Note-1

Sec. 25G : Procedure for Retrenchment

Where any workmen in an industrial establishment who is the citizen of India, is to be

retrenched and he belongs to a particular category of workmen in that establishment, in
the absence of any agreement between the employer and the workmen in this behalf,
the employer shall ordinarily retrench the workman who was the last person to be
employed in that category unless for the reasons to be recorded the employer retrenches
any other workman.

Note-2

In Bangalore Water Supply vs. A. Rajappa; a seven judges bench of the Supreme Court
exhaustively considered the scope of industry and laid down the following test which has
practically reiterated the test laid down in Hospital Mazdoor Sabha case:

Triple Test:

1. where there is systematic activity,

2. organized by cooperation between employer and employee
3. for the production and/or distribution of goods and services calculated to satisfy
human wants and wishes, prima facie, there is an industry in that enterprise.

This is known as triple test.

The following points were also emphasized in the case:

1. Industry does not include spiritual or religious services or services geared to celestial
bliss, example, making, on a large scale, Prasad or food. But includes material services
and things geared to seek celestial bliss.

2. Absence of profit motive or gainful objective is irrelevant, be the venture in the public,
joint, private or other sector.

3. The true focus is functional and the decisive test is the nature of the activity with
special emphasis on the employer-employee relations.

4. If the organisation is a trade or business it does not cease to be one because of

philanthropy, animating the undertaking.

Therefore the consequences of the decision in this case are that professions, clubs,
educational institutions cooperatives, research institutes, charitable projects and other
kindred adventures, if they fulfil the triple test stated above cannot be exempted from
the scope of section 2(j) of the act.
(Note-3)

Sec.2(l): "lock-out" means the temporary closing of a place of employment or the

suspension of work, or the refusal by an employer to continue to employ any number of
persons employed by him;

Section 22: Prohibition of strikes and lock-outs.-

(1) No person employed in a public utility service shall go on strike in breach of contract--
(a) Without giving to the employer notice of strike, as herein-after provided, within
six weeks before striking; or
(b) Within fourteen days of giving such notice; or
(c) Before the expiry of the date of strike specified in any such notice as aforesaid; or
(d) During the pendency of any conciliation proceedings before a conciliation officer
and seven days after the conclusion of such proceedings.

(2) No employer carrying on any public utility service shall lock-out any of his workmen--
(a) without giving them notice of lock-out as hereinafter provided, within six weeks
before locking out; or
(b) Within fourteen days of giving such notice; or
(c) Before the expiry of the date of lock-out specified in any such notice as aforesaid;
or
(d) During the pendency of any conciliation proceedings before a conciliation officer
and seven days after the conclusion of such proceedings.

(3) The notice of lock-out or strike under this section shall not be necessary where there
is already in existence a strike or, as the case may be, lock-out in the public utility
service, but the employer shall send intimation of such lock-out or strike on the day on
which it is declared, to such authority as may be specified by the appropriate
Government either generally or for a particular area or for a particular class of public
utility services.

(4) The notice of strike referred to in sub-section (1) shall be given by such number of
persons to such person or persons and in such manner as may be prescribed.

(5) The notice of lock-out referred to in sub-section (2) shall be given in such manner as
may be prescribed.

(6) If on any day an employer receives from any persons employed by him any such
notices as are referred to in sub-section (1) or gives to any persons employed by him
any such notices as are referred to in sub-section (2), he shall within five days thereof
report to the appropriate Government or to such authority as that Government may
prescribe the number of such notices received or given on that day.

Sec.23 :General prohibition of strikes and lock-outs.

No workman who is employed in any industrial establishment shall go on strike in breach

of contract and no employer of any such workman shall declare a lock-out
(a) During the pendency of conciliation proceedings before a Board and seven days after
the conclusion of such proceedings;
(b) During the pendency of proceedings before a Labour Court, Tribunal or National
Tribunal and two months after the conclusion of such proceedings;
(bb) During the pendency of arbitration proceedings before an arbitrator and two months
after the conclusion of such proceedings, where a notification has been issued under
section 10A (3A); or
(c) During any period in which a settlement or award is in operation, in respect of any of
the matters covered by the settlement or award.

