Legally required compensation & benefits


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Legally required employee compensation & benefits

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Legally required compensation & benefits

  1. 1. Legally Required Compensation & BenefitsDr. G C Mohanta, BE(Mech), MSc(Engg), MBA, PhD(Mgt) Professor
  2. 2. Introduction• Labour is one of the principal factors of production in an establishment, whether- big or small- organized or un-organized- industrial or commercial• Several legislations made concerning labour:- to ensure job security and satisfaction of labour- to give them their due wages along with certain employment benefits and- to prevent exploitation of labour
  3. 3. Labour Legislations on Compensation & BenefitsThe Employee’s Provident Fund and Miscellaneous Provisions Act, 1952The Employee State Insurance Act, 1948The Equal Remuneration Act, 1938The Industrial Disputes Act, 1947The Factory’s Act, 1948The Minimum Wages Act, 1948The Payment of Wages Act, 1936The Payment of Bonus Act, 1965The Payment of Gratuity Act, 1972
  4. 4. Employees Provident Fund ActObjective• For instituting a compulsory contributory fund for future of the employee:- Retirement of employee- Dependents in case of early deathScope1. Every establishment employing more than 20 employees2. Once an organization covered under act, it will be applicable whether employees are 20 or less
  5. 5. Exemption from the Act1. A newly established organization for the initial period of 3 years from the date of its set up2. Cooperative society employing less than 50 employees
  6. 6. Eligibility of Employees1. Every employee receiving wages upto Rs 5000/- pm, will be eligible to be a member of Family Pension scheme2. In case wage is more than Rs 5000/-, employee will continue as member of Family pension scheme3. Family pension will be limited to the amount payable on monthly wage Rs. 5000/-4. Employee will become member of the scheme from the date of joining5. Employee will cease to be member after attaining age of 60 years
  7. 7. The Schemes under the Act1. Employee Provident Fund Scheme Establish provident fund for the employees2. Employees Pension/Family Pension Scheme Provide Pension/Family pension to employees & their family after superannuation/death/permanent disablement3. Employees Deposit Linked Insurance Scheme Provide life insurance benefit to the employees and their family members
  8. 8. Terms related to ActContribution- Employer’s contribution to PF & Pension Fund -12% of wages- Employer’s contribution to EDLI Fund - 0.5% of wages- Employee’s contribution to PF & Pension Fund -12% of wages- Central Govt’s contribution to Pension Fund -1.16% of wagesInterest - Accrued on PF, Pension Fund & EDLI Fund invested in specified securities - Rate of interest determined by the Central Govt. which is 9% p.a. at present
  9. 9. Employees State Insurance ActObjective:First major legislation on Social SecurityProvides protection to worker in contingences :- illness,- long term sickness- any other health risk due to exposure to employment injury or occupational hazardsMedical facilities are also made available to legal dependents or insured personScheme extended to retired /permanently disabled employee and their family
  10. 10. Employee State Insurance ActThe act applies to an organization- employing 20 or more persons in non-seasonal organisation- organization using power & employing 10 or more personsEmployees covered with earnings up to Rs. 6,500/- pmEvery eligible organization has to get registered under ESIEligible employee has to fill up declaration form
  11. 11. Employee State Insurance ActEmployer contributes 4.75% of wages, payable to employeeEmployee Contributes 1.75% of wages payable to himIf contribution is not paid in time, the rate of damages is 5% to 25% and prosecution by State Govt.
  12. 12. Equal Remuneration Act Objective:• Payment of equal remuneration to men & women for the same work of regular nature• Prevention of discrimination on the ground of sex against women in employment and matters connected with it
  13. 13. Equal Remuneration ActNo discrimination for wages or for recruitment & selection processEmployer required maintain register in terms of equal remuneration actThere are penalties ranging from Rs. 500/- to Rs. 5,000/-
  14. 14. Factory’s ActObjective:Factory’s act provides safety measures and promotes health and welfare of workers, employed in factoriesApplicability:Act applies to those industries which qualify the definition of Factory under the act
  15. 15. Factory’s ActTo safeguard health and safety of workersTo provide adequate safety measures in plant, machinery and appliances,To provide healthy and safe environment, proper system of working and training to workers on safetyPenalties are ranging from Rs 5000/- to Rs. 35,000/- andProsecution by State/Central Govt. for non-compliance
  16. 16. Factory’s ActAct concerns- Health- Safety- Hazardous processes- Welfare- Working hours of Adults- Prohibition of employment of young persons- Annual leave with wages
  17. 17. Industrial Disputes ActObjective:To provide amicable settlement of conflicts between employer and employeeTo make provision to solve other problems arising in an industrial or commercial undertakingTo minimise industrial tensionsTo provide mechanism for dispute resolutionsTo ensure that energies of employer & employees not wasted in counter productive battlesTo ensure Industrial justice for creating congenial climate
  18. 18. Industrial Disputes ActThe Act makes provision for:- Works committee- Board of Conciliation- Industrial courts/tribunals- Arbitration- Prohibition of lockouts and strikes- Lay offs- Retrenchment- Transfer of undertakings- Unfair labour practices &- Closure of establishmentPenalties ranges from Rs. 1000/- to Rs. 5000/- and imprisonment up to 6 months for violation of rules
