Security Service Providers – Compliance Trends

Security service providers perform a critical function in ensuring that the industry and its human and physical assets are kept safe. The operations of security service providers are governed by the Private Security Agencies Regulation Act, 2005 (PSARA). Labour law compliance is of utmost importance and adherence to the PSARA Act and several other applicable labour laws is necessary to ensure that security service providers and principal employers that engage them operate smoothly and efficiently.

With nearly 1000 audits of security service providers over the last few years, BCP Associates has been able to put together a comprehensive analysis of labour law compliance trends and pain points experienced by security service providers and principal employers who engage them. Key amongst the non-compliances trending across the industry are:

  • Driven by lack of resources and uninformed absenteeism, several security personnel are usually found working multiple shifts and for more than 9 hours every day
  • For the overtime hours worked, security guards are not paid at twice the rate of ordinary wages
    • Many organizations pay overtime wages at a single rate or are making overtime payments on the basic wages as opposed to the gross earnings of the worker. In addition, security personnel are also engaged in excess hours of overtime. Audit data analysed indicates that in most cases, security personnel end up working anywhere between 40 – 150 hours of overtime a month which is a serious violation of the law. This does not reflect well on the organization and more importantly, it affects the health and well-being of the workers.
    • Overtime payments are made under different heads to avoid detection.
    • Some client agreements are illegal
      • Agreements do not allow for the payment of overtime
      • Agreements require guards to work 12-hour shifts
  • Inadequate headcounts compel guards to work without weekly offs
    • Mandating a low security guard headcount compels them to work for more than 10 days continuously without being extended a day of rest. Non-compliance of weekly off is not only in contravention of labour laws but it also affects the well-being of the worker

Our data collected over the last four years indicates a very positive trend in adherence to labour law compliances and a mindset shift is evident. The importance of compliance and risk exposure to security service providers and principal employers has been understood. Periodic labour law audits by third party entities augmented with periodic compliance education and knowledge sharing has greatly helped security service providers achieve desired compliance levels and in several cases, exceed them.

Larger questions such as the impact of attrition on compliance, hiring trained guards and complying with the prescribed training requirements, submission of certified trainees list to the police authorities and even identifying the authority within the department that has jurisdiction under PSARA, still plague a majority of service providers.

Register of Particulars under the Karnataka PSARA rules has been the greatest pain point for service providers to comply with from a documentation standpoint.

The chart below highlights key labour law compliance trends for overtime, multiple deployments and weekly off for security service providers. (BCP Associates data sample taken across 15 major security service providers in 9 major cities).

labour and employment law

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Recent Trends in Labour Law Judgements

  • Supreme Court states that wage segregation by Appropriate Government is not allowed
    In Hindustan Sanitary Ware Vs. State of Haryana 2019 LLR 399, a Minimum wage Notification dt.21/10/2015 was challenged among other things on the following grounds:
    • There shall not be any segregation of the minimum rates of wages into components in the form of allowances by the employer.

    When challenged, the High Court of Punjab, upheld the notification.The Supreme Court stated that the prohibition on segregation of wages into components is not valid. In other words, while fixing of minimum wages, put in the condition that, the Employer shall not segregate the wages into various components.

  • Supreme Court’s Judgment on the Provident Fund Case in relation to Allowances
    In RPFC(II) West Bengal vs. Vivekanda Vidyamandir & Ors. 2019 LLR 339, several questions arose as to what allowances must be considered for the purpose of computing wage for the purpose of payment of PF contribution.The matter was taken to the Supreme Court of India when Calcutta High Court upheld the contentions of the Employers that special allowances do not form a part of Basic Wages. The companies were paying varied allowances like conveyance, special allowance and incentives, on which no PF was being remitted. In light of the Judgment, managements will now have to pay PF on all the components of the salary/wages up to the limit of Rs.15,000/- except HRA or restructure salary components. The Civil Appeal(No.3965-3966/2013) preferred by Surya Roshni was dismissed on 28/08/2019. labour and employment law

Disclaimer: This content is meant for informational purposes only and does not constitute a legal opinion of any kind. This content is not designed to be used as legal advice and is provided on an as is basis and comes with no guarantees or warranties. All links provided herein are to external sources and are not owned, operated or managed by BCP Associates and may be opened at the sole risk of the viewer. BCP Associates neither warrants nor indemnifies its viewers against any loss or damage that may occur as a result of any action taken based on the information provided in this document.

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