Compensation: the remuneration received by an
employee in return for his/her contribution to the
organization.
 An organized practice
 An integral part of HRM
 Balances the work-employee relation by providing
monetary and non-monetary benefits.
 Helps in motivating the employees and improving
organizational effectiveness.


Compensation systems depends on:
-- Strategic goals,
-- Business objectives,
-- The job work and responsibilities.
MOTIVATION
Compensation
Management
EMPLOYEE
RETENTION
NEED
SATISFACTION

In India, compensation is regulated by
following labor legislations:
Minimum Wages Act
Payment of Wages Act
Equal Remuneration Act
Workmen Compensation Act
Factories Act
Payment of Bonus Act
Employees Provident Fund Act
ESIC Act
Payment of Gratuity Act
Maternity Benefit Act
Industrial Dispute Act
Industrial Employment
(Standing Orders) Act

Extends to the whole of India.
Objectives:
-- To pay minimum amount of wages according to
work done.
-- To protect rights of unorganized workers.
-- to prevent exploitation of workers.

Fixation of wages:
-- Appropriate Government fixes minimum rates of
wages,
-- Reviews/revises it every 5 years (Sec-3).

Different minimum rates of wages fixed for:
-- Different scheduled employments;
-- Different classes of work in the same scheduled
employment;
-- Adults, adolescents, children and apprentices;
-- Different localities.

Minimum rate of wages:
-- A basic rate of wages
-- Variable dearness allowance
-- Value of other concessions.

Procedure for fixing and revising minimum wages:
-- By appointing committees,
-- By issuing notification in the Official Gazette.

The Minimum Wages Act, 1948

Payment of Minimum Rates of Wages:
The employer pay to employee wages at the
rate not less than the minimum rates of wages
fixed. (Section-12)
Hours of Work, Overtime: (Section-13 to 17)
The Act provides for-- Working hours,
-- Overtime and overtime wages,
-- Weekly holidays,
-- Period and payment of wages,
-- Deductions from wages.

The Minimum Wages Act, 1948

Claim by Employees: To be filed before
authority within 6 months.
Penalty:
-- Paying less than minimum rates of wages:
Imprisonment up to 6 months or with fine up
to Rs. 500/- or with both.
-- Contravention of any provision relating to
fixing hours for normal working day:
Fine up to Rs.500.

The Minimum Wages Act, 1948

Extends to the whole of India.
Objectives:
-- To provide wages in a particular form at regular
interval.
-- To prohibit unlawful & unauthorized deductions
from wages.



Coverage of Employees:
Drawing wages up to Rs. 10000/- pm.
Fixation of wage-periods: No wage-period shall
exceed one month.
Wages include
Does not include
Basic Pay
Bonus
Dearness Allowance
Gratuity
Production Incentives
The value of any houseaccommodation,
All other allowances payable
under the terms of employment
Employer’s contribution to pension
or provident fund
Travelling allowance or travelling
concession;
Any defrayal of special expenses
Mode of Payment:
-- Paid in current coin or currency notes or in both.
-- Bank transfer can be resorted to only after the
authorization to do so from employee.
The Payment of Wages Act, 1936
Time of payment of wages:
-- By the 7th day of the subsequent month employing personnel less
than 1000.
-- By the 10th day of the subsequent month employing personnel
more than1000.
-- In case of termination, within 2 days from the day of termination.

Permissible Deductions:
-- Total deductions not exceeding 50% of wages
-- Total fine not exceeding 3% of wages.

Penalty:
-- Fine of Rs. 1000 to 5000 /- for failing to maintain registers or records
-- Imprisonment of 1 to 6 months &fine of Rs. 2000 to 15000 for failing
or neglecting to pay wages.

