Performance Management System and its impact

Compensation & Benefits
Analysis
Unit-IV
1

Workmen Compensation Act
2
• The Workmen Compensation Act, 1923 is
an enactment that was issued by the trial
Government and was implemented by
various State Governments which gives
social security to workers.
• This security is offered by the law for
people who work.

3
• The Act was formed after it was noted that
laborers were getting more exposed to danger
with the use of advanced and sophisticated
machinery.
• The common law had it that the employer
would only take up the compensation
responsibility if it is found that the industrial
accident was a result of his negligence.

Objective
4
• The Workmen Compensation Act of 1923 was formed
majorly to give compensations to workmen in the event of
an accident.
• The Act has it that employers should have duties and
obligations that include the welfare of workers after an
injury resulting from employment in the same way they
have reserved the right to make profits.
• The Act aims to see workmen have a sustainable life after an
employment-related accident.

Scope
5
• The Act is applicable only to those
workmen
working in industries as specified in the Act.
• The Act affords protection to a workman from
losses or injury caused by accident arising out
of and in the course of employment subject to
certain exceptions as laid down in the Act.

Applicability
6
• The Act is applicable throughout India .
The Act does not apply to those areas
which are covered by the Employees
State Insurance Act, 1948.

Salient Features
7
• It applies to:
• All railway servants not permanently employed in any
administrative, district or sub- divisional office of a railway
and not employed in any capacity as is specified in Schedule
II to the Act.
• Persons employed in any such capacity as is specified in
Schedule II to the Act. Schedule II includes persons employed
in factories, mines, plantations, mechanically propelled
vehicles, construction works and certain other hazardous
occupations. In all, there are 48 employments listed in the
Schedule.

Salient Features
8
• Persons employed in employments added
to Schedule II by the State Government in
exercise of the powers conferred on them
under section 2(3) of the Act. In this
connection, a statement indicating the
additions made so far by different State
Governments is enclosed (Annex-I).

9
Contingencies in which Compensation is
Payable
• Compensation is payable in case of
temporary/permanent disablement or
death as a result of an employment
injury. The contracting of any disease
listed in Schedule III to the Act is
deemed to be an injury by accident.

10
• Occupational Diseases:
– If a workman employed in the
employment specified in Schedule III of
the Act contracts any occupational
disease peculiar to that employment he
becomes eligible for payment of
compensation under the Act.

• Occupational Diseases:
– If a workman employed in the
employment specified in Schedule III of
the Act contracts any occupational
disease peculiar to that employment he
becomes eligible for payment of
compensation under the Act.
11

• Settlement of Claims under the Act:
– The claims for compensation broadly fall
in three categories, namely
• Uncontested cases of disablement;
• Disputed cases of disablement and
• Fatal cases.
12

Employers Liability
13
1. The employer of any establishment covered
under this Act, is required to compensate an
employee Who has suffered an accident arising
out of and in the course of his employment,
resulting into
1) death,
2) permanent total disablement,
3) permanent partial disablement, or
4) temporary disablement whether total or
partial, or Who has contracted an occupational
disease.

The Employer Shall Not Be Liable
14
1. In respect of any injury which does not result in the
total or partial disablement of the workmen for a
period exceeding three days;
2. In respect of any injury not resulting in death, caused
by an accident which is directly attributable to the
workmen having been at the time thereof under the
influence or drugs, or
3. the willful disobedience of the workman to an order
expressly given, or to a rule expressly framed, for the
purpose of securing the safety of workmen.

1. Disablement means any loss of capacity to work
or move
2. May result in loss or reduction of his
earning capacity
3. Disablement may be
1) Total {sec.2.1(g)}
2) Partial {sec 2.1(l)}
3) Temporary
4) permanent
15
Disablement

1. Disablement, is said to be total when if
Incapacitates a
worker for all work he was capable of doing at the
time of the accident resulting in such disablement.
2. "Total disablement" is considered to be permanent if
a workman, as a result of an accident, suffers
from the
injury specified in Part I of Schedule I or suffers from
such
combination of injuries specified in Part l of Schedule I
as
would be the loss of earning capacity when totaled to
one hundred per cent .
3. Disablement is said to be permanent partial
when it reduces for all times, the earning
capacity of a workman in
every employment which he was capable of
undertaking
at the time of the accident. Every injury specified in
Part II
of Schedule I is deemed to result in permanent 16
Disablement

Distribution of Compensation
17
• The employerwill not be liable to pay
compensation for any kind of disablement (except
death)
1) Which does not continue for more than three
days,
2) if the injury is caused when the workman was
under the influence of drink or drugs or
3) willfully disobeyed a clear order or violated a rule
expressly framed for the purpose of securing his
safety or willfully removed or disregarded a
safety device

Claims and Appeals
18
1. The claim shall be filed within a period of two
years of the occurrence of the accident or death.
2. An appeal by an employer against an award of
compensation is incompetent unless the
memorandum of appeal is accompanied by a
certificate that the employer has deposited the
amount of such compensation.
3. The period of limitation for an appeal under
Section 30 is sixty days.

