Firm took a license under the Factory Act in 1999. It has 17 employees and 30 contract workers through a contractor. Is the firm's total employee strength 17 or 47?
I would like to know how it is decided whether a firm is a factory or a shop. What is the differentiating factor between a factory, shop, and establishment?
Also, firms maintain Shop Act registers for wages, attendance, etc because of a lack of knowledge. Will it be a problem for them in the future?
Should attendance and leave registers be maintained on a calendar year basis or a financial year basis?
From India, Bengaluru
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1I would like to know how it is decided whether a firm is a factory or a shop. What is the differentiating factor between a factory, shop, and establishment?
Also, firms maintain Shop Act registers for wages, attendance, etc because of a lack of knowledge. Will it be a problem for them in the future?
Should attendance and leave registers be maintained on a calendar year basis or a financial year basis?
From India, Bengaluru
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The difference in factories lies in the 'manufacturing process' being carried out on its premises and engaging ten or more workers in case of the use of power in the manufacturing process and otherwise 20 or more. So, you have to examine the nature of the activity being carried out and check it with respect to the definition of a Factory as per the Factories Act 1948. The Act includes in its scope several activities which one may not think of as a manufacturing process, like running a cold storage, mechanized cloth washing, sweet preparation, stitching of cloth, etc.
Regarding Shop/Establishment, reference has to be made to the applicable state act in this regard. But as a general rule, it can be said that the term establishment means a shop or a commercial establishment. "Shop" means any premises where goods are sold, either by retail or wholesale, or where services are rendered to customers, and includes an office, a storeroom, go-down, warehouse, or workplace for distribution or packaging or repackaging where finished goods are carried on; but does not include a shop attached to a factory where persons employed in such a shop are allowed the benefits provided under the Factories Act, 1948. A commercial establishment is defined exclusively and is neither a factory nor a shop.
In case it is a factory, then keeping wages and attendance registers as per the Shop Act will not be sufficient compliance with the Act. Whether the registers are to be maintained on a calendar year or financial year basis is to be determined from the provisions of the State Rules applicable.
From India, Mumbai
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Regarding Shop/Establishment, reference has to be made to the applicable state act in this regard. But as a general rule, it can be said that the term establishment means a shop or a commercial establishment. "Shop" means any premises where goods are sold, either by retail or wholesale, or where services are rendered to customers, and includes an office, a storeroom, go-down, warehouse, or workplace for distribution or packaging or repackaging where finished goods are carried on; but does not include a shop attached to a factory where persons employed in such a shop are allowed the benefits provided under the Factories Act, 1948. A commercial establishment is defined exclusively and is neither a factory nor a shop.
In case it is a factory, then keeping wages and attendance registers as per the Shop Act will not be sufficient compliance with the Act. Whether the registers are to be maintained on a calendar year or financial year basis is to be determined from the provisions of the State Rules applicable.
From India, Mumbai
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Dear friend,
The self-stated details of your first query are themselves indicative of its answer. All the employees, including managers, supervisors, permanent employees, outsourced contract labor, and casuals engaged in the manufacturing activity, are "workers" under the Factories Act, 1948. If the number of workers, inclusive of all such categories mentioned in the factory license taken in 1999 and renewed thereafter annually, remains less than 47 as of now, you have to get it suitably amended.
Any establishment is decided as a factory or otherwise depending on the predominant activity carried on therewith. If the predominant activity is manufacturing, it would be a factory as defined under section 2(m) of the FA, 1948. The definition of "manufacturing process" as given under section 2(k) of the Act covers a variety of separable activities concerned with the manufacturing process. Hence the application of the predominant activity test. For instance, we may take an automobile showroom which normally comprises sales and service of automobiles and their spare parts. But here the activities of sales and service can be easily separated. Therefore, the part of the premises where the workshop is located would certainly be a factory under section 2(m). The other part comprising the showroom where sales are conducted can be a shop. But if the factory license is taken for the entire premises, the showroom area would also be a factory, and the sales personnel would also be workers under the FA, 1948. This is the normal practice adopted for the sake of managerial convenience and uniformity of compliance. Take the case of a sweetmeat shop where the preparation of sweets and savories and their sales is done simultaneously in the same premises; it will be a shop only and cannot be a factory just because power is used for the preparation of the sweets. Yet another example is a tailoring shop where no sales are done, but the clothes of the customers are stitched and delivered to them. Here the predominant activity becomes cutting and stitching of clothes may be with or without the aid of power. It would be a factory under section 2(m)(i) or 2(m)(ii) of the FA, 1948 depending on the satisfaction of the parameter of the number of workers employed therein. That's why in some states, they are notified factories under section 85 of the FA, 1948.
Coming to your third query, service conditions of employees differ according to the types of establishment. Therefore, you have to maintain only the registers, notices, etc., pertaining to the Act which applies to your establishment.
From India, Salem
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The self-stated details of your first query are themselves indicative of its answer. All the employees, including managers, supervisors, permanent employees, outsourced contract labor, and casuals engaged in the manufacturing activity, are "workers" under the Factories Act, 1948. If the number of workers, inclusive of all such categories mentioned in the factory license taken in 1999 and renewed thereafter annually, remains less than 47 as of now, you have to get it suitably amended.