The Payment of Wages Act, 1936
FINE
PF, ESI
CONTRIBUTION,
INCOME TAX
PAYABLE
ADVANCES
PAID
PERMISSIBLE
DEDUCTIONS
RECOVERY
OF LOSSES
LOANS
PREMIUM
for LIC
COOPERATIVE
SOCIETIES
The Payment of Wages Act, 1936

Extends to the whole of India.
Objective:
-- To provide for payment of equal
remuneration to men and women workers
for work of similar nature.
--To prevent discrimination on recruiting,
promoting, transferring or training the men
and women workers.

Penalties:
1) Imprisonment up to one month or fine up to Rs. 10000 or both:
-- Omits or fails to maintain any prescribed register or other
document,
-- Omits to furnish information or return,
-- Omits or refuses to give any evidence or prevents others from
giving evidence.

2) Fine of Rs. 10000 to 20000 or with imprisonment not less than 3
months, may extend to 1 year or both for the first offence, and
with imprisonment up to 2years for the second:
-- Makes any recruitment in contravention of the provisions of this
Act,
-- Makes any payment of remuneration at unequal rates to men
and women workers, for the same work or work of a similar
nature, or
3) Fine up to Rs. 500:
-- Omits or refuses to produce to an Inspector any register or other
document or to give any information.
Equal Remuneration Act, 1976

Extends to the whole of India.
Applies to:
-- Every factory wherein 10 or more persons with the aid
of power or
-- Every establishment in which 20 or more persons are
employed without aid of power on any day during
an accounting year.

Objectives:
-- To share the profits of establishment with the workers,
-- To increase their earnings &
-- To improve their standard of living.


Coverage of Employees:
Drawing wages up to Rs. 10000/- pm.

Eligibility for bonus:
Every employee entitled only when he has worked for 30 working
days in that year.

Time-limit for Payment of Bonus:
Within 8 months from closing of accounting year.
Disqualification for bonus:
On dismissal from service for(a) Fraud;
(b) Riotous or violent behavior on the premises of the establishment;
(c) Theft, misappropriation or sabotage of any property of the
establishment;
(d) Misconduct causing financial loss to the employer.

The Payment of Bonus Act, 1965
Payment of minimum & maximum bonus:
-- Minimum bonus 8.33% of the salary or Rs. 100,
whichever is higher.
-- Maximum bonus 20% of the salary.
-- Payable by the employer on the completion
of 5 yrs after 1st accounting year.

Amount of Bonus:
-- Employees drawing the salary up to Rs. 3500
pm, the bonus payable on actual wages.
-- Wages between Rs. 3500 & 10000 pm, bonus
payable on Rs. 3500 pm.

The Payment of Bonus Act, 1965
Wages to Calculate Bonus:
-- Basic Pay
-- Dearness Allowance
-- But no other allowances.

Recovery of Bonus:
-- By the employee himself by making an application in
writing OR
-- By his assignee by making an application to the
appropriate Government in the case of the death of
the employee.

Penalty:
-- Imprisonment up to 6 months or fine up to Rs. 10000 or
both:
Contravention of any provision of the Act.

The Payment of Bonus Act, 1965

Extends to the whole of India.
Objective:
-- To provide for occupational safety, health
and welfare of workers at work places.

The act tells about:
-- Working hours, resting hours, spread-over,
-- Holidays,
-- Overtime wages,
-- Annual Leave with Wages, etc.


Weekly hours:
No adult worker allowed to work for more
than 48 hrs in a week.

Weekly holidays:
No adult worker allowed to work on the 1st
day of the week unless he has a holiday on 1
of the 3 days immediately before or after the
said day.

Daily hours:
No adult worker allowed to for more than 9hrs
in any day.
Factories Act, 1948


Extra wages for overtime:
Works for more than 9 hrs in a day or for more than 48
hrs in a week, entitled to wages at the rate of twice
his ordinary rate of wages.
Annual leave with wages:
Every worker worked for a period of 240 days or more
during a calendar year shall be allowed leave with
wages for a no. of days calculated at the rate of(i) If an adult: 1 day for every 20 days of work
(ii) If a child: 1 day for every 15 days of work.
In the case of a female worker: maternity leave for
any no. of days not exceeding 12 weeks.
Factories Act, 1948

Termination or death while in service, he or his
nominee entitled to wages according to the leave
entitled immediately before the said day.

