Legislative framework wage and salary administration at macro Level -.ppt

Wage and salary administration
at macro Level
Legal Frame work:
Workmen compensation Act 1923
Minimum wages Act 1948
Payment of Bonus act 1965
Equal remuneration act 1976

Workmen compensation Act 1923
 First social security measure undertaken in
India to enable the workers to get relief in
case of accidents or injuries in course of
employment
 The claims under workmen compensation Act
falls under 3 categories
 1.accidents resulting in Temporary
disablements
 2. accidents resulting in permanent
disablement
 3 fatal accidents

 The question of granting
compensation to workmen for fatal
and serious accidents was realized in
India in the beginning of 20th century.
 Prior to passing workmen
compensation act the person injured
in the course of employment had to
seek the help of court for getting
compensation from the employer.
 He had to resort to Common Laws
and Fatal Accidents Act, 1885 .

 Also he had to prove that:
 That injury was the result of an accident
 The employer was somehow responsible for the accident
 The amount of compensation due for his injury
 The procedure was so lengthy and costly- poorer. Also court
was reluctant to grant the compensation because of the view
that all these injuries and disablement is inherent in the job
itself.
 The employer too escaped from the liability to pay the
compensation because of the following arguments
 The doctrine of assumed risks
 The doctrine of common employment
 The doctrine of contributory negligence

Broad features of the act
1. Provides social security to the workers
2. The term workmen doesn't t include the person included in the
administrative or clerical capacity , drawing more than 3500 p.m.
3. Any injury caused by an accident arising out of or in course of
employment
4. If at the time of accident, the employee was under drugs or alcohol, the
employer is not liable to pay compensation
5. The term wages includes overtime pay , value of concession, benefits in
the form of food, clothing accommodation.
6. Amount of compensation payable depends on the nature and extent of
disablement and the average monthly wages of the workman
7. The minimum rate for permanent total disablement and death are 60,000
and 50,000 respectively and the maximum rates are 2.28 lakhs and 2.74
lakhs respectively depending on the age and the wages of workmen.
8. All cases of fatal accidents has to be brought under the notice of the
commissioner of labor within 7 days of the accident
9. The commissioner on receiving this notification issue a notice to the
employer asking him to remit the amount of compensation
10. Within 30 days of the receipt of the notice from the commissioner, the
employer should remit the amount of compensation in the
commissioners office.
11. If the employer denies his liability, the commissioner can decide whether
or not there is a ground for the claim.

Commissioner sec(2b)
 Commissioner means commissioner for
workmen’s compensation appointed
under section 20. He is appointed by the
state government. Appointment and
area of jurisdiction must be notified , in
the official gazette. If more than one
commissioner is appointed in an area,
the state, State government may by
general order or special order regulate
the distribution of business between
them.

Powers
 Commissioner can decide:
1. The liability of the employer to pay the
compensation
2. Whether the person injured comes under the
purview of the definition of workmen
3. Amount and duration of the compensation
4. The nature and extent of disablement
 The commissioner may exercise his power in
the absence of agreement between the parties

Workman (sec 2n)
 Workman means any person
employed under any capacity
specified under Schedule II of the act
 Doesn’t include:
 Any person whose employment is of
casual nature or contract employment
 Member of armed forces
 Person of clerical or administrative
capacity
 Person earning more than 3500 p.m.

Rules regarding compensation
 Employers liability to pay compensation(sec.3(1)):
 If a personal injury is caused to a workman by any
accident arising out of course of employment, He shall
be liable to get compensation
 4 conditions to hold the employer responsible to pay
compensation
 Personal injury is caused to the workmen
 Personal injury is caused by an accident
 Accident arising in course of employment
 The accident has resulted in the death of the workmen or
his total or partial disablement for a period exceeding 3
days.

