Wage Legislation
Learning Objectives:
•
The Payment of Wages Act
•
The Minimum Wages Act
•
The Payment of Bonus Act
•
The Equal Remuneration Act
Chapter Nine
Wage Legislation
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Structure:
1.
Introduction
2.
The Payment of Wages Act,1936
3.
The Minimum Wages Act,1948
4.
The Payment of Bonus Act,1965
5.
The Equal Remuneration Act,1976
6.
Summary
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1 Introduction:
The Acts that are included under the wage
legislation in India are
1.
The Payment of Wages Act,1936
2.
The Minimum Wages Act,1948
3.
The Payment of Bonus Act,1965
4.
The Equal Remuneration Act,1976
We now look at main features of each of
them.
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2 The Payment of Wages Act,1936
Prior to the passing of this Act, it was
observed that employers used to
- make unauthorized deductions from
workers’
wages
for
interest
on
advances arranged to them from their
own wages, for charities and religious
purposes selected by employers, medical
treatment etc.
- take long period to disburse wages
- make wage payments without any
uniformity.
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2 The Payment of Wages Act,1936
Employers
were
also
observed
to
be
imposing fines on workers under several
pretexts.
The Royal Commission on Labour appointed
in 1931 recommended steps to prevent
these abuses in payment of wages. They
were incorporated in the Payment of
Wages Act passed in 1936.
The Government of Maharashtra framed rules
under the Act known as Maharashtra
Payment of Wages Rules in 1963.
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2 The Payment of Wages Act,1936
The Act is in three parts. The first part
deals with regulation and payment of
wages by the employer.
The second part specifies the heads under
which deductions are to be made from
wages.
The third part provides for machinery for
enforcing specific claims arising out
of delayed payments , deductions from
wages and appeals.
It is a self-contained Act and provides
its own machinery for the disposal of
claims.
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2 The Payment of Wages Act,1936
The object of the Act is to regulate the
payment of wages to certain classes of
persons employed in industry, to pay
wages in particular form and at regular
intervals and to prevent unauthorized
deductions from the wages.
The
Act is concerned merely with the
fixation of wage periods and not with
the fixation of wages.
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3 Main Features of the Payment of Wages
Act
The Act is applicable to persons employed
in any factory, railway and to such
other establishments to which the State
Government may, by notification, extend
the provisions of the Act, after giving
three months’ notice to that effect.
Employees whose wages average less than
Rs. 1,600/- a month are covered by the
Act.
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3
Features of the Payment of Wages Act
The term wages includes
any remuneration payable under the
award or settlement between the parties
or order of court.
remuneration in respect of overtime
work or holidays or any leave period.
any sum which is payable on termination
of employment
any sum to which a person employed is
entitled to under any scheme, or under
any law for the time being in force.
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3
Features of the Payment of Wages Act
The term wages does not include
- any bonus which does not form a part
of remuneration.
- value of any house accommodation,
supply
of
light,
water,
medical
assistance etc.
contribution payable by employer to
any pension or provident fund.
- any travelling concession
- any sum paid to the employee to
defray special expenses incurred by him
- gratuity payable on termination of
employment.
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3 Main Features of the Payment of Wages
Act
The
responsibility for payment
rests
with
the
employer
representative, if any.
of wages
or
his
The wage period cannot exceed one month.
Where there are less than 1000 persons
employed , wages shall be paid before
expiry of the seventh day and in other
cases before expiry of tenth day after
the last day of the wage period.
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3
Features of the Payment of Wages Act
In
case
the
employer
terminates
the
services of an employee, the employee
is entitled to receive his dues within
expiry of two working days.
The wages must be paid in cash. However,
with
written
authorization
from
employee wages can be paid by cheque or
direct
credit
to
employee’s
bank
account.
Wages shall be paid without any deductions
except those authorized under the Act.
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3 Main Features of the Payment of Wages
Act
The
Act
specifies
heads
under
deductions can be made. They are
which
Fines, deductions for absence from duty,
or for damages to employer’s goods or
property, deductions for house supplied
by the employer or for recovery of
advances / over payments, loans, income
tax payable by
employees, deductions
for payment to cooperative societies or
ant other deductions authorized by
employees.
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3 Main Features of the Payment of Wages
Act
The total amount of deductions which may
be made in any wage period from the
wages of an employed person shall not
exceed 75% of such wages in case where
such deductions were wholly or partly
made
for
payment
to
cooperative
societies; and in other cases 50% of
such wages.