Three approaches for settling
workers compensation claims
19
1. Direct Settlement: The employer or its insurance company
begins making what it thinks are the prescribed payments. The
insurer sets the period over which payments will be made.
Both factors are subject to review by the designated state
agency.
2. Agreement Settlement: The injured employee and the employer
or its insurance company work out an agreement on how
much compensation will be paid and for how long. Typically
the agreement is reviewed by the designated state agency.
3. Public Hearing: An injured worker can request a hearing. The
hearing commission reviews the facts surrounding the injured
worker’s case and renders a judgment concerning the amount
and duration of compensation. Should the employee disagree
with the decision rendered, civil action through the courts is an
option.

The functions of the Commissioner
20
1. Settlement of disputed claims;
2. Disposal of cases of injuries involving
death; and
3. Revision of periodical payments (Section
20).

Introduction
22
1. Over the years, in a country like India, except
certain highly organized industries, the labour
as a whole was not able to put a face of
collective bargaining and look after their own
interests.
2. Thus, Minimum Wages Act, 1948 was enacted in
the country to provide minimum wages to
workers and to prevent them from
exploitation.

1. To provide minimum wages to the workers
working in organized sector (scheduled
employment).
2. To stop exploitation of the workers.
3. To empower the government to take steps
for fixing minimum wages and to revise this
wages within a period of five years.
4. To provide for appointment of Advisory
Committees & Advisory Boards, having equal
representatives of employers and workers.
23
Objective

Applicability of the Act
24
1. The Act extends to whole of India.
2. To any employment in any State if it employs 1000
employees.
3. The Act will not apply to employees in any
undertaking owned by the Central Govt. or of
Federal railway, except with the consent of the
Central Govt.
4. Thus, the wages have to be statutorily paid.

Who is an employee?
• EMPLOYEE is anyone
(1) Employed for Hire or Reward
(2) To do skilled or unskilled work
(3) Manual or Clerical
(4) Job Worker
(5)Any person declared by the appropriate
Government as employee but, does not
include any member of armed forces.
25

What is wages?
26
Section 2(h) explains Wages means all remuneration
capable of being expressed in terms of money. It
includes house rent allowance but does not include:
1. value of house accommodation,supply of
light, water, medical attendance
2. Value of any other amenity provided, if excluded
by Government order
3. Contribution to pension fund or provident
fund or insurance
4. Traveling allowance
by he nature
of
5. Special expenses
incurred employment
6. Gratuity payable on
discharge.

Minimum wage fixation (section 3)
27
1. The appropriate government shall fix and revise
the minimum wages payable to employees
employed in an employment specified in part I
& II of the Schedule.
2. The rate can be fixed on
1) time work basis
2) piece work basis
3) guaranteed rate basis
4) overtime rate basis.

3. Different minimum wage rates can be fixed for
1) different scheduled employments
2) different class of work in the same scheduled
employment
3) adults, adolescents, children and apprentices
4) Different localities.
4. Minimum rates can be fixed on basis of hour, day or
month, or even longer period.
5. BASIS: the fixation of minimum wages depends on
various factors like Socio-economic and agro-
climatic conditions, prices of essential
commodities, paying capacity and the local factors
influencing the wage rate.
28
Minimum wage fixation (section
3)

Minimum Rate of wages (section
4)
29
Any minimum rate of wages fixed or
revised by the appropriate govt. may
consist of:
1. a basic rate of wages and a special allowance at a
rate to be adjusted at such intervals and in such
a manner as the govt. may direct OR
2. A basic rate of wages with or without allowance
for cost of living allowance based on cost of
living index number. OR
3. An all inclusive rate allowing for basic wage, cost
of living allowance and cash value of
concession, if any

Procedure for fixation of min
wages(sec.5)
30
1. Committee method : a committee is
appointed to hold enquiry and suggest
minimum wages to be fixed.
2. Notification Method : notification is
published in the official gazette and 2
months period is given to different parties
to suggest their case. Based on the
representations, the govt. will fix the
minimum wages. The notification can apply
from retrospective effect also.

Authorities
31
Advisory board
• Government is required to constitute Advisory Board
to recommend minimum wages. The
recommendations of Advisory Board are not binding
on Government.
Central Advisory Board
• It is constituted from persons nominated by central
government.
• And consist of representatives of employers, employees and
independent members (up to 1/3rd of the total strength).

Can you pay wages in kind?
32
1. Sec. 11 of Min. Wages Act says that you can only make
the payment in cash.
2. If it is a custom to make payment wholly or partly
in kind, the appropriate govt. may permit it.
3. It may by notification in the Official gazette,
authorize the provision of essential commodities at
concessional rates.

33
Are working hours fixed?
• Sec. 13: the govt. may fix the hours of work. It may
provide for rest day and interval also.
Will there be overtime?
• Sec. 14: if minimum wages is fixed by hours, then the workers
will be paid overtime if he works more than the hours
prescribed. The overtime rate will be as fixed in this law or
other law as applicable.
if a worker works less than normal hours
• He will receive minimum wages
• However, he will not receive minimum wages if he is not willing
to work or circumstances as may be prescribed.