Any establishment is decided as a factory or otherwise depending on the predominant activity carried on therewith. If the predominant activity is manufacturing, it would be a factory as defined under section 2(m) of the FA, 1948. The definition of "manufacturing process" as given under section 2(k) of the Act covers a variety of separable activities concerned with the manufacturing process. Hence the application of the predominant activity test. For instance, we may take an automobile showroom which normally comprises sales and service of automobiles and their spare parts. But here the activities of sales and service can be easily separated. Therefore, the part of the premises where the workshop is located would certainly be a factory under section 2(m). The other part comprising the showroom where sales are conducted can be a shop. But if the factory license is taken for the entire premises, the showroom area would also be a factory, and the sales personnel would also be workers under the FA, 1948. This is the normal practice adopted for the sake of managerial convenience and uniformity of compliance. Take the case of a sweetmeat shop where the preparation of sweets and savories and their sales is done simultaneously in the same premises; it will be a shop only and cannot be a factory just because power is used for the preparation of the sweets. Yet another example is a tailoring shop where no sales are done, but the clothes of the customers are stitched and delivered to them. Here the predominant activity becomes cutting and stitching of clothes may be with or without the aid of power. It would be a factory under section 2(m)(i) or 2(m)(ii) of the FA, 1948 depending on the satisfaction of the parameter of the number of workers employed therein. That's why in some states, they are notified factories under section 85 of the FA, 1948.
Coming to your third query, service conditions of employees differ according to the types of establishment. Therefore, you have to maintain only the registers, notices, etc., pertaining to the Act which applies to your establishment.
From India, Salem
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@Umakanthan53 Sir,
I did not understand your point 1. What is meant by casuals engaged? Like painters, electricians who came for tiny repairs, etc?
Next, I did not understand the amended part. What should be amended now? After COVID, there are just 9 workers in total in the factory.
From India, Bengaluru
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I did not understand your point 1. What is meant by casuals engaged? Like painters, electricians who came for tiny repairs, etc?
Next, I did not understand the amended part. What should be amended now? After COVID, there are just 9 workers in total in the factory.
From India, Bengaluru
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Dear friend,
By casuals, I mean daily wagers employed on and off for incidental works at the factory.
Amendment, if necessary, is in respect of the license on the maximum number of workers to be employed in the factory. The fact that the license was initially obtained in 1999 and your query regarding the inclusion of contract labor in the total number of workers led to such a suggestion. The important point is that the total number of workers employed on any day shall not exceed the maximum number mentioned in the factory license already obtained.
From India, Salem
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By casuals, I mean daily wagers employed on and off for incidental works at the factory.
Amendment, if necessary, is in respect of the license on the maximum number of workers to be employed in the factory. The fact that the license was initially obtained in 1999 and your query regarding the inclusion of contract labor in the total number of workers led to such a suggestion. The important point is that the total number of workers employed on any day shall not exceed the maximum number mentioned in the factory license already obtained.
From India, Salem
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Sir, some more general queries:
Should the factory amend and reduce the number of workers, since the workforce has decreased over the past 7 years? Also, if the number of workers is now below 10, should the factory change its license to Shops and Establishment?
Additionally, if someone provides a quotation and charges for their services, are such individuals considered employees?
From India, Bengaluru
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Should the factory amend and reduce the number of workers, since the workforce has decreased over the past 7 years? Also, if the number of workers is now below 10, should the factory change its license to Shops and Establishment?
Additionally, if someone provides a quotation and charges for their services, are such individuals considered employees?
From India, Bengaluru
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When the number of employees falls below the maximum number mentioned in the license, there is no need to amend it. However, you cannot switch over to shops and establishments as long as your predominant activity is manufacturing.
Certainly, a person offering their services within the factory premises for hire would also be deemed as a worker of the factory for the purposes of the Factories Act, 1948.
From India, Salem
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Certainly, a person offering their services within the factory premises for hire would also be deemed as a worker of the factory for the purposes of the Factories Act, 1948.
From India, Salem
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Understood, sir. If any person enters the factory and performs work, they are considered an employee. Therefore, I believe the factory has more than 70-80 employees, as various individuals come in to carry out tasks within the factory.
From India, Bengaluru
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From India, Bengaluru
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What will be the acts to be complied in case of a petrol pump ?? Can the manager work 12 hrs shift?
From India, Ernakulam
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From India, Ernakulam
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For the purpose of the Factories Act 1948, any person found in any premises where a manufacturing process as defined in the Act is carried out is a 'Workman'. The connection with the occupier of the factory may be direct or indirect, with or without his knowledge (Section 2(l) of the Act). Thus, when 60-70 persons are working in the factory premises, it would obviously be a factory under the Factories Act 1948, and all legal consequences would follow.
As regards the statutory compliances needed for a Petrol Pump, it is storing highly hazardous and fire risk petroleum products, so the compliances called for in the license issued have to be fulfilled. All labor laws, including the Factories Act 1948, would be applicable depending on the number of persons working there.
From India, Mumbai
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As regards the statutory compliances needed for a Petrol Pump, it is storing highly hazardous and fire risk petroleum products, so the compliances called for in the license issued have to be fulfilled. All labor laws, including the Factories Act 1948, would be applicable depending on the number of persons working there.
From India, Mumbai
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