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EPGP- IRLL-Labour Laws

• Some Labour Laws:
– Arbitration Act, 1940
– Apprentices Act, 1969
– Bonus Act
– Constitution of India
– Defence of India Rules
– Dock Workers Regulation of Employment Act
– Emigration Act
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Some Labour Laws…2
• Employees PF Act
• Employees State Insurance Act, 1948
• Employees Family Pension Scheme…
• Employment Exchanges…
• Employment of Children Act, 1938
• Essential Services Maintenance Act…
• Factories Act, 1948

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Some Labour Laws…3
• Industrial Disputes Act, 1947
• Industrial Relations Act, 1971
• Labour Welfare Fund Acts…
• Lok Adalats
• Maternity Benefits Act, 1961
• Mines Acts…
• Minimum Wages Act, 1948

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Some Labour Laws…4
• National Commission on Labour – 1 & 2
– 1969 and 2002
• Payment of Gratuity Act, 1976…
• Payment of Wages Act, 1936
• Plantation Labour Act, 1951
• Shops and Establishments Acts…
• Trade Unions Act, 1913…
• Workmen’s Compensation Act, 1923

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The Background
• Protection of workers against loss of income due
to old age and invalidity ….
• Began with Private employers, later Govt
• PF, Gratuity and Pension on ad hoc basis
• Provident Funds Act, 1925 – enacted by GOI
• Only for Govt, Railway, local authorities etc
• RCL 1931 – provisions against old age ….
• Govt to encourage employers to launch schemes
for their employees……..
IRLL 2006 Provident Fund Legislation 6
Proposals for Model PF Rules
• Prop’l before 3rd Lab Min Conference 1942
• Model Rules placed before 5th Conf 1943
• Also to Standing Labour Comm. In 1944
• No final decision taken at this stage…..
• Coal Mines PF/ Bonus Schemes Act, 1948
• Workers’ P F Bill 1948
• Employees’ PF Act, 1952 – after discussions
at several stages …….

IRLL 2006 Provident Fund Legislation 7

• To induce employees to
save a portion of their
present earnings for a rainy
• Provide for the institution of
provident funds for
employees in factories and
other establishments
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• Factory wherein 20 or more persons
are employed
• Other establishments in which more
than 20 persons are employed – the
central government may specify
such establishments
• Mutual agreement of employer and
majority of the employees

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EPF – Personal Records
• Every employer is required to maintain Personal
Files in respect of the employees:
• Duly filled and signed application form along
with passport size photograph
• Age Certificate
• Doc’s pertaining to earlier employment…
• Appointment Letter
• Any other document pertaining to the employee

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P F Act…
• PF Remittance shall be made on or before 15th
• Mly returns in form 5, 10 and 12A along with
triplicate copy shall be submitted before 25th
• Nomination Forms in F No. 2 in respect of new
employees shall be submitted along with mly…
• Annual Returns in Form 6A alongwith 3A shall
be submitted on or before 30th April
• PF shall be calculated on Basic and DA…the
ceiling limit being Rs. 6,500/-
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• Gratuity is a kind of retirement benefit,
like provident fund or pension.
• It is a payment intended to help the
employee after his retirement. The
general principle underlying gratuity
schemes is that by faithful service over
a long period the employee is entitled to
claim a certain benefit. Thus it is earned
by an employee as a reward for long and
meritorious service. The Act was passed
in 1972 by parliament. It has been
amended to keep up with the times.
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• Prior to 1972, various states had
enacted their own gratuity laws. It
became necessary, therefore, to have
a Central Law so as to ensure a
uniform pattern of gratuity to the
employees throughout the country.
(Also, to avoid different treatment to
the employees of establishments
having branches in one or more
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• The Act provides for a scheme of compulsory
payment of gratuity by managements of
factories, mines, oilfields, plantations, ports,
railways, shops and other establishments
employing 10 or more persons in the event
of super-annuation, retirement, resignation
and death or disablement due to accident or
disease. In case of death of the employee,
gratuity payable to him will be payable to his
nominee or if no nomination is made, it will
be paid to his heirs.
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• It is calculated at the rate of 15 days salary
for every year of completed service, subject
to a maximum of Rs. 3,00,000. 15 days
salary is calculated on the basis of a 26-
day month.
• The employer should arrange to pay the
amount of gratuity within 30 days from the
date it becomes payable to the person to
whom the gratuity is payable.