Employer to close the unit,
if minimum wages cannot be paid…
34
1. If employer cannot pay minimum wages, he has to
close down the undertaking. Paying capacity is not
relevant consideration for rate of minimum wages.
2. Minimum wages are payable irrespective of financial
position of individual employer.

If you pay more than minimum wages
35
1. Even if State Government notification
prescribes variable dearness allowance which
is linked with cost of living index, amount
paid on basis of DA is not to be taken as an
independent component of minimum wages,
but as part and parcel of process of
computing minimum wages.
2. Hence, in cases where employer is paying
total sum which is higher than minimum
rates of wages fixed under the Act including
the cost of living index (VDA), he is not
required to pay VDA separately.

Minimum Wages Paid Internationally
1. Minimum wages in Delhi (per day)
1. Skilled Rs. 783.00
2. Semi-skilled Rs. 712.00
3. Unskilled Rs. 646.00
2. In Australia its 812.60 Australian dollars per week;
3. NEPAL- 4,600 Nepalese rupees a month for unskilled labor (3,050 rupees
as a basic salary, and 1,550 rupees as an allowance); 4,650 NRS for semi-
skilled labor; 4,760 NRS for skilled labor; 4,950 NRS for highly skilled labor
4. PAKISTAN- 6,000 Pakistani rupees per month, applying only to industrial
and commercial establishments employing 50 or more workers
5. THAILAND-ranges from 313 Thai baht to 336 baht per day, depending on
the cost of living in various provinces; set by provincial tripartite wage
committees that sometimes include only employer representatives
6. UNITED KINGDOM- £ 9.50 per hour (aged 22 and older), £6.83 per hour
(aged 18-21) or £4.81 per hour (under 18 and finished compulsory
education)
7. USA-the federal minimum wage is US$7.25 per hour; states may also set a
minimum, in which case the higher of the two is controlling

Objectives of the Act
38
1. To ensure regular and prompt payment of wages
and to prevent the exploitation of a wage earner
by prohibiting arbitrary fines and deductions
from his wages.
2. To regulate the payment of wages to certain
classes of persons employed in industry in a
particular form and at regular intervals; and to
prevent unauthorised deductions from the
wages. The Act is concerned merely with the
fixation of wage periods and not with the fixation
of wages.

Scope and coverage
39
1. Application for payment of wages to persons
employed in any factory.
2. Not applicable to wages which
average Rs 1600/-per month or more.
3. Wages include all remuneration, bonus, or sums
payable for termination of service, but do not
include house rent reimbursement, light vehicle
charges, medical expenses, TA, etc.

Applicability
40
1. 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
2. Employees whose average wage is less than rupees
1,600 a month are covered under the Act. The
Payment of Wages (Amendment) Bill, 2002 provides
for the enhancement of the wage ceiling to rupees
6,500 per month.
3. Section 3, Sub section (ii), dated 20th September,
2012.Ministry of Labour and Employment,
Government of India, has revised the wage ceiling
Rs. 18,000 per month under the payment of
wages act, with effect from 12th September 2012.

Definitions
41
• “Wages” means all remuneration (whether by way of salary,
allowances or otherwise) expressed in terms of money or
capable of being so expressed which, if the terms of
employment express or implied were fulfilled, would be
payable to a person employed in respect of his employment
or of work done in such employment. It includes:
1) Any remuneration payable under any award or settlement
between the parties or order of a court;
2) Any remuneration to which the person employed is entitled
in respect of overtime work or holidays or any leave period;
3) Any sum which by reason of the termination of employment
of the person employed is capable under any law, contract or
instrument which provides for the payment of such sum,
whether with or without deduction but does not provide for
the time within which the payment is to be made.
4) Any sum to which the person employed is entitled under any
scheme framed under any law for the time being in force.

Definitions
42
• “establishment” includes:
1) tramway service or motor transport engaged in
carrying passengers and goods or both by road for hire or
reward;
2) air transport service other than such service belonging
to, or exclusively employed in the military, naval or air
force of the
Union, or the Civil Aviation Department of the Govt. of
India;
3) dock, wharf, or jetty;
4) inland vessel mechanically propelled;
5) mine, quarry or oil field;
6)plantation; 7)
workshop, or other establishments in which articles
are
produced, adapted, or manufactured, with a view to their
use, transport or sale;
8) establishment in which any work relating to the
construction, development or maintenance of
building, roads, bridges or
canals or relating to transmission, or distribution of
electricity, or any other form of power is being carried on;
9) any other establishment, or class of establishments, which
the
Central or a State Government may notify in the

The Wage does not include
43
1) Any bonus (whether under a scheme of profit sharing or
otherwise) which does not form part of the
remuneration payable under the terms of employment
or which is not payable under any award or settlement
between the parties or order of a court;
2) The value of any house accommodation or of the supply
of light, water, medical attendance or other amenity or
of any service excluded from the computation of wages
by a general or special order of the state government;
3) Any contribution paid by the employer to any pension or
provident fund and the interest which may have accrued
thereon;
4) Any travelling concession;
5) Any sum paid to the employed person to defray special
expenses entailed on him by the nature of his
employment; or
6) Any gratuity payable on the termination of employment

