wages act

7. The wage boards take the following factors into
consideration for fixing or revising the wages in industries
• Job evaluation
• Wage rates for similar jobs in comparable industries
• Employee productivity
• Various wage legislation
• Government’s objective regarding Social Justice, social
equality and economic equality
• Need for incentive or improvement in productivity etc.

8. An important component of employees earnings besides
salary is BONUS
• The dictionary meaning of bonus is an extra payment to the
worker beyond the normal wage
• It is also said that bonus is share of workers in the
prosperity of an organisation
• Another argument is that bonus is primarily a share in the
profits of the company
• But actually bonus is a source of bridging the gap between
the actual age and need based wage

9. The Payment of Bonus Act 1965
• Applies to every factory or establishment in which 20 or more
people are employed in an accounting year
• An employees is entitled to bonus only when he has worked for
30 working days in a particular year
• Bonus is paid out of available surplus of an accounting year
after deducting the sums referred into the Bonus Act
• The minimum bonus will be paid to the employee is 8.33% of
the salary
• If in any here the available surplus exceeds amount of minimum
bonus payable to the employee then the employer shall pay a
higher bonus subject to a maximum of 20% of employee salary
• The bonus is to be paid within 8 months from the close of an
accounting year
• Violation of this act would invite penalty in the form of
imprisonment of up to 6 months or fine of up to Rs1000 rupees

10. EMPLOYEE STOCK OPTIONS
 Employee Stock Option Plans/Equity Incentive Plans (commonly referred to
as ESOPs) are one of the most important tools to attract, encourage and
retain Employees. It is the mechanism by which employees are
compensated with increasing equity interests over time.
 Company grants an option to its Employee to acquire Equity Shares of the
company at a future date and at predetermined price.
 There is no limit on quantum of ESOPs to be issued to employees
Owners Employees

11. WHY ESOPs?
Attract, Reward, Motivate and
Retain Employees
Enhances job satisfaction
Deferred compensation strategy
Good retirement benefit plan
Employee aligns with company’s
goals

12. MAJOR TERMS TO
UNDERSTAND
Grant: Offering of ESOP Options from Company to
Employee
Vesting: Process through which employee becomes eligible
to exercise options
Exercise: When employee applies to Company for getting
shares allotted

13. RESTRUCTURING MODES
UNDER ESOP
Employee
Stock Option
Plans
(ESOP)
Stock
Appreciation
Rights – Cash
Settled
(SAR-Cash
Settled)
Stock
Appreciation
Rights – Equity
Settled
(SAR-Equity
Settled)
Employee
Stock
Purchase Plan
(ESPP)
Restricted
Stock Units
(RSU)

14. EMPLOYEE STOCK OPTION
PLAN (ESOP)
It is a right offered by a company to its employees to take equity
shares of company at discounted price.
Grant of
options
Vesting of
options
Exercise of
Vested
options
Allotment
of Shares
Example of Companies Offering ESOPs:

15. EMPLOYEE STOCK PURCHASE
PLANS (ESPP)
It allows Employee to purchase Company’s shares, often at a
discount from Fair Market Value.
Offer of
shares at
discounted
price
Allotment
of shares
If accepted by the
Employee
Example of Companies Offering ESPPs:

16. RESTRICTED STOCK UNITS (RSU)
Employee is awarded with the shares subject to fulfillment of certain
underlying conditions.
Underlying
Conditions like:
- Target / Revenue
- Performance
based etc.
If Condition fulfilled
Grant
of
options
Vesting
of
options
Exercise
of vested
options
Allotment
of shares
Example of Companies Offering RSUs:

17. STOCK APPRECIATION RIGHTS
(SAR)
In case of SARs employee gets the benefit in the form of cash /
equity which is the difference between the date of grant and final
exercise of options.
Grant of
Options
Exercise
of Vested
Options
Vesting of
Options
Share price on
Grant Rs 10
Share price on
Exercise Rs
100
Appreciation = Rs. 90/-
Example of Companies Offering SARs:

18. ESOP IMPLEMENTING
MODES
Direct
Route Trust
Route

19. DIRECT ROUTE
Direct
Route
Company Employee
1 Options to buy shares
2 Exercise of options
3 Issue of shares

20. TRUST ROUTE
Employee
Welfare
Trust
Company Employee
1
Grant of Loan for Payment of
subscription Money
4
Exercise of
options
6
Repayment
of Loan
5 Transfer of
Shares
3
Issue of options
2
Direct Issue of Shares

21. COVERAGE OF
EMPLOYEES
Defined under Regulation 2(f) of
SEBI (SBEB) Regulations, 2014
Employees
Covered
Not Covered
Of
Company,
its holding
&
subsidiari
es +
Foreign
employee
s

22. WHAT COMPANY’S SEE WHILE
GRANTING ESOPs
Loyalty
Performance
Designation
Present & Potential Contribution
Opportunity Cost

23. HOW TO ISSUE ESOPs?
General Meeting
Grant of options
Exercise of option by an
employee
Allotment of shares to the
Employees
Vesting
period
Board Meeting

24. PRICING CRITERIA
BASE FOR PRICE
Market price, one day before the
date of Grant
A price calculated on the basis
of valuation done upon Grant.
- Companies are free to decide the Exercise price,
- discount / premium over it however,
- the Exercise price shall never go below the Par Value
of Shares
Listed Company
Unlisted Company