According to V.V. Giri, the basic foundation of industrial legislation is to ensure – “equitable distribution of profits and benefits accruing from industry between industrialists and workers and affording protection to the workers against harmful effects to their health, safety and morality”.
Thus, the protection of labour in industry is the motive force behind labour legislation. Legislation only sets the minimum rates and obligations on the part of the employer.
Nothing prevents more liberal terms being negotiated through collective bargaining processes.
1. The Payment of Wages Act, 1936.
2. The Minimum Wages Act, 1948.
3. The Payment of Bonus Act, 1965.
A. The Payment of Wages Act, 1936:
The recommendation of the Royal Commission on Labour was largely responsible for the enactment of the Payment of Wages Act in 1936.
The primary objective is to ensure that wages are paid properly and all malpractices like non-payment or short-payment or irregular payment, or payment in kind rather than in cash or short measurement of the work of piece-rate workers are avoided.
Thus, the objective of the Act was to ensure regular and prompt payment of wages and to prevent the exploitation of wage earners by arbitrary deductions and fines.
The Payment of Wages Act 1936 was passed to regulate the payment of wages to certain classes of persons employed in industry.
It is essentially meant for the benefit of industrial employees not getting very high salaries and the provisions of the Act were enacted to safeguard their interest. It also provides against irregularities in payment of wages and unauthorised deductions there from by the employers. Further, it ensures payment of wages in a particular form and at regular intervals without unauthorized deductions.
Rules for Payment of Wages (sec 3 to 6): Every employer shall be responsible for the payment to persons employed by him of all wages required to be paid under the Payment of Wages Act. The rules relating to time of payment of wages are as follows:
1. Wages to be paid before 7th or 10th day: Sec 5(1):
The wages of every person employed in an establishment where less than 1000 persons are employed, must be paid before the expiry of 7th day of the following wage-period.
In case the number of workers exceeds 1000, the wages shall be paid before the expiry of the 10th day of the following wage-period.
2. Wages in case of termination of employment: Sec 5(2):
Where the employment of any person is terminated by or on behalf of the employer, the wages earned by him shall be paid before the expiry of the 2nd working day from the day on which his employment is terminated.
3. Medium of payment of wages (sec 6):
All wages shall be paid in currency notes and coins. Payment of wages in kind is not permitted. The employer may, after obtaining the written authorisation of the employed person, pay him the wages either by cheque or by crediting the wages in his bank account.
Deductions from Wages (sec 7 to 13):
1. Deductions for fines: No fine shall be imposed on any employed person except in respect of acts of omissions on his part as the employer may have specified by a notice with the previous approval of the state government.
2. The notice specifying the acts of omissions should be exhibited in the prescribed manner on the premises in which the employment is carried on.
3. No fine shall be imposed on an employed person until he has been given an opportunity of showing cause against the fine.
4. The total amount of fine which may be imposed in any one wage period on any employed person shall not exceed 3% of the wages payable to him in respect of that wage period.
5. All fines and all realisations thereof shall be recorded in a register to be kept by the person responsible for the payment of wages, in such form as may be prescribed.
I. Deductions for Absence from Duty:
Deduction may be made on account of the absence of an employed person from duty from the place or places where, by the terms of his employment, he is required to work.
The absence may be for the whole or any part of the period during which he is so required to work. But the ratio between the amount of such deductions and the wages payable shall not exceed the ratio between the period of absence and total period within such wage-period.
II. Deductions for Damage or Loss:
A deduction for damage to or loss of goods expressly entrusted to the employed person for custody or for loss of money for which he is required to account shall not exceed the amount of the damage or loss caused to the employer by the neglect or default of the employed person.
The deduction for damage or loss shall not be made until the employed person has been given an opportunity of showing cause against the deduction.
III. Deductions for Services:
A deduction for house accommodation and such amenities and services supplied by the employer as have been authorised by the state government, shall not be made from the wages of an employed person, unless such services have been accepted by him as a term of employment or otherwise. Deductions in respect of these services shall not exceed the value thereof.
IV. Deductions for Recovery of Advances:
A deduction for recovery of an advance given to an employed person is subject to the following conditions.