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• The gratuity of an employee, whose
services have been terminated for any
act, willful omission or negligence
causing damage or loss to, or
destruction of, property belonging to
the employer, shall be forfeited to the
extent of the damage or loss so caused.

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[Act No. 4 of Year 1936]
Payment of Wages Act …
• 1. Short title, extent, commencement and
(1) This Act may be called the Payment of Wages
Act, 1936.

2[(2) It extends to the whole of India 3[* * *]].

(3) It shall come into force on such 4[date] as the

Central Government may, by notification in the
Official Gazette, appoint.
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Sections 4 & 5
• (4) It applies in the first instance to the payment of wages to
persons employed in any 5[factory, to persons] employed
(otherwise than in a factory) upon any railway by a railway
administration or, either directly or through a sub-contractor,
by a person fulfilling a contract with a railway
administration, 6[and to persons employed in an industrial or
other establishment specified in sub-clauses (a) to (g) of
clause (ii) of section 2.]
(5) The State Government may, after giving three months’
notice of its intention of so doing, by notification in the
Official Gazette, extend the provisions of 7[this Act] or any
of them to the payment of wages to any class of persons
employed in 8[any establishment or class of establishments
specified by the Central Government or a State Government
under sub-clause (h) of clause (ii) of section 2]:
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• 9[PROVIDED that in relation to any such
establishment owned by the Central Government no
such notification shall be issued except with the
concurrence of that governments.]
(6) Nothing in this Act shall apply to wages payable
in respect of a wage-period which, over such wage-
period, average 10[one thousand six hundred rupees] a
month or more.

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• 2. Definitions
In this Act, unless there is anything repugnant in the subject or
11[(i) "employed person" includes the legal representative of a
deceased employed person;
(ia) "employer" includes the legal representative of a deceased
(ib) "factory" means a factory as defined in clause (m) of section
2 of the Factories Act, 1948 (63 of 1948) and includes any place
to which the provisions of that Act have been applied under sub-
section (1) of section 85 thereof;]

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• (ii) 12["industrial or other establishment"] means any-

11[(a) tramway service , or motor transport service

engaged in carrying passengers or goods or both by road
for hire or reward;

(aa) air transport service other than such service

belonging to, or exclusively employed in the military,
naval or air forces of the Union or the Civil Aviation
Department of the Government of India;]

(b) dock, wharf or jetty;

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• 13[(c) inland vessel, mechanically propelled;]

(d) mine, quarry or oil-field;

(e) plantation;

(f) workshop or other establishment in which

articles are produced, adapted or manufactured,
with a view to their use, transport or sale;

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Definitions … contd..
• 14[(g) establishment in which any work relating to the
construction, development or maintenance of buildings,
roads, bridges or canals, or relating to operations
connected with navigation, irrigation, or to the supply of
water or relating to the generation, transmission and
distribution of electricity or any other form of power is
being carried on;]
6[(h) any other establishment or class of establishments
which the Central Government or a State Government
may, having regard to the nature thereof, the need for
protection of persons employed therein and other
relevant circumstances, specify, by notification in the
Official Gazette.]
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• 15[(iia) "mine" has the meaning assigned to it in clause (j) of
sub-section (1) of section 2 of the Mines Act, 1952 (35 of
11[(iii) "plantation" has the meaning assigned to it in clause
(f) of section 2 of the Plantations Labour Act, 1951 (69 of
(iv) "prescribed" means prescribed by rules made under this
(v) "railway administration" has the meaning assigned to it in
clause (6) of section 3 of the Indian Railways Act, 1890 (9 of
1890); and

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• 13[(vi) "wages" means all remuneration (whether by way of
salary, allowances, or otherwise) expressed in terms of money
or capable of being so expressed which would, if the terms of
employment, express or implied, were fulfilled, be payable to
a person employed in respect of his employment or of work
done in such employment, and includes-
(a) any remuneration payable under any award or settlement
between the parties or order of a court;
(b) any remuneration to which the person employed is entitled
in respect of overtime work or holidays or any leave period;

