Wage Legislation Learning Objectives: The Payment of Wages Act The Minimum Wages Act The Payment of Bonus Act The Equal Remuneration Act Chapter Nine Wage Legislation 1
Structure: 1. Introduction 2. The Payment of Wages Act,1936 3. The Minimum Wages Act,1948 4. The Payment of Bonus Act,1965 5. The Equal Remuneration Act,1976 6. Summary Chapter Nine Wage Legislation 2
1 Introduction: The Acts that are included under the wage legislation in India are 1. The Payment of Wages Act,1936 2. The Minimum Wages Act,1948 3. The Payment of Bonus Act,1965 4. The Equal Remuneration Act,1976 We now look at main features of each of them. Chapter Nine Wage Legislation 3
2 The Payment of Wages Act,1936 Prior to the passing of this Act, it was observed that employers used to - make unauthorized deductions from workers wages for interest on advances arranged to them from their own wages, for charities and religious purposes selected by employers, medical treatment etc. - take long period to disburse wages - make wage payments without any uniformity. Chapter Nine Wage Legislation 4
2 The Payment of Wages Act,1936 Employers were also observed to be imposing fines on workers under several pretexts. The Royal Commission on Labour appointed in 1931 recommended steps to prevent these abuses in payment of wages. They were incorporated in the Payment of Wages Act passed in 1936. The Government of Maharashtra framed rules under the Act known as Maharashtra Payment of Wages Rules in 1963. Chapter Nine Wage Legislation 5
2 The Payment of Wages Act,1936 The Act is in three parts. The first part deals with regulation and payment of wages by the employer. The second part specifies the heads under which deductions are to be made from wages. The third part provides for machinery for enforcing specific claims arising out of delayed payments, deductions from wages and appeals. It is a self-contained Act and provides its own machinery for the disposal of claims. Chapter Nine Wage Legislation 6
2 The Payment of Wages Act,1936 The object of the Act is to regulate the payment of wages to certain classes of persons employed in industry, to pay wages in particular form and at regular intervals and to prevent unauthorized deductions from the wages. The Act is concerned merely with the fixation of wage periods and not with the fixation of wages. Chapter Nine Wage Legislation 7
3 Main Features of the Payment of Wages Act The Act is applicable to persons employed in any factory, railway and to such other establishments to which the State Government may, by notification, extend the provisions of the Act, after giving three months notice to that effect. Employees whose wages average less than Rs. 1,600/- a month are covered by the Act. Chapter Nine Wage Legislation 8
3 Features of the Payment of Wages Act The term wages includes any remuneration payable under the award or settlement between the parties or order of court. remuneration in respect of overtime work or holidays or any leave period. any sum which is payable on termination of employment any sum to which a person employed is entitled to under any scheme, or under any law for the time being in force. Chapter Nine Wage Legislation 9
3 Features of the Payment of Wages Act The term wages does not include - any bonus which does not form a part of remuneration. - value of any house accommodation, supply of light, water, medical assistance etc. - contribution payable by employer to any pension or provident fund. - any travelling concession - any sum paid to the employee to defray special expenses incurred by him - gratuity payable on termination of employment. Chapter Nine Wage Legislation 10
3 Main Features of the Payment of Wages Act The responsibility for payment of wages rests with the employer or his representative, if any. The wage period cannot exceed one month. Where there are less than 1000 persons employed, wages shall be paid before expiry of the seventh day and in other cases before expiry of tenth day after the last day of the wage period. Chapter Nine Wage Legislation 11
3 Features of the Payment of Wages Act In case the employer terminates the services of an employee, the employee is entitled to receive his dues within expiry of two working days. The wages must be paid in cash. However, with written authorization from employee wages can be paid by cheque or direct credit to employee s bank account. Wages shall be paid without any deductions except those authorized under the Act. Chapter Nine Wage Legislation 12
3 Main Features of the Payment of Wages Act The Act specifies heads under which deductions can be made. They are Fines, deductions for absence from duty, or for damages to employer s goods or property, deductions for house supplied by the employer or for recovery of advances / over payments, loans, income tax payable by employees, deductions for payment to cooperative societies or ant other deductions authorized by employees. Chapter Nine Wage Legislation 13
