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Question
Critically examine the measures provided in the Payment of Wages Act, Minimum Wages Act, Payment of Bonus Act and Equal Remuneration Act.

Answer
9.Critically examine the measures provided in the payment of wages act, minimum wages act, payment of bonus act and equal remuneration act.

THE  PURPOSE  OF  THE  ACT

Payment Of Wages Act, 1936
•   Applicability
i) Every person employed in any factory, upon any railway or through subcontractor in a railway and a person employed in an industrial or other establishment.
ii) The State Government may by notification extend the provisions to any class of person employed in any establishment or class of establishments.
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•   Eligibility
Every person who is employed in any of the above mentioned establishments and who is drawing less than Rs. 1,600 per month.
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•   Benefits : the Act prescribes for
i) The regular and timely payment of wages (on or before 7th day or 10th day after last day of the wage period in respect of which the wages are payable)
ii) Preventing unauthorised deductions being made from wages and arbitrary fines.
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•   Penal Provisions
Penalties are from Rs. 200-1000. Repeat offenses attract 1 to 6 months imprisonment and fine from Rs. 500-3000.
Delay wage payments attract penalty of Rs. 100 per day of delay.
Minimum Wages Act, 1936
•   Applicability
Any person who directly or through another person, whether for himself or for any other person employs one or more employees in any scheduled employment in respect of which minimum rates of wages have been fixed under this Act.
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•   Eligibility
Any person who is employed for hire or reward to do any work in a scheduled employment and includes an outdoor worker to whom any articles or materials are given for either doing some work either at home or at any other premises.
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•   Benefits
The Act prescribes the minimum rates of wages payable to employees for different scheduled employment for different class of work and for adults, adolescents, children and apprentices depending upon different localities.
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•   Penal Provisions
Imprisonment up to 6 months and/or fine up to Rs. 500 is imposable for contravention.
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Payment of Bonus Act, 1965    


The Payment of Bonus Act, 1965 was enacted to provide for the payment of bonus to persons employed in certain establishments on the basis of profits or productivity and for the matters connected therewith. The Act applies to:- (i) every factory as defined under the Factories Act, 1948; and (ii) every other establishment in which twenty or more persons are employed on any day during an accounting year. However, the Government may, after giving two months' notification in the Official Gazette, make the Act applicable to any factory or establishment employing less than twenty but not less than ten persons.
The Act is enforced through the Central Industrial Relations Machinery (CIRM). CIRM is an attached office of the Ministry of Labour and is also known as the Chief Labour Commissioner (Central) [CLC(C)] Organisation. It is headed by the Chief Labour Commissioner (Central).
The key provisions of the Act are:-
   According to the Act, the term 'employee' means "any person employed on a salary or wage not exceeding three thousand and five hundred rupees per mensem in any industry to do any skilled or unskilled manual, supervisory, managerial, administrative, technical or clerical work for hire or reward, whether the terms of employment be express or implied".

   An employee is entitled to be paid by his employer a bonus in an accounting year subjected to the condition that he/she has worked for not less than 30 working  days of that year.

   An employer shall pay minimum bonus at the rate of 8.33% of the salary or wages earned by an employee in an year or one hundred rupees,whichever is higher. Here it is not required that the employer has any allocable surplus in the accounting year. However, where an employee has not completed fifteen years of age at the beginning of the accounting year, the minimum bonus payable is 8.33% or sixty rupees, whichever is higher.

   In any accounting year, if the allocable surplus exceeds the amount of minimum bonus payable to the employees, the employer shall in lieu of such minimum bonus, be bound to pay bonus (maximum bonus) equivalent to the amount which shall not exceed 20% of the salary or wages earned by employees.

   In computing the allocable surplus, the amount set on or the amount set off shall be taken into account. In other words:- (i) If, in any accounting year, the allocable surplus exceeds the amount of maximum bonus payable to the employees in the establishment, then the excess surplus is carried forward for being set on in the succeeding accounting year and so on up to and inclusive of the fourth accounting year for the purpose of payment of bonus; or (ii) If there is no or less allocable surplus in respect of that year, then such a shortfall is carried forward for being set off in the succeeding accounting year and so on up to and inclusive of the fourth accounting year.