Amount of Compensation
 The amount depends on the nature and extent
of disablement and the amount of average
monthly wages of the workman concerned.
There is no distinction between an adult and
minor with respect to amount of compensation
to be paid.
 Compensation is payable for
1. Death
2. Temporary disablement
3. Permanent total disablement
4. Permanent partial disablement

Amount of compensation
 Compensation for death:
 40% of monthly wages * relevant factor for the
respective age of the workman or 20,000
whichever is higher
 Relevant factor is that factor in the second
column of the schedule IV of the act against
the completed years of age of the workman. It
is used for computing the amount of
compensation for permanent disablement and
death.

(Contd..)
 Compensation for permanent
total disablement
 50% of the monthly wages * relevant
factor or 24,000 whichever is higher

(contd..)
 Compensation for permanent partial
disablement:
 % loss of earning capacity due to injury * the
compensation for permanent total disablement
 i.e. % loss of earning capacity due to injury *
50% of the monthly wages * relevant factor or
24,000 whichever is higher.
 % loss of earning capacity is ascertained by a
qualified practitioner and specified in schedule
I of the act.

(Contd..)
 Compensation for temporary
disablement:
 Half monthly installment equivalent to
25% of the monthly wages for the
period of disablement or 5 years
which ever is shorter.

What is a relevant factor?
 Relevant factor in relation to
workmen compensation means the
factor specified in second column of
schedule IV against completed years
of age of a person
 relevant factor schedule 4.htm

Q. A worker employed in a factory on a
monthly wages of rupees 900. While
working he met with an accident and
died at the age of 20 years (relevant
factor for 20 years of age is 224).
a)What is the amount of compensation
to be paid to his dependents?
b) In case, if he had permanent total
disablement, what should have been
the compensation?

 A) 40% of monthly wages * relevant
factor or 20,000 whichever is more
 (40*900*224)/100 =80,640
 B)50%of monthly wages * relevant
factor or 24,000 which ever is higher
 50*900*224/100=1,00800

Q. A worker aged 20 years whose
minimum wage is rupees 800 loses
an eye as a result of injury caused to
him on Oct1, 1999. As per the
schedule I the injury result in 40%
loss of earning capacity. Calculate the
amount of compensation payable to
him?

 % loss of earning capacity due to the
injury * the compensation for
permanent total disablement
 = (40/100)* [(50*800*224)/100]
 =35840/-

Q. A worker employed in a factory on a
monthly wages of rupees 1500. While
working he met with an accident and
died at the age of 30 years (relevant
factor for 30 years of age is 207).
a)What is the amount of compensation
to be paid to his dependents?
b) In case, if he had permanent total
disablement, what should have been
the compensation?

Amendment of the Act
 As amended in 1972, act is applicable all over
India to factories, mines, plantations, transport,
construction works, railway and hazardous
occupation
 In case of death:
 50% of monthly wages of the deceased
workmen * relevant factor OR an amount of
80,000 Rs which ever is more. And Rs 2500 For
funeral expenses
 Total permanent disablement:
60 % of monthly wages of deceased * relevant
factor OR 90,000 Rs whichever is more

Penalty of non payment of
compensation
If the employer doesn't pay the
amount of compensation within
one month from the due date ,
commissioner may order for the
recovery of the arrear amount +
not more 50% of such amount +
a simple interest of 6 % on the
arrear amount.
The_Ant-pps.zip

MINIMUM WAGES ACT 1948
 The act was passed in 1948 to secure
welfare of unorganized workers in
certain industries by fixing min. rate
of wages
 The law ensures for him not only his
subsistence and that of his family and
also preserves his efficiency as a
workman.

 Fixation of minimum wages relates to
the industries were sweated labor is
more or where there are chances of
exploitation. In prescribing minimum
wages, the employers capacity to pay
need not be considered as the state
assumes that every employer must
pay the minimum wages if he
employs labor.
 officialminimumwages.htm

Broad features of the Act
1.The act lays down the principles for fixation of
a. Min time rate of wages
b. Min piece rate of wages
c. Guaranteed time rate
d. Overtime rate for occupation, localities or classes of
work for adults, adolescents, children and apprentices.
2. The minimum wage rate may consist of
a)Basic rate of wage+ cost of living allowance
b)Basic wages with or without cost of living allowance +
cash value of the concessions in respect of essential
commodities supplied by the employer at a
concessional rate.