Sec.24 : Illegal strikes and lock-outs.

(1) A strike or a lock-out shall be illegal if--

(i) it is commenced or declared in contravention of section 22 or section 23; or
(ii) it is continued in contravention of an order made under section 10(3) or section
10A(4A)

(2) Where a strike or lock-out in pursuance of an industrial dispute has already

commenced and is in existence at the time of the reference of the dispute to a Board,
an arbitrator, a Labour Court, Tribunal or National Tribunal, the continuance of such
strike or lock-out shall not be deemed to be illegal, provided that such strike or lock-
out was not at its commencement in contravention of the provisions of this Act or the
continuance thereof was not prohibited under section 10(3) or section 10A(4A).

(3) A lock-out declared in consequence of an illegal strike or a strike declared in

consequence of an illegal lock-out shall not be deemed to be illegal.

Sec.25 :Prohibition of financial aid to illegal strikes and lock-outs.

No person shall knowingly expend or apply any money in direct furtherance of support of
any illegal strike or lock-out.

Sec.26 : Penalty for illegal strikes and lock-outs.

(1) Any workman who commences, continues or otherwise acts in furtherance of, a strike
which is illegal under this Act, shall be punishable with imprisonment for a term which
may extend to one month, or with fine which may extend to fifty rupees, or with both.

(2) Any employer who commences, continues, or otherwise acts in furtherance of a lock-
out which is illegal under this Act, shall be punishable with imprisonment for a term
which may extend to one month, or with fine which may extend to one thousand
rupees, or with both.

Constitutional Validity of Right to Strike

Right to strike is not a fundamental right but a legal right and with this right statutory
restriction is attached in the industrial dispute Act, 1947.

Position in India

The right to strike in the Indian constitution set up is not absolute right but it flow from
the fundamental right to form union. As every other fundamental right is subject to
reasonable restrictions, the same is also the case to form trade unions to give a call to
the workers to go on strike and the state can impose reasonable restrictions. In the All
India Bank Employees Association v. N.I.T. , the Supreme Court held,

"the right to strike or right to declare lock out may be controlled or restricted by
appropriate industrial legislation and the validity of such legislation would have to be
tested not with reference to the criteria laid down in clause (4) of article 19 but by totally
different considerations."

Thus, there is a guaranteed fundamental right to form association or Labour unions but
there is no fundamental right to go on strike. Under the Industrial Dispute Act, 1947 the
ground and condition are laid down for the legal strike and if those provisions and
conditions are not fulfilled then the strike will be illegal

Even as early as 1961, the Supreme Court had held in Kameshwar Prasad v. State of
Bihar (ii) that even a very liberal interpretation of article 19 (1) (c) could not lead to the
conclusion that the trade unions have a guaranteed fundamental right to strike. In All
India Bank Employees' Association v. National Industrial Tribunal (iii - the AIBE case) also
it was contended that the right to form an association guaranteed by Article 19 (1) (c) of
the Constitution, also carried with it the concomitant right to strike for otherwise the right
to form association would be rendered illusory. The Supreme Court rejected this
construction of the Constitution

Difference between Strike & Lock out

In the realm of labour law, strikes and lockouts are types of work stoppages. A Strike is
initiated by the employees and is when the workers cease work during a labour
dispute. A lockout is initiated by the employer and is a denial of employment during a
labour dispute.

(Note 4 )

Sec.33 : Conditions of service, etc., to remain unchanged under certain

circumstances during pendency of proceedings.

(1) During the pendency of any conciliation proceeding before a conciliation officer or a
Board or of any proceeding before an arbitrator or a Labour Court or Tribunal or National
Tribunal in respect of an industrial dispute, no employer shall-

(a) in regard to any matter connected with the dispute, alter, to the prejudice of the
workmen concerned in such dispute, the conditions of service applicable to them
immediately before the commencement of such proceeding; or

(b) for any misconduct connected with the dispute, discharge or punish, whether by
dismissal or otherwise, any workmen concerned in such dispute,

Except with the express permission in writing of the authority before which the
proceeding is pending.