Mode of recovery of unpaid wages.Any sum required to be paid but not paid by
employer is recoverable as delayed wages under the
Payment of Wages Act, 1936.
Factories Act, 1948

Extends to the whole of India.

Objective:
To provide for certain benefits to employees
in case of sickness, maternity and
employment injury.

Applicability:
Apply to all factories including Govt. factories
other than seasonal factories.
Employees' State Insurance Fund:
-- All contributions and all moneys received
shall be paid into the ESI Fund.
-- All fund paid into the Reserve Bank of India
or such other bank approved by the
Central Govt. to ESIC Fund Account.


Contributions:
The employer's contribution and the
employee's contribution shall be paid to
the Corporation.
Employees’ State Insurance Act, 1948
Contribution:
-- Employees’ contribution: 1.75% of the wages,
-- Employer’s contribution: 4.75% of the wages.


Cash Benefits:
1) Sickness benefit:
• The benefit becomes admissible after paying
contribution for at least 78 days in a contribution
period of 6 months.
• Sickness benefit payable for a maximum of 91
days in 1year.
• Payment is made by the local office within 7
days of certificate of sickness, which is not less
than 50% of the wages.
Employees’ State Insurance Act, 1948
2) Maternity benefit:
• Payable to insured women in case of confinement or
miscarriage or sickness.
• An insured woman should have paid for at least 70 days
in 1 year.
• The benefit payable for 12 weeks, can be extended up
to 16 weeks on medical grounds.
3) Disablement benefit:
• Payable to insured employees suffering from physical
disablement due to employment injury or occupation
disease.
• Temporary disablement benefit at 70% of the wages till it
lasts.
• Permanent disablement, benefit is payable for life.
Amount payable is on the basis of earning capacity.
Employees’ State Insurance Act, 1948

Extends to the whole of India except the
State of J&K.
Objective:
-- To provide for the institution of provident
funds, pension fund and deposit linked
insurance fund for employees in factories
and other establishments.

Contributions in the Provident Scheme:
-- The employer’s and employees' contribution: 12% of
the ‘B+DA’ and retaining allowance (if any).

Penalties:
-- Imprisonment for one year or fine of Rs. 5000 or both:
For avoiding any payment under the Scheme OR
enabling any other person to avoid such payment OR
knowingly makes any false statement or false
representation.
-- Imprisonment up to 6 months not less than 1 month
and fine up to Rs. 5000 .
For contravening any of the provisions under the Act.

Employees’ Provident Fund Act, 1952

Extends to the whole of India except the
State of J&K.

Objective:
To provide for a scheme for the payment
of gratuity to employees engaged in
factories, mines, oilfields, plantations, ports,
railway companies, shops or other
establishments.
Payment of gratuity:
Payable to an employee on the termination
of his employment after rendering continuous
service for not less than 5 years, (a) on his superannuation, or
(b) on his retirement or resignation, or
(c) on his death or disablement due to accident
or disease.


Completion of continuous service of 5 years
not necessary where the termination of the
employment is due to death or disablement.
Payment of Gratuity Act, 1972

For every completed year of service or part
thereof in excess of 6 months, gratuity is paid at
the rate of 15 days wages based on wages last
drawn by the employee concerned.

In the case of a piece-rated employee, daily
wages shall be computed on the average of the
total wages received by him for last 3 months.

For employee employed in a seasonal
establishment, gratuity is paid at the rate of 7
days wages for each season.

The amount of gratuity up to Rs. 3.5 lakhs is
non-taxable.
Payment of Gratuity Act, 1972

15 days wages calculated by dividing the monthly
rate of wages last drawn by him by 26 and
multiplying the quotient by 15.

