Tag Archives: labor laws

THE PAYMENT OF WAGES ACT, 1936, Bonus Part- DO YOU KNOW?

Under the Constitution, LABOUR falls under the Concurrent List (or List-III (Seventh Schedule) is a list of 52 items (though the last subjects are numbered 47) given in the Seventh Schedule to the Constitution of India) which means the Union government and states have joint jurisdiction.

Parliament has recently passed 4 labor Codes to simplify and modernize labor regulations.

Under the new plan, 29 central laws will be subsumed into four broad codes:
I. Code on Wages;
II. Industrial relations;
III. Occupational Safety, Health and Working conditions (OSH) and
IV. Social Security Code.

These Codes got introduced on the recommendations of the Second National Commission on Labour (2002).

In subject to the Payment of Wages Act, 1936, let’s get into the “Code of Wages”

I. INTRODUCED:
The Code on Wages was passed by Parliament in 2019 while the three other codes got clearance from both the Houses in 2020.

II. REPLACEMENT:
The Code on Wages replaces 4 existing Laws:
(a) Minimum Wages Act, 1948
(b) Payment of Wages Act, 1936
(C) Payment of Bonus Act, 1965
(d) Equal Remuneration Act, 1976.

III. AIM:
It aims to regulate wage and bonus payments in all employments (industry, business, trade, and manufacture).

IV. APPLICABILITY:
This Code will apply to all the employees. Wage relevant decisions will be made accordingly-
➡The Central Government: For the people employed in mines, railways, and oil fields. ➡the State Governments: For all other employments.

V. WAGES:
There will be one definition of ‘wages’:
The Wages in this Code include salary, allowance, or any other monetary component excluding the bonus and traveling allowance among others.

VI. PAYMENT OF WAGES:
The employer can fix the wage period as daily, weekly, fortnightly, or monthly. The payment will be made in coins, currency notes, through an electronic medium, cheque, or by a credit to the bank account.

VII. PROHIBITING GENDER DISCRIMINATION:
The Code prohibits discrimination based on gender in matters associated with wages and recruitment of employees for the same work or work of similar nature.

VIII. DEDUCTIONS:
The employer has the right to deduct wages on the following grounds: fines, absence from duty, accommodation provided by the employer, or the advance payment made to the employee.
It is to be noted that the deductions should not be more than 50% of the employee’s total wage.

IX. OFFENCE:
The Code specifies penalties of the offense committed by an employer in cases where any provision of the Code is contravened or employees’ are paid less than the minimum wages.
As per the Code, the maximum punishment for the said offenses is three-month imprisonment along with a fine of Rs. 1 lakh.

WITH THIS ‘DO YOU KNOW?’ PART, WE COME TO AN END TO THIS SERIES ON THE PAYMENT ACT, 1936.

THE PAYMENT OF WAGES ACT, 1936, Part- 4: AUTHORITIES FOR CLAIMS (Section 15)

CLAIMS ARISING OUT OF DEDUCTIONS FROM WAGES OR DELAY IN PAYMENT OF WAGES AND PENALTY FOR MALICIOUS OR VEXATIOUS CLAIMS

Section 15:

Empowers the appropriate government to appoint some person as the authority (for any specific area),

  • to hear and decide all claims arising out of-
    • deductions from the wages, or
    • delay in payment of the wages of person employed or paid in that area, including all matters incidental to such claims.

Section 15(1):

The appointment shall be made by notification in the Official Gazette,

Following may be appointed as the authority as aforesaid:

(a)Any commissioner for workmen’s compensation, or

(b)Any officer of the bCentral Government exercising functions, as-

  • Regional Labor Commissioner, or
  • Assistant Labor Commissioner (with at least 2 years experience), or

(c)Any officer of the State Government (with at least 2 years experience),

  • not below the rank of assistant commissioner, or

(d)A presiding officer of any labor Court, or Industrial Tribunal constituted under-

  • the Industrial Disputes Act, 1947 or
  • any corresponding law relating to the investigation and settlement of industrial disputes in force in the State, or

(e)Any other officer with experience as a –

  • Judge of a Civil Court, or
  • Judicial Magistrate.

PROVIDED:

  • The appropriate Government may appoint more than 1 authority for any specific area where it is considered necessary to do so.
  • It may be general or specific order to provide for the distribution or allocation of work to be performed by them under this Act.