1. Recovery of an advance of money given before employment began shall be made from the first payment of wages in respect of complete wage-period, but no recovery can be made of such advance given for traveling expenses,
2. Recovery of an advance of money given after employment began shall be subject to such conditions as the state government may impose.
3. Recovery of advance of wages not already earned shall be subject to any rules made by state Government in this regard.
V. Deductions for Recovery of Loans:
Deductions for loans granted for house building or other purposes and the interest due in respect thereof approved by the state government shall be subject to any rules made by the state government regulating the extent to which such loans may be granted and the rate of interest payable thereon.
VI. Deductions for Payment to Co-operative Societies and Insurance Schemes:
These deductions shall include:
1. Deductions for payments to co-operative societies approved by the state Government or to a scheme of insurance maintained by the Indian post office.
2. Deductions made with the written authorisation of the person employed for the payment of any premium on his life insurance policy to the Life Insurance Corporation of India or for the purchase of securities of the government of India or of any state government or for being deposited in any post office saving bank in furtherance of any saving scheme of any such government.
The following deductions shall also be permitted under the Act.
1. Deduction of income-tax payable by the employed person.
2. Deductions required to be made by order of a court or other authority competent to make such orders.
3. Deductions for payments to co-operative societies or advances from any provident fund to which the Provident Fund Act, 1925 applies or any recognised provident fund or any provident fund approved in this behalf by the state government.
4. Deductions for payment of insurance premium on Fidelity Guarantee Bonds.
5. Deductions for recovery of losses sustained by a railway administration on account of any default by the employed person.
6. Deductions made, with the written authorisation of the employed person, for contribution to the prime Minister’s National Relief Fund or to such other funds as may be specified by the central government.
7. Deductions for contributions to any insurance scheme framed by the central government for the benefit of its employees.
Limit on Deductions:
The total amount of deductions which may be made under the above heads in a wage period from the wages of any employed person shall not exceed 75% of such wages in case where such deductions are wholly or partly made for payments to co-operative societies. In any other case, they shall not exceed 50% of such wages.
Maintenance of Registers and Records:
Every employer shall maintain registers and records giving the following particulars of the persons employed by him:
(a) The work performed by them.
(b) The wages paid to them.
(c) The deductions made from their wages.
(d) The receipts given by them.
The registers and records shall be in such form as may be prescribed. They shall be preserved for a period of 3 years after the date of the last entry made therein.
B. The Minimum Wages Act, 1948:
The aim of the Minimum Wages Act, 1948 is to fix minimum wages in certain employments wherein sweated labour is most prevalent or where there is a big chance of exploitation of labour.
This legislation seeks to avoid exploitation of workers by under-paying them for their efforts. The minimum wage sets the lowest pay levels for the skilled occupations. It takes into account the bare minimum that is needed to keep a man’s “body and soul” together.
The Minimum Wages Act provides for the computation of the cost of living allowance and cash value of concessions like essential commodities supplied. The minimum rate fixed or revised rate may consist of
1. A basic rate of wages and a cost of living allowance.
2. A basic rate of wages with or without the cost of living allowance and cash value of concessions for supply of essential commodities, or
3. An all-inclusive rate. The object of the Act is to secure the welfare of the workers in a competitive market by fixing the minimum rates of wages in certain employments.
The intention is to apply the Act to those industries and localities in which, by reason of causes such as unorganised labour or absence of machinery for regulation of Wages, wages paid to workers were below the general level of wages and were inadequate.
Important Aspects of the Act:
1. Fixation of a minimum time rate of wages, piece-rate, and guaranteed time rate.
2. Fixation of overtime rate for different occupations, classes of work, for adults, children etc.
3. Minimum wages may consist of a basic rate of wages and a-cost of living allowance. The cost of living allowances shall be computed by competent authority, e.g: Director, Labour Bureau.
4. Wages shall ordinarily be paid in cash.
5. The act empowers the appropriate government to fix number of working hours in a day, a weekly holiday and payment of overtime wages.
6. The employer is required to maintain registers and office records in proper manner.
7. Inspectors may be appointed to hear and decide claims arising due to payment of less than minimum wages.
8. Penalties shall be imposed for violating the provisions of the act.
Fixation and Revision of Minimum wages:
1. The appropriate government authority shall fix the minimum rates of wages for different scheduled employments for different classes of work and for adults, apprentice’s and children.
