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Legal framework on Compensation Structure

Labour Legislations

The Employee’s Provident Fund And Miscellaneous Provisions Act, 1952

The Employee State Insurance Act, 1948 The Equal Remuneration Act, 1938 The Industrial Disputes Act, 1947 The Factory Act, 1948 The Minimum Wages Act, 1948 The Payment of Wages Act, 1936 The Payment of Bonus Act, 1965 The Payment of Gratuity Act, 1972

Labour is one of the principal factors of production in all kinds of establishments whether big or small, organized or organized, industrial or commercial.

With a view to ensure job security and satisfaction the lobour to give them their due wages alongwith certain employment benefits and to prevent exploitation of labour by the capitalists, several legislations have been made covering a number of aspects concerning labour

Introduction

Employees Provident Fund Act

Objective

The act is enacted with the objective of instituting a compulsory contributory fund for the future of the employee after his / her retirement or for his / her dependents in case of his / her early death

Scope

1. Every factory or establishment employing more than 20 employees

2. Once the Act applies to any organization, it shall continue to be governed by the Act irrespective of the the fact that the no. of employees fallen below20

1. A newly established organization for the initial period of 3 years from the date of its set up

2. Cooperative society employing less than 50 employees

Exemption from the Act

1. Every employee in receipt of wages upto Rs 5000/- pm shall be eligible to be a member of Family Pension scheme

2. In case his pay increases beyond Rs 5000/-, he continued to be a member of Family pension scheme but the contribution payable shall be limited to the amount payable on monthly pay of Rs. 5000/-

3. An employee become a member of the scheme from the date of joining the organization

4. An employee ceases to be a member after attaining the age of 60 years

Eligibility of Employees

The Schemes under the Act

1. Employee Provident Fund Scheme Establish provident fund for the employees

2. Employees Family Pension SchemeProvide Family pension to the employees and their family after superannuation / death or total permanent disablement

3. Employees Deposit Linked Insurance Scheme Provide life insurance benefit to the employees and

their family members

Terms related to the Act

Contribution

Employer’s contribution to PF & Pension Fund 12% of wages, etc Employer’s contribution to EDLI Fund 0.5% of wages, etcEmployee’s contribution to PF & Pension Fund12% of wages, etcC. Govts contribution to Pension Fund1.16% of wages, etc

Interest accrued

The amount deposited in PF, Pension Funs & EDLI Fund is invested in specified securities. The rate of interest is determined by the C. Govt which is 9% p.a. at present

Employee State Insurance Act

Objective: This is the first major legislation on Social Security to

provide protection to worker in contingences such as illness, long term sickness or any other health risk due to exposure to employment injury or occupational hazards. Under the scheme medical facilities are also made available to the legal dependents or insured person. The scheme is extended to retired personnel as well as to permanently disabled workers and their family.

Employee State Insurance Act

The act applies in the non seasonal organization employing 20 or more persons or organization using power & employing 10 or more persons

The Employees covered are those whose earnings is up to Rs. 6,500/- per month comes under its purview

Every eligible organization has to get registered under the ESIC

The eligible employee has to fill up the declaration form

Employee State Insurance Act

The amount of contribution for a wage period shall be as follows:

Employer’s contributes equal to 4.75% of the wages payable to an employee

Employee Contributes a sum equal to 1.75% of the wages payable to the employees

If contribution is not paid in time, the rate of damages is 5% to 25% and the prosecution by the State Govt.

Equal Remuneration Act

Objective:

The equal remuneration act provides for payment of equal remuneration to men and women workers and for the prevention of discrimination on the ground of sex against women in the matter of employment and for matters connected therewith or incidental thereto.

Under the act it is duty of employer to pay equal remuneration to men and women workers for the same work of a regular nature

Equal Remuneration Act

No discrimination for wages or for recruitment & selection process

The employer is required maintain register in terms of equal remuneration act

There are heavy penalties ranging from Rs 500/- to Rs, 5,000/-

Factories Act

Objective: The factory act is to provide safety measures and to

promote the health and welfare of workers employed in factories

Applicability: The act applies to those industries which qualify the

definition of Factory under the act

Factories Act

To safeguard the health and safety of worker and extends to provided adequate plant machinery and appliances, supervision over workers to provide healthy and safe environment, proper system of working and extends to give reasonable instructions

The act talks about Health, Safety, Hazardous processes, Welfare, Working hours of Adults, Prohibition on employment of young persons, Annual leave with wages

The penalties are ranging from Rs 5000/- to Rs. 35,000/- and prosecution by State/Central Govt.