The Act has imposed certain conditions and
limits on fines that can be levied on
employees. Fines recovered have to be
recorded in prescribed register.
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3 Main Features of the Payment of Wages
Act
The Act prescribes penalties that may be
levied for offences committed under the
Act.
The person responsible for payment of
wages shall display abstracts of this
Act and rules
made there under in
English
and
regional
language
of
majority
workers
at
a
prominent
location in the work place.
Any contract or agreement whereby employee
relinquishes any right conferred by
this Act shall be null and void.
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4. The Minimum Wages Act,1948
The genesis of the Minimum Wages Act is
traceable to the Minimum Wage Fixing
Machinery
Convention,
1928
of
the
International Labour Organization. It
sought to provide machinery for fixing
minimum wages in manufacturing and
commercial trades where no arrangements
exist for effective regulation of wages
by collective bargaining or where wages
are exceptionally low.
In India Royal Commission on Labour [1929]
stressed the need for minimum wages.
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4. The Minimum Wages Act,1948
The
Act aims to extend the concept of
social justice to workmen employed in
certain
schedules
employments
by
statutorily providing for them minimum
rates of wages.
It is a piece of social legislation which
provides
protection
to
workers
in
employments
in
which
they
are
vulnerable to exploitation on account
the lack of organization & bargaining
power and where sweated labour is most
prevalent.
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4. The Minimum Wages Act,1948
Main provisions:
Wages :All remuneration capable of
being expressed in terms of money ,
which would , if the terms of the
contract of employment, express or
implied, were fulfilled , be payable to
a person employed in respect of his
employment or of work done in such
employment , and includes house rent
allowance;
but
excludes
value
of
accommodation
supplied,
supply
of
light, water, medical attendance etc ;
contribution towards PF, Pension ,
Gratuity; Traveling allowance.
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4. The Minimum Wages Act,1948 - Main provisions
Fixing of Minimum Rates of Wages
When the appropriate government has
fixed &
notified minimum rates of
wages in respect of any employment, the
employer is bound to pay every employee
engaged in that employment at rates not
less than the rates notified.
The appropriate government may review
and if necessary revise wages at
intervals not exceeding five years.
Minimum rates shall not be fixed where
less than 1000 employees are engaged in
scheduled employment in the state.
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4. The Minimum Wages Act - Main provisions
Fixing of Minimum Rates of Wages
Minimum rates of wages may be fixed
[i] for different employments
[ii] for different classes in the same
employment
[iii] for adolescents, children and
apprentices
[iv] for different localities.
The rates of wages may be a] A time rate;
b] A piece rate; c] A guaranteed time
rate or d] An overtime rate.
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4. The Minimum Wages Act - Main provisions
The Act has incorporated a schedule [list]
of employments.
Provisions of the
Minimum Wages Act, 1948 are applicable
to these employments only.
It may however be kept in mind that the
schedule is modified by the appropriate
governments from time to time .
The schedule is in two parts. The second
part lists employments in agriculture
and the first others.
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4. The Minimum Wages Act Penalties
Offences and
If any employer pays to any employee less
than the minimum rate of wages fixed
for that employee’s class of work ; or
contravenes any rule or order made by
the appropriate government regarding
hours of work, he would be punished
with imprisonment up to six months or
with fine of Rs. 500/- or both.
Any contract or agreement whereby an
employee relinquishes or reduces his
right under this Act shall be null and
void. However, an agreement which is
more advantageous can be entered.
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4. The Minimum Wages Act - Enforcement
For undertakings under the sphere of the
Central Government, Central Government
is the enforcing authority. The chief
labour commissioner [central] is in
charge of implementation of the Act in
central sphere.
In the State sphere, officers in charge of
industrial
relations
machinery
are
entrusted
with
responsibility
for
implementation. In some states whole
time inspectors enforce the Act while
in others the job is assigned to
revenue officers.
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5. The Payment of Bonus Act,1965
The
term bonus is applied to a cash
payment made in addition to wages. It
generally represents the cash incentive
given
conditionally
on
certain
standards of attendance and efficiency
being attained. The term bonus is not
defined in this Act or any other
enactment.