CASE 1: Marute M. Mullik V Polson Ltd. (1970) Lab. I.C. 308

  • The scheme of Payment of Wages Act is the all claims arising out of:
    • deductions from wages, or
    • delay in the payment of wages,
  • are to be decided by the authority appointed by the appropriate Government under section 15 and not by a Civil Court.

CASE 2: Authority Sabastian Almenda V Taylor R.M. [AIR (1956) Bom. 737]

The authority under Payment of Wages Act constitutes a court or tribunal of summary jurisdiction.

CASE 3: Rameshwar Lal V Jogender Dass [AIR (1970) Ori. 76]

  • The clear object of the legislature in settling up this court or tribunal,
    • is to give facilities to the to recover his wages as expeditiously as possible.

POWERS OF AUTHORITIES APPOINTED UNDER SECTION 15

Section 18:

Every authority appointed under section 15 shall have all the powers of a Civil Court under the Code of Criminal Procedure, 1908, for purpose of:

  • taking evidence and enforcing the attendance of witnesses, and
  • compelling the production of documents.

Further, every such authority shall be deemed to be a Civil Court for the purposes of Section 195 and of Chapter XXVI, Code of Criminal Procedure, 1973.

APPLICATION FOR CLAIMS

Section 15(2): Who may file application?

An application for claims arising under the Act may be filed by:

  • the person employed himself, or
  • any legal practitioner, or
  • any legal practitioner, or
  • any official of a registered trade union authorized in writing to act on his behalf, or
  • any inspector under the Act, or
  • any other person acting with the permission of the Authority, appointed under section 15(1).

Application to be filled within 12 months-

Section 15(2) provides:

Proviso 1: Every application for claims under the Act shall be presented within 12 month from the date on which:

  • the deduction from the wages was made, or
  • the payment of the wages was due to be made.

Proviso 2: An application may also be admitted after 12 months if the applicant satisfies the authority that-

  • there was a sufficient cause for not making the application within 12 months.

PROCEDURE (Section 15(3))

SITUATION: When any application for claims under the Act is entertained.

CONSEQUENCE:

  • The Authority shall hear or give an opportunity of being heard to:
    • the applicant, and
    • the employer or other persons responsible for payment of wages under section 3.
  • The Authority shall:
    make such further inquiry as may be necessary.
  • The Authority may, direct-
    • the refund to be made to the employed person of:
      • the amount deducted or
      • the payment of the delayed wages.
    • together with such compensation as it may think fit.
  • The compensation shall not exceed:
    • Case 1: Improper deduction: 10 times of the amount improperly deducted.
    • Case 2: Delayed wages: Rs. 3000, but not less than Rs. 1500.

(SITUATION: Where the deducted or delayed wages are paid before the disposal of the application.

CONSEQUENCE: The Authority, may direct the payment of such compensation as it may think fit. )

PROVIDED:

No direction if the Authority is satisfied:

SITUATION: Delayed wages.

CONSEQUENCE: No direction for the payment of compensation shall be made if the Authority is satisfied that the delay was due to:

  • a bona fide error or dispute, or
  • the occurrence of an, emergency or the existence of exceptional circumstances, or
  • the failure of the employed person to apply for or accept payment.

MALICIOUS OR VEXATIOUS APPLICATION (Section 15(4))

SITUATION: If the Authority hearing an application is satisfied.

 CONSEQUENCE:

Case 1: The application was malicious or vexatious.

Consequence: The Authority may direct a penalty not exceeding Rs. 375, by the person presenting the application to be paid to:

  • the employer, or
  • other person responsible for payment of wages.

Case 2: Where, the applicant ought not to have been compelled to seek redress under section 15.

Consequence: The Authority may further direct that a penalty not exceeding Rs. 375by they employer to be paid to-

  • the State Government, or
  • other person responsible for the payment of wage.

FINE DECISION OF THE AUTHORITY (Section 15(4-A))

SITUATION: Where there is any dispute as to:

  • the person, or
  • person being the legal representative or
  • representative of the employer or of the employed person.

CONSEQUENCE: The decision of the Authority on such dispute shall be final.

DEEMED JUDICIAL PROCEEDING (section 15(4-B))

Any inquiry under section 15 shall be deemed to be a judicial proceeding within the meaning of section 193, 219 and 228, Indian Penal Code, 1860.