3. The cost of living allowance and cash value of the
concessions in respect of supplies of essential
commodities at a concessional rate shall be computed
by competent authority at certain intervals. In case of
undertakings by union territories and central
government, Director of labor bureau is the competent
authority.
4. The act lays down that wages should be paid in cash.
5. The act empowers that the appropriate government to fix
the number of hours per day, to provide for a weekly
holiday and payment of overtime wages .
6. The act lays down provision for the appointment of
inspectors and other authorities to hear and decide on
the claims arising out of payment of wages less than
minimum wages.

Appropriate government sec
2(b)
 In case of scheduled employment
carried under central government like
railways, mines, ports, oilfields etc,
the appropriate government means
the central government
 In case of other scheduled
employment, it means state
government

Competent authority sec2(c)
 Competent authority is appointed by
appropriate government by
notification in official gazette to
ascertain from time to time the cost
of living index applicable to the
employees in scheduled employment
in such notification.

Scheduled employment [sec 2(g)]and
cost of living index number [sec 2(d)]
 Scheduled employment is the employment
specified in the schedule of the act.
 Cost of living index number is the index
number ascertained and declared by the
competent authority by notification in official
gazette to be the cost of living index number
applicable to the employees in nay scheduled
employment in respect of which minimum
rates of wages have been fixed. The term ‘cost
of living index’ has been replaced by state
government as ‘consumer price index number’

Minimum wage
 Represent the level below which
wages cannot be allowed to drop. It is
the lower limit or the floor wage
below which no worker should be
paid. It should be provided not
merely for bare subsistence but also
for some measure of education,
medical requirement and other
amenities.

Procedure for fixation & revision
of minimum rates of wages
 The appropriate government shall appoint
committees and subcommittees necessary to
hold enquiries and submit the report to the
government
 After considering the advise of the said
committees, appropriate government shall
publish the information through notification in
official gazette for the information of persons
likely to get affected. If within 2 months no
claims against this comes up, the government
fix or revise that minimum wages.

Payment of minimum wages
 Wages in Kind sec 11
 Minimum wages under this act should
be paid in cash. But this section
authorises the payment of minimum
wages in kind where the appropriate
government is of the oinion that it is
customary to pay wages wholly or
partly in kind.
 Notified in official gazatte
 Cash value to be ascertained.

 Payment of minimum rate of
wages [sec12]
 The employer shall pay to every
employee, minimum rates of wages
without any deduction of any kind. I a
workman does not turn out for work,
the employer may take disciplinary
action against the workman but cant
pay him anything less than the
minimum wages. That is illegal.

 Fixing hours of work [sec13]
 In regard to any scheduled
employment, the appropriate
government
1. Fix the number of hours which shall
constitute a normal working day.
2. Provide for a day of rest in every
period of 7 days
3. Provide for payment of work on a day
of rest at a rate not less than the
overtime rate.

 Wages for overtime [sec14]
 If an employee works for more than 9
hours in a day or more than 48 hours
in a week, he is entitled to get
overtime pay. He is entitled to one
and half times the ordinary rate of
wages in case of agriculture job and
double the ordinary rate of wages in
any other scheduled employment

 Wages for less than the normal
working day [Sec 15]
 An employee who works on any day
for a period less than the normal
working day, he is entitled to get the
full normal working day except in the
following case where
 a) where his failure of work is caused
by his unwillingness to work and not
by omission of the employer to
provide him work.
 b) any other circumstances as may
be prescribed

Penalties on non payment of
minimum wages [sec22]
 Imprisonment upto six months or fine
upto 500 or both
****

Payment of Bonus act 1965
 The right to share in the profit of an
industrial undertaking was conferred
to the workers under the payment of
Bonus Act 1965. The payment of
Bonus (second amendment)act 1980,
provided for the payment of minimum
Bonus of 8.33% of annual wages,
irrespective of whether there is
allocable surplus or not. Bonus upto
20% of annual wages is payable
under the law with a prescribed
formulae

Object of the act
 In Hutti Gold Mine Kamgar Union v/s
Government of India (1973), it was
observed that,” the object of payment
of bonus act 1965 is to maintain each
and harmony between the labor and
capital by allowing the employees in
recognition of the right to share in
the prosperity of the establishment,
reflected by the contribution made by
capital, management and labor.