Industrial Disputes Act

Objective:

The act aimed to brining conflicts between employer and employee to an amicable settlement and at the same time it makes provision for some of the other problems that may arise from time to time in an industrial or commercial undertaking which comes under the purview

The ID act seeks to pre empts industrial tensions, provide the mechanism of dispute resolutions and set up the necessary infrastructure so that the energies of partner in production may not be dissipated in counter productive battles and assurance of Industrial justice may create a congenial climate

Industrial Disputes Act

The Act talks about Works committee, Board of Conciliation, Industrial courts/tribunals, Arbitration, Prohibition on lock out and strikes, lay off, retrenchment, transfer of undertakings, unfair labour practices & closure

The penalties ranges from Rs. 1000/- to Rs. 5000/- and prosecution up to 6 months for violation of rules

Minimum Wages Act

Wages are remuneration which the workers are entitled for the work performed by them

The employers always think of how to decrease the employee/production costs, while the workers see wages in terms of their preoccupation, better housing, children education, medical requirements, minimum recreations, provision for old age, marriage etc

The Govt. also enjoins in regulating the wags in the country through Minimum Wages Act to protect the interest of workers

Minimum Wages Act

Objectives

To provide for fixing minimum rates of wages in certain employment and the provisions of the act are intended to achieve the object of doing social justice to the workers employed in the scheduled employment by prescribing minimum rates of wages for them

The act prevents exploitation of labour as such the authorities under the act are empowered to announce and fix the minimum wages from time to time keeping in view the market inflation and cost of living index.

Minimum Wages Act

The act prescribes the minimum wages of different

category of employee.

It provides the basic rates of wages and special allowance i.e. cost of living allowance

Cash value of concessions for supplied of essential commodities

An all inclusive rates

Minimum Wages Act

The other provisions such as the wages must be paid in cash, manner & procedure of fixing and revising minimum rates of wages , Hours of work and holidays, Extra wages for overtime, Rest day, Employer’s obligations and maintenance of records

It also talks about penalties & prosecution for any violation of provision prescribed under the act.

Payment of Bonus Act

The payment of Bonus Act applies to certain person employed in every factory and establishment employing not less than 20 person on any day during an accounting year

An employee under the act means any person engaged for hire/reward other than apprentice including supervisory, managerial staff drawing salary/ wages not exceeding Rs.3,500/- per month. However, in case of the employees in he salary/wages range of Rs, 2,500/- to Rs 3,500/- per month for the purpose of payment of bonus, their salaries/wages would be deemed be Rs 2,500/- per month

Payment of Bonus Act

The organization covered under the act are required to pay Bonus minimum of 8.33% and maximum of 20%

The infancy benefit for the new establishment is for the first 5 accounting years in which the employer sells goods/services

The overtime is not wages as such no bonus on overtime

The commission paid to employee is not remuneration as such no bonus on Commissions

The Dearness Allowance is part of wages and attract Bonus

Payment of Bonus Act

The bonus is calculated basis allocable surplus in the accounting year as per the accuracy of Balance Sheet & Profit & Loss Account

The bonus can be forfeited if the employee is sacked on account of fraud, riotous or violent behavior at the premises of the establishment or for theft

The act provides penalties & prosecution for any violations of provisions/rules

Payment of Gratuity Act

The act applies to every shop & establishment in which 10 or more person are employed or were employed on any day of the preceding 12 months. Once covered will continue to be under coverage even if the employee number goes down

The act applies to all person drawing a salary up to Rs. 3,500/-. The maximum limit of gratuity is Rs 3,50,000/-

Gratuity is payable to an employee on termination of his employment after he has rendered continuous service for not less than 5 years on reaching the age of superannuation or on his retirement/resignation or on his death or disablement due to accident or disease.

Payment of Gratuity Act

Gratuity is calculated on Basic Rate plus Dearness Allowance but does not include any bonus, commission, house rent allowance, overtime wages and any other allowance

In case of a monthly rated employee, the fifteen days wages shall be calculated by dividing the monthly rate of wages last drawn by him by twenty six and multiplying the quotient by fifteen

Payment of Gratuity Act

Forfeiture of Gratuity can be done only if the service of employee is terminated for his riotous or disorderly conduct or any act of violence on his part or any act of moral turpitude provided such an act is conducted during the course of employment

The payment mode is by Cheque or Bank Draft in Favour of employee or his legal heirs

The act provides penalties for violation of provisions and right to appeal

The time limit for claiming gratuity is 12 months and 60 days for filling an appeal

Payment of Wages Act

The payment of wages act regulates the payment of wages to certain classes of person employed in industry and its importance cannot be underestimated

The act not only guarantees, payment of wages in time and without any deduction except those authorized under the act

The act provides the responsibility for payment of wages, fixation of wage period, time and mode of payment of wages, permissible deductions as also casts upon the employer a duty to seek the approval and permission for the fine imposed, if any

Payment of Wages Act

Wages under this act means all remuneration expressed in term of money and includes over time, bonus holiday or any other leave period

The payment has to be made before the expiry of the seventh day after the last day of the wages period if less than 1000 workmen are employed and in other case on the 10th day

Payment is to made on working day and that too in cash and by Cheque where the employee has given consent in writing

Payment of Wages Act

The deduction allowed are fines, deduction for actual period of absence, for willful damages to goods & property, for house accommodation, for amentias provided. All deduction to be made within 60 days and the total deduction should not exceed 50% of the total wage. The total deduction in the case of Cooperative society should not exceed 75%. The fine should not exceed 3%.

The employer has to maintain register for record/ evidence and required to deposit the unpaid wages/ bonus with the labour department