3. 3
Legends used in the presentation
AY Accounting Year
Code The Code on Wages, 2019
CG Central Government
Dept. Department
Govt. Government
HC High Court
POBA Payment of Bonus Act, 1965
SC Supreme Court
4. 4
Presentation Schema
Mode & Time limit for payment
of wages
Deduction from wages
Payment of bonus
Case law: K.C.P. Employees’
Association, Madras v.
Management, K.C.P. & others
5. Definitions
5
Accounting Year means the year commencing on the 1st day of April
Government establishment means any office / department of the Government /
local authority
8. 8
Mode of payment: Currency coin / currency notes / cheque / crediting
wages in the bank account
Appropriate Govt. may by notification specify the industrial or other
establishment, where the wages shall be paid only by cheque / crediting
wages in the bank account
Fixation of wage period: Daily / weekly / fortnightly / monthly
Fixation of wage period for payment of wages shall not be in excess of a
month
Different wage periods may be fixed for different establishments
9. 9
Time Limit:
Daily basis – at the end of the shift
Weekly basis – on the last working day before weekly holiday
Fortnightly basis – before the end of the second day after the end of fortnight
Monthly basis – before the 7th day of the succeeding month
In case of removal / dismissal / retrenchment / resignation, within 2
working days of such cause of action
- Appropriate Govt. may provide any other time limit for payment of wages
- Where it considers reasonable having regard to the circumstances under
which the wages are to be paid
11. 11
No amount can be deducted from the wages of the employee, except those as are
authorised in the Code and for the specified purposes
Total amount of deduction in any wage period shall not exceed 50% of such wages.
If it exceeds 50% of wages, then, the same may be recovered in such manner as
prescribed
Any deduction if made by the employer from the wages of an employee but not
deposited in the account of the trust / Govt. fund / any other account, then, such
employee shall not be held responsible for such default of the employer
12. Fines
12
Employee shall not be imposed fine save in respect of those acts and omissions on his
part, as the Employer may have specified by notice, with prior approval of - Appropriate
Govt.
Notice specifying such acts and omissions shall be exhibited in such manner on the
premises of employment
Opportunity to show cause against the fine has to be provided to the employee
Maximum Fine amount: 3% of wages payable to the employee in a wage period
Age limit for imposition of fine: Not below the age of 15 years
Collection of fine amount: Not to be recovered in instalments / after 90 days
Recording: All fines imposed and realisation thereof shall be recorded in a separate
register
Utilisation of fines collected: For the benefit of persons employed in the establishment
13. 13
Only on account of absence from the place, where by the terms of
employment, he is required to work
Such absence for the whole / part of the period during which he is required to
work
Proportion of amount of deduction from the wages payable to the
employee during the wage period shall not be more than the period of
absence
Subject to the rules made by Appropriate Govt, if 10 or more employees
absent themselves without due notice to the employer and without
reasonable cause, then the deduction may include such amount not exceeding
wages for 8 days, as may by any such terms be due to the employer
Deduction for absence from duty
14. 14
Amount of deduction shall not exceed the amount of damage / loss
caused to the employer by the negligence / default of the employee
Opportunity to show cause against the deduction has to be provided to
the employee
All deductions and realisation thereof shall be recorded in a separate
register
Deduction for damage / loss
Only if the house accommodation amenity / service has been accepted by
the employee in terms of employment
Amount of deduction shall not exceed an amount equivalent to the value
of house accommodation amenity / services supplied
Deduction for services rendered
15. 15
Recovery of advance of money given to an employee before the
employment began shall be made from the first payment of wages to the
employee in respect of a complete wage-period (Not applicable for travelling
expenses)
Advance money given to an employee after the employment began and
recovery of advance of wages to an employee not already earned shall be
subject to such conditions as may be prescribed
Deduction for recovery of advances
Amount of deduction regulating the extent to which the loan may be granted and the
rate of interest payable
Deduction for recovery of loans
The Chapter shall not apply to the Govt. Establishments unless the appropriate Govt. by
notification applies such provisions to the Govt. establishments
Non-applicability of Chapter to Govt. establishments
17. 17
An annual minimum bonus has to be paid to every employee who has worked at least 30 days
in an accounting year, at the rate of 8 1/3% of wages earned by the employee or Rs.100/-
(whichever is higher) , whether or not the employer has any surplus allocable by
Where in any AY, the allocable surplus exceeds the amount of minimum bonus, the employer shall be
bound to pay bonus in proportion to the wages, subject to a maximum of 20% of wages
Any demand for bonus in excess of bonus referred above, either on the basis of production or productivity
in an AY for which bonus payable shall be determined by an agreement, subject to the condition that the
total bonus including annual minimum bonus shall not exceed 20% of wages