1. The responsibility for the payment of wages under the ACT
is of the employer or his representative.
2. Wages may be payable daily, weekly, fortnightly and
monthly. Should not extend a period longer than one
month
3. If less than 1000 person employed in a company, the wage
shall be paid before the 7th day
4. If there are more than 1,000 employed, the wage shall be
paid before the 10th day.
5. Terminated employee is entitled to receive the wage
earned by him before the expiry of the 2nd working day
from the day on which his service has been terminated
(Section 5(2) )
44
Wage Payment

Method of Payment of Wages
45
1. Wages must be paid in current coin or currency
note or in both and not in kind.
2. Wages can be pain through cheque or by
crediting to the bank account if so authorised in
writing by the employed person.

Conditions and limits subject to which
fines may be imposed
46
A fine can be imposed only for such acts or omissions as are specified
by the employer and previously approved by the State Government;
A notice specifying such acts or omissions must be exhibited on the
premises in which employment is carried on;
A person involved must be informed in writing the reasons for
imposing
fine;
No fine shall be imposed on an employed person who is under the
1)
2)
3)
4)
5)
6)
7)
age of 15 years.
No fine shall be recovered from an employed person by installments
after the expiry of 60 days from the day on which it was imposed;
The total amount of fine in one wage period shall not exceed an
amount equal to 3 per cent for that wage period;
All realisations by way of fine have to be recorded in a register and
must be applied only for such purpose as are beneficial to
the
persons employed in the factory or establishment as are approved by
the prescribed authority.

List of Authorized or Permissible Deductions
47
1) Deductions for fines.
2) Deductions for absence from duty.
3) Deductions for damage or loss.
4) Deductions for house accommodation.
5) Deductions for amenities and services.
6)Deductions for recovery of advances or
for adjustment of over payment of wages.
7)Deductions for recovery of loans made for the
welfare of labour.
8)Deductions for recovery of loans granted
for house building.

9)Deductions for payment toco-operative societies and
insurance schemes.
10)Deductions of income tax.
11)Deductions made under orders of court.
12)Deductions for contributions to provident fund.
13)Deductions for the welfare of the employed persons.
14)Deductions in respect of fees payable for the
membership of trade union.
15)Deductions for payment of insurance
premium on guarantee bonds.
16)Deductions for recovery of losses sustained by railway
administration.
17)Deductions for contribution to the Prime Minister’s
National Relief Fund.
18)Deductions for contributions to any insurance scheme.
48
List of Authorized or Permissible
Deductions

Obligations of Employers
49
1) To fix the wage-period not exceeding one month.
2)To pay wages in cash or by cheque after taking
written authorisation of the employed person.
3) To pay wages on any working day.
4)To make deductions permissible from the wages of
the employed person.
5)To ensure that deductions do not exceed 75% where
payment to a cooperative society is to be made, and
in other cases, deductions do not exceed 50%.
6)To seek, before imposing fines approval of list of acts
and omissions from the prescribed authority.

7)Not to impose fines exceeding 3%of the wages on
the employee.
8)To give show-cause notice to the employed person
before imposing fines.
9) To recover fines within 60 days of the date of offence.
10)To afford facilities to Inspectors for entry,
inspection, supervision, examination or inquiry under
the Act.
11)To display abstract of the Act and the Rules in English
and in a language understood by the majority of
workmen.
12) To maintain following register in the prescribed
forms:
i) Register of wages;
ii)Register of fines;
iii)Register of deductions for damage or loss;
iv) Register of advances.
50

Obligations of Employees
• Every employee is entitled:
1. To receive his wages in the prescribed wage
period in cash or by cheque or by credit to his
bank account.
2. To refuse to agree to any deductions and fines
other than those authorized under the Act.
3. To approach within six months the prescribed
authority to claim unpaid or delayed wages,
unauthorised deductions and fines along with
compensation.
4. To appeal against the direction made by the
authority if the amount of wages claimed
exceeds rupees one hundred.

THE EQUAL
REMUNERATION
ACT, 1976
52

Introduction
53
1. The principle of equal work to men and women
worker has been gaining increasing acceptance all
over the world. In many countries, law have been
passed prohibiting discrimination between men
and women in matters relating to payment of
wages for similar work.
2. The State Policy article 39 of the Constitution
envisages that the State shall direct its policy,
among other things, towards securing that there
is equal pay for equal work for both men and
women.
3. The International Women’s Year, President of India
promulgated the Equal Remuneration Ordinance,
1975 on 26th September, 1975 to provide for the

1. Article 39(a) states that the citizens, men and
women, equally, have the right to an adequate
means of livelihood.
2. Article 39(d) “that there is equal pay for equal
work for both men and women”.
3. Article 16(2) makes a specific mention that “no
citizen shall on ground only of ‘Gender’ be
ineligible for or discrimination against in
respect of any employment or office under
state.”
54
Introduction

Equal Remuneration Act, 1976
55
1. The Equal Remuneration Act, 1976 aims to provide
for the 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.
2. Objective of the Act
1) provide for the payment of equal
remuneration to men and women workers
2) the prevention of discrimination, on
ground of sex, against women in the matter of
employment.
3) provide for increasing opportunities for
women in the specified employments.