(2) During the pendency of any such proceeding in respect of an industrial dispute, the
employer may, in accordance with the standing orders applicable to a workman
concerned in such dispute or, where there are no such standing orders, in accordance
with the terms of the contract, whether express or implied, between him and the
workman--

(a) alter, in regard to any matter not connected with the dispute, the conditions of
service applicable to that workman immediately before the commencement of
such proceeding; or

(b) for any misconduct not connected with the dispute, or discharge or punish,
whether by dismissal or otherwise, that workman:

Provided that no such workman shall be discharged or dismissed, unless he has

been paid wages for one month and an application has been made by the
employer to the authority before which the proceeding is pending for approval of
the action taken by the employer.

(3) Notwithstanding anything contained in sub-section (2), no employer shall, during the
pendency of any such proceeding in respect of an industrial dispute, take any action
against any protected workman concerned in such dispute--
 a) by altering, to the prejudice of such protected workman,the conditions of service
applicable to him immediately before the commencement of such proceedings; or

b) by discharging or punishing, whether by dismissal or otherwise, such protected

workman,

Except with the express permission in writing of the authority before which the
proceeding is pending.

Explanation.--For the purposes of this sub-section, a "protected workman", in relation to

an establishment, means a workman who, being a member of the executive or other
office bearer of a registered trade union connected with the establishment, is recognised
as such in accordance with rules made in this behalf.

(4) In every establishment, the number of workmen to be recognised as protected

workmen for the purposes of sub-section (3) shall be one per cent. of the total number of
workmen employed therein subject to a minimum number of five protected workmen and
a maximum number of one hundred protected workmen and for the aforesaid purpose,
the appropriate Government may make rules providing for the distribution of such
protected workmen among various trade unions, if any, connected with the
establishment and the manner in which the workmen may be chosen and recognised as
protected workmen.

(5) Where an employer makes an application to a conciliation officer, Board, an

arbitrator, a labour Court, Tribunal or National Tribunal under the proviso to sub-section
(2) for approval of the action taken by him, the authority concerned shall, without delay,
hear such application and pass, within a period of three months from the date of receipt
of such application, such order in relation thereto as it deems fit:

Provided that where any such authority considers it necessary or expedient so to do, it
may, for reasons to be recorded in writing, extend such period by such further period as
it may think fit:

Provided further that no proceedings before any such authority shall lapse merely on the
ground that any period specified in this sub-section had expired without such
proceedings being completed.

(Note 5)

Lay-Off:
1. Section 2 (kkk) defines Lay-off.
2. Lay-off is purely temporary.
Retrenchment:
1. Section 2 (oo) defines
Retrenchment.
2. Retrenchment is permanent. Of
course, the re-appointment of
retrenched persons is not bar at law.
They may again be appointed in
appropriate cases.

3. In lay-off, the employer is compelled to 3. In retrenchment, the employer

refuse employment under certain lessens over-burdened / surplus
circumstances, viz. shortage of raw materials, employees under circumstance s, viz.
power, finance, etc., which arise temporarily Government policies, loss in some
in the industry. departments, etc.

4. Where the employer declares lay-off, the 4. While the process of retrenchment is
industry stops its function. going on, the industry does not stop its
function. It continues to function.
5. In lay-off, all the employees or a group of 5. In retrenchment, the last comes, first
employees are refused to employment. goes.

6. The Conditions Precedent is not necessary 6. The Conditions Precedent are to be

in case of lay-off. followed in case of retrenchment, viz.
notice, retrenchment compensation,
notice to Government in the prescribed
manner, etc. (Sec. 25-F).