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• c) any additional remuneration payable under the
terms of employment (whether called a bonus or by
any other name);
(d) any sum which by reason of the termination of
employment of the person employed is payable
under any law, contract or instrument which provides
for the payment of such sum, whether with or
without deductions, but does not provide for the time
within which the payment is to be made;
(e) any sum to which the person employed is entitled
under any scheme framed under any law for the time
being in force,
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• but does not include-
(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;

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• (3) any contribution paid by the employer to any pension
or provident fund, and the interest which may have
accrued thereon;
(4) any travelling allowance or the value of any travelling
(5) any sum paid to the employed person to defray special
expenses entailed on him by the nature of his employment;
(6) any gratuity payable on the termination of employment
in cases other than those specified in sub-clause (d).]

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• 3. Responsibility for payment of wages
Every employer shall be responsible for the payment to
persons employed by him of all wages required to be paid
under this Act:

PROVIDED that, in the case of persons employed

(otherwise than by a contractor)-

(a) in factories, if a person has been named as the manager

of the factory under 16[clause (f) of sub-section (1) of
section 7 of the Factories Act, 1948 (63 of 1948)];

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• 17[(b) in industrial or other establishments, if there is a
person responsible to the employer for the supervision and
control of the industrial or other establishments;]

(c) upon railways (otherwise than in factories), if the

employer is the railway administration and the railway
administration has nominated a person in this behalf for
the local area concerned.

The person so named, the person so responsible to the

employer, or the person so nominated, as the case may be
18[shall also be responsible] for such payment.
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Other Sections …
4. Fixation of wage-periods
5. Time of payment of wages
6. Wages to be paid in current coin or currency notes
7. Deductions which may be made from wages
8. Fines
9. Deductions for absence from duty
10. Deductions for damage or loss

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Other Sections …
11. Deductions for services rendered
12. Deductions for recovery of advances
13. Deductions for payments to co-operative
societies and insurance schemes
14. Inspectors
15. Claims arising out of deductions from wages
or delay in payment of wages and penalty for
malicious or vexatious claims

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16. Single application in respect of claims from
unpaid group
17. Appeal
18. Powers of authorities appointed under section 15
19. Power to recover from employer in certain cases
20. Penalty for offences under the Act
21. Procedure in trial of offences

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22. Bar of suits
23. Contracting out
48[24. Application of Act to railways, air
transport services, mines and oilfields
25. Display by notice of abstracts of the Act
26. Rule-making power

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Trade Unions Act
• The Trade Unions Act, 1926 provides for
registration of Trade Unions with a view to
rendering lawful organisation of labour to
enable collective bargaining. It also confers
on a registered trade union certain
protection and privileges

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The Act …
• The Act extends to the whole of India and
applies to all kinds of unions of workers and
associations of employers, which aim at
regularising labour management relations. A
Trade Union is a combination whether
temporary or permanent, formed for regulating
the relations not only between workmen and
employers but also between workmen and
workmen or between employers and

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Registration of TU
• Registration of a trade union is not
compulsory but is desirable since a
registered trade union enjoys certain rights
and privileges under the Act. Minimum
seven workers of an establishment (or seven
employers) can form a trade union and
apply to the Registrar for it registration

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Registration … 1
• The application for registration should be in the
prescribed form and accompanied by the
prescribed fee, a copy of the rules of the union
signed by at least 7 members, and a statement
containing (a) the names, addresses and
occupations of the members making the
(b) the name of the trade union and the addresses
of its head office, and
(c) the titles, names, ages, addresses and
occupations of its office bearers.
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Registration … 2
• If the union has been in existence for more than a
year, then a statement of its assets and liabilities in
the prescribed form should be submitted along with
the application.
• The registrar may call for further information for
satisfying himself that the application is complete
and is in accordance with the provisions, and that
the proposed name does not resemble
• On being satisfied with all the requirements, the
registrar shall register the trade union and issue a
certificate of registration, which shall be conclusive
evidence of its registration

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• A registered trade union is a body corporate
with perpetual succession and a common
• It can acquire, hold sell or transfer any
movable or immovable property and can be
a party to contracts.
• It can sue and be sued in its own name

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• No civil suit or other legal proceeding can
be initiated against a registered trade union
in respect of any act done in furtherance of
a trade dispute under certain conditions.
• No agreement between the members of a
registered trade union shall be void or
voidable merely on the ground that any of
its objects is in restraint of trade

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• At least 50% of the office bearers of a union
should be actually engaged or employed in
the industry with which the trade union is
concerned, and the remaining 50% or less
can be outsiders such as Lawyers,
politicians, social workers etc.

