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The Coffee Break Guide to Compliance – Vol. 16

Posted by: on 27 September 2018 in HR

This post is part of the Coffee Break Guide to Compliance by Anandan Subramaniam. Please subscribe to the blog updates if you’d like to be notified of these posts. Please comment below with your doubts and queries.

The Coffee Break Guide to Compliance – Vol. 16 {Unpaid Accumulation in an Establishment – What is the Employer’s Obligation?}

What is unpaid accumulation? What does an Employer do with unpaid accumulations? Read on to find out.

How is Unpaid Accumulation Described in Provisions of the Labour Welfare Fund Act?

Unpaid accumulation means all payments, other than gratuity, due to an employee but not paid to him within a period of three years from the date on which the payments became due, whether before or after the commencement of this Act, and the gratuity accrued to an employee after the commencement of this Act but not paid within a period of three years from the date of such accrual but does not include the amount of contribution, if any, paid by an employer to a provident fund established under the Employees’ Provident Funds Act, 1952 (Central Act XIX of 1952).

What is considered as unpaid accumulation?
1. Basic Wages
2. Dearness Allowance and other allowance
3. Overtime
4. Bonus
5. Gratuity
6. Any other item of unpaid accumulations

All unpaid accumulations shall be deemed to be abandoned property.

What does the Employer need to do?

When an Employer has not been able to settle any of the items listed above to a separated Employee (absconded, terminated, resigned, discharged, dismissed, etc.), efforts are to be taken by the Employer to reach out or connect to the Employee in any of the following ways:

  • Call to the last registered landline or mobile number. If it fails, then
  • Write to the last registered email ID. If it fails, then
  • Send a written communication through registered post or Speed Post with acknowledgement due. This needs to be done three (3) times with a frequency of 15 days. If it fails, then
  • Display a notice with details of employee and unpaid details in the Establishment’s notice board. This needs to be done in three (3) different periods with a frequency of 15 days. If it fails, then
  • The monies can be deposited with the Labour Welfare Board.

Usually the monies are to be kept till three (3) years from the date of such disbursement, and then they need to be deposited to the Government. Such monies do not attract any interest on pending payment.

Payment to the Labour Welfare Board

The sum has to be paid to the Labour Welfare Board along with the following:

  • A demand draft for the total amount in favour of the appropriate authority
  • Details of Employee – name, employment code, date of joining, date of separation, reason for separation, amount to be paid for each item and period, last registered contact number, email ID and contact address
  • Copies of all communication through which efforts were taken to reach out to the Employee:
    • Communication and proof of postal details – copies of three (3) communications sent
    • Communication displayed in the notice board – copies of three (3) different periods
  • A covering letter, stating all the above and the efforts taken by the Employer to reach out to the Employee

Employers need to pay the unpaid accumulations to the Labour Welfare Board in accordance with the provisions on such payment,

  • which will discharge an Employer of the liability to make payment to an Employee in respect thereof but to the extent only or the amount paid to the Board, and
  • the liability to make payment to the Employee to the extent aforesaid shall subjected to the succeeding provisions of this section be deemed to be transferred to the Board.

Once such monies are paid to Labour Welfare Board, if the Employee or Employee’s dependent or nominee approaches the Employer, they have to be directed to meet with the Labour Welfare Board authority for further process and settlement.

What will the Labour Welfare Board do where there is no claim?

As soon as possible after the payment of any unpaid accumulations is made to the Board, the board shall by notice,
a) Exhibited on the notice-board of the factory or establishment in which the unpaid accumulations was earned, and
b) Also published in any two newspapers circulating and in the language commonly understood in the area in which the factory or establishment in which the unpaid accumulation was earned is situated, or in such other manner as may be prescribed, regard being had to the amount of the claim, invite claims by employees for any payment due to them. The notice shall be inserted in the manner aforesaid in June and December of every year, for a period of three (3) years from the date or the payment of the unpaid accumulation to the Board.

Penalty Provisions for Non-compliance of Unpaid Accumulations

If an Employer does not pay to the board any amount of unpaid accumulation, or fines realised from the Employees, within the time specified by or under this Act, the Secretary may serve a notice on such Employer to pay the amount within the period specified therein, which shall not be less than thirty days from the date of service of such notice.


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