   Where in any accounting year, any amount has been carried forward and set on or set off, then in calculating bonus for the succeeding accounting year, the amount of set on or set off carried forward from the earliest accounting year shall first be taken into account.

   All amounts payable to an employee by way of bonus under this Act shall be paid in cash by his employer within a month from the date on which the award become enforceable or the settlement comes into operation, in respect of any dispute regarding payment of bonus. But, in any other case, it shall be paid within a period of eight months from the close of the accounting year.
However, the Government may order, upon receiving application made to it by the employer and for sufficient reasons, to extend the said period of eight months to such further period or periods as it thinks fit, such that that the total period so extended shall not, in any case, exceed two years.

   An employee shall be disqualified from receiving bonus if he/ she is dismissed from service for:- (i) fraud; or (ii) riotous or violent behaviour while on the premises of the establishment; or (iii) theft, misappropriation or sabotage of any property of the establishment.

AIMS OF THE PAYMENT OF BONUS ACT, 1965 The payment of Bonus Act, 1965 aims at providing for the payment of bonus to the employees of certain establishments, on the basis of profits or production or productivity and for matters connected therewith. 8
APPLICABILITY The Act applies to every factory and every other establishment employing not less than 20 persons 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 10persons. The establishments covered under the Act shall continue to pay bonus even if the number of employees falls below 10, at a later date. 9
ELIGIBILITY Every employee (other than an apprentice) receiving salary or wages up to Rs.3,500 per month and engaged in any kind of work whether skilled, unskilled, manual, managerial, supervisory, technical, clerical , etc. is entitled to bonus for every accounting year, if he has worked for at least 30 working days in that year. 10
Employees of the general insurance companies, LIC, Central/State Government establishments, Indian Red Cross Society, Universities and Educational Institutions, Hospitals, Chambers of Commerce, Reserve Bank of India, Industrial Finance Corporation of India, Unit Trust of India , Social Welfare Institutions, Local Bodies, etc. are not entitled to bonus under the Act. What they are paid as bonus, is ex-gratia payment. 11
MINIMUM BONUS The minimum bonus which an employer is required to pay even if he suffers losses during the accounting year or there is no allocable surplus (except in case of new establishments), is 8.33% of the salary or wages of the employee during the accounting year. {Section 10} Rs. 100 in case of employees above 15 years and Rs 60 in case of employees below 15 years, whichever is higher 12
MAXIMUM BONUS If in any accounting year, the allocable surplus exceeds the amount of minimum bonus, the employer shall pay bonus in proportion to the salary or wages earned by the employee during that accounting year, subject to a maximum of 20% of such salary or wages. 13
. MODE AND TIME FOR PAYMENT OFBONUS Bonus should be paid in cash and within 8 months from the close of the accounting year . Bonus is payable only annually. ( section 22 ) 14
EMPLOYERS’ OBLIGATIONS To calculate and pay the annual bonus as required under the Act. To maintain the prescribed registers and file annual returns of bonus paid. 15
•   16. TIME LIMIT FOR PAYMENT The bonus should be paid in cash 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 if there is sufficient cause extension may be applied for. 16
•   17. OFFENCES AND PENALTIES For contravention of the provisions of the Act or rules the penalty is imprisonment up to 6 months, or fine up to Rs.1000, or both. For failure to comply with the directions or requisitions made the penalty is imprisonment up to 6 months, or fine up to Rs.1000, or both. 17
•   18.  In case of offences by companies, firms, body corporate or association of individuals, its director, partner or a principal officer responsible for the conduct of its business, shall be deemed to be guilty of that offence, unless the person concerned proves that the offence was committed without his knowledge or that he exercised all due diligence. 18
•   19. CALCULATION OF BONUS1.) Calculate the Statutory bonus2.) Calculate the Available Surplus. 19