The claim of bonus is based on two main
considerations, 1] that there is a gap
between the present wage and the living
wage
which
bonus
is
expected
to
shorten. 2] that there is an available
surplus or profits of the year out of
which bonus may be paid.
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5. The Payment of Bonus Act,1965
The practice of paying bonus as ex-gratia
payment by employers had its early
roots in the textile industry in Mumbai
& Ahmedabad. The profits earned by
textile
industry
during
the
wars
prompted employers to voluntarily pay
bonus
to
keep
workers
happy
and
production unhampered.
For a long time the claim to bonus was not
considered as a legal right but was
awarded
on
principles
of
justice,
equity and good conscience, with a view
to keep the labour contended.
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5. The Payment of Bonus Act,1965
However, in a case before Bombay High
Court it was ruled that workers have a
right to bonus as an extra remuneration
for work done for the employer under a
contract express or implicit.
The Supreme Court felt the necessity of a
high powered commission to go into the
different aspects of the bonus. Central
Government
constituted
the
Bonus
Commission in 1961. Its recommendations
were published in 1964 which were
accepted with slight modifications.
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5. The Payment of Bonus Act,1965
The Government promulgated an ordinance in
1965 and the Act came into force from
October 1965. Subsequently there were a
number of amendments to the Act which
has forty sections and four schedules.
The object of the Act is to maintain peace
and harmony between labour and capital
by allowing the employees to share in
the prosperity of the establishment
reflected by the profits earned through
the
contributions
together
from
capital, management and labour.
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5. The Payment of Bonus Act,1965
Applicability:
The Act applies to all factories and
establishments
[&
their
branches]
employing 20 or more persons.
Definitions:
Employee: includes any person [other than
apprentice] employed in any industry on
a salary or wage not exceeding Rs.
10,000/- per month.
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5. The Payment of Bonus Act,1965
Accounting
year:
in
relation
to
corporation, the year ending on the day
on which the books & accounts of the
corporation are closed & balanced.
- in relation to a company the period in
respect of which profit & loss account
is laid before the annual general
meeting { April 1st or March 31st }
Salary or wages :
includes basic pay &
DA but not any other allowance.
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5. The Payment of Bonus Act,1965
Unless separate profit & loss account and
balance sheet is prepared for them, all
branches,
departments
undertakings
whether in same place or not, be
considered
as
parts
of
the
main
establishment
for
the
purpose
of
computation of bonus. They should be
continued to be treated as such.
Calculation of Bonus
Determination of gross profit is the first
step towards calculating the amount of
bonus.
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5. The Payment of Bonus Act,1965
First
schedule
provides
manner
for
calculation of gross profits for Banks
and second schedule for other cases.
The next step is to calculate available
surplus by arranging certain deductions
from gross profit like : remuneration
to partners / proprietors; a return of
8.5% on equity capital and 6% on
reserves;
depreciation under IT Act;
development
rebate
or
investment
allowance; direct taxes and dividends
paid or payable.
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5. The Payment of Bonus Act,1965
The bonus is to be paid from
allocable
surplus which is 67% of available
surplus in case of a company and 60% in
other cases.
Each employee who has worked for not less
than 30 days in an accounting year is
eligible for bonus . Employee is
disqualified from receipt of bonus, if
he is dismissed as a result of fraud,
violent
behaviour
or
theft,
misappropriation etc.
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5. The Payment of Bonus Act,1965
Irrespective
of
profit
or
loss
or
allocable
surplus
each
eligible
employee shall be paid a bonus higher
of Rs. 100/- or 8.33% of the salary
earned. The maximum is fixed at 20%.
If the salary of an employee exceeds Rs.
2,500/- per month, bonus payable to
such employee shall be calculated on
Rs. 2,500/Proportionate reduction is also to be
arranged for cases where the employee
has not worked for all the working days
in the accounting year.
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5. The Payment of Bonus Act,1965
After distribution of bonus at the maximum
rate , if any balance is left of
allocable surplus, it is set on for and
be taken into account for distribution
of bonus up to fourth accounting year.
In
case of any shortage or want of
allocable
surplus,
the
amount
distributed as bonus shall be carried
forward for set off and adjusted out of
the future excess allocable surplus.
This method is described in the fourth
schedule.
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5. The Payment of Bonus Act,1965
Newly
set
up
establishments
enjoy
exemption from the Act up to first six
years or up to the year in which it
shows profit, whichever is earlier.