3 Main Features of the Payment of Wages Act The total amount of deductions which may be made in any wage period from the wages of an employed person shall not exceed 75% of such wages in case where such deductions were wholly or partly made for payment to cooperative societies; and in other cases 50% of such wages. The Act has imposed certain conditions and limits on fines that can be levied on employees. Fines recovered have to be recorded in prescribed register. Chapter Nine Wage Legislation 14
3 Main Features of the Payment of Wages Act The Act prescribes penalties that may be levied for offences committed under the Act. The person responsible for payment of wages shall display abstracts of this Act and rules made there under in English and regional language of majority workers at a prominent location in the work place. Any contract or agreement whereby employee relinquishes any right conferred by this Act shall be null and void. Chapter Nine Wage Legislation 15
4. The Minimum Wages Act,1948 The genesis of the Minimum Wages Act is traceable to the Minimum Wage Fixing Machinery Convention, 1928 of the International Labour Organization. It sought to provide machinery for fixing minimum wages in manufacturing and commercial trades where no arrangements exist for effective regulation of wages by collective bargaining or where wages are exceptionally low. In India Royal Commission on Labour [1929] stressed the need for minimum wages. Chapter Nine Wage Legislation 16
4. The Minimum Wages Act,1948 The Act aims to extend the concept of social justice to workmen employed in certain schedules employments by statutorily providing for them minimum rates of wages. It is a piece of social legislation which provides protection to workers in employments in which they are vulnerable to exploitation on account the lack of organization & bargaining power and where sweated labour is most prevalent. Chapter Nine Wage Legislation 17
4. The Minimum Wages Act,1948 Main provisions: Wages :- All remuneration capable of being expressed in terms of money, which would, if the terms of the contract of employment, express or implied, were fulfilled, be payable to a person employed in respect of his employment or of work done in such employment, and includes house rent allowance; but excludes value of accommodation supplied, supply of light, water, medical attendance etc ; contribution towards PF, Pension, Gratuity; Traveling allowance. Chapter Nine Wage Legislation 18
4. The Minimum Wages Act,1948 - Main provisions Fixing of Minimum Rates of Wages When the appropriate government has fixed & notified minimum rates of wages in respect of any employment, the employer is bound to pay every employee engaged in that employment at rates not less than the rates notified. The appropriate government may review and if necessary revise wages at intervals not exceeding five years. Minimum rates shall not be fixed where less than 1000 employees are engaged in scheduled employment in the state. Chapter Nine Wage Legislation 19
4. The Minimum Wages Act - Main provisions Fixing of Minimum Rates of Wages Minimum rates of wages may be fixed [i] for different employments [ii] for different classes in the same employment [iii] for adolescents, children and apprentices [iv] for different localities. The rates of wages may be a] A time rate; b] A piece rate; c] A guaranteed time rate or d] An overtime rate. Chapter Nine Wage Legislation 20
4. The Minimum Wages Act - Main provisions The Act has incorporated a schedule [list] of employments. Provisions of the Minimum Wages Act, 1948 are applicable to these employments only. It may however be kept in mind that the schedule is modified by the appropriate governments from time to time. The schedule is in two parts. The second part lists employments in agriculture and the first others. Chapter Nine Wage Legislation 21
4. The Minimum Wages Act - Offences and Penalties If any employer pays to any employee less than the minimum rate of wages fixed for that employee s class of work ; or contravenes any rule or order made by the appropriate government regarding hours of work, he would be punished with imprisonment up to six months or with fine of Rs. 500/- or both. Any contract or agreement whereby an employee relinquishes or reduces his right under this Act shall be null and void. However, an agreement which is more advantageous can be entered. Chapter Nine Wage Legislation 22
4. The Minimum Wages Act - Enforcement For undertakings under the sphere of the Central Government, Central Government is the enforcing authority. The chief labour commissioner [central] is in charge of implementation of the Act in central sphere. In the State sphere, officers in charge of industrial relations machinery are entrusted with responsibility for implementation. In some states whole time inspectors enforce the Act while in others the job is assigned to revenue officers. Chapter Nine Wage Legislation 23
5. The Payment of Bonus Act,1965 The term bonus is applied to a cash payment made in addition to wages. It generally represents the cash incentive given conditionally on certain standards of attendance and efficiency being attained. The term bonus is not defined in this Act or any other enactment. The claim of bonus is based on two main considerations, 1] that there is a gap between the present wage and the living wage which bonus is expected to shorten. 2] that there is an available surplus or profits of the year out of which bonus may be paid. Chapter Nine Wage Legislation 24