7. The laid-off employees are paid laid-off 7. The retrenched employees are paid
compensation. The payment of gratuity does retrenchment compensation + payment
not arise in lay-off. of gratuity

8. All of the laid-off employees should be 8. Re-employment of retrenched

taken back in their usual posts, as soonas the workmen also takes place in certain
lay-off lifted out. circumstances. But it is, not mandatory
that all the retrenched workers should
be appointed. (Sec. 25-H)

(Note 6)

Sec.11A: Powers of Labour Courts, Tribunals and National Tribunals to give

appropriate relief in case of discharge or dismissal of workmen.

Where an industrial dispute relating to the discharge or dismissal of a workman has been
referred to a Labour Court, Tribunal or National Tribunal for adjudication and, in the
course of the adjudication proceedings, the Labour Court, Tribunal or National Tribunal, as
the case may be, is satisfied that the order of discharge or dismissal was not justified, it
may, by its award, set aside the order of discharge or dismissal and direct reinstatement
of the workman on such terms and conditions, if any, as it thinks fit, or give such other
relief to the workman including the award of any lesser punishment in lieu of discharge or
dismissal as the circumstances of the case may require:

Provided that in any proceeding under this section the Labour Court, Tribunal or National
Tribunal, as the case may be, shall rely only on the materials on record and shall not take
any fresh evidence in relation to the matter.

(Note 7)

Sec. 4: Amount of compensation.

(1) Subject to the provisions of this Act, the amount of compensation shall be as follows,
namely:

(a) Where death results from the injury; an amount equal to fifty per cent of the monthly
wages of the deceased workman multiplied by the relevant factor; or an amount of 80K
rupees, whichever is more;

(b) Where total permanent disablement results from the injury; an amount equal to sixty
per cent of the monthly wages of the injured workman multiplied by the relevant factor;
or an amount of 90K rupees , whichever is more;

(relevant factor is prescribed in Schedule IV & Monthly wage can be max. 4K)

(c) Where permanent partial disablement result from the injury -

(i) in the case of an injury specified in Part II of Schedule-I, such percentage of the
compensation which would have been payable in the case of permanent total
disablement as is specified therein as being the percentage of the loss of earning
capacity caused by that injury; and
 (ii) in the case of an injury not specified in Schedule-I, such percentage of the
compensation payable in the case of permanent total disablement as is
proportionate to the loss of earning capacity (as assessed by the qualified medical
practitioner) permanently caused by the injury;

(d) Where temporary disablement whether totals or partial results from the injury a half
monthly payment of the sum equivalent to twenty-five per cent of monthly wages of the
workman, to be paid in accordance with the provisions of sub-section (2).

Note-8

Employee Provident Fund Act, 1952

Applicability Sec.1(3):
Subject to the provisions contained in section 16, it applies

(a) to every establishment which is a factory engaged in any industry specified in

Schedule I and in which twenty or more persons are employed and

(b) to any other establishment employing twenty or more persons or class of such
establishments which the Central Government may, by notification in the Official
Gazette, specify, in this behalf:

Provided that the Central Government may, after giving not less than two months notice
of its intention so to do, by notification in the Official Gazette, apply the provisions of this
Act to any establishment employing such number of persons less than twenty as may be
specified in the notification.

An establishment to which this Act applies shall continue to be governed by this Act
notwithstanding that the number of persons employed therein at any time falls below
twenty.

Act not to apply to certain establishments (Sec.16):-

(1) This Act shall not apply

(a) to any establishment registered under the Co-operative Societies Act, or under
any other law for the time being in force in any State relating to co-operative
societies employing less than fifty persons and working without the aid of power;
or

(b) to any other establishment belonging to or under the control of the Central
Government or a State Government and whose employees are entitled to the
benefit of contributory provident fund or old age pension in accordance with any
Scheme or rule framed by the Central Government or the State Government
governing such benefits; or

(c) to any other establishment set up under any Central, Provincial or State Act and
whose employees are entitled to the benefits of contributory provident fund or old
age pension in accordance with any scheme or rule framed under that Act
governing such benefits;

(2) If the Central Government is of opinion that having regard to the financial position of
any class of establishments or other circumstances of the case, it is necessary or
expedient to do so, it may, by notification in the Official Gazette, and subject to such
conditions, as may be specified in the notification, exempt whether prospectively or
retrospectively that class of establishments from the operation of this Act for such period
as may be specified in the notification.