RECOVERY OF AMOUNT (Section 15(5))

Any amount directed to be paid under section 15-

  • Case 1: If the Authority is a Magistrate.
    • Consequence: the amount, may be recovered by the Authority,
      • as if it were a fine imposed by him as a Magistrate, and
  • Case 2: If the Authority is not a magistrate.
    • Consequence: the amount, may be recovered by any magistrate to whom the Authority makes application in this behalf,
      • as if it were a fine imposed by such magistrate.

FOURTH PART CONSISTS OF AUTHORITIES FOR CLAIMS (Section 15), AS FIRST PART CONSISTS OF NEED, OBJECTIVE AND DEFINITIONS, and SECOND PART CONSISTS OF RULES FOR PAYMENT OF WAGES (Section 3-6),and THIRD PART CONSISTS OF DEDUCTIONS FROM WAGES (Section 7-13).

THE PAYMENT OF WAGES ACT, 1936, Part -3: DEDUCTIONS FROM WAGES (Sections: 7- 13),

DEDUCTIONS WHICH MAY BE MADE FROM WAGES (Sec. 7)

Section 7(1): The wages of an employed person shall be paid to him without deductions,

Except- deductions authorized by or under the Payment of Wages Act, 1936.

DEEMED OR NOT TO BE DEEMED DEDUCTIONS [Explanations under section 7(1)]

Deemed deduction (Explanation: 1)

  • Every payment made by the employed person to the employer or his agent,
    • shall be deemed to be deduction from wages for the purpose of this Act.

Not to be deemed deduction (Explanation: 2)

  • Any loss of wages, for good and sufficient cause,
  • resulting from the imposition, upon an employed person of any of the following penalties, namely-
    • the withholding of increment or promotion, (including the stoppage of increment at any efficiency bar), or
    • the reduction to:
      • a lower post or time-scale, or
      • lower post in a time-scale, or
    • suspension,
  • shall not be deemed to be a deduction from wages.
  • CASE: Where the rules, framed by the employer, for the imposition of any such penalty.
    • CONSEQUENCE: The rules are in conformity with the requirements, if any,
      • requirements, which may be specified by the State Government by notification in the Official Gazette.

KINDS OF DEDUCTIONS (authorized as aforesaid) [Section 7(2), 8, 9, 10, 11, 12, 13]

Deductions referred under section 7(1), from wages of an employed person, may be of the following kinds only, namely-

I.DEDUCTIONS FOR FINES (Sec. 7(2)(a) and 8)

Exception to the deduction:

(1)Section 8(1): No fine shall be imposed:

  • with the previous approval of appropriate government or prescribed authority,
  • on an employed person,
  • if, he has not committed such act or omission which may have specified by notice by employer, for fine may be imposed.

No fine shall be imposed on an employed person, until:

  • Sec. 8(3): he has been given an opportunity of showing cause against the fine.
  • Sec, 8(5): he has completed the age of 15 years.

Exhibition of the notice:

Notice (specifying the act or omissions, for which fines may be imposed) shall be exhibited:

  • in prescribed manner,
  • on the premises in which employment is carried on.

(and in case of persons employed upon a railways at prescribed place or places.)

Fine limit:

Sec. 8(4): Total amount of fine, which may be imposed:

  • in any one wage period,
  • on any employed person,
  • shall not exceed 3% of wages payable to him, in respect of that wage-period.

Time barred recovery:

Sec. 8(6): Such imposed fine shall not be recovered from the employed person;

  • by installments or
  • after, expiry of 90 days from the days on which, it was imposed.

Implied imposition of fine:

Sec.8(7): Every fine shall be deemed to have been imposed on the day of act or omission,

  • in respect of which it was imposed,
  • record and purpose of fine:

Record and purpose of fine:

Sec. 8(8):

I.RECORD: All fines and realizations thereof,

  • shall be recorded in a register (in prescribed form),
  • to be kept by the responsible for payment of wage.

II.PURPOSE: All realizations of fines,

  • shall be applied only to the purposes, beneficial to persons employed in the factory.

II.DEDUCTION FOR ABSENCE FROM DUTY (Section 7(2)(b) and 9)

Deduction for being absent.