Broad features of the act
 Deals with only profit bonus , and does not
govern customary, traditional or contractual
bonus.
 Statutory liability upon all employers of every
establishment covered by the act to pay bonus
to employees in the establishment.
 Define payment of bonus under prescribed
formulae
 Provide for maximum and minimum payment
with the scheme of set off and set on
 Provide machinery for the enforcement of the
liability for payment of Bonus.

Application of the act
 The act applies to every factory and
every establishment where there are
20 or more workers are employed on
any day during an accounting year.
 Applies to any public sector
undertaking if it sells any good or
render any service in competition
with any establishment in private
sector and the income derived from
such sale of good or service is not
less that 20% of the gross income for
that year.

Eligibility and disqualification
for bonus
 Eligibility for bonus (Sec 8) Every employee shall be
entitled to bonus provided he has worked in that
establishment for not less than 30 working days in that
year.
 Disqualification for Bonus (Sec 9)
 Any employee may be disqualified from the getting the
bonus is he id dismissed from service for
 Fraud
 Riotous behavior while on premises of the establishment
 Theft, misappropriation or sabotage of any property of
the establishment

Determination of bonus
 The act requires 67% of available
surplus to be allotted for the payment
of Bonus in relation to a company
(other than banks) which has not
made arrangements prescribed under
the income tax act for the declaration
and payment of dividends payable
out of it profit within India and in
other cases 60% of available surplus

Determination of
bonus(contd..)
 Allocable surplus is the workers share
in the available surplus which has to
be distributed to the workers as
Bonus.
 To find out the allocable surplus the
first step is to find out the gross profit
if the organization.
 Gross profit (sec 4)- It is mentioned
in schedule 1 in case of banks
 Schedule 2 in case of other
establishments

 Available surplus (sec 5)- In respect of any
accounting year, from the gross profit the
following shall be deducted to arrive at the
available surplus.
 Depreciation
 Direct taxes
 Such further sums as specified in the third
schedule.
 The 60% or 67% thereoff of the available surplus
is the allocable surplus.

Payment of minimum bonus
sec10
 Minimum bonus to be paid is 8.33%
of the annual wages even if the
employer has allocable surplus or not.
 If in an accounting year, allocable
surplus exceed the amount of
minimum bonus, the employer should
pay to the employee an amount in
proportion to the salary earned
subject to a maximum of 20% of the
annual wages.

Proportionate reduction in
Bonus (sec13)
 Where an employee has not worked for all working
days, the bonus shall be proportionately reduced.
For this purpose, an employee shall be deemed to
have worked on the days on which
1. He has been laid off
2. He has been on leave with salary or wage
3. He has been absent due to temporary disablement
arising out of employment
4. She has been on maternity leave with salary
during the accounting year.

Set on and set off of allocable
surplus
 Set on: In any accounting year, the
allocable surplus is more than the
amount of maximum bonus payable
to the employee, subject to a limit of
20% of the total salary or wage of the
employee employed in that
establishment in that accounting year
be carried forward for being set on in
the next year upto 4th accounting
year to be utilized for the purpose of
payment of Bonus.

 Set off : If in any accounting year,
there is no available surplus or
allocable surplus, the minimum bonus
cant be paid that year. That is there
is no amount to be carried forward to
the next accounting year as set on.
 Therefore for the purpose of paying
minimum bonus, such minimum
amount of deficiency shall be carried
forward for being set off in the
succeeding year.