Objects of Employees Provident Funds and Miscellaneous provision Act, 1952:

The Act was enacted with the main objective of making some provisions for the future of
industrial workers after their retirement and for their dependents in case of death. It
provides insurance to workers and their dependents against risks of old age, retirement,
discharge, retrenchment or death of the workers.

Main Provisions :

1. The Employees Provident Fund Scheme 1952 provides for contributory Provident
fund: Statutory rate of contribution to the PF by employees and employers as
prescribed in the Act, is 10% of the pay of the employees. The term wages
includes basic wage, DA, including cash value of Food concession and retaining
allowance, if any.

2. Employees Pension Scheme provides for monthly member pension, widow

pension, orphan pension and nominee pension: Employee is not required to
contribute separately under Employees pension scheme. Employer share of PF
contribution @8.33% is diverted to pension fund every month. Employee will be
entitled to pension on completing 58 years with minimum service of 10 year.

3. The Employees Deposit-linked Insurance Scheme provides for insurance cover to

all PF members in the event of their unfortunate death while in service: While the
employees are not required to contribute to the Insurance fund, the employers are
required to pay contributions to it @.5% of the pay of employee. Central
Government also contributes to the insurance fund @.25% of the pay iro the
covered employee

Note - 9

THE MATERNITY BENEFIT ACT, 1961

The object of the Maternity Benefit Act, 1961: The Object of the Act is (1) to provide
for maternity benefit to women workers in certain establishments; (2) to regulate the
employment of women workers in such establishments for certain period before and after
child birth.

Establishments are covered by the Act: The Act applies to:

(1) every establishment being a factory, mine, plantation or circus;
(2) every shop in which 10 or more persons are employed;
(3) any other establishment to which the Act is applied by the State Government under
the proviso to Section 2(1)

Note: (1) The Act applies to a factory, mine or plantation belonging to Government. (2)
The Act does not apply to any factory or other establishment to which the provisions of
the Employees' State Insurance Act apply. {Section 2}

Is there any justification for denying the benefits of the Maternity Benefit
Act to women workers on the ground that they are not regular employees but
they are on the muster roll?: The Supreme Court, in Municipal Corporation of
Delhi v. Female workers (Muster Roll) & Anr. (2000 I C.I.R. 879) has said; "We have
scanned the different provisions of the Act, but we do not find anything contained in the
Act which entitles only regular woman employees to the benefit of maternity leave and
not those who are engaged on casual basis or on muster roll on daily wage basis."
Restrictions placed by the Act on the employment of women: The restrictions
placed by the Act on the employment of women are as follows:
i. The employer is prohibited from knowingly employing a woman in
any establishment during the six weeks immediately following the day of her
delivery or her miscarriage;
ii. A woman also, on her part, is required to abstain from working in any
establishment during the said period;
iii. A pregnant woman can also request her employer not to give her any work which
is of an arduous nature or which involves long hours of standing, etc. during the
period of one month immediately preceding the period of six weeks, before the
date of her expected delivery or any period during the said period of six weeks for
which the pregnant woman does not avail of leave of absence, under the Act. On
such a request being made by her, the employer shall not give her such work
during such period. {Section 4}

To whom maternity benefit is payable in case of death of a woman?: If a woman

entitled to maternity benefit dies before receiving such benefit, the employer shall pay
such benefit to the person nominated by the woman and in case there is no such
nominee, to her legal representative. {Section 7}

Restrictions placed by the Act on the termination of employment of a woman:

When a woman absents herself from work in accordance with the provisions of the Act, it
shall be unlawful for her employer to discharge or dismiss her during or on account of
such absence. {Section 12}

Time for payment of maternity benefit: The amount of maternity benefit for the
period preceding the date of her expected delivery shall be paid in advance to the
woman on production of proof that the woman is pregnant and the amount due for the
subsequent period shall be paid to the woman within 48 hours of production of proof that
the woman has been delivered of a child. {Section 6}

