry regarding conduct of Labour Audit?
Answer:
- Increases the cost of compliance.
- Fear of adverse report in an audit.
- Rationale of labour audit when statutory auditor confirms payment of provident fund, ESI dues, gratuity liability, etc.
Question 9.
Give a Illustrative list of Labour Laws that can be bought within the ambit of Labour Laws.
Answer:
Illustrative list of Labour Laws that can be bought within the ambit of Labour Laws are as follows:
- Factories Act, 1948
- Minimum Wages Act, 1948
- Payment of Wages Act, 1936
- Employee Provident Fund and Miscellaneous Act, 1952
- Miscellaneous Act, 1952
- Payment of Bonus Act, 1965
- Payment of Gratuity Act, 1972
- Employees’ Compensation Act, 1923
- Contract Labour (Regulation and Abolition) Act, 1970
- Industrial Dispute Act, 1947
- Trade Union Act, 1926
Industrial and Labour Laws Audit Notes
What is Labour Audit
Labour Audit is a fact finding exercise whereby scrutiny of all records of factories, industries and commercial establishment is undertaken.
Scope of Labour Audit
- Labour Audit ensures compliance of provisions of all labour laws.
- It helps to detect non compliance by the establishments.
- It also aids in suggesting remedial action, wherever required.
- Thus, scope of labour audit is very wide and it ensures compliance of provisions of labour laws.
- Labour Audit is therefore beneficial both for employer & employee.
Benefits/Objective of Labour Audit to Employees
- Labour Audit ensures that all the labour laws are complied, which will provide social security to the employees.
- Lower absenteeism: Labour Audit results in lower absenteeism of the employees.
- Congenial atmosphere: Labour Audit helps in maintaining the congenial environment within an organisation which ultimately results in higher productivity.
- Greater Benefit: Labour Audit ensures that all benefits related to bonus, wages, gratuity, provident fund, leaves etc. are duly received by employees.
Benefits of Labour Audit to the Employer
- Reduces penalties: Labour audit helps to ensures that all the rules & regulations with regards to labour laws are adhered to and thus helps or saves the company from paying heavy interest & penalty for non compliance.
- Increases productivity: By audit, labour is satisfied that their rights & benefits are duly provided to them. Ultimately it helps in increasing the labour productivity.
- Increases belongingness: Labour Audit increases a sense of belongingness within an organisation.
- No threat of legal action/industrial dispute which may damage the reputation, image or goodwill of the corporation.
- It helps in ensuring smooth running of business.
- It helps in attracting & retaining talent by establishing healthy work environment.
- It helps in significant saving on legal fees paid to defend the corporation in various litigation.
- It results in better governance and caters to the interests of varied stakeholders.
Benefits of Labour Audit to the Government
- Results in greater compliance and does away with fraud and default cases.
- Increases social welfare.
- Improves status before International Labour Organisation (ILO)
Methodology of Conduct of Labour Audit
- Labour Audit should preferably be conducted by Independent professional like Company Secretary in whole time practice.
- The methodology for conducting Labour Audit are as follows:
- Defining the scope of audit
- Identifying the applicability of various Acts and Rules.
- Preparing a compliance checklist.
- Conducting a scrutiny of compliance of each applicable Act/Rule as per the checklist.
- Preparing and finalizing a Labour Audit Report.
Objections to be faced from the industry regarding conduct of Labour Audit
- Increases the cost of compliance.
- Fear of adverse report in an audit.
- Rationale of labour audit when statutory auditor confirms payment of provident fund, ESI dues, gratuity liability, etc.
Other Noteworthy Points
- Social justice is guaranteed by the preamble of our constitution.
- Labour is a subject matter of concurrent list.
- Labour Audit is new concept, currently evolving.
- It is a continuos fact finding process.
- It calls for scrutiny by independent professional like Company Secretary in Whole Time Practice.
Illustrative list of Labour Laws that can be bought within the ambit of Labour Audit are as follows:
- Minimum Wages Act, 1948
- Payment of Wages Act, 1936
- Employee Provident Fund and Miscellaneous Act, 1952
- Payment of Bonus Act, 1965
- Payment of Gratuity Act, 1972
- Employees’ Compensation Act, 1923
- Contract Labour (Regulation and Abolition) Act, 1970
- Industrial Dispute Act, 1947
- Trade Union Act, 1926