The gratuity of an terminated employee for any act
shall be forfeited to the extent of the damage or loss
so caused.

Every employer shall obtain an insurance for his
liability for payment towards the gratuity from the LIC
of India.

Organization should submit 4.8% of total wages paid
(B+DA) every month with LIC.
Payment of Gratuity Act, 1972

Extends to the whole of India.

Objective:
To provide for, in the case of an employment injury,
compensation to the injured workman and in case of
his death to his dependants.
Amount of compensation :
1) In case of death:- an amount equal to 50% of the
monthly wage multiplied by the relevant factor or Rs.
80,000/- whichever is more.
2) In case of permanent total disablement: 60% or Rs.
90,000/- whichever is more
3) In case of permanent partial disablement:
compensation is proportionate to the disability
arrived as at (2) above.


Employer’s liability to pay compensation:
In case a personal injury by accident
arising out of and in the course of his
employment within 30 days otherwise
liable to pay interest and penalty also.

This act is applicable where the ESIC Act
is not applicable.
Workmen Compensation Act, 1923

Extends to the whole of India except the State of
J&K.

Objective:
To regulate the employment of women in certain
establishments for certain periods before and after
childbirth and to provide for maternity benefits and
certain other benefits.

Prohibited Period of Employment or Work:
The employment of women during the 6 weeks
immediately following the day of her delivery or her
miscarriage (sectiion-4).
Payment of Maternity Benefit:
-- Every women entitled to payment of maternity benefit at the
rate of average daily wage for the period of her actual
absence.

-- In addition, every women also entitled to receive a medical
bonus of Rs.250/- if no prenatal confinement and post natal
care is provided free of charge.
Eligibility for Maternity Benefit:
-- Worked in an establishment for a period of not less then 80
days in the preceding 12 months of the date of her expected
delivery.

Maternity Benefits Act, 1961
Maximum Period of Maternity Benefit:
-- Maximum 12 weeks of which not more then 6 weeks shall proceed the
date of her expected delivery.


Other Benefits:
Act also provides provisions for leave for miscarriage, leave for illness
arising out of pregnancy or delivery, miscarriage and nursing breaks for
nursing the child until the child attained the age of 15 months.

Deduction of Wages:
No employer shall deduct from the usual daily wages of a women
entitled to maternity benefits.
Penalty:
-- Imprisonment not less than 3 months but may extend to 1 year and fine
not less than Rs.2000 but may extend to Rs 5000 for contravening any of
the provisions under the Act.
.

Maternity Benefits Act, 1961

Extends to the whole of India.

Objective:
To make provision for the investigation and settlement of
industrial disputes.

Payment of Full Wages to Workman Pending Proceedings
in Higher Courts.

Right of Workmen Laid Off for Compensation:
Whenever a workman (other than a badli workman or a casual
workman) who has completed not less than one year of continuous
service under an employer is laid off, he shall be paid by the employer
for all days during which he is so laid off, equal to 50% of the total of
B+DA .

Conditions Precedent to Retrenchment:
The workman be paid at the time of retrenchment,
compensation be equivalent to15 days' average
pay for every completed year of continuous
service or any part thereof in excess of six months.

Compensation to Workmen in Case of Transfer of
Undertakings or Closing Down:
Where the ownership or management of an
undertaking is transferred, every workman who has
been in continuous service for not less than one
year in that undertaking immediately before such
transfer shall be entitled to notice and
compensation as if the workman had been
retrenched.
Industrial Dispute Act, 1947

Extends to the whole of India.

Objective:
To provide for better service conditions to the
workers.
Payment of Subsistence Allowance:
In case of suspension, pending investigation
charges of misconduct, the employer shall pay
subsistence allowance –
(a) at the rate of 50% of the wages for the first 90 days
of suspension;
(b) at the rate of 75% of such wages for the remaining
period of suspension.

Thank You For Patience!