Period for which a woman is entitled to maternity benefit and the rate of the
benefit: (i) The maximum period for which any woman shall be entitled to maternity
benefit shall be 12 weeks of which not more than 6 weeks shall precede the date of her
expected delivery. If a woman dies during this period, the maternity benefit shall be
payable only for the days up to and including the day of her death. If a woman, having
been delivered of a child, dies during her delivery or during the period immediately
following the date of her delivery for which she is entitled for the maternity benefit,
leaving behind in either case the child, the employer shall be liable to the maternity
benefit for the entire period but if the child also dies during the said period, then, for the
days up to and including the date of the death of the child.

(ii) But no woman shall be entitled to maternity benefit unless she has actually worked in
an establishment of the employer from whom she claims maternity benefit, for a period
of not less than 80 days in the 12 months immediately preceding the date of her
expected delivery.

For the purpose of calculating the days
the establishment, the days for which she
under any law to be holidays with wages
preceding the day of her delivery, the
immediately following that day.
on which a woman has actually worked in
has been laid off or was on holidays declared
during the period of 12 months immediately
actual day of her delivery and any period

For the purpose of this provision, 'the average daily wage' means the average of the
woman's wages payable to her for the days on which she has worked during the period of
3 calendar months immediately preceding the date from which she absents herself on
account of maternity, or the minimum rate of wage fixed or revised or under
the Minimum Wages Act, 1948 or 10 rupees, whichever is the highest. {Section 5}

Is a woman entitled to maternity benefit, also entitled to any medical bonus?: A

woman entitled to maternity benefit under the Act shall also be entitled to receive from
her employer a medical bonus of 250 rupees, if no pre-natal confinement and postnatal
care is provided for by the employer free of charge. The medical bonus shall be paid
along with the second installment of the maternity benefit. {Section 8 & Rule 5}

Can a woman claim the maternity benefit from her employer if she works
elsewhere during the period for which she has been permitted to absent
herself under the provisions of the Act?: If a woman works in
any establishment after she has been permitted by her employer to absent herself under
the provisions of the Act for any period during such authorized absence, she shall forfeit
her claim to the maternity benefit for such period. {Section 18}

Is it permissible under the Act to exempt any establishment for the provisions
of the Act?: The appropriate Government can exempt any establishment from the
operation of all or any of the provisions of the Act or of any rule made under the Act if the
benefits provided by the establishment are not less favourable that those provided in the
Act. {Section 26}

Is a woman entitled to any leave with wages for illness in addition to the
period of absence allowed to her under the provisions of the Act?: A woman
suffering from illness arising out of pregnancy delivery, premature birth of child or
miscarriage shall be entitled, in addition to the period of absence allowed to her under
the provisions of the Act, to leave with wages at the rate of maternity benefit for a
maximum period of one month. {Section 10}

Is a woman entitled to any leave with wages for miscarriage?: In case of

miscarriage, a woman shall be entitled to leave with wages at the rage of maternity
benefit, for a period of 6 weeks immediately following the day of her miscarriage.
{Section 9}

Is it necessary for a woman claiming leave with wages for miscarriage to

satisfy the condition that she had worked for a period of not less than 80 days
in the 12 months immediately preceding the date of miscarriage?: Such condition
has to be satisfied for claiming Maternity Benefit under Section 5 of the Act. There is no
condition of any sort to be satisfied for claiming leave wages for miscarriage under
Section 9 of the Act.