Sec. 7(2)(b): Deductions may be made:

  • on account of absence of an employed person from duty,
  • from the place or places where he is required to work,
  • by the terms of his employment.

“absence” means :

Sec. 9(1): The absence may be:

  • for the whole or any part of the period,
  • period, during which he is so required to work.

Amount of deduction:

Sec. 9(2): Ratio between amount of such deduction and the wages payable,

  • shall not exceed the ratio between the period of absence and total period within such wage period.

Case: K.S.R.T. Employees’ Association V General manager, K.S.R.T. (1985) Lab. I.C. 552(Ker.)

  • In a strike by workers in a public utility like transport service,
  • if, employees absent for a part of the day without notice,
  • deduction of full day’s wages would not be unjustified or illegal.

Absence from concert.

Sec. 9(2): Provided-

  • SITUATION: If 10 or less employed persons acting in concert absent themselves without die notice and reasonable cause.
  • CONSEQUENCE: Deduction may:
    • include, such amount not exceeding his wages for 8 days.
    • be due, to employer in lieu of notice.

Deemed absence.

  • SITUATION: Employed person refuses to carry out his work in pursuance of stay-in –strike, or any other cause (non-reasonable in circumstances).
  • CONSEQUNECES: He shall be deemed to be absent from the place (where he is required to work).

III.DEDUCTIONS FOR DAMAGE OR LOSS (Section 7(2)(c),(m),(n) and (o) and 10)

Amount of deduction.

Sec. 7(2)(c) and 10(1):

  • A deduction for:
    • loss of (or damage to) goods expressly entrusted to employed person for custody,
    • loss of money for which he is required to account,
  • shall not exceed the amount of damage or loss caused to the employer.,
  • for loss, caused by neglect or default of the employed person.

(same is the case regarding losses sustained by railway administration on account of any rebates or refunds incorrectly granted by employed person.)

Opportunity of showing cause.

Sec. 10(1-A): The deduction shall not be made, until:

  • employed person has been given a opportunity of showing cause against deduction.

(similar opportunity, shall also be given to employed person)

In case of deductions for recovery of losses sustained by railway administration on account of:

 Sec. 7(2)(m): Acceptance by employed person of counterfeit, base coins, mutilated, or forged currency notes.

Sec. 7(2)(n): Failure of employed person:

  • To invoice, bill, collect, or account,
    • for appropriate government, due to railway administration.
  • Loss may relate to:
    • Fares, freight, demurrages, wharfage,
    • in respect of-
      • sale of goods, in catering establishments,
      • sale of commodities in grain shops or otherwise.

Sec. 7(2)(o):  Any rebates or refunds incorrectly granted by the employed person,

  • where such loss is directly attributable to his neglect or default.

Register record.

Sec. 10(2): All deductions and realizations regarding damage to or loss of goods,

  • shall be recorded in register to be kept by the person responsible for the payment of wages under section 3.

IV.DEDUCTIONS FOR SERVICES (Section 7(2)(d),(e) and 11)

Conditions to impose deduction.

CASES:

  • Sec. 7(2)(d): deduction for house accommodation,
  • Sec. 7(2)(e): such amenities and services supplied by employer as have been authorized by appropriate government.

CONSEQUENCE: The deduction shall not be made from the wages of employed person,

  • unless, such services have been accepted by him as:
    • a term of employment, or
    • otherwise.

Power to impose conditions.

Sec. 11: In case of deductions regarding services and amenities,

  • the appropriate government may impose conditions.

V.DEDUCTIONS FOR RECOVERY OF ADVANCES (section 7(2)(f) and 12)

Conditions to recover advances as deductions:

Sec. 12:

SITUATION 1: An advance of money given before employment.

CONSEQUENCE: recovery shall be made-

  • from the first payment of wages in respect of complete wages period,
  • except- no recovery can be made of such advance given foe traveling expenses.

SITUATION 2: An advance of money given after employment.

CONSEQUENCES: Recovery shall be subject to-

  • such conditions as the appropriate government may impose.

SITUTION 3: Advances of wages not already earned.

CONSEQUNECES: Recovery shall be subject to :

  • any rules made by the appropriate government in this regard,
  • appropriate government may regulate:
    • the extent to which such advances may be given and
    • the installments by which they may be recovered.