1. It is the duty of the employer to pay equal
remuneration to men and women workers for
the same work or work of a similar nature.
2. No discrimination shall be made while making
recruitment for the same work or work of a
similar nature between men and women
workers,
3. The Act prohibits discrimination against women
not only in recruitment but also in relation to
the conditions of service subsequent to
employment, such as promotions, training, and
transfers. 56
Equal Remuneration Act, 1976

Duty of employer to pay equal
remuneration (sec.2(h))
57
“Same work or work for similar nature”
The act define “work in respect of which the skill,
effort and responsibility required are the same,
when performed under similar working
conditions, by a man or a women and the
difference, if any between the skill, effort and
responsibility required of man and those
required of a women are not of practical
importance in relation to the terms and condition
of employment .”

Prohibition of discrimination in recruitment or
other condition of service(sec 5)
58
1. This Act, no employer shall while making recruitment
for the same work or work of a similar nature, or in
any condition of service subsequent to recruitment
such as promotions, training or transfer, make any
discrimination against women except where the
employment of women in such work is prohibited or
restricted by or under any law for the time being in
force.
2. Provided that the provisions of this section shall not
affect any priority or reservation. for Scheduled
Castes or Scheduled Tribes, ex-servicemen,
retrenched employees or any other class or category
of persons in the matter of recruitment to the posts
in an establishment or employment.

Advisory Committee (increasing employment
opportunities for women)
59
1. Every Advisory Committee shall consist of not less than
ten persons, to be nominated by the appropriate
Government, of which one-half shall be women.
2. Every Advisory Committee shall consist of not less than
ten persons, to be nominated by the appropriate
Government, of which one-half shall be women.
3. The Advisory Committee shall regulate its own procedure.
4. The appropriate Government may, after considering the
advice tendered to it by the Advisory Committee and after
giving to the persons concerned in the establishment or
employment an opportunity to make representations,
issue such directions in respect of employment or women
workers, as the appropriate Government may think fit.

Authorities for hearing and deciding claims and
complaints
60
• The appropriate Government may, by
notification, appoint such officers, not below
the rank of a Labour Officer, as it thinks fit to
be the authorities for the purpose of hearing
and deciding claims and complaints regarding
equal remuneration act.
Maintenance of registers (Sec 8)
• Every employer is required to maintain prescribed registers
and documents in relation to workers employed by him

Administration
61
1. The appropriate government may constitute one or more
Advisory Committees.
2. The appropriate government may appoint an authority, not below
the rank of a Labour Officer, to hear and decide claims and
complaints.
3. The authority appointed for this purpose shall have all the
powers of a civil court
4. The aggrieved employer or worker may prefer appeal to the
appellate authority within 30 days from the date of the order.
5. It is the duty of employers to maintain prescribed registers and
other documents in relation to the workers employed by them.
6. The appropriate government may appoint inspectors for the
purpose of enforcing the provisions of the Act.
7. The Act provides for penalties for violation of provisions of the
Act.

Exemption
62
1. The
terms
employme
nt
and conditions of a
workmen’s are,
in any respect, affected
by
compliance with the law regulating
the employment of women;
2. Any special treatment is accorded to women in
connection with the birth, or expected birth, of
a child.

THE EMPLOYEES PROVIDENT
FUNDS & MISCELLANEOUS
PROVISIONS ACT 1952 (EPF&
MP ACT)
63

Objective
64
1. The Employees’ provident Funds and
Miscellaneous provisions Act, 1952 is enacted to
provide a kind of social security to the industrial
workers. The Act mainly provides retirement or
old age benefits, such as Provident Fund,
Superannuation Pension, Invalidation Pension,
Family Pension and Deposit Linked Insurance.
2. The Act provides for payment of terminal
benefits in various contingencies such as
retrenchment, closure, retirement on reaching
the age of superannuation, voluntary retirement
and retirement due to incapacity to work.

Applicability of the Act
65
1. To every factory employing 20 or more persons.
2. Any establishment to which the Act applies shall
continue to be governed by the Act even if
the number of persons employed therein at any
time falls below.

Excluded Employee
66
1. An employee who, having been a member of the fund,
has withdrawn the full amount of his contribution in
the fund
1) on retirement from service after attaining the age of
55 years
2) before migrationfrom India for permanent
settlement abroad; or for taking employment
abroad.
2. An employee whose pay at the time he is otherwise
entitled to become a member of the Fund, exceeds Rs.
6,500/- per month.
3. A person who, is an apprentice, or who is declared to
be an apprentice by the authority specified in this
behalf by the appropriate Government.

