Running a business

Shops and Establishments Act – What the Law Says

A business plan is not the only thing you need to work on if you want to do business. This is to say that besides business plan, you also need to work on other things like the:

  • product or the service model
  • financing options and
  • compulsory regulations for business

Now, GST compliance, licensing requirements, etc are few of the important regulations you need to comply with. In addition, the Shops and Establishments Act is another important regulation your business needs to take care of.

Hence, every state in India has enacted the Shops and Establishments Act. This Act is executed in order to:

  • regulate the conditions of work,
  • provide for statutory obligations of the employers and
  • administer the rights of employees in the unorganized sector and other establishments in their jurisdiction.

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The rules under this act vary as per the states. You must consult the Shops and Establishments Act with the Administrative Office/Municipal Corporation in your city.

Moreover, you need to fully adhere to the legal requirements to ensure continuity as well as the smooth running of your business.

Thus, the Shops and Establishments Act basically includes amendments and laws relating to :

  • the regulation of working hours,
  • payment of wages,
  • leave or holiday
  • the terms of services and
  • any other conditions of work for people working in various establishments.

These rules apply to people employed in:

  • shops
  • commercial establishments
  • establishments for public entertainment or amusement and
  • other establishments.

What is an Establishment?

According to the Shops and Establishments Act, the term establishment means a shop or a commercial establishment.

These establishments include commercial spaces, residential hotels, restaurants, theaters or other places of public amusement or entertainment. In addition to this, the state government also declares establishments for the purpose of this Act.

Such establishments are also covered under this Act. Furthermore, the concerned state government declares such establishments through notification in the Official Gazette.

What is a Commercial Establishment?

According to the act, a commercial establishment means a premise where any trade, business, profession or any work related with it is undertaken. Accordingly, a commercial Establishment could include:

  • a society registered under the Societies Registration Act, 1860
  • registered or unregistered charitable or other trust
  • journalistic and printing establishments
  • contractors and auditors establishments
  • quarries and mines not governed by the Mines Act, 1952
  • educational or other institutes run for private gain
  • any premises where the business of banking, insurance, stocks and shares, brokerage or produce exchange is undertaken. This does not include a factory registered under the factories act, 1948
  • theaters and cinemas.
  • restaurants and eating houses
  • residential hotels, clubs
  • other places of public amusement or entertainment

What is a Shop?

Shop means any premises where:

  • goods are sold, either by retail, wholesale, or
  • services are rendered to customers. This could include an office a store-room, godown, warehouse or work place, whether in the same premises or otherwise, used in connection with such trade/ business.

A shop however does not include a factory or a commercial establishment.

Regulations Under The Act

The Shop and Establishments act lays down the rules with regards to:

  • working hours per day and week.
  • guidelines for spread-over, rest interval, opening and closing hours, closed days, national and religious holidays, overtime work
  • employment of children, young persons and women
  • annual leave, maternity leave, sickness and casual leave, etc.
  • employment and termination of service
  • maintenance of registers and records and display of notices
  • obligations of employers as well as employees