In the first 5 AYs following the AY in which the employer sells the goods produced /
manufactured by him / renders services, bonus shall be payable only in respect of the
accounting year in which the employer derives profit from such establishment without applying
the provision of section 36
18. 18
For 6th AY - set on / set off, shall be made, in the manner as may be prescribed by the CG,
taking into account the excess / deficiency, if any, of the allocable surplus set on / set off
in respect of the 5th and 6th AYs
For 7th AY- set on / set off, shall be made, in the manner as may be prescribed by the CG,
taking into account the excess / deficiency, if any, of the allocable surplus set on / set off
in respect of the 5th, 6th and 7th AYs
From the 8th AY following the AY in which the employer sells goods produced or
manufactured by him or renders service – Section 36 shall apply in relation to such
establishment as they apply to any other establishment
Contd. Section 36 shall apply to the following AYs
The above shall apply to any new departments / undertakings /
branches which are set up by the existing establishments
19. 19
Where an employee has not worked for all the working days in an AY, if the
minimum bonus is higher than the 8 1/3% of the wages of working days in an
AY, it shall be proportionately reduced
Proportionate reduction in bonus
Deemed working days:
Laid off under an agreement / permitted by standing orders
Leave with wages / salary
Absent due to temporary disablement caused by accident arising out of
and in the course of his employment and
Maternity leave with wages / salary during the AY
Computation of no. of working days
20. 20
Fraud /
Riotous / violent behaviour while on the premises of the establishment /
Theft, misappropriation or sabotage of any property of the establishment /
Conviction for sexual harassment
Disqualification for bonus
An establishment which consists of different dept. / undertakings / branches, whether
situated in the same place or in different places, all such places shall be treated as part
of the same establishment for the purpose of computation of bonus under this Code
Establishment to include dept., undertaking & branches
If separate financials are prepared and maintained for such dept. / undertakings /
branches, then it will be treated as a separate establishment for the purpose of
computation of bonus under this Code
22. 22
K.C.P. Employees’
Association, Madras
Management of K.C.P
Ltd, Madras & others
Facts of the case
Respondent
Appellant
K.C.P Limited, a public limited Company, carries on 3 business adventures and the
concerned factories are in 3 different places and they employ workmen on different
terms
The appellants were directly concerned with the engineering unit. When the Payment
of Bonus Act, 1965 came into force the workmen of this unit, which was financially
faring ill unlike the other 2 sister units demanded bonus
23. 23
They demanded bonus on the footing that 3 different undertakings must be treated
as 1 composite establishment and on the basis of overall profit, bonus must be
reckoned as provided in POBA, 1965
But, the respondents demurred on the ground that the unit was a separate
undertaking to which the proviso to Section 3 of POBA, 1965 applied and
consequently the claim of bonus was untenably over-ambitious
Thus, the case was filed before the Tribunal and it upheld the claim of the workmen
for both the years. But, the two awards were challenged by writ petition in the HC
Contd.
24. 24
• HC’s view:
• Though the units were divergent and located in 3 different places, they were owned by the
same Company and were covered by the main part of Section 3 and the proviso stood
repelled
The first point that appealed to the learned Single Judge, but failed before the Division Bench,
has admittedly no merit in the light of this Court's direct ruling on the point
Contd.
Aggrieved by the decision of single bench, the respondents filed an appeal before the decision
bench. It was of the view that the proviso is attracted
Appeal to SC
25. Contd.
25
The second point urged by Shri M. K. Ramamurthy that the central workshop has had no
'separate, viable financial statements in respect of' that undertaking, and that such is the
finding of fact by the Tribunal, does not appeal to us
SC agreed with the appellant judgement that proviso is attracted.
Separate financials have been prepared and maintained in the past and during the
relevant years of accounting also, although there is much force in the contention that
they have not been properly maintained.
Nor is there life in the third limb of this argument that the respondent has failed to show
that the Workshop has not been treated as part of the common establishment for the
purpose of computation of bonus
SC Analysis and Decision as on 24th January, 1978
26. Contd.
26
Some items which may help enhance the bonus have, perhaps, been omitted and the
High Court is right in directing the Tribunal to re-enquire, rectify the balance-sheets and
profit and loss accounts for the years in question taking due note of the requirements of
the Act as mentioned in the judgment of the Division Bench vis-a-vis Central Workshop.
The Tribunal will dispose of the case making this compassionate approach but without
over-stepping the proved facts, correct the balance- sheets and profit and loss accounts
of the Central Workshop to the extent justified by the Act within three months of receipt
of this order. Appeal was dismissed.
In Industrial Law, interpreted and applied in the perspective of Part IV of the Constitution,
the benefit of reasonable doubt on law and facts, if there be such doubt, must go to the
weaker section, labour
