compensation ppt

1. Welcome to Presentation
Legal framework on
Compensation Structure

2. Labour Legislations
• 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 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

3. Labour is one of the principal factors of production in
all kinds of establishments whether big or small,
organized or organized, industrial or commercial.
With a view to ensure job security and satisfaction
the lobour to give them their due wages alongwith
certain employment benefits and to prevent
exploitation of labour by the capitalists, several
legislations have been made covering a number of
aspects concerning labour
Introduction

4. Employees Provident Fund Act
Objective
The act is enacted with the objective of instituting a
compulsory contributory fund for the future of the
employee after his / her retirement or for his / her
dependents in case of his / her early death
Scope
1. Every factory or establishment employing more than 20
employees
2. Once the Act applies to any organization, it shall continue
to be governed by the Act irrespective of the the fact that
the no. of employees fallen below20

5. 1. A newly established organization for the initial period of
3 years from the date of its set up
2. Cooperative society employing less than 50 employees
Exemption from the Act

6. 1. Every employee in receipt of wages upto Rs 5000/- pm
shall be eligible to be a member of Family Pension
scheme
2. In case his pay increases beyond Rs 5000/-, he
continued to be a member of Family pension scheme but
the contribution payable shall be limited to the amount
payable on monthly pay of Rs. 5000/-
3. An employee become a member of the scheme from the
date of joining the organization
4. An employee ceases to be a member after attaining the
age of 60 years
Eligibility of Employees

7. The Schemes under the Act
1. Employee Provident Fund Scheme
Establish provident fund for the employees
2. Employees Family Pension Scheme
Provide Family pension to the employees and their
family after superannuation / death or total permanent
disablement
3. Employees Deposit Linked Insurance Scheme
Provide life insurance benefit to the employees and
their family members

8. Terms related to the Act
Contribution
Employer’s contribution to PF & Pension Fund
12% of wages, etc
Employer’s contribution to EDLI Fund
0.5% of wages, etc
Employee’s contribution to PF & Pension Fund
12% of wages, etc
C. Govts contribution to Pension Fund
1.16% of wages, etc
Interest accrued
The amount deposited in PF, Pension Funs & EDLI Fund is invested
in specified securities. The rate of interest is determined by the C.
Govt which is 9% p.a. at present

9. Employee State Insurance Act
• Objective:
This is the first major legislation on Social Security to
provide protection to worker in contingences such as
illness, long term sickness or any other health risk due to
exposure to employment injury or occupational hazards.
Under the scheme medical facilities are also made
available to the legal dependents or insured person. The
scheme is extended to retired personnel as well as to
permanently disabled workers and their family.

10. Employee State Insurance Act
• The act applies in the non seasonal organization
employing 20 or more persons or organization using
power & employing 10 or more persons
• The Employees covered are those whose earnings is up
to Rs. 6,500/- per month comes under its purview
• Every eligible organization has to get registered under
the ESIC
• The eligible employee has to fill up the declaration form

11. Employee State Insurance Act
• The amount of contribution for a wage period shall be as
follows:
• Employer’s contributes equal to 4.75% of the wages
payable to an employee
• Employee Contributes a sum equal to 1.75% of the
wages payable to the employees
• If contribution is not paid in time, the rate of damages is
5% to 25% and the prosecution by the State Govt.

12. Equal Remuneration Act
Objective:
• The equal remuneration act provides for payment of
equal remuneration to men and women workers and for
the prevention of discrimination on the ground of sex
against women in the matter of employment and for
matters connected therewith or incidental thereto.
• Under the act it is duty of employer to pay equal
remuneration to men and women workers for the same
work of a regular nature

13. Equal Remuneration Act
• No discrimination for wages or for recruitment &
selection process
• The employer is required maintain register in terms of
equal remuneration act
• There are heavy penalties ranging from Rs 500/- to Rs,
5,000/-

14. Factories Act
Objective:
• The factory act is to provide safety measures and to
promote the health and welfare of workers employed in
factories
Applicability:
• The act applies to those industries which qualify the
definition of Factory under the act

15. Factories Act
• To safeguard the health and safety of worker and
extends to provided adequate plant machinery and
appliances, supervision over workers to provide healthy
and safe environment, proper system of working and
extends to give reasonable instructions
• The act talks about Health, Safety, Hazardous
processes, Welfare, Working hours of Adults, Prohibition
on employment of young persons, Annual leave with
wages
• The penalties are ranging from Rs 5000/- to Rs. 35,000/-
and prosecution by State/Central Govt.