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• To be appointed as an office bearer or
executive of a registered trade union, a
person must have
• attained the age of 18 years; and
• not been convicted of any affiance
involving moral turpitude and sentenced to
imprisonment, or a period of at least 5 years
has elapsed since his release
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• A registered trade union may change its
name with the consent of at least 2/3rds of
the total numbers of its members.
• Notice of change of name in writing, signed
by the secretary and 7 members of the
union, should be sent to the registrar

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• the Registrar shall register the change in name if
he is satisfied that the proposed name is not
identical with the name of any other existing union
and the requirements with respect to change of
name have been complied with.
• The change of name shall not affect any rights and
obligations of the trade union or render any legal
proceeding by or against the trade union as
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• Notice of change in registered office

address should be given to the Registrar in
writing within 14 days of such change.

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• A registered trade union can be dissolved in
accordance with the rules of the union. A notice of
dissolution signed by any seven members and the
secretary of the union should be sent to the
registrar within 14 days of the dissolution. On
being satisfied the registrar shall register the
notice and the union shall stand dissolved from the
date. The funds of the union shall be divided by
the Registrar amongst its members in the manner
prescribed under the rules of the union or as laid
down by the government
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• Any registered trade union may amalgamate with
any other union(s), provided that at least 50% of
the members of each such union record their votes
and at least 60% of the votes so recorded are in
favor of amalgamation. A notice of amalgamation
signed by the secretary and at least 7 members of
each amalgamating union, should be sent to the
registrar, and the amalgamation shall be in
operation after the Registrar registers the notice
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1. The general funds of a registered trade union should be
spent only for the objects specified such as, payment of
salaries, allowances and expenses of its office bearers, its
administrative and audit expenses, prosecution or defence
af any legal proceeding for securing or protecting its
rights, conduct of trade disputes, compensation for loss
arising out of trade disputes, compensation for loss arising
out of trade disputes, provision of educational, social or
religious benefits and allowances on account of death, old
age, sickness, accident or unemployment to its members,
publication of labour journals etc. The trade union may set
up a separate political fund for furtherance of civic and
political interest of members. Contribution to this fund is
not compulsory.
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• 2. The account books and membership
register of the union should be kept open
for inspection by any of its office-bearers.
• 3. A copy of every alteration made in the
rules of the union should be sent to the
Registrar within 15 days of making the

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• 4. An annual statement of receipts and
expenditure and assets and liabilities of the
union for the year ending on the 31st
December, prepared in the prescribed forms
and duly audited should be sent to the
Registrar within the prescribed time. This
statement should be accompanied by a
statement showing changes in office bearers
during the year and a copy of the rules as
amended up to date
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Payment of Bonus Act : Intro
• The payment of Bonus Act provides for payment
of bonus to persons employed in certain
establishments of the basis of profits or on the
basis of production or productivity and for matters
connected therewith.
• It extends to the whole of India and is applicable
to every factory and to every other establishment
where 20 or more workmen are employed on any
day during an accounting year
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• Every employee receiving salary or wages upto
RS. 3,500 p.m. and engaged in any kind of work
whether skilled, unskilled, managerial,
supervisory etc. is entitled to bonus for every
accounting year if he has worked for at least 30
working days in that year.
• However employees of L.I.C., Universities and
Educational institutions, Hospitals, Chamber of
Commerce, R.B.I., IFCI, U.T.I. Social Welfare
institutions are not entitled to bonus under this Act
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• Notwithstanding anything contained in the
act, an employee shall be disqualified from
receiving bonus, if he is dismissed from
service for fraud or riotous or violent
behaviour while in the premises of the
establishment or theft, misappropriation or
sabotage of any property of the
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• The minimum bonus which an employer is
required to pay even if he suffers losses during the
accounting year or there is no allocable surplus is
8.33 % of the salary or wages during the
accounting year, or
• Rs. 100 in case of employees above 15 years and
Rs 60 in case of employees below 15 years, at the
beginning of the accounting year,
• whichever is higher
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Maximum Bonus
• If in an accounting year, the allocable surplus,
calculated after taking into account the amount
‘set on’ or the amount ‘set of’ exceeds the
minimum bonus, the employer should pay bonus
in proportion to the salary or wages earned by the
employee in that accounting year subject to a
maximum of 20% of such salary or wages.

