The Labour Welfare Fund (LWF) is an important contribution by employees and employers. The LWF Act was first mentioned under the provisions of the Industrial Disputes Act of 1947. Since then, it has been implemented in 16 states (the list is mentioned below).
State governments deduct this fund to provide various welfare initiatives for employees and their dependents. Put simply, this deduction aims to ensure workers’ well-being and social security wherever they work.
So, this article will explore the LWF’s meaning in salary, some benefits it brings, and the importance it has. Also, we get to know how it contributes to the workers’ social security by charging a minimal amount.
What is Labour Welfare Fund (LWF) in India?
The name itself reveals the meaning behind it. The Labour Welfare Fund is a fund that is used to improve the living of workers in work areas.
In a formal sense, the LWF in India is a statutory contribution managed by state government authorities to support employee welfare initiatives.
Okay, let’s understand LWF’s meaning in simple words.
- Definition and Concept: LWF is a fund aimed at providing social security and promoting the welfare of workers.
- Role of State Authorities and Labour Welfare Board: These entities oversee the administration and use of the fund to ensure it benefits all eligible workers.
- Contribution of Workers and Employers: Both workers and employers make contributions to the fund, which is then utilised for various welfare schemes.
- Meaning of State Government’s Involvement: State governments play a crucial role in determining LWF contribution rates. The major factors determining the LWF rates are regional economic conditions and the cost of living.
Applicability and Contributions to the LWF
The Labour Welfare Fund applies to various establishments and sectors across different states and union territories. Here’s an overview of its applicability and regulations:
Applicability of LWF
The LWF applies to establishments governed by the Shop and Establishment Act in the states given below.
|
States with Labour Welfare Fund |
States Without LWF |
|
Chandigarh |
Jammu & Kashmir |
|
Delhi |
Himachal Pradesh |
|
Haryana |
Uttarakhand |
|
Punjab |
Sikkim |
|
Uttar Pradesh |
Arunachal Pradesh |
|
Madhya Pradesh |
Assam |
|
Chhattisgarh |
Manipur |
|
Odisha |
Meghalaya |
|
West Bengal |
Mizoram |
|
Gujarat |
Nagaland |
|
Maharashtra |
Bihar |
|
Goa |
Jharkhand |
|
Andhra Pradesh |
Andaman & Nicobar Islands |
|
Telangana |
Lakshadweep |
|
Karnataka |
Dadra and Nagar Haveli |
|
Tamil Nadu |
Daman & Diu |
|
Kerala |
Puducherry |
|
Rajasthan |
|
|
Uttar Pradesh |
|
|
Ladakh |
|
|
Tripura |
It covers a wide range of businesses, including shops, transport services, plantations and companies.
State-wise Contributions to LWF
| States Name | Employee Contribution | Employer Contribution | Deduction Frequency |
| Andhra Pradesh | 30.00 | 70.00 | Annual |
| Chandigarh | 5.00 | 20.00 | Monthly |
| Chhattisgarh | 15.00 | 45.00 | Half-yearly |
| Delhi | 0.75 | 2.25 | Half-yearly |
| Goa | 60.00 | 180.00 | Half-yearly |
| Gujarat | 6.00 | 12.00 | Half-yearly |
| Haryana | 31.00 | 62.00 | Monthly |
| Karnataka | 20.00 | 40.00 | Yearly |
| Kerala | 20.00 | 20.00 | Monthly |
| Madhya Pradesh | 10.00 | 30.00 | Half-yearly |
| Maharashtra (Category 1)* | 6.00 | 18.00 | Half-yearly |
| Maharashtra (Category 2)** | 12.00 | 36.00 | Half-yearly |
| Odisha | 10.00 | 20.00 | Half-yearly |
| Punjab | 5.00 | 20.00 | Monthly |
| Tamil Nadu | 20.00 | 40.00 | Yearly |
| Telangana | 2.00 | 5.00 | Yearly |
| West Bengal | 3.00 | 15.00 | Half-yearly |
*Maharashtra Category 1 employees earn up to Rs. 3,000 per month.
** Maharashtra Category 2 employees earn more than Rs. 3,000 per month.
How Does the Labour Welfare Fund Help Workers?
LWF contributions provide several benefits to employees, such as:
- The LWF ensures that employees and their dependents have access to quality health care. This includes dental care, financial benefits in case of death in service and funeral benefits.
- It helps employees secure affordable housing by providing accommodation at subsidised rates, such as discounted housing loans.
- This deduction offers educational support for the children of eligible employees. State governments run many scholarship schemes and provide financial assistance to workers’ children to buy books, school uniforms and other stationery benefits.
- In addition to the key welfare initiatives, the LWF also provides financial assistance to workers in times of need. For example, the Haryana government provides financial assistance of Rs. 1,00,000 for minor disability and Rs. 1,50,000 for major disability caused by accidents or other reasons while working.
- This fund supports the professional development of workers by organising skill-building programmes and training workshops.
These invaluable benefits of the Labour Welfare Fund contribute to the overall well-being and empowerment of workers and their families.
Benefits of the Labour Welfare Fund for Employers
Employers benefit from the Labour Welfare Fund (LWF) in several ways, such as:
- Legal Compliance: Adhering to LWF regulations ensures legal compliance, avoiding penalties and legal implications for non-compliance.
- Social Responsibility: Fulfilling LWF obligations reflects corporate social responsibility and ethical business practices.
- Positive Image: Contributing to the LWF enhances the company’s reputation and demonstrates a commitment to employee welfare.
- Employee Retention: The provision of welfare measures through the LWF can lead to higher employee satisfaction and retention.
Importance of Compliance with LWF Regulations
Compliance is crucial! When it comes to labour welfare, compliance becomes more important. As we know, each state has its own LWF rules and regulations; a company must comply with state-specific labour regulations.
Put directly, complying with the LWF helps workers to have a better standard of living and helps employers to have a skilled workforce in their area. Here are some key points that highlight its importance:
Penalties and Legal Implications
Employers who violate the LWF regulations can be subjected to penalties, fines, or legal action. However, these penalties vary from state to state, but they may include monetary fines and some individuals may even go to jail. Moreover, any business that is not LWF-compliant risks damage in terms of reputation.
Employee Dissatisfaction
This dissatisfaction can adversely affect morale, productivity, and the overall work environment. That is why employees depend on this fund for their well-being as well as for their dependents. Consequently, non-compliance results in mistrust and disloyalty among workers.
Social Responsibility
When a company complies with the provisions of LWF laws, it is a testament to its dedication to social responsibility and employee welfare. This way, employers demonstrate commitment to supporting employees in the unorganised sector through contributions to the fund, which would lead to an improved quality of life.
In short, compliance with LWF regulations is a social responsibility to support our labour. If they fail to follow the regulations, it may damage the reputation of the company and put them in legal trouble.
Implementing LWF with NYGGS Payroll Software
Introducing NYGGS Payroll Software: A Time-saving and Compliant Solution.
This compliant software can assist businesses in accurately calculating and deducting LWF contributions for seamless payroll management. It:
- Automate LWF calculation based on updated rates and employee wages
- Ensures compliance with applicable rules through built-in legal provisions and updates feature
- Automate workflows with direct LWF deduction reflection to the payslips.
If you would like to learn more about the process of managing LWF with software, please contact NYGGS for a live demo.