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The Coffee Break Guide to Compliance – Vol. 5

Posted by: on 10 July 2018 in Compliance, HR, Payroll

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. As always, your questions are welcome: please comment below with your doubts and queries.

The Coffee Break Guide to Compliance – Vol. 5 (Statutory Requirement of Issuance of Appointment Letter)

It is a general practice in every establishment (Manufacturing as well as Commercial) to issue either an Offer Letter or an Appointment Letter to a person who joins. But this is not a practice in many smaller establishments or manpower staffing companies. Besides, it is not a statutory requirement, except for a few States. Let us have a brief look into this subject.

To fill the vacuum of this mandatory clause in any of the labour legislations, the Ministry of Labour and Employment published a draft Labour Code on Occupational Safety, Health and Working conditions, 2018 (on 23rd April 2018), making a provision, stating,
“Every employer or manager of an establishment shall furnish to every worker on his appointment in the establishment, a letter of appointment in the prescribed form and where a worker appointed on or before the commencement of this Code does not have an appointment letter furnished by his employer or manager, such worker shall, within three months of such commencement, be furnished with appointment letter in the form so prescribed.”

This Labour code is an amalgamation of many Acts, including the Factories Act, CLRA, Building & Other Construction Workers Act and Inter State Migrant Workers Act.

Once the draft code is notified as an Act, this will be a statutory requirement for:

  1. Manufacturing establishments
  2. Employers who engage their employees as Contract Labourers in other establishment
  3. Employers who engage their employees for Building and other construction workers
  4. Employers who engages Inter State migrant workers

Besides, there is an indicative reference to “letter of appointment” in the Model Standing Order of Industrial Establishment (Standing Order) Central Rules, 1946, as per the para 3 of Section 4 of Model Standing Order, which states,
“Provided further that a workman is transferred from one job to another, which he is capable of doing, and provided also that where the transfer involves moving from one State to another such transfer shall take place, either with the consent of the workman or where there is a specific provision to that effect in the letter of appointment, and provided also that (i) reasonable notice is given to such workman, and (ii) reasonable joining time is allowed in case of transfers from one station to another.”

Otherwise, it does not state anything about statutory issuance of appointment letter.

For commercial establishments, issuing of appointment letter is statutorily mandatory in S & E Rules of States of Karnataka, Assam, Meghalaya, Nagaland and Mizoram. But these appointment letter forms does not carry terms & condition clauses or termination clause. Hence these cannot be paralleled to the normal appointment letters.

For an acceptable contract of employment there should be an offer and an acceptance. This is an essential requirement and scope as per Sections 3 to 8 of the Indian Contract Act.

Issuance of right lettered appointment order is the proof of employment, which protects the interest of both, the establishment and the person engaged.
Among others things, the following may be statutorily required (which may be included in the Appointment Letter/ Offer Letter):

  • Date of joining (PF, ESI, Gratuity, F & F, Superannuation)
  • Annual salary (fixed) (PF, ESI, Gratuity, F & F, Bonus, PT & LWF)
  • Title/Designation (ID Act, Standing Order Act)
  • Working hours (Regulatory Act)
  • Leave (Wages, F & F, Regulatory Act)
  • Reporting structure (Regulatory Act)
  • Location (PT, LWF, ESI, Regulatory Act)
  • Termination clause (Regulatory Act, ID Act, F&F)

Any such Offer Letter / Appointment Letter issued should be acknowledged by the new joinee, with date.

Please subscribe to the blog updates if you’d like to be notified of these posts. As always, your questions are welcome: please comment below with your doubts and queries.

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