By IndiaHub 
ET Wealth Online explains what the State Labour Welfare Fund is and how it benefits employees.
What is State Labour Welfare Fund?
Vaibhav Bhardwaj, Partner at Khaitan & Co – a law firm, says, “The labour welfare fund (LWF) is a statutorily set up fund that is intended to promote the welfare of workers engaged in various specified sectors such as manufacturing, hospitality, construction, textile, transport, and agriculture.
How does State Labour Welfare Fund help employees?
The Labour Welfare Fund is used to finance activities that promote the welfare of labour in the state. It also helps to utilize unpaid accumulations (such as wages, bonuses, gratuities, etc.) lying with the employer in the best interests of labour.
Puneet Gupta, Tax Partner at EY India says, “The Labour Welfare Fund is utilised to cover the expenses of labour by providing various facilities.” Some of these facilities provided to employees, as per Gupta, are:
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(a) Community and social education centres, including reading rooms and libraries;
(b) Community necessities;
(c) Games and sports;
(d) Excursions, tours, and holiday homes;
(e) Entertainment and other forms of recreation;
(f) Home industries and subsidiary occupations for women and unemployed persons;
(g) Corporate activities of a social nature;
(i) Such other objects as would, in the opinion of the state government, improve the standard of living and ameliorate the social conditions of labour.
According to Aarti Raote, Partner at Deloitte India, says, “The objective of the State Labour Welfare Fund is to provide financial assistance, improve working conditions and provide medical facilities for the workers. It is supposed to be financial aid.”
Bhardwaj says, “The amount collected through the LWF is used to provide financial aid, social security, improved working conditions, and higher standards of living for workers. The benefits offered via LWF include educational support, medical care, housing, and recreational facilities for workers and their dependents. The impact of the LWF is significant, especially for low-income workers. By providing vocational training to workers and educational support to their children, the LWF enables skill development, which can allow workers to access better employment opportunities and better educational opportunities for their families in the future.
Additionally, by providing workers and their families with medical facilities, housing facilities, access to nutrition, etc, the LWF provides for their long-term well-being and enhances their socio-economic status. The financial assistance available through the LWF also helps ensure workers have a safety net during emergencies, contributing to their financial security.”
How are contributions to Labour Welfare Fund made?
Gupta from EY India, says, “It comprises contributions from employers, employees, and the Government/State Government (in a few states). Unpaid accumulations (such as wages, bonuses, and gratuities) held by the employer are also deposited into the fund. Currently, there is a total of 16 states where state-specific labour welfare laws are applicable, including two Union Territories.”
“It is governed by the state-specific Labour Welfare Fund Acts and the rules framed thereunder, which inter alia often mandate employers and employees to make periodic contributions to the LWF. However, do note that contribution requirements, applicability, and benefits vary from state to state. In fact, some states such as Rajasthan, Uttarakhand, Jharkhand, etc, do not have a statutorily set up LWF,” says Bhardwaj.
He adds, “The contribution is determined on a state-specific basis, depending mostly on economic factors (for instance, the cost of implementing welfare schemes, inflation, cost of living adjustments, etc). The State Labour Welfare Boards, at times, pass amendments revising the contribution rates to ensure that the LWF is maintained sustainably and it achieves its purpose. It is common for contributions to be required both on the part of the employer and the employee. In some cases, the State government makes a separate contribution as well.”
Raote says, “The contribution is made by the employer and the employee. Since this is a state legislation, the contribution may differ from State to State. Some states have not incorporated this legislation, so it’s not applied uniformly across India.”