Hello readers, as we all know, Labour law licensing is a crucial part of running a responsible business. It ensures that companies follow the law and protect the rights and well-being of their employees.

By properly implementing licensing and registration, both employers and employees can have a clear understanding of their rights and responsibilities. These legal requirements serve multiple important purposes:

In order to operate your business, you should obtain certain licenses and registrations that are mandatory. Various important drivers determine which type of license and/or registration is required.

Out of many variables, there are three most important ones.

1. Location of the organization
2.  Size of the organization
3. Nature of work of the organization

Let’s examine these variables one by one and understand why they are so important in determining the type of license or registration that needs to be obtained.

Location of the organization:

There are two types of government in India: Central Government and State Government.

There are various acts in the domain of Labour laws, such as the Minimum Wages Act, Payment of Wages Act, Gratuity Act, Bonus Act, POSH Act, etc.

So there are certain acts that fall under the central government jurisdiction, such as the Provident Fund Act, Employee State Insurance Act, etc.

However, the majority of the acts fall under the jurisdiction of the state government. Hence it is safe to say that more than 90% of the compliance gets affected when you cross the state boundary. Everything from the applicability, format of registers, due date of filling returns, etc., varies from state to state.

Hence The location of the organization will determine a lot of parameters on the applicability of various licenses and registrations that need to be obtained in order to run your business

Size of the organization:

The size of the organization in terms of the number of employees will also determine various licenses to be obtained. For an organization having more than 9 employees, meaning 10 or more employees will have to obtain registration under the Employees State Insurance Act.

For an organization having more than 19 employees, meaning 20 or more employees will have to obtain registration under The Provident Fund and Miscellaneous Act.

Off-role employees, meaning the contractual employees working in any organization through a third party or a contractor, will also impact the applicability. For example, a company having contractual/off-roll employee strength of more than 49 (50 or more) will have to mandatorily register themselves under the CLRA act (Contractual Labour Regulation and Abolition Act), and they have to obtain the registration copy or RC in CLRA as the principal employer. And the contractors have to obtain a labor license.

Failure to obtain either will be treated as non-compliance.

Nature of work of the organization –

The nature of the work of the organization plays an important role in determining the applicability of various licenses and registrations along with certain other implications.

For example, if the nature of work is manufacturing, then the company has to be covered under the factories act; similarly, if any type of construction-related activity is being carried on, then the company has to be covered under the Building and Other Construction Workers Act and has to take applicable licenses and registrations under that act.

Let’s see an example.

Suppose an organization in the healthcare industry manufactures medicines and drugs.

Hence it is imperative for them to use chemicals in the process and conduct tests on lab rats, and dogs, and then further human trials.

In this scenario, the organization has to obtain the factory license since it is in the manufacturing sector and some other licenses, such as fire NOC, pollution NOC, etc.

It is important to understand that the labor administration machinery in India has various bodies known as departments, which are responsible for giving out various licenses and registrations required by any organization falling under their domain.

If you take the pollution NOCs, for example.

Every state has a pollution control board, which has categorized the process in various categories.

Mainly in the following
1. White category
2. Green category
3. Orange category and
4. Red Category.

This is in increasing order of pollution, which means the white category has zero or no pollution, and red has the maximum pollution.

If a company falls under the white category, then they have to obtain the pollution exemption certificate under the white category.

However, for any other category, the organization has to obtain two different certificates, namely CTE and CTO.

CTE stands for consent to establish, and CTO stands for consent to operate.

The above example of the drug manufacturer will fall under the red category.

Time of obtaining the license 

Timelines to obtain any specific license are very crucial. As every license shall be taken as and when they cross a certain threshold and/or a certain event has happened.

Let’s understand the importance with an example.

If any organization has deployed contractual employees at any site, then they are liable to obtain the CLRA registration as soon as they cross the threshold for that location, which is different for every state.

Similarly, if you already have a factory license for 150 employees, and you hired 100 more, then you have to make an amendment to your already existing factory license by doing the factory building plan amendment as mentioned in the Factories Act, of 1948.

Ending note

It is extremely important to check the applicability of the various licenses and registrations that an organization must obtain. This should be done by carefully analyzing the external environment.

All the drivers that determine the applicability should be carefully studied and understood before applying for any licenses.

An organization should be able to promptly identify the department they have to reach out to in case of any technical queries regarding any of the information asked.

It is very important to understand that, however, we are only discussing the licensing and registration in this blog, but once a license and registration are obtained, an organization has to do various compliances as required under this act.

Failure to obtain the required licenses and registration and doing regular compliance required by each license and/or registration may result in interest, fines, damages, prosecution, etc.

That is why a proactive approach regarding licensing and registration will be important so that when there is any applicability, to obtain any license, the same can be obtained immediately.