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• The bonus should be paid in cash within 8
months from the close of the accounting
year or within one month from the date of
enforcement of the award or coming into
operation of a settlement following an
industrial dispute regarding payment of
• However if there is sufficient cause
extension may be applied for
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• The method for calculation of annual bouns
is as follow:
• Calculate the gross profit profit in the
manner specified in-
– First Schedule, in case of a banking company,
– Second Schedule, in any other case.

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Calculation …
2. Calculate the Available Surplus.
• Available Surplus = A+B, where A = Gross Profit –
Depreciation admissible u/s 32 of the Income tax Act -
Development allowance - Direct taxes payable for the
accounting year (calculated as per Sec.7) – Sums specified
in the Third Schedule.
• B = Direct Taxes (calculated as per Sec. 7) in respect of
gross profits for the immediately preceding accounting
year – Direct Taxes in respect of such gross profits as
reduced by the amount of bonus, for the immediately
preceding accounting year.

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Calculation …2
• Calculate Allocable Surplus
• Allocable Surplus = 60% of Available Surplus, 67% in
case of foreign companies.
• Make adjustment for ‘Set-on’ and ‘Set-off’. For
calculating the amount of bonus in respect of an
accounting year, allocable surplus is computed after
considering the amount of set on and set offf from the
previous years, as illustrated in Fourth Schedule.
• The allocable surplus so computed is distributed amongst
the employees in proportion to salary or wages received by
them during the relevant accounting year

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Calculation … 3
• In case of an employee receiving salary or
wages above Rs. 2,500 the bonus payable is
to be calculated as if the salary or wages
were Rs. 2,500 p.m. only

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• To calculate and pay the annual bonus as
required under the Act
• To submit an annul return of bonus paid to
employees during the year, in Form D, to
the Inspector, within 30 days of the expiry
of the time limit specified for payment of
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Duties …2
• To co-operate with the Inspector, produce
before him the registers/records maintained,
and such other information as may be
required by them.
• To get his account audited as per the
directions of a Labour Court/Tribunal or of
any such other authority

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• An employer has the following rights:

• Right to forfeit bonus of an employee, who

has been dismissed from service for fraud,
riotous or violent behaviour, or theft,
misappropriation or sabotage of any
property of the establishment

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Rights …1
• Right to make permissible deductions from
the bonus payable to an employee, such as,
festival/interim bonus paid and financial
loss caused by misconduct of the employee.
• Right to refer any disputes relating to
application or interpretation of any
provision of the Act, to the Labour Court or
Labour Tribunal.

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• Right to refer any dispute to the Labour
Court/Tribunal Employees, to whom the
Payment of Bonus Act does not apply,
cannot raise a dispute regarding bonus
under the Industrial Disputes Act.
• Right to seek clarification and obtain
information, on any item in the accounts of
the establishment.
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ACT 1965*
* Till 1965, it was entirely up to the employer to pay
bonus to his employees. But the enactment of the
Payment of Bonus Act 1965 makes this annual

payment obligatory on the employers.

• To maintain peace and harmony between
labour and capital by allowing the
employees, in recognition of their rights, to
share in the prosperity of the establishment
reflected by the contributions made by
capital, management and labour.
• To provide for payment of bonus to persons
employed in certain establishments and for
matters connected therewith.

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• Every factory defined in the Factories

• Every other establishment in which 20

or more persons are employed on any
day during the accounting year.

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• The Act specifically precludes some categories
of employees from this Act. E.g. Bank
employees (other than RBI) are eligible for
bonus but employees of LIC are not. Employees
of Universities and educational institutions or
hospitals or seamen or employees employed
through contractors etc., are not eligible for
bonus. Moreover, the Central Govt., is
empowered to make such rules as it thinks fit
excluding certain employees drawing a certain
amount of salary from receiving bonus.