 If an employee is found to be guilty
or there is misconduct causing
financial loss to the employer, then it
shall be lawful for the employer to
deduct the amount of loss from the
amount of bonus payable to the
employee during that accounting
year.

Bonus linked with production or
productivity (sec 31a)
 Act also provides for the payment of
Bonus linked with production or
productivity based on agreement. Any
agreement whereby the employee
relinquish his right to receive
minimum bonus is null and void.
 8.33%-20%

Payment and recovery of bonus
 Adjustment of a customary bonus (sec17)
 In an accounting year if the employer has paid
any puja bonus or customary bonus to an
employee
Or
 An employer has paid a part of the bonus
under the act to employee before the date on
which bonus becomes payable,
the employer shall be entitled to deduct
amount of bonus so paid from the amount of
bonus payable to him and employee can
receive only the balance.

Time limit for payment of
Bonus sec 19
 All amounts payable to the employee
shall be in cash
 If there is any dispute regarding the
payment of bonus before an
authority, payment shall be made
within a month from the date on
which award becomes enforceable
 In any other case, the payment shall
be made within 8 months from the
close of the accounting year.

Maintenance of register and
records(sec 26)
 Every employer shall maintain such register,
records and other documents in such forms
and in such manner as may be prescribed.
 A register showing the computation of the
allocable surplus in Form A
 A register showing set on and set off of
allocable surplus in form B
 A register showing the amount of bonus due to
each employee and deductions and the amount
actually disbursed in form C

Penalty (sec 28)
 Six months or 1000 or both

Minimum wages Act 1948(for
students’ extra reference)
 The genesis of Min wages act 1948
can be traced back to the Min wage
fixing machinery convention 1928 of
ILO providing for machinery for fixing
min wages in manufacturing and
commercial trades

 Objective:
 Aims to extend the concept of social
justice to workmen employed in
certain Scheduled employment by
statutorily providing for them min
rate of wages

 Main provision:
 The act is not applicable to all
establishment or industries
 It covers only those establishments /
organization / industry/sector which
are entered in the schedule I of Min
wages act 1948.(46 ests are covered
as per schedule I)

 Employment in woolen carpet making or
shwal weaving establishment
 In rice mill, flour mill, dal mill
 Employment in any tobacco (including bidi
making)
 Plantation
 Roads and building
 Shops, commercial est, hotels,
restaurants, theaters
 Sweepers and scavengers in Municipal
corporation
 Agricultural sector etc

 When appropriate govt has fixed the
MW and notified the employer , the er
is bound to pay the amount to the
ees
 MW should be fixed for 1) different
employment 2) different classes of
the same employment 3 )for
adolescents, apprentices 4) For
different localities

 Rates may be fixed by an hour, a day
or by month or for any longer period
as fixed by the appropriate authority
 Rate of wages may be on the basis of
time rate, piece rate or measured day
rate

 In fixing or revising the min wage,
Govt shall a) a appoint as many
committees and sub committees as it
considers necessary to hold enquires
and advise it in respect of such fixation
of revision
 Govt by notification in official gazette
may publish the proposals for the
information of the persons likely to be
affected thereby and may respond
within 2 months from the date of
publication of the proposals

 After considering the advise of the
committees the govt will by
notification in the official gazatte fix
or revise the pay.
 Act also empowers the state to
constitute Advisory boards to co-
ordinate the work of different
committees

 Central advisory Boards also help the
central and state govts by
coordinating the advisory boards
 Advisory boards have equal
representation of ers and ees and
independent persons (1/3rd of the total
strength)
 In case of default :Imprisonment upto
6 months, or fine upto Rs.500 or both.

