written by | April 22, 2022

A Guide to Labour Welfare Fund Contributions and Benefits

The workers of this country, be that the private or the public sector, work extremely hard to make a living for themselves. We should treat them properly, and thus, the government gives them certain facilities and services as welfare. Labour welfare refers to the services and facilities that the government provides to improve the working conditions of labourers. In this article, we will get to know more about labour welfare and how the government of India carries it.

Did you know?

Initially, the Labour Welfare Fund Act came into existence in 1953, but the government has implemented it in 16 states as of 2022.

What Is the LWF or the Labour Welfare Fund?

The Labour Welfare Fund or LWF is a statutory contribution managed by the government of India. The Central government does this but by individual state authorities. Labour welfare refers to the services and facilities provided to improve the working conditions of labourers. It also ensures to offer the hardworking men and women proper social security and raises their standard of living.

In some states, the employer, employee, and government contribute to the LFW. A special entity is known as the State Labour Welfare Board, which runs the LWF. This board determines the amount and the frequency of the contribution periodically. The funding, along with the periodicity, is specific to each state. For example, the periodicity is annual in states such as Haryana, Andhra Pradesh, Tamil Nadu and Karnataka.

On the other hand, in states like Madhya Pradesh, Maharashtra and Gujarat, the authorities contribute it in June and December. Several state legislatures have established an act that focuses exclusively on the welfare of labourers, and this Act is the Labour Welfare Act or the LWF. Let's get to know more about the LWF.

Also Read: Meaning of Statutory Compliance in Payroll

What Is the LWF or the Labour Welfare Fund Act?

As stated above, the Labour Welfare Fund provides medical care, housing, and educational and recreational facilities to labourers and their dependents. It is a sort of aid in the form of money to those in need. Several state legislatures have established and enacted an act to focus exclusively on the welfare of the workers, and this Act is commonly known as the Labour Welfare Fund Act.

The Labour Welfare Fund Act includes services, benefits, and facilities the employer offers to the employee. The government provides this through contributions from both the employee and the employer. In some states, even the government funds the state-specific labour funds in addition to the employee and the employer.

With that said, one should also note that the contribution rate differs from state to state. The government introduced the Labour Welfare Fund Act to provide social security to the workers of India. The government introduced the Act in 1953, and it applies to all the companies that employ five people or more.

The scope of this Act is not just limited to housing but also family care and the workers' health. This is carried out by providing clinics for general treatment, infant welfare, medical examinations, worker activity services, women's education, funerals, etc. Out of all the 36 states and Union territories, the Labour Welfare Fund Act is valid in 16 states. An employer is required to contribute a certain amount on behalf of himself and the employee. One needs to check the applicability, which will be dependent on the state in which the particular company is registered. For example, in Tamil Nadu, employee contribution is ₹14 per annum, whereas it is ₹21 per annum for employers of the same organisation.

What Are the Common Benefits of the Labour Welfare Fund (across states)?

As the Labour board manages the Labour Welfare Fund, it doesn't fail to provide a vast number of schemes for the welfare of workers and their dependents. As a founder and employer, one should be fully aware of all the places the government puts your money to use and how helpful it is to those in need. We could categorise the support provided by the schemes in three broad spectrums:

1) Better Work Conditions

In today's times, one of the major causes of concerns relating to the unorganised sector is the poor working conditions. The government realised this problem and took the following measures to reduce the number of complaints concerning the same:

  • Furnishing facilities for workers and employees such as commuting to work, reading rooms and libraries.
  • Apart from this, employers provide vocational training programs and recreational activities at the office in addition to excursions and tours.

2) Better Standard of Living

· The government is providing educational facilities and scholarships to workers' children. To make this even better, it also provides nutritious food in mid-day meals. The children enjoy going to school more because of these initiatives. They are eligible for scholarships if they are meritorious and score above a specified percentage in their 10th or 12th board examinations. They reserve some of these scholarships for children who wish to pursue MBBS as they are a boon to society.

  • The government also provides medical services to both the private and public sector workers and their families.
  • In addition to all of this, it also includes housing schemes at concessional schemes and rates.