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• The employee should have worked for not
less than 30 days in that year

• The employee should not have been

dismissed from service for fraud, riotous or
violent behaviour while on the premises of
the establishment or for theft,
misappropriation or sabotage of any
property of the establishment.

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– Bonus cannot be claimed as a right. The
bonus formula under the Act rests on the
calculation of available surplus. It entails
the following calculations:

– Computation of the gross profit (not in the

sense of gross profit under accountancy)

– Certain deductions from the gross profit.

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• The bonus formula as envisaged in the Act
provides for the payment of minimum &
maximum bonus to the employees in an
accounting year so that they are not
deprived of any bonus in the accounting
year. The bonus is payable even if there
are losses in that particular year.
• Minimum bonus : 8.33% of the salary or
wage earned by the employee during the
accounting year or Rs. 100 whichever is

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• Maximum bonus: Bonus at a higher rate
is payable only when the employees share
of bonus in a particular year exceeds the
minimum bonus payable to employees.
The distribution in this case will be
proportionate to the salary or wages
earned by the employee during the
accounting year subject to a maximum of
20% of such salary or wage.
• Where the salary of an employee exceeds
Rs. 2,500 per month, the bonus payable
to such an employee will be calculated as
if his salary or wages were Rs. 2,500 per
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The bonus shall be paid in cash within
a period of 8 months from the close of
the accounting year.

If an employee has deceased, then his

legal heirs can claim bonus for that
part of the year for which the employee
was alive

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• To secure industrial peace:
– a) by preventing and settling industrial
disputes between the employers and
– b) by securing and preserving amity and
good relations between the employers and
workmen through an internal works
committee and
– c) promoting good relations through an
external machinery of conciliation, courts
of inquiry, labour courts, industrial
tribunals and national
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• To ameliorate the condition of workmen
in industry by redressal of grievances of
workmen through a statutory
machinery and provide job security.
• The main object of this Act is to make provisions
for the investigation and settlement of industrial
disputes. It seeks to prevent industrial strikes,
to maintain industrial peace, to promote
industrial harmony and to ensure social justice.
The ultimate object is to help the industrial
progress and economic growth of the national
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• Industry means any systematic activity
carried on by the co-operation between an
employer and his workmen.
• The employer may employ the workmen
directly or by or through an agency,
including a contractor. The employment
should, however be for the production,
supply or distribution of goods & services
with a view to satisfy human wants and
• It makes no difference whether or not: a)
any capital has been invested or b) such
activity is carried on with a motive to make
any gain or profit.
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• Workman is a person employed in any
industry to do any manual, unskilled,
skilled, technical, operational, clerical
or supervisory work for hire or reward,
whether the terms of employment be
expressed or implied and for the
purpose of any proceeding under this
act in relation to an industrial dispute,
including any such person who has
been retrenched, dismissed or
discharged in connection with or as a
consequence of that dispute.
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• In common language, any industrial
dispute is implied to mean a dispute
between the workmen and
• Under the Act, Industrial Dispute

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• There should be a real & substantial
dispute or difference (It means that
the dispute has some element of
persistency and continuity till resolved
and is likely, if not resolved, to endanger
the industrial peace of the undertaking
or the community)
• The dispute should be between
employer and his workmen.
• The dispute or difference must be
connected with the employment or
non-employment or terms of
employment, or the conditions of
of any person.
IRLL - Labour Laws 85
• The act contains provisions regarding:
a) Lock outs, b) Lay off, c) List of
industries which can be declared to be
public utility services, d) Retrenchment,
e) Strike, f) List of unfair trade practices
by employer & workmen which are
prohibited, g) Circumstances when the
dispute can be referred to tribunals etc.
and h) award & settlement.

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• Lockout is an employer’s weapon.
It means the temporary closing of
a place of employment, or the
suspension of work or refusal of
an employer to employ any
number of persons employed by

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The essentials of a lockout
• There is a temporary closing of a place of
employment or the suspension or with
holding of work by the employer.
• There is an element of demands for
which the place of employment is locked
out or closed, and
• There is an intention to re-employ the
workers if they accept the demands.