Rates of Contribution
67
SCHEME EMPLOYEE’S EMPLOYER’S CENTRAL
GOVT’S
Provident
Fund
Scheme
12% Amount >
8.33
Nil
Insurance
Scheme NIL 0.5 Nil
Pension
Scheme
NIL 8.33 1.16%

Contribution under EPF
Scheme,1952
68
1. Employees : 12% on Basic + DA
2. Employer :
(a) 3.67% on Basic + DA
(b) Administrative Charges :
1.10% on Basic +DA

Purpose of the Act
69
The purpose of the scheme is to provide for
1. superannuation pension, retiring pension
or permanent total disablement pension
to employees covered by the Employees’
Provident Funds and Miscellaneous
Provisions Act, and
2. widow or widower’s pension, children
pension or orphan pension payable to the
beneficiaries of such employees.

Contribution
70
1. Employee: Not required
2. Employer :
It is to be noted that where the pay of the
member exceeds Rs. 6,500/- per month, the
contribution payable by the employer will
be limited to the amt. payable on his pay
of Rs. 6,500/- only.

Formalities under EPF Act
71
1. Employees have been appointed on salary
(Basic+ DA or Consolidated ) of Rs. 6500 or
less or covered under the provision of the
EPF Act, right from the day of
commencement of their work. Employee can
contribute more behind Rs.6500. similarly
employer also at his discretion can do so but
not mandatory
2. EPF Act is applicable to such of the
establishments who are engaging 20 or more
persons or had engaged 20 or more persons
at any time during calendar year.

72
1. Casual workers/ Temporary workers/ Probationary, even if
they had performed work even for a day, are technically
taken into account for the purpose of assessments of
strength of 20 for the purpose of applicability of the act
and are also covered under the act. Apprentices/
Trainees are excluded from the definition of employees.
2. Percentage of contribution to be deducted from
employees contribution is 12% of his salary, namely Basic
+ DA , but does not include HRA, CCA, Incentive, Bonus,
Washing allowance etc.

73
 Employer contribution of 12% of the
salary of employees is to be paid as
under
1) 3.67% to be remitted in Account No.1
( Employees Account)
2) 8.33% to be remitted in Account No.10
towards pension fund
 In addition to 12% of the
employer has to remit 1.61% paid as
under
1) 1.10% Administrative charges in Account
No.2

Employees’ Deposit-Linked
Insurance Scheme, 1976
Purpose
 To provide life insurance benefits to the
employees of the establishments covered
by the EPF & MP Act, 1952
74

Contribution under EDLI
Scheme,1976
75
1. Employees : Not required
2. Employer :
(b) Administrative Charges :
0.01% on Basic +DA
• Where the monthly pay of an employee is
more than Rs. 6,500 the contribution payable
in respect of him by the employer is limited
to the amts payable on a monthly pay of Rs.
6,500 only.

Benefits of EDLI scheme
76
• The benefit provided under the scheme in the
nature of life insurance as follows:
1. On the death of an employment while in service
a lump sum insurance amount is payable to his
nominee or family members.
2. The insurance amount is equal to the average
balance in the account of the deceased employee
in the Provident Fund during a period of 12
months immediately preceding his death. In
case the average balance exceeds Rs.35,000/- the
insurance amount payable is Rs. 35,000/- plus
25% of the amount in excess of Rs. 35,000/-
subject to a ceiling of Rs. 60,000/-.

Prior to September 1, 2014
77
1. An employee with monthly salary of up to Rs 6,500
was a
member under the three schemes. The membership
was
voluntary for an employee with monthly
salary exceeding the limit of Rs 6,500.
2. Twelve per cent of the salary contributed by
the
employee was deposited fully into the PF.
Matching contribution made by the
employer was allocated as
under: 8.33 per cent of Rs 6,500 per month into
the
pension scheme and balance to PF.
3. Salary for the purpose of calculating contributions
was limited to Rs 6,500 per month unless the

Change from September 1,
2014:
78
• The existing salary limit of Rs 6,500 has been
increased
to Rs 15,000, thereby expanding both membership
base and the quantum of contributions.
• Now an employee with monthly salary above Rs
6,500
but up to Rs 15,000 will also be covered under the
three
schemes. Unlike PF and insurance scheme, voluntary
membership is not available under the pension
scheme for an employee with monthly salary of
above Rs 15,000.
• The government has also fixed monthly pension
benefit
at Rs 1,000 for the financial year 2014-15 and
increased the lumpsum benefit available on death

THE PAYMENT
OF BONUS
ACT, 1
965
79

Introduction
80
• An Act to provide for the payment of bonus to
persons employed in certain establishments on
the basis of profits or on the basis of production
or productivity and for 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.

Objective of the Act
81
• 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 by the contributions made by
capital, management and labour.
– To improve statutory liability to pay bonus [reward
for good work] in case of profits or losses.
– To prescribe formula for calculating bonus
– To prescribe Minimum & Maximum percentage
bonus
– To provide of set off/set on mechanism
– To provide redressal mechanism

Definitions
82
1. Employee: The definition of “employee” includes
any
person (other than an apprentice) employed on a salary
or wage not exceeding rupees 3,500 per
month Rs 10,000 from 2007) in any industry doing
any skilled or
unskilled
,
manual
,
supervisor
y,
manageria
l,
administrative, technical, or clerical work for hire or
reward. There must, however, be a contract of service
between the person employed and the employer.
2. Appropriate Government: The term
“appropriate government” means:
1) in relation to an establishment in respect of
which
appropriate government under the
Industrial Disputes Act, 1947 is the Central
Government;
2) in relation to any other
establishment, the
Government of the State in which that
establishment is situated.