•   20. MEANING OF STATUTORY BONUS Statutory Bonus means bonus payable as per statute, i.e., the Payment of Bonus Act. As per the Act, an amount equal to 8.33% of the Basic + Dearness allowance paid to an employee who is eligible for bonus is to be paid irrespective of availability of surplus or profit. Therefore, 8.33% is the statutory minimum bonus payable. However, depending upon availability of profit, the employer shall pay bonus 20 subject to a maximum of 20%.
•   21.  The Payment of Bonus Act, 1965, gives to the employees a statutory right to a share in the profits of his employer. Prior of the Act some employees used to get bonus but that was so if their employers were pleased to pay the same. payment of bonus act 1965 all the confirmed employees whose basis is less than or equal to 10000/- per month is eligible for statutory bonus @ rate of 8.33% of Basic pay. 21
•   22. HOW STATUTORY BONUS CALCULATE The Act enables the employees to get a minimum bonus equivalent to one months salary or wages (8.33% of annual earnings) whether the employer makes any profit or not. But the Act also puts a ceiling on the bonus and the maximum bonus payable under the Act is equivalent to about 2 1/2 months salary or wage (20% of annual earnings). 22
•   23. MEANING OF AVAILABLE SURPLUS Available Surplus = Gross Profit [as per section 4] – Depreciation admissible u/s 32 of the Income tax Act - Development allowance Calculate the gross profit in the manner specified in First Schedule, in case of a banking company, or Second Schedule, in any other case. 23
•   24. CALCULATE THE AVAILABLE SURPLUS Available Surplus = Gross Profit1.) – Depreciation admissible u/s 32 of the Income tax Act2.) - Development allowance3.)- Direct taxes payable for the accounting year4.) – Sums specified in the Third Schedule5.)+ Direct Taxes in respect of gross profits for the immediately preceding accounting year6.) – Direct Taxes in respect of such gross profits as reduced by the amount of bonus, for the immediately preceding accounting year. 24
•   25. FORMULA OF AVAILABLE SURPLUS1. Direct taxes payable for the accounting year (calculated as per sec-7)- sums specified in the third schedule.2. Direct taxes (calculated as per sec-7) in respect of gross profit for the immediately preceding accounting year.3. Allocable surplus = 60% of available surplus, 67% in case of foreign companies.4. Make adjustment for „set on‟ and „set off ‟ for calculating the amount of bonus in respect of an accounting year. 25
•   26. ALLOCABLE SURPLUS (Allocable Surplus = 60% of Available Surplus, 67% in case of foreign companies). The bonus is to be paid out of the allocable surplus. The allocable surplus so computed is distributed amongst the employees in proportion to salary or wages received by them during the relevant accounting year. In case of a foreign company, the allocable surplus is 67 percent of the available surplus and in other cases it is 60 percent (section 4,5 and 7) 26
•   27. SET ON & SET OFF Where in any accounting year any amount has been carried forward and set on or set off under this section, then, in calculating bonus for the succeeding accounting year, the amount of set on or set off carried forward from the earliest accounting year shall first be taken into account. The allocable surplus so computed is distributed amongst the employees in proportion to salary or wages received by them during the relevant accounting year. 27
•   28. WHO IS ENTITLED TO BONUS UNDER THEPAYMENT OF BONUS ACT, 1965 Every employee of an establishment covered under the Payment of Bonus Act, 1965 is entitled to bonus from his employer in an accounting year, provided he has worked in that establishment for not less than 30 working days in the year on a salary less than Rs.3,500 per month(Section 2 (13) 28
•   29. AN EMPLOYEE IN THE FOLLOWING CASES ISENTITLED TO BONUS:(1) A temporary workman on the basis of total number of days worked by him.(2) An employee of a seasonal factory is entitled to proportionate bonus and not minimum bonus, as prescribed by the Act.(3) A part-time employee, as a sweeper engaged on a regular basis. Exa :- (Automobile Karmachari Sangh vs. Industrial Tribunal (1970) 29
•   30. (4) A retrenched employee, provided he has worked for minimum qualifying period Exa: (East Asiatic C. (P) Ltd. Vs. Industrial Tribunal (1961).(5) A probationer is an employee and as such is entitled to bonus. Exa: (Bank of Mudra Ltd. Vs. Employee’s Union, 1970 US. 30
•   31. (6) A dismissed employee re-instated with back wages is entitled to bonusExa: (Gammon India Ltd Vs. Nirnjan Das (1984)(7) A piece rated worker is entitled to bonusExa: (Mathuradas Kani Vs. L.A. Tribunal AIR (1958) 31


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