Labour Audit
The labor and employment law audit is an important method for managing compliance with labor, employment, and industrial laws. The audit helps to identify non-compliance with labor and employment laws applicable to a company and to take corrective steps to prevent authorities from taking unjustified legal action against the company and its management.
While the Labour Law Audit is not necessary, the operation of this audit is strongly recommended. The audit helps to identify non-compliance with labor and employment laws applicable to a company and to take corrective steps to prevent authorities from taking unjustified legal action against the company and its management.
Scope of the Audit of Labour
The auditor of labor law shall cover all labor laws applicable to an industry/business or any other commercial institution in which the audit is carried out by the auditor of labor law. Where a specific piece of labor law is not relevant to a particular undertaking, the same should be explicitly disclosed in the Independent Professional study. The nature of the labour law audit would definitely vary from company to company.
For example, the rules of the 'Payment of Bonus Act, 1965' do not apply if the establishment does not hire 20 or more employees on any day during the accounting year. Similarly, certain factories do not have the facilities of the Workers State Insurance Company in remote areas. There is no need to ensure compliance with the ESI Act in such situations.
Methodology of Labour Audit Conduct
The Independent Professional, like the Company Secretary in Whole Time Practice, should identify the scope of his audit at the start of the audit. Surely, the scope may vary from employer to employer. Consequently, the provisions of the Factories Act, 1948 would not be applicable if the employer does not own a factory. Similarly, certain factories do not have the facilities of the Workers State Insurance Company in remote areas. There is no need to ensure compliance with the ESI Act in such situations.
Independent professionals such as the Company Secretary in Whole Time Practice can recognize various Central and State Acts and Rules applicable to an employer as specified. He should start scrutinizing the enforcement with provisions of different Acts/Rules on the basis of such recognition. It would be in accordance with the provisions of Section 383A(1) of the Companies Act, 1956, that the Report is drawn up in the same manner as PCS does for the Compliance Certificate. Before starting the audit, a checklist for compliance with each law must be drawn up.
Benefits of Labour Audit
Though Labour laws audit a newly introduced concept, there is a number of benefits available to the various stakeholders.
For a detailed description of Labour Audit Benefits, click on Cs executive.
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