2. There will be a review of the wages so fixed by the appropriate government authority at intervals not exceeding 5 years.
3. The minimum wages shall be fixed or revised by the government either by appointing a committee or by publishing its proposals.
4. The government shall appoint an advisory board for coordinating the work of committees and for advising it as regards fixing and revising it.
Payment of Minimum Wages:
1. Minimum wages shall be payable in cash.
2. The wages paid should not be less than the minimum wages.
3. The government may
(a) Fix number of working hours in a day.
(b) Provide a day for rest in every period of 7 days.
(c) Provide payment of work on a day of rest at a rate not less than the over-time rate.
4. If an employee does two or more classes of work, each having a different minimum wage rate, he shall get payment in respect of time spent on each class of work.
5. Every employer shall maintain registers and other records giving details of employees, nature of work performed by them, wage paid to them etc.
6. An employer who contravenes any provision of the Act, will be punishable with fine extending up to Rs.500 and an imprisonment for a term up to 6 months or both.
Inspectors and their Powers:
1. To enter at all reasonable hours, any premises for examining registers, records of wages etc.
2. To examine any person.
3. To seize relevant records in respect of an offense. The inspector is appointed by the government.
An employee or an official of registered trade union on behalf of employees or an inspector can apply to the authority to hear and decide claims
1. Arising out of payment of less than minimum wages. If claim is correct, the balance amount payable plus compensation not exceeding 10 times the balance amount will be paid by the employer.
2. In respect of rest day wages and over-time etc., amount due towards worker plus compensation not more than Rs. 10. If employees claim is false, he may be penalised to pay employer an amount up to Rs.50.
C. The Payment of Bonus Act, 1965:
The ‘bonus’ is an ex-gratia amount paid to workmen beyond the wages. It also represents the desire of the employer to share with his workers the surplus generated by common endeavour and enterprise. However, the Payment of Bonus Act 1965 makes this annual payment obligatory on the employer.
The object of the Payment of Bonus Act, 1965 is to maintain peace and harmony between labour and capital by allowing the employees the recognition of their right to share in the prosperity of the establishment reflected by the contributions made by capital, management and labour.
1. Bonus is payable to employees in an establishment where 10 or more persons are employed.
2. Employer should pay a minimum bonus of 8.33% of wages actually earned during the year irrespective of profit subject to a minimum of Rs. 100/=.
3. The Act includes all employees drawing wages or salary up to Rs.2,500/- per month.
4. An infancy period of 5 years is allowed. If adequate profits are made during the infancy period, bonus should be paid.
5. Bonus is payable within 8 months from the close of the accounting year.
6. Maximum bonus is 20% of wages.
7. The Act permits contracting out subject to the approval of the government.
8. The employer shall maintain Registers A, B, and C and submit annual returns in Form D.
9. Allocable surplus is permitted to be set on or set off. Applicability of the Act
The Act includes all employees, factory workers or clerical staff or executives, drawing wages or salary up to Rs.2500/- per month, who perform any skilled, unskilled, manual, supervisory, managerial, administrative, technical or clerical work.
To become eligible for bonus, every employee must have worked in the establishment for not less than 30 working days in the relevant accounting year.
The Act is applicable to establishments employing 10 or more persons. Newly set up establishments are exempted for the first 5 years, provided they do not make profit during the staid period.
Payment of Bonus:
Bonus is payable within a period of 8 months from the close of the accounting year. When there is a dispute regarding bonus, it becomes payable within one month from the date that the award becomes enforceable or settlement comes into operation.
When an employee has not worked for all the working days in any accounting year, the bonus payable to him shall be proportionately reduced subject however to the minimum 8.33%. An employee is not deemed to be absent from work if
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 caused by accident arising out of and in the course of employment.
Deductions from Bonus:
1. When in any accounting year, an employee has been paid any customary bonus or advance bonus, the employer is entitled to deduct such amount from the final amount of bonus payable to him.
2. Where in any accounting year an employee is found guilty of misconduct causing financial loss to the employer, the employer may lawfully deduct such amounts from the bonus payable in respect of that accounting year only.
The Payment of Bonus Act has been subject to amendment by the government and criticism from all quarters.
The basis or the rationale behind it, the quantum and formula for calculating the allocable surplus for bonus purposes have all been questioned.