1. Employer: The term “employer” includes:
1) in relation to an establishment which is a factory, the owner or occupier
of the factory, including the agent of such owner or occupier, the legal
representative of a deceased owner or occupier and the manager of the
factory;
2) in relation to any other establishment, the person who, or the authority which,
has the ultimate control over the affairs of the establishment. Where the said
affairs are entrusted to a manager or managing director, such manager or
managing director is the employer.
2. Accounting year: The term “accounting year” means:
1) In relation to a corporation, the year ending on the day on which the books and
accounts of corporation are to be closed and balanced;
2) In relation to a company, the period in respect of which profit and loss account
is laid before the annual general meeting (first day of April or 31st of March).
3. Salary or Wage: The term “salary or wage” includes
1) basic pay and dearness allowance but not any other allowance.
2) It excludes the value of any house accommodation or of supply of light, water,
medical attendance or amenity or any service or of any concessional supply of
food grains or other articles, any travelling concession, any contribution paid or
payable by the employer to any pension fund or provident fund, retrenchment
compensation, and gratuity.
83
Definitions

Applicability
1. Every factory (as def. in Factories Act), & (b) Every
other establishment in which 20 or more persons
(less than 20 but 10 or more if appropriate Govt.
notifies) are employed on any day subject to
certain exemptions.
2. Employees' drawing remuneration of Rs. 3,500/- or
more (Rs 10,000 from 2007) and those who have
worked for less than 30 days are not eligible to
receive bonus under the Act.
3. Bonus to be paid within eight months from the
expiry of the accounting year.
84

Eligibility
85
1. Eligibility for bonus. [Sec 8] (2007 amendment)
Every employee (receiving salary or wages
up to RS. 10,000 p.m). engaged in any
industry to do any skilled or unskilled
manual, supervisory, managerial,
administrative, technical or clerical work is
entitled to bonus for every accounting
year if he has worked for at least 30
working days in that year.

Calculation of bonus with respect
to certain employees. [Sec
12] (2007 amendment)
86
• Where the salary or wage of an employee
exceeds 3500/- rupees per month, the minimum
(8.33%) bonus payable to Such employee under
section 10 or, in case maximum bonus (20%)
payable to such employee under section 11,
should be calculated as if his salary or wage
were 3500/- rupees per month.
• That means 3500/- as a salary or wage per
month will be the fixed limit amount for
calculation of payment of bonus to
employees those who are
drawing the salary or wage more than 3500/- per
month but not more than 10,000/- per month.

Payment of minimum bonus.
[Sec 10]
87
• Bonus should be paid along with the salary
• Every year, every employer shall be bound to pay bonus
to every employee.
• a minimum bonus which shall be 8.33% cent of the
salary
or wage earned by the employee during the
accounting year or 100/- rupees, whichever is higher.
• Bonus shall be payable in case of profits or losses in
the accounting year.
Payment of Maximum Bonus [Sec 11]
• In case the allocable surplus amount [Section 2(4)] exceeds the minimum
bonus (8.33%) payable amount to employees, the employer is bound to
pay extra percentage of bonus.
• But maximum of 20% of bonus is payable to the every employee on the
wage or salary earned during the year.

Benefits
• Subject to other provisions : — Minimum bonus
shall be 8.33% of salary/wages earned or RS 100
whichever is higher.
1) If allocable surplus exceeds the amount of
minimum bonus, then bonus shall be payable at
higher rate subject to a maximum 20% of
salary/wages.
2) Computation of bonus is to be worked out as per
Schedule I to IV of the Act.
88

Calculation of Bonus
89
Available surplus = gross profit [derived as per First Schedule
or Second Schedule of this act] –
(minus) Depreciation, investment
allowance or developmentallowance [Section 6] - (minus)
direct
taxes payable [Section 7] - (minus) further sums as are
specified in
respect of the employer in the Third Schedule of this act
consist of dividend payable (preference shares), reserves and
% of paid up
equity
share
capita
l
[investment
].
Allocable surplus [sec 2 (4)]
Allocable surplus= 67% of the available surplus (other than
banking companies) or 60% of the available surplus (banking
companies and companies linked with
abroad)
Payment of bonus calculated on the allocable surplus which is
derived by the above calculation.

Set-On and Set-Off Of Allocable
Surplus [Sec 15]
90
Set-On (In case of huge profits,)
Excess allocable surplus remain after paying the maximum bonus
of 20% on the wage or salary of the employee, Should be carried
forward to the next following year to be utilized for the purpose
of payment of bonus in case of the shortage of the allocable
surplus or losses occur. This is called as Set-On.
Set-Off (in case of losses occur)
When there are no profits (available surplus or allocable surplus) or
the amount falls short or deficiency for payment of minimum
bonus to employees 8.33%, such deficiency amount should be
adjusted to the current accounting year from the Set-On amount
which was carried forward in case of excess allocable surplus in
the previous year. This is called as Set-Off.