5. The Payment of Bonus Act,1965 The practice of paying bonus as ex-gratia payment by employers had its early roots in the textile industry in Mumbai & Ahmedabad. The profits earned by textile industry during the wars prompted employers to voluntarily pay bonus to keep workers happy and production unhampered. For a long time the claim to bonus was not considered as a legal right but was awarded on principles of justice, equity and good conscience, with a view to keep the labour contended. Chapter Nine Wage Legislation 25
5. The Payment of Bonus Act,1965 However, in a case before Bombay High Court it was ruled that workers have a right to bonus as an extra remuneration for work done for the employer under a contract express or implicit. The Supreme Court felt the necessity of a high powered commission to go into the different aspects of the bonus. Central Government constituted the Bonus Commission in 1961. Its recommendations were published in 1964 which were accepted with slight modifications. Chapter Nine Wage Legislation 26
5. The Payment of Bonus Act,1965 The Government promulgated an ordinance in 1965 and the Act came into force from October 1965. Subsequently there were a number of amendments to the Act which has forty sections and four schedules. The object of the Act is to maintain peace and harmony between labour and capital by allowing the employees to share in the prosperity of the establishment reflected by the profits earned through the contributions together from capital, management and labour. Chapter Nine Wage Legislation 27
5. The Payment of Bonus Act,1965 Applicability: The Act applies to all factories and establishments [& their branches] employing 20 or more persons. Definitions: Employee: includes any person [other than apprentice] employed in any industry on a salary or wage not exceeding Rs. 10,000/- per month. Chapter Nine Wage Legislation 28
5. The Payment of Bonus Act,1965 Accounting year: in relation to corporation, the year ending on the day on which the books & accounts of the corporation are closed & balanced. - in relation to a company the period in respect of which profit & loss account is laid before the annual general meeting { April 1st or March 31st } Salary or wages : includes basic pay & DA but not any other allowance. Chapter Nine Wage Legislation 29
5. The Payment of Bonus Act,1965 Unless separate profit & loss account and balance sheet is prepared for them, all branches, departments undertakings whether in same place or not, be considered as parts of the main establishment for the purpose of computation of bonus. They should be continued to be treated as such. Calculation of Bonus Determination of gross profit is the first step towards calculating the amount of bonus. Chapter Nine Wage Legislation 30
5. The Payment of Bonus Act,1965 First schedule provides manner for calculation of gross profits for Banks and second schedule for other cases. The next step is to calculate available surplus by arranging certain deductions from gross profit like : remuneration to partners / proprietors; a return of 8.5% on equity capital and 6% on reserves; depreciation under IT Act; development rebate or investment allowance; direct taxes and dividends paid or payable. Chapter Nine Wage Legislation 31
5. The Payment of Bonus Act,1965 The bonus is to be paid from allocable surplus which is 67% of available surplus in case of a company and 60% in other cases. Each employee who has worked for not less than 30 days in an accounting year is eligible for bonus. Employee is disqualified from receipt of bonus, if he is dismissed as a result of fraud, violent behaviour or theft, misappropriation etc. Chapter Nine Wage Legislation 32
5. The Payment of Bonus Act,1965 Irrespective of profit or loss or allocable surplus each eligible employee shall be paid a bonus higher of Rs. 100/- or 8.33% of the salary earned. The maximum is fixed at 20%. If the salary of an employee exceeds Rs. 2,500/- per month, bonus payable to such employee shall be calculated on Rs. 2,500/- Proportionate reduction is also to be arranged for cases where the employee has not worked for all the working days in the accounting year. Chapter Nine Wage Legislation 33
5. The Payment of Bonus Act,1965 After distribution of bonus at the maximum rate, if any balance is left of allocable surplus, it is set on for and be taken into account for distribution of bonus up to fourth accounting year. In case of any shortage or want of allocable surplus, the amount distributed as bonus shall be carried forward for set off and adjusted out of the future excess allocable surplus. This method is described in the fourth schedule. Chapter Nine Wage Legislation 34
