Labour Welfare Fund

    Running a company efficiently requires complete dedication to achieving the goal and taking care of your employees. That’s why the state authorities introduced the act to help your employees with financial aid like loans, scholarships, pensions, etc. if they meet all the terms of the Act. Let’s move forward to know every single detail about it.

    What is the Labour welfare fund?

    It is a government initiative designed to help and improve the living conditions of workers in India’s unorganized sector. The fund has been implemented in 16 states/union territories thus far, with different employer contribution requirements based on location.

    It depends on where your company has registered, the amount to be contributed and the last date for contribution vary. The applicable penalties for noncompliance vary by state. Other than this, some other compliances that you need to be aware of are Employee State Insurance, Employee Provident Fund, Professional Tax, and TDS. These factors can be taken care of using software for running payroll in Excel.

    What is the Labour Welfare Fund Act?

    This act provides benefits, facilities, and services that employers offer to employees. Some states provide extra funding for state-specific labour funds, in addition to employee and employer contributions. Although, it is important to understand that the rate of contribution in every state is different. The government introduced the Labour Welfare Fund Act (LWFA) in 1953 to give financial assistance to workers.

    The scope of this Act extends beyond housing to family care and workers’ health. It enables the provision of infant welfare, clinics for general treatment, worker activity services, medical examinations, women’s education, etc. It is applicable in 16 states and Union territories. Before contributing, you must check the rules of this Act by the registration state of the particular company.

    What are the benefits of the Labour Welfare Fund?

    States use the funds differently, but some benefits are common to all.

    1. It allows the unemployed and women in subsidiary occupations to arrange medical treatments. Furthermore, the unorganized sector has a higher wage base because of this fund, which leads to better living conditions for many people; this, in turn, increases the standard of living. Food and medical facilities are provided by the families of workers, as well as access to recreational facilities.
    2. State governments use your contributions to provide transportation for industrial workers while they commute to work.
    3. Scholarships are available for the children of industrial workers. They can apply for these scholarships if they secure marks more than a certain number in their 10th and 12th exams. Some scholarships are reserved for those who wish to study medicine; these scholarships are also offered competitively.
    4. The government provides unique benefits to industrial workers, especially those in the construction industry when they apply for loans to buy homes. As an employer, you should know all the places your money goes and to whom it potentially benefits.

    List of the state where the Labour Welfare Fund is applicable

    The following states are:

    1. Andhra Pradesh
    2. Chandigarh
    3. Chhattisgarh
    4. Delhi
    5. Goa, Diu, and Daman
    6. Gujarat
    7. Haryana
    8. Karnataka
    9. Kerala
    10. Madhya Pradesh
    11. Maharashtra
    12. Odisha
    13. Punjab
    14. Tamil Nadu
    15. Telangana
    16. West Bengal

    Rules in the applicable states

    Rules in Andhra Pradesh:

    • Any business employing one or more persons must register with the Labour office within twenty-one days of hiring a worker.
    • All employees except those working in managerial positions, part-time and apprentice.

    Rules in Chandigarh

    • Any employer with one or more employees.
    • All employees earning ₹ 15,000 a month or less are eligible for this benefit.

    Rules in Chhattisgarh

    • Any business employs one or more people.
    • All employees except those in management, administrative, and supervisory positions earning more than 10,000 rupees per month

    Rules in Delhi

    • Any establishment with five or more employees.
    • All employees except those in managerial and administrative capacities earn more than ₹ 2,500 per month.

    Rules in Goa, Diu and Daman

    • Any company employs one or more individuals.
    • All employees except those in managerial, administrative, and supervisory positions earn more than ₹ 1,600 per month.

    Rules in Gujarat

    • Any business employs ten or more persons.
    • All employees except managerial and supervisory staff drawing a monthly salary of more than ₹ 3,500

    Rules in Haryana

    • A business has more than ten employees.
    • The Act covers all employees employed in factories or through contractors for remuneration.

    Rules in Karnataka

    • Any employer with fifty or more employees.
    • All employees employed for wages in an establishment do any unskilled, skilled, clerical, and manual work.

    Rules in Kerala

    • Any entity employs one or more persons.
    • The Kerala Labour Welfare Fund Act, 1975, applies to all employees of establishments and shops under the purview of the Kerala Shops and Commercial Establishments Workers Welfare Fund Act, 2006. Employers must contribute 20 rupees every month by the 30th of each month, and employees must contribute 20 rupees by the 5th of every month.

    Rules in Madhya Pradesh

    • Any business employs one or more persons.
    • All employees except those in managerial or supervisory positions and those who earn more than ₹ 10,000 per month.

    Rules in Maharashtra

    • Any establishment employs five or more persons.
    • All employees except managers and supervisors can contribute up to ₹ 3,000. Contributions vary according to the employee’s wage, up to a maximum of ₹ 3,000 per month.

    Rules in Odisha

    • An employer with at least 20 employees.
    • All employees except those working in part-time positions, apprenticeships, and managerial roles.

    Rules in Punjab

    • Any business has more than 20 employees.
    • All employees, unskilled, skilled, clerical, and manual must be employed in an establishment.

    Rules in Tamil Nadu

    • Any employer with five or more employees.
    • All employees earning ₹ 15,000 a month or less are eligible for this benefit.

    Rules in Telangana

    • Any employer with twenty or more employees.
    • All employees except those in managerial capacities and drawing salary above ₹ 1,600 per month.

    Rules in West Bengal

    • Any establishment employing ten or more persons.
    • All employees except those in managerial capacities and drawing a salary of more than ₹1,600 per month

    Who contributes to Labour Welfare Fund?

    According to the Labour Welfare Fund Act, the employer and employee must contribute toward the fund. However, in practice, most employers contribute on behalf of their employees. As such, this is something you need to keep in mind when paying workers’ salaries. You must make LWF deductions for each employee before paying them their wages, and this means you make the LWF deduction before you pay an employee’s salary.

    Employers typically contribute a percentage of an employee’s income to the plan, and the employer contributes double or triple this amount for each employee.

    Eligibility for the employees

    The Labour Welfare Fund Act applies only to employees whose salaries fall within the prescribed threshold and whose position is considered eligible. The employer must also ensure that his company meets the threshold number of employees so that he can avail of the Act. Furthermore, it depends on the state where the establishment is located to check the rules for it depending on the total quantity of employees.

    Remittance period

    The State Labour Welfare Board decides the contribution frequency and amount of contributions to the Labour Welfare Fund. In Karnataka, Haryana, and Tamil Nadu, which have annual contributions; Maharashtra, Gujarat, and Madhya Pradesh, which have monthly contributions; and Andhra Pradesh which has half-yearly contributions.

    Conclusion

    Hope you’ve gotten all the details about it. This fund is for the benefit of employees and workers in unorganized sectors. Employers are legally required to pay this tax or accumulated fund, which can be used to provide benefits and protection to workers in the unorganized sector.

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