Eligibility for Bonus
91
1. Every employee shall be entitled to be paid bonus
by his employer in an accounting year, provided
that he has worked in the establishment for not
less than 30 working days in that year.
2. An employee will be disqualified from receiving
bonus if he is dismissed from service for:
1) Fraud;
2) Riotous or violent behaviour while on the
premises of the establishment;
3) Theft, misappropriation or sabotage
of any property of the establishment.

1. Newly set-up establishments get exemption from
payment
of bonus for a period of six years following the
accounting
year in which the goods producedor
manufactured are
sold for the first time and, in the alternative, up to the
year
when the new establishment shows profits,
whichever is earlier.
2. Under the Act, adjustment can be made towards
payment
of customary or puja bonus against bonus payable
under the Act.
3. If an employee is found guilty of misconduct
causing financialloss to the employer,
then the employer can
92

93
1. Work out and pay annual bonus to the
employees as required under the Act.
2. Maintain the following registers:
1) Register showing the computation of allocable
surplus.
2) Register showing set on and set off of the allocable
surplus.
3) Register showing the details of the amount of
bonus due to each employee, deductions there
from and the amount disbursed.
3. Submit an annual return of bonus paid during the
year.

Time Limit for Payment of Bonus
94
1.The bonus shall be paid within a period of 8 months from the
close of the accounting year. If there is a dispute, it shall 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 2 years.
2. Claim for Bonus: If any bonus is due to an employee under a
settlement, award or agreement, the employee himself, or any
other person authorised by him in writing in this behalf, or
in the case of death of the employee, his assignee or heirs,
may make an application for its recovery to the appropriate
government. The application must be made within one year
3.Mode of Payment: Employees can enter into an agreement or a
settlement with their employer for grant of bonus under a
formula different from that under the Act, i.e., bonus linked
with production or productivity; but subject to the provisions
of the Act in respect of payment of minimum and maximum
bonus.

Rights of Employees
95
1.Right to claim bonus payable under the Act and
to
make an application to the Government, for
the
recovery of bonus due and unpaid, within one
year of its becoming due.
2.Right to refer any dispute to the
Labour Court/Tribunal.
3. Employees, to whom the Payment of Bonus Act
does
not apply, cannot raise a dispute regarding
bonus under the Industrial Disputes Act.
4.Right to seek clarification and obtain information,
on any item in the accounts of the establishment

Disputes under the Bonus Act
96
Where any dispute arises between an employer and
his employees with respect to the bonus payable
under this Act or with respect to the application of
this Act to an establishment in public sector, then,
such dispute shall be deemed to be an industries
dispute within the meaning of the Industrial
Disputes Act, 1947 (14 of 1947), or of any
corresponding law relating to investigation and
settlement of industrial disputes in force in a State
and the provisions of that Act.

Employees not eligible for Bonus
97
Nothing in this Act shall apply to –
1. Employees employed by any insurer carrying on
general insurance business and the employees
employed by the Life Insurance Corporation of
India;
2. Seamen
3. Employees registered or listed under any scheme
made under the Dock Workers
4. Employees employed by an establishment
engaged in any industry carried on by or under
the authority of any department of the Central
Government or a State Government or a Local
authority

98
5. Employees employed by --
1) the Indian Red Cross Society or any other
institution of a like nature (including its
branches);
2) universities and other educational institutions;
3) institutions (including hospitals, chambers of
commerce and social welfare institutions),
established not for purposes of profit;
6. Employees employed through contractoron
building operations;

99
7. Employees employed by the Reserve Bank of India;
8. Employees employed by --
1) the Industrial Finance Corporation of India;
2) any Financial Corporation established under
section 3,
3) or any Joint Financial Corporation established
under
section
3A,
4) of the State Financial Corporations Act, 1951
(63 of
1951);
5) the Deposit Insurance
Corporation;
6) the National Bank for Agriculture and Rural
Development;]
7) the Unit Trust of India;
8) the Industrial Development Bank of India;

Recovery of Bonus Due from
an Employer (Sec-22)
100
Where any money is due to an employee by way of
bonus from his employer under a settlement or an
award or agreement, the employee himself or any
other person authorized by him in writing in this
behalf, or in the case of the death of the employee,
his assignee or heirs may, without prejudice to any
other mode of recovery, make an application to the
appropriate Government or such authority as the
appropriate Government may specify in this behalf is
satisfied that any money is so due, it shall issue a
certificate for that amount to the Collector who shall
proceed to recover the same in particular employee.

Maintenance of Register, Records &
Inspectors
101
1. Every employer shall prepare and maintain such
registers, records and other documents in such
form and in such manner as may prescribed.
2. The appropriate Government may, by notification
on the Official Gazette, appoint such person as it
think fit to be Inspectors for the purposes of
this Act and may define the limits within which
they shall exercise jurisdiction.

Offences and Penalties
102
1. For contravention of the provisions of the Act or
rules the penalty is imprisonment upto 6
months, or fine up to Rs.1000, or both.
2. For failure to comply with the directions or
requisitions made the penalty is imprisonment
upto 6 months, or fine up to Rs.1000, or both.
3. 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

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