5. The Payment of Bonus Act,1965 Newly set up establishments enjoy exemption from the Act up to first six years or up to the year in which it shows profit, whichever is earlier. In case any pooja bonus is paid it can be adjusted against the statutory bonus. If an employee is found guilty of misconduct causing financial loss to the company, employer can deduct the loss amount from the statutory bonus. Chapter Nine Wage Legislation 35
5. The Payment of Bonus Act,1965 The bonus shall be paid within a period of eight months from the close of the accounting year. If there is a dispute, it should be paid within one month from the date on which the award becomes enforceable. The appropriate government may extend the said period up to a maximum of two years. Chapter Nine Wage Legislation 36
5. The Payment of Bonus Act,1965 If bonus is due to an employee, employee himself, someone on his behalf or in case of death of an employee his heir or assignee may make an application for its recovery to the appropriate Government within a period of one year. If the bonus is payable as a result of a settlement, award or an agreement, the government can recover it as land revenue. The disputes connected with bonus need to be raised under Industrial Disputes Act. Chapter Nine Wage Legislation 37
5. The Payment of Bonus Act,1965 If the accounts of the employer have been audited by qualified auditors [ or Comptroller & Auditor General in case of public undertakings] the profit & loss account and balance sheet are assumed to be correct and employer is not required to prove accuracy. Employer contravening provisions of this Act would be punished with imprisonment up to six months or fine up to Rs. 1,000/- or both. Chapter Nine Wage Legislation 38
5. The Payment of Bonus Act,1965 It is open to an employer to pay bonus linked with production or productivity instead of bonus based on profits. There has to be a agreement to that effect between employer and his employees. Employees can enter into agreement on bonus with their employers using a formula other than the one specified in the Act. Provisions of the Act in respect of payment of minimum and maximum bonus are applicable to such agreements. Chapter Nine Wage Legislation 39
6. The Equal Remuneration Act,1976 Introduction The Equal Remuneration Act was passed in 1976 to give effect to Article 39 of the Indian Constitution. Prior to that Equal Remuneration ordinance was promulgated in 1975. The Central Government framed Equal Remuneration Rules in 1976. The object of the Act is to provide for payment of equal remuneration to men and women workers and for the prevention of discrimination, on ground of sex, against women in the matter of employment. It also seeks to provide for increasing opportunities for women in the specified employments Chapter Nine Wage Legislation 40
6. The Equal Remuneration Act,1976 Main Provisions The term remuneration includes basic wage or salary and any additional emoluments payable, either in cash or kind, to a person employed in employment, or work done in such employment, if the terms of the contract of employment, express or implied, were fulfilled. It is the duty of the employer to pay equal remuneration to men and women for the same or similar work. Chapter Nine Wage Legislation 41
6. The Equal Remuneration Act,1976 Main Provisions No discrimination between men and women shall be made while recruiting except where employment of women is prohibited. The Act initially did not state specifically that no such discrimination be made in promotions, transfers, training etc. This lacuna was removed by amendment in 1987. The appropriate Government is to constitute an advisory committee for the purpose of providing increasing employment opportunities to women. Chapter Nine Wage Legislation 42
6. The Equal Remuneration Act,1976 Main Provisions An authority, not below the level of Labour Officer, is to be appointed to hear and decide claims and complaints. The officer has powers of a civil court. The aggrieved party has a right to appeal. Employers are required to maintain prescribed registers & documents and offer them for inspection on demand. The Act has been brought into force for certain employments by the Central Government. Chapter Nine Wage Legislation 43
7. Summary The wage legislation in India broadly covers the Payment of Wages Act, the Minimum Wages Act, the Payment of Bonus Act and the Equal Remuneration Act. The main purpose of the Payment of Wages Act is to ensure regular and prompt payment of wages and to prevent the exploitation of wage earner by prohibiting arbitrary, fines and deductions from wages. Periodical fixation and revision of wages under the Minimum Wages Act and their effective implementation is very much desirable. Chapter Nine Wage Legislation 44
7. Summary The payment of Bonus Act provides for the payment of bonus to persons employed in certain establishments and for matters connected therewith. The Equal Remuneration Act provides for the payment of equal remuneration to men and women for the same work or work of a similar nature and for prevention of discrimination against women. Chapter Nine Wage Legislation 45
Thus we arrive at the end of Wage Legislation Next we move to Chapter Ten Wage Policy Good Luck! Chapter Nine Wage Legislation 46