“advance” includes:

Sec. 7(2) (f): The advances may be of any nature including:

  • advances for travelling allowances and conveyance allowances and the interest due in respect thereof, or
  • adjustment of over payment of wages.

Cases: M.G.Koshi V A.D.Cotton Mills (AIR (1959) Ker. 332)

  • Deductions for adjustment of overpayment of wages is authorized under section 7(2)(f) of the Act,
  • But there is no provision in the Act limiting the period within which employer should make deduction for adjustment of over-payment of wages.

VI.DEDUCTIONS FOR RECOVERY OF LOANS (Section 7(2) (fff) and 12-A)

Deduction regarding granted loans:

Sec. 7(2)(fff): Deduction for loan granted for;

  • house building or other purposes and
  • the interest due I respect thereof.

Regulating authorities:

Sec. 12-A: Deduction for recovery of loans, approved by the appropriate government, which shall be subject, to the rules made by it, regulating-

  • the extent to which such loans may be granted and
  • the rate of interest payable thereon.

VII.DEDUCTIONS FOR PAYMENTS TO CO-OPERATIVE SOCIETIES AND INSURANCE SCHEME (Section 7 (2)(j) and (k) and 13)

These deductions include:

Sec. 7(2)(j): Deductions for payments to:

  • co-operative societies appropriate by the appropriate government or
  • a scheme of insurance maintained by the INDIAN POST Office.

Sec. 7(2)(k): Deductions made with written authorization of the person employed for-

  • payment of any premium on his life insurance policy to Life insurance Corporation, India, or
  • purchase of securities of:
    • the Government of India , or
    • any State Government, or
  • depositions in any Post office saving Bank furtherance of any savings scheme of any such government.

Power to impose conditions:

Sec. 13: These deductions shall be subject to such conditions,

  • as the appropriate government may impose.

OTHER DEDUCTIONS

Deductions not got covered under the headings of section 8, 9, 10, 11, 12, and 13 are;

I.Section 7(2)(g): Deduction of Income tax payable by the employed person.

II. Section 7(2)(h): Deduction required to be made by order of a court or other authority competent to make such order.

III.Section 7 (2)(i): Deduction for subscription to or payment of advances from any provident fund:

  • to which the Provident Funds Act, 1925 (19 of 1925) applies, or
  • ‘as defined in clause (38) of section 2 of , the Income Tax Act, 1961 (43 of 1961), or
  • approved in this behalf, by the appropriate government.

IV.Section 7(2)(l): Deduction for payment of insurance premia on Fidelity Guarantee Bonds.

V.Sec. 7(2)(m): Deduction for payment of losses sustained by a  railway administration:

  • recovery on a account of acceptance by the employed person and
  • losses on account of counterfeit or base coins or mutilated or forged currency notes.

VI.Section 7(2)(p): Deductions made with written authorization of the employed person,

  • for contribution to funds as:
    • Prime Minister’s National Relief Fund, or
    • such other fund, as may be specified by the appropriate government.

(this clause was added by the Payment of wages (Amendment) Act, 1976)

VII.Section 7(2)(q): Deductions for contributions to any insurance scheme:

  • framed by the appropriate government,
  • for the benefit of it’s employees.

(this clause was added by the payment of Wages (Amendment) Act, 1977)

LIMIT ON DEDUCTIONS (Section 7(3))

The total amount of deductions which may be made under section 7(2), in 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 under section 7(2)(j),
  • 50% of such wages:
    • in any other case.

PROVIDED:

SITUATION: Where the total deductions authorized under section 7(2) exceed 75% or as the case may be, 50% of the wages.

CONSEQUENCE: The excess may be recovered in such manner as may be prescribed.

CRUX (Section 7(4))

  • This section shall be understood as preventing (construed as precluding) the employer from:
    • recovering from the wages of the employed person, or
    • otherwise, any amount payable by such person under any law for the time being in force (other than the Railways Act, 1989 (24 of 1989).

THIRD PART CONSISTS OF DEDUCTS FROM WAGES (Section 7-13) as FIRST PART CONSISTS OF NEED, OBJECTIVE AND DEFINITIONS, and SECOND PART CONSISTS OF RULES FOR PAYMENT OF WAGES (section 3-6), and FOURTH (and the last part) PART CONSISTS OF AUTHORITIES.