In case any pooja bonus is paid it can be
adjusted against the statutory bonus.
If
an
employee
is
found
guilty
of
misconduct causing financial loss to
the company, employer can deduct the
loss amount from the statutory bonus.
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5. The Payment of Bonus Act,1965
The bonus shall be paid within a period of
eight months from the close of the
accounting year.
If there is a dispute, it should be paid
within one month from the date on which
the award becomes enforceable.
The appropriate government may extend the
said period up to a maximum of two
years.
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5. The Payment of Bonus Act,1965
If bonus is due to an employee, employee
himself, someone on his behalf or in
case of death of an employee his heir
or assignee may make an application for
its
recovery
to
the
appropriate
Government within a period of one year.
If the bonus is payable as a result of
a settlement, award or an agreement ,
the government can recover it as land
revenue.
The disputes connected with bonus need to
be raised under Industrial Disputes
Act.
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5. The Payment of Bonus Act,1965
If the accounts of the employer have been
audited by qualified auditors [ or
Comptroller & Auditor General in case
of
public undertakings] the profit &
loss account and balance sheet are
assumed to be correct and employer is
not required to prove accuracy.
Employer contravening provisions of this
Act
would
be
punished
with
imprisonment up to six months or fine
up to Rs. 1,000/- or both.
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5. The Payment of Bonus Act,1965
It is open to an employer to pay bonus
linked with production or productivity
instead of bonus based on profits.
There has to be a agreement to that
effect
between
employer
and
his
employees.
Employees can enter into agreement on
bonus with their employers using a
formula other than the one specified in
the Act.
Provisions of the Act in respect of
payment of minimum and maximum bonus
are applicable to such agreements.
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6. The Equal Remuneration Act,1976
Introduction
The Equal Remuneration Act was passed in
1976 to give effect to Article 39 of
the Indian Constitution. Prior to that
Equal
Remuneration
ordinance
was
promulgated
in
1975.
The
Central
Government framed Equal Remuneration
Rules in 1976.
The object of the Act is to provide for
payment of equal remuneration to men
and
women
workers
and
for
the
prevention
of
discrimination
,
on
ground of sex, against women in the
matter of employment. It also seeks to
provide for increasing opportunities
for women in the specified employments
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6. The Equal Remuneration Act,1976
Main Provisions
The term remuneration includes basic wage
or salary and any additional emoluments
payable, either in cash or kind, to a
person employed in employment, or work
done in such employment , if the terms
of the contract of employment, express
or implied, were fulfilled.
It
is the duty of the employer to pay
equal remuneration to men and women for
the same or similar work.
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6. The Equal Remuneration Act,1976
Main Provisions
No
discrimination between men and women
shall be made while recruiting except
where
employment
of
women
is
prohibited.
The
Act
initially
did
not
state
specifically
that
no
such
discrimination be made in promotions,
transfers, training etc. This lacuna
was removed by amendment in 1987.
The
appropriate
Government
is
to
constitute an advisory committee for
the purpose of providing increasing
employment opportunities to women.
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6. The Equal Remuneration Act,1976
Main Provisions
An
authority , not below the level of
Labour Officer, is to be appointed to
hear and decide claims and complaints .
The officer has powers of a civil
court.
The aggrieved party has a right to appeal.
Employers are required to maintain
prescribed registers & documents and
offer them for inspection on demand.
The Act has been brought into force for
certain employments by the Central
Government.
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7. Summary
The
wage legislation in India broadly
covers the Payment of Wages Act, the
Minimum Wages Act, the Payment of Bonus
Act and the Equal Remuneration Act.
The main purpose of the Payment of Wages
Act is to ensure regular and prompt
payment of wages and
to prevent the
exploitation
of
wage
earner
by
prohibiting
arbitrary,
fines
and
deductions
from
wages.
Periodical
fixation and revision of wages under
the
Minimum
Wages
Act
and
their
effective implementation is very much
desirable.
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7. Summary
The payment of Bonus Act provides for the
payment of bonus to persons employed in
certain establishments and for matters
connected therewith.
The
Equal Remuneration Act provides for
the payment of equal remuneration to
men and women for the same work or work
of a similar nature and for prevention
of discrimination against women.
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Thus we arrive at the end of
“Wage Legislation ”
Next we move to Chapter Ten –
“ Wage Policy”
Good Luck!
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