The Centre will soon make it mandatory for companies with more than ten workers to give appointment letters to employees at the time of joining — a move that would benefit millions of workers in the informal sector.
An absence of legislation on the issue makes it difficult for workers, including those who are employed informally or via contractors in the organised sector, to establish proof of employment and gives companies room to violate labour laws and not ensure any social security benefits for such employees.
Draft code
A proposal to make appointment letters mandatory is part of the draft labour code on working conditions finalised by the Union Labour and Employment Ministry. Companies in the manufacturing, construction, plantation, mining and a few other sectors will have to issue a letter of appointment within days of hiring, even if this involves contractual or migrant short-term workers.
“Appointment letters become a starting point for industrial disputes in many cases,” said a senior labour ministry official, on condition of anonymity. “In extreme cases, the companies even try to deny that the worker was appointed by them.”
The official said the Centre may prescribe a format for appointment letters which would include details such as designation of the worker, the time period for which she is employed and other working conditions and benefits.
Centre of Indian Trade Unions President A.K. Padmanabhan said only a handful of labour laws such as the Sales Promotion Employees (Conditions of Service) Act, 1976 specifically mention about the need to issue an appointment letter.
Authoritative proof
“Appointment letter is the only authoritative proof that a person is employed and all the statutory benefits including Employees’ State Insurance, provident fund are passed on to her or him,” Mr. Padmanabhan said. “We have seen instances where workers involved in accidents are removed by the company as there is no evidence of employment.”
At the time of claiming certain benefits such as gratuity from the employers, workers are not able to prove whether or not they are eligible for the claim, the union leader said. As per the law, workers are entitled to get gratuity benefits at the time of termination of employment or retirement, only after completing five years of service at the firm.
While appreciating the move, staffing companies said the government should also take into consideration how such engagements can be documented in case of contingent or temporary nature of work.
“The appointment letters are relevant as the terms of agreement and engagement between employers and employee needs to be always laid down which clearly states the entitlements,” Indian Staffing Federation President Rituparna Chakraborty said.
In many cases employers and employees get into an informal arrangement for their mutual benefit, she said.
Workers often do not want the statutory benefits to be deducted from their salary in order to enhance their take-home pay.
“To avoid getting into the trap of administrative hassles of filing compliance, employers also avoid handing out a formal letter to workers,” she said.
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