What are the other obligations of the employer under the Act?: Under the Act the
employer is required: (a) to exhibit the abstract of the provisions of the Act and the rules
made thereunder in a conspicuous place in every part of the establishment in which
women are employed {Section 19 & Rule 5}; (b) to maintain a muster roll in the
prescribed form {Rule 3}; (c) to submit annual returns in the four prescribed forms. {Rule
16}

What is the punishment for the contravention of the provisions of the Act?: (1)
If any employer fails to pay any amount of maternity benefit to a woman entitled under
the Act or discharges or dismisses such woman during or on account of her absence from
work in accordance with the provisions of the Act, he shall be punishable with
imprisonment which shall not be less than three months but which may extend to one
year and with fine which shall not be less than two thousand rupees but which may
extend to five thousand rupees. The Court may, however, for sufficient reasons to be
recorded in writing, impose a sentence of imprisonment for a lesser term or fine only in
lieu of imprisonment. (2) If any employer contravenes the provisions of the Act or the
rules made thereunder, he shall, if no other penalty is elsewhere provided by or under
the Act for such contravention, be punishable with imprisonment which may extend to
one year, or with fine which may extend to five thousand rupees, or with both. Where the
contravention is of any provision regarding maternity benefit or regarding payment of
any other amount and such maternity benefit or amount has not already been recovered,
the Court shall, in addition, recover such maternity benefit or amount as if it were a fine
and pay the same to the person entitled hereto. {Section 21}
Note - 10

THE PAYMENT OF BONUS ACT, 1965

The Payment of Bonus Act, 1965, gives to the employees a statutory right to a share in
the profits of his employer. Prior to the enactment of the Act some employees used to get
bonus but that was so if their employers were pleased to pay the same.

What is the Object of the Payment of Bonus Act, 1965?: The object of the Act is to
maintain peace and harmony between labour and capital by allowing the employees to
share the prosperity of the establishment reflected by the profits earned by the
contributions made by capital , Management and labour.

To which establishments is the Act applicable?: The Act is applicable to:

(a) every factory
(b) every other establishment employing 20 or more persons.
The Government can, however, apply the Act to any establishment employing less that
20 but not less than 10 persons. An establishment to which the Act applies shall continue
to be governed by the Act irrespective of any fall in the number of person employed
therein. {Section 1}

Who are entitled to be paid bonus?: Every employee who is drawing a salary or wage
upto Rs. 10000.00 per month (w.e.f. 1-4-2006) and who has worked for minimum period
of 30 days in a year is entitled to be paid bonus. {Section 2(13) & 8}

Is the ceiling limit of a salary or wage of an employee fixed under Section 2(13)
of the Act illegal and invalid?: The provision imposing the ceiling is constitutionally
valid.

Can an employee be held ineligible for payment of Bonus under the Act on the
ground that he is a managerial employee?: An employee, irrespective of whether he
is managerial or not, so long as he came within the definition of employee by virtue of
drawing salary falling within the maximum prescribed under Section 2(13) of the Act, he
would be eligible for payment of bonus under the Act.

Is a seasonal worker entitled to get bonus?: Section 8 relates to the eligibility for
bonus. The only requirement of that section is that the employee should have worked in
an establishment for not less than thirty working days in an accounting year. Therefore, if
a seasonal worker has worked in an establishment for more than thirty working days, he
shall be entitled to get bonus.

What is to be included in and excluded from a salary or wage for the purpose
of calculating bonus?: For the purpose of calculation of bonus a salary or wage
includes a basic salary or wage and dearness allowance but does not include other
allowances, overtime salary or wage, house rent allowance, traveling concessions, bonus,
employer's contribution to provident fund, retrenchment compensation, gratuity or
commission. {Section 2(21)}

Is an employee entitled to get bonus on the basis of his entire salary or wage?:
If an employee is drawing a salary or wage not exceeding Rs. 3500.00 per month, he is
entitled to get bonus on his entire salary or wage. If an employee is getting a salary or
wage exceeding Rs. 3500.00 per month, but not exceeding 10000.00 per month, the
bonus payable to him is to be calculated as if his salary or wage were Rs. 3500.00 per
month. An employee getting a salary or wage exceeding Rs. 10000.00 per month is not
entitled to get bonus. {Section 12}

What is the amount of minimum bonus payable by the employer to his

employees every year?: The employer is bound to pay to his employees every year a
minimum bonus of 8.33% of the salary or wage or Rs. 100.00, whichever is higher,
whether he has any allocable surplus or not. {Section 10}

What is the amount of maximum bonus