 Employees are entitled to mw at all
times and under all circumstances
 An er who cant pay the mw has no
right to engage labor and no
justification to run the industry

Payment of Bonus Act 1965(For
students’ extra reference)
 This act provides for the payment of
bonus linked with productivity or profit
to the ees in all factories and
establishments
 The supreme court in the new Maneek
Chowk Spinning and weaving company
Vs Textile labor association 1961
suggested 4 types of Bonus

1. Production bonus
2. Profit bonus
3. Bonus on festive occasions
4. Bonus has got a statutory recognition in
the payment of bonus act
 The quantum of bonus depends on the
amount of profit in that year

Scope and coverage:
The Act extends to the whole of India and is applicable
to every factory and to every establishment wherein
20 or more workmen are employed on any day during
an accounting year.
The Central/State Government can, however, extend
its provisions to any establishment employing less
than 20 but more than 10 persons.
For the purpose of calculating the number of
employees for applicability of the Act, part time
employees are also included.

Employees entitled:
Every employee receiving salary or wages upto
Rs. 3500 p.m.and engaged in any kind of work
whether skilled, unskilled, managerial,
supervisory, manual, etc., is entitled to bonus for
every accounting year, if he has worked for
atleast 30 days in that year.
Probationer, sweepers working on part time, daily
wagers are entitled to receive bonus.

Employees not eligible:
Employees of GIC, LIC, Deposit Insurance company
Central/State Government establishments
Indian Red Cross society
Universities and Educational institutions, Hospitals
Chambers of Commerce
RBI, IFCI, UTI, NABARD, IDBI, SIDBI
Social Welfare Institutions
Seamen (Merchant Shipping Act)
Dock Workers
contract workers ( building operations), etc.

Disqualification:
An employee shall be disqualified from receiving
bonus, if he is dismissed from service for fraud, or
riotous or violent behavior, or theft,
misappropriation or sabotage of any property of
the establishment.

Minimum bonus
Minimum bonus to be paid even if the employer
suffers loss during the accounting year or there is
no allocable surplus, is –
(a) 8.33% of the salary or wages during the
accounting year, or
(b) Rs.100 in case of employees above 15 years of
age and Rs. 60 in case of employees who were
below 15 years, at the beginning of the accounting
year, whichever is higher.

Maximum bonus
However, bonus should not exceed 20% of salary
or wages.

Mode and time limit for payment of Bonus
Bonus should be paid in cash and within 8
months from the close of the accounting
year or within one month from the date of
enforcement of the award or coming into
operation of a settlement, following an
industrial dispute regarding payment of
bonus. However, an employer may apply
for extension of the period of 8 months
upto two years, if there is a sufficient
cause.

Offences and penalties
1. Contravention of
the provisions of
the Act or rules,
Imprisonment upto
6 months, or fine
upto Rs.1000 or
both.
.

Equal remuneration Act
1976(Self study topic)
 To give effect to the article 39 of the
Indian constitution , govt of India
promulgated an equal remuneration
ordinance on 1975
 The ordinance was replaced by equal
remuneration act 1975

 Objective:
 Payment of equal remuneration to
men and women and prevention of
discrimination on the ground of sex ,
against women in the matter of
employment

 Provisions:
 It is the duty of the employerr to pay
equal remuneration to men and
women workers for the same work
 No discrimination while making
recruitment for same work between
men and women except when the
employment of women is prohibited /
restricted by law

 No discrimination shall be made for
getting proper T& D , promotion,
transfer etc
 Appoint appropriate authorities not
below the rank of labor officer for
hearing and deciding the claims and
complaints
 The appropriate authority has got the
power of civil court
 The employer shall maintain registers
and records about the persons
employed by him

Penalties.
 If after commencement of this Act any employer
–
1. makes any recruitment in contravention of the
provision of this Act. or
2. Makes any payment of remuneration at unequal
rates to men and women workers , for some
work or work of a similar nature or
3. Makes any discrimination between men and
women workers in contravention of the
provisions of this Act or
4. Omits or fails to carry out any directions made by
the appropriate government under sub section
(5) of section 6
He shall be punishable with a fine which may extend
to five thousand rupees.

. If any person being required so to do ,
omits or refuses to produce to an
inspector any register or other
document or to give any information ,
he shall be punishable with a fine
which may extend to five hundred
rupees

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