  19. 19. Minimum Wages ActWages are remuneration to workers for work performedEmployers want to decrease employee/production costsWorkers want wages for better livelihood, housing, children’s education, medical requirements, minimum recreations, provision for old age, marriage ,etcGovt. Wants to regulate wages through Minimum Wages Act to protect the interest of workers
  20. 20. Minimum Wage ActMinimum WageFor sustenance of lifePreservation of efficiency of workers andProviding some measure of :- education,- medical requirements and- amenities 
  21. 21. Minimum Wages ActObjectivesTo fix minimum wages in certain employmentTo achieve objective of social justice to workersTo prevents exploitation of labourAuthorities are empowered to fix minimum wages from based on market inflation and cost of living index
  22. 22. Minimum Wages ActAct prescribes minimum wages of different categories of employeesIt provides basic rates of wages and special allowance , i.e. cost of living allowanceCash value of compensation for essential commoditiesAn all inclusive rates
  23. 23. Minimum Wages ActWages must be paid in cashManner & procedure of fixing and revising minimum rates of wages,Hours of work and holidaysExtra wages for overtime,Rest dayEmployer’s obligations and maintenance of recordsPenalties & prosecution for any violation of provision under the act.
  24. 24. Calculation of MinimumWagesWorker’s family with 3 members- Earnings of women, children & adolescents disregardedMinimum food requirements - 2,700 calories/adultClothing requirements- 18 yards per annum/personHousing - minimum rent charged by Govt for houses under subsidized housing schemeFuel, lighting and other miscellaneous items - 20 % total minimum wage
  25. 25. Payment of Bonus ActAct applies to employee of an establishment employing not less than 20 person during an accounting yearEmployee under the act means any person engaged for hire/reward , including supervisory & managerial staffDrawing salary/wages not exceeding Rs.3,500/- per monthFor employee with salary/wages Rs, 2,500/- to Rs 3,500/- pm, bonus will be paid on wages /salary of Rs. 2,500/- pm
  26. 26. Payment of Bonus ActOrganization covered under the act required to pay minimum Bonus of 8.33% and maximum of 20%Infancy benefit for new establishment is for first 5 accounting years in which the employer sells goods/servicesThe overtime is not wages as such no bonus on overtimeThe commission paid to employee is not remuneration as such no bonus on CommissionsThe Dearness Allowance is part of wages and attract Bonus
  27. 27. Payment of Bonus ActBonus is calculated based on available surplus in the accounting year as per Balance Sheet & Profit & Loss AccountBonus can be forfeited if employee is sacked for fraud, riotous or violent behavior in the establishment or for theftAct provides penalties & prosecution for employer for any violations of provisions/rules
  28. 28. Payment of Gratuity ActAct applies to every establishment in which 10 or more person are employed or were employed on any day of preceding 12 monthsOnce covered will continue to be under coverage even if the employee number goes downGratuity is payable to an employee on- termination of his employment after he has rendered continuous service for not less than 5 years- reaching age of superannuation- retirement/resignation or- death or disablement due to accident or disease
  29. 29. Payment of Gratuity ActGratuity is calculated on Basic Rate plus Dearness AllowanceDoes not include any bonus, commission, house rent allowance, overtime wages and any other allowance15 days wages for each year of service7 days wages per season for seasonal occupationMaximum limit Rs 10,00,000.00Employee with monthly wage, 15 days wages calculated by dividing monthly wages with 26 and multiplying by 15
  30. 30. Payment of Gratuity ActForfeiture of Gratuity can be done• If service of employee is terminated for riotous or disorderly conduct• Violence on his part• Act of moral turpitude• Such act is conducted during course of employmentPayment mode must be by Cheque or Bank Draft in favour of employee or his legal heirsAct provides penalties to employer for violation of provisions with right to appealTime limit for claiming gratuity is 12 months and60 days for filling an appeal
  31. 31. Payment of Wages ActRegulates payment of wages to certain class of employeesGuarantees payment of wages in time and without any deduction except those authorized under the actProvides responsibility for- payment of wages- fixation of wage period- time and mode of payment of wages- permissible deductions- seeking approval & permission for any fine imposed
  32. 32. Payment of Wages ActWage means all remuneration in term of money, including over time, bonus, holiday or any other leavePayment to be made before expiry of 7th day after last day of wages period where less than 1000 workmen employedIn other case on the 10th dayPayment to made on working day and in cash and by cheque where employee has given consent in writing
  33. 33. Payment of Wages ActThe deduction allowed for:- Fines, fine should not exceed 3%- deduction for actual period of absence- willful damages to goods & property- house accommodation- amentias provided.- all deduction to be made within 60 days- total deduction not exceed 50% of total wage- total deduction for Cooperative society not exceed 75%.Employer to maintain register for record/evidence & required to deposit unpaid wages/bonus with labour department
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