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• It means the failure, refusal or
inability of an employer to give
employment to a workman:
– whose name is borne on the muster
rolls of his industrial establishment
– who has not been retrenched.

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The failure, refusal or
inability may be due to:
• Shortage of coal, power or raw
• Accumulation of stocks,
• Breakdown of machinery, and
• Natural calamity.

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• The employer is bound to pay
compensation to the workman for
the period of lay off. The right of the
workman to lay-off compensation is
designed to relieve the hardship
caused by the unemployment due to
no fault of the workman. It is based
on grounds of humane public policy.

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• It means to end, conclude or cease.
Under the act it means the
termination by the employer of the
service of a workman for any reason
whatsoever otherwise than as
punishment inflicted or by way of
disciplinary action.

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• But it does not include:
• voluntary retirement of the workman
• retirement due to superannuation
• retirement due to non renewal of
contract of employment &
• termination on the grounds of
continued ill health.

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• No workman, who has been in
continuous service for not less than 1
year under an employer, shall be
retrenched by that employer until:
– the workman has been given 3 months
notice in writing indicating the reasons
for retrenchment and the period of notice
has expired, or the workman has been
paid in lieu of such notice, wages for the
period of notice
– the prior permission of the appropriate
authority as may be specified by the
govt. has been obtained on an
application made in this regard.
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• The retrenchment is on the basis of the
principle of last come first go.

• The workman shall be paid

retrenchment compensation at the
rate of 15 days average pay for every
completed year of service or part
thereof in excess of 6 months.

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• Strike is the weapon of the workman.
It means:
– Cessation of work by a body of persons
employed in any industry acting in
– Concerted refusal of any number of
persons who are or have been so
employed to continue to work or accept
employment or
– Refusal under a common understanding
of any number of such persons to
continue to work or to accept
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• The object of the Act is to provide for
certain benefits to employees in case
of sickness, maternity and
employment injury and to make
provision for certain other matters in
relation thereto.
• The act provides for these benefits
through compulsory state insurance.
These benefits are secured by
financial contributions to the
scheme both by employers and
employees, central and state
government grants, donations &
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• The act is designed to provide cash
benefits to the worker in distress or to his
dependants in case of death. All persons
employed for wages in or in connection
with work of a factory or establishment
are entitled to disablement benefit
provided their remuneration does not
exceed Rs.2,500 per month. The
dependants of workers who died as a
result of any employment injury were
paid compensation in the form of a
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• The ESI scheme offers both direct and
indirect medical care :
– The direct method is called the “service
system” by which the ESI Corporation
provides medical care, either through its
own ESI hospitals or through reservation
of beds in state govt. hospitals.
– The indirect method is known as the panel
system, under which medical care is
provided through private doctors selected
by the state govt. with the approval of the
ESI Corporation.

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• The benefits provided under the act are:

a. Sickness benefit b.maternity

benefit c. disablement benefit d.
dependants benefit e. funeral benefit
f. medical benefit & g. extended
sickness benefit for 22 specified long
term diseases.

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• The main sources of finance are the
contributions from employers and
employees and one eight share from the
state government towards the cost of
medical care .The employee’s
contribution will be 2.25 percent of the
wages while the employer’s contribution
will be 5% of the wage in respect of
every wage period.

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• According to the Act, a factory
means any premises including
– Wherein a manufacturing process is
being carried on
– If power is being used, 10 or more
workers are working
– If power is not being used, 20 or
more workers are working.
• A precinct means a space enclosed by
walls or fences

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• A worker means a person employed, directly
or by or through any agency (including a
contractor) with or without the knowledge of
the principal employer. He may be employed
for or without remuneration. But he must be
employed in a manufacturing process, or in
cleaning some part of the machinery or
premises used for the manufacturing
process, or in some other kind of work
incidental to, or connected with, the
manufacturing process, or the subject of the
manufacturing process
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• The Act contains provisions relating to:
– Approval, Licensing & registration of
– Appointment of Inspecting Staff.
– Provisions ensuring the health of the
– Provisions ensuring safety of workers.
– Provisions regarding the welfare of the
– Provisions regarding the hours of work,
employment of young workers, holidays &
annual leave with wages.

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