3) Social Security

  • The state legislature provides social security in the form of medical treatments and camps.
  • It also provides schemes for specific other industries regularly.
  • It also makes subsidiary occupations for women and other unemployed people available to the workers.

What Are the Labour Welfare Fund Benefits for Employers?

  • Better work efficiency.
  • Refined industrial relations.
  • High morale of the worker.
  • Improvement in mental as well moral health. 
  • Better outlook amongst employers.
  • Social benefits also exponentially grow.

Who Contributes to the LWF and How to Contribute?

The employee, the employer, and the government are liable to make contributions to the labour welfare fund. However, the employer makes contributions on behalf of the employee. The employer does this by deducting the amount from their salary. This process is known as LWF deduction, and it takes place before the payment of the employee's salary. In most cases, the employer's contribution is double or three times that of each employee.

Also Read: Basic Salary in India - Explained with Calculation

What Is the State-Wise Applicability of the Labour Welfare Fund Act?

The Act is only valid in 16 states out of 37 states, including the union territories of India.

The Applicable States are-:

  • Andhra Pradesh
  • Chandigarh
  • Chhattisgarh
  • Delhi
  • Goa
  • Gujarat
  • Haryana
  • Karnataka
  • Kerala
  • Madhya Pradesh
  • Maharashtra
  • Odisha
  • Punjab
  • Tamil Nadu
  • Telangana
  • West Bengal

The rest are the non-applicable states where the Labour Welfare Fund Act is not valid nor implemented. These are:

  • Andaman and Nicobar Islands
  • Arunachal Pradesh
  • Assam
  • Bihar
  • Dadra and Nagar Haveli
  • Daman and Diu
  • Himachal Pradesh
  • Jammu and Kashmir
  • Jharkhand
  • Ladakh
  • Lakshadweep
  • Manipur
  • Meghalaya
  • Mizoram
  • Nagaland
  • Puducherry
  • Rajasthan
  • Sikkim
  • Tripura
  • Uttar Pradesh
  • Uttarakhand

How Should You Calculate the Labour Welfare Fund Deduction in the Different States?

Depending upon the state-specific Act, you can contribute the LWF monthly, half-yearly and annually. This is a broader topic as each state has specific rules and numbers.

For example, in Maharashtra, all employees contribute, including employees through contractors, except those working in the managerial or supervisory positions drawing wages of more than ₹3500 per month.

Conclusion

As the workers of this country work hard to earn a living, the government should protect their interests. Several state legislatures have established an act that focuses exclusively on the welfare of labourers, and this Act is known as the Labour Welfare Act or the LWF. 

The employee, the employer and in some cases, the state government contribute to the Labour Welfare Fund. Generally, the employer pays the LWF on behalf of the employee as a deduction from the employee's salary. Depending on the company's state, the contributions could be made half-yearly, yearly or even monthly.

Thus, the Labour Welfare Fund Act protects the interests of the workers and their dependents and increases work efficiency. It will soon be enacted in more states as it is one of the most important acts of this country.
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FAQs

Q: When did the Labour Welfare Fund Act come into existence?

Ans:

The government established the Act in 1953. However, it is only valid in 16 states as of 2022.

Q: When does the employer contribute to the Labour Welfare Fund?

Ans:

Depending upon the company's state, an employer can contribute half-yearly, yearly or even monthly. For example, the periodicity is annual in states such as Haryana, Andhra Pradesh, Tamil Nadu and Karnataka. On the other hand, in states like Madhya Pradesh, Maharashtra and Gujarat, the contribution is in June and December.

Q: Who contributes to the Labour Welfare Fund?

Ans:

The employee, the employer and in some cases, the state government contribute to the Labour Welfare Fund. Generally, the employer pays the LWF on behalf of the employee as a deduction from the employee's salary. The employer's contribution is usually double or thrice that of each employee.

Q: What is the Labour Welfare Fund Act?

Ans:

Several state legislatures have established an act that focuses exclusively on the welfare of labourers. This Act is known as the Labour Welfare Act or the LWF.

Q: What is the LWF or the Labour Welfare Fund?

Ans:

The Labour Welfare Fund or LWF is a statutory contribution managed by the government of India. The Central government doesn't do this, but the respective state authorities do. Labour welfare refers to the services and facilities provided to improve the working conditions of labourers.

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