16. Industrial Disputes Act
Objective:
• The act aimed to brining conflicts between employer and employee
to an amicable settlement and at the same time it makes provision
for some of the other problems that may arise from time to time in an
industrial or commercial undertaking which comes under the
purview
• The ID act seeks to pre empts industrial tensions, provide the
mechanism of dispute resolutions and set up the necessary
infrastructure so that the energies of partner in production may not
be dissipated in counter productive battles and assurance of
Industrial justice may create a congenial climate

17. Industrial Disputes Act
• The Act talks about Works committee, Board of
Conciliation, Industrial courts/tribunals, Arbitration,
Prohibition on lock out and strikes, lay off, retrenchment,
transfer of undertakings, unfair labour practices &
closure
• The penalties ranges from Rs. 1000/- to Rs. 5000/- and
prosecution up to 6 months for violation of rules

18. Minimum Wages Act
• Wages are remuneration which the workers are entitled
for the work performed by them
• The employers always think of how to decrease the
employee/production costs, while the workers see wages
in terms of their preoccupation, better housing, children
education, medical requirements, minimum recreations,
provision for old age, marriage etc
• The Govt. also enjoins in regulating the wags in the
country through Minimum Wages Act to protect the
interest of workers

19. Minimum Wages Act
Objectives
• To provide for fixing minimum rates of wages in certain
employment and the provisions of the act are intended to
achieve the object of doing social justice to the workers
employed in the scheduled employment by prescribing
minimum rates of wages for them
• The act prevents exploitation of labour as such the
authorities under the act are empowered to announce
and fix the minimum wages from time to time keeping in
view the market inflation and cost of living index.

20. Minimum Wages Act
The act prescribes the minimum wages of different
category of employee.
• It provides the basic rates of wages and special
allowance i.e. cost of living allowance
• Cash value of concessions for supplied of essential
commodities
• An all inclusive rates

21. Minimum Wages Act
• The other provisions such as the 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
• It also talks about penalties & prosecution for any
violation of provision prescribed under the act.

22. Payment of Bonus Act
• The payment of Bonus Act applies to certain person
employed in every factory and establishment employing
not less than 20 person on any day during an accounting
year
• An employee under the act means any person engaged
for hire/reward other than apprentice including
supervisory, managerial staff drawing salary/ wages not
exceeding Rs.3,500/- per month. However, in case of the
employees in he salary/wages range of Rs, 2,500/- to Rs
3,500/- per month for the purpose of payment of bonus,
their salaries/wages would be deemed be Rs 2,500/- per
month

23. Payment of Bonus Act
• The organization covered under the act are required to
pay Bonus minimum of 8.33% and maximum of 20%
• The infancy benefit for the new establishment is for the
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

24. Payment of Bonus Act
• The bonus is calculated basis allocable surplus in the
accounting year as per the accuracy of Balance Sheet &
Profit & Loss Account
• The bonus can be forfeited if the employee is sacked on
account of fraud, riotous or violent behavior at the
premises of the establishment or for theft
• The act provides penalties & prosecution for any
violations of provisions/rules

25. Payment of Gratuity Act
• The act applies to every shop & establishment in which 10 or more
person are employed or were employed on any day of the preceding
12 months. Once covered will continue to be under coverage even if
the employee number goes down
• The act applies to all person drawing a salary up to Rs. 3,500/-. The
maximum limit of gratuity is Rs 3,50,000/-
• Gratuity is payable to an employee on termination of his
employment after he has rendered continuous service for not less
than 5 years on reaching the age of superannuation or on his
retirement/resignation or on his death or disablement due to
accident or disease.

26. Payment of Gratuity Act
• Gratuity is calculated on Basic Rate plus Dearness
Allowance but does not include any bonus, commission,
house rent allowance, overtime wages and any other
allowance
• In case of a monthly rated employee, the fifteen days
wages shall be calculated by dividing the monthly rate of
wages last drawn by him by twenty six and multiplying
the quotient by fifteen

27. Payment of Gratuity Act
• Forfeiture of Gratuity can be done only if the service of
employee is terminated for his riotous or disorderly
conduct or any act of violence on his part or any act of
moral turpitude provided such an act is conducted
during the course of employment
• The payment mode is by Cheque or Bank Draft in
Favour of employee or his legal heirs
• The act provides penalties for violation of provisions
and right to appeal
• The time limit for claiming gratuity is 12 months and 60
days for filling an appeal

28. Payment of Wages Act
• The payment of wages act regulates the payment of
wages to certain classes of person employed in industry
and its importance cannot be underestimated
• The act not only guarantees, payment of wages in time
and without any deduction except those authorized
under the act
• The act provides the responsibility for payment of wages,
fixation of wage period, time and mode of payment of
wages, permissible deductions as also casts upon the
employer a duty to seek the approval and permission for
the fine imposed, if any

29. Payment of Wages Act
• Wages under this act means all remuneration expressed
in term of money and includes over time, bonus holiday
or any other leave period
• The payment has to be made before the expiry of the
seventh day after the last day of the wages period if less
than 1000 workmen are employed and in other case on
the 10th day
• Payment is to made on working day and that too in cash
and by Cheque where the employee has given consent
in writing

30. Payment of Wages Act
• The deduction allowed are fines, deduction for actual
period of absence, for willful damages to goods &
property, for house accommodation, for amentias
provided. All deduction to be made within 60 days and
the total deduction should not exceed 50% of the total
wage. The total deduction in the case of Cooperative
society should not exceed 75%. The fine should not
exceed 3%.
• The employer has to maintain register for record/
evidence and required to deposit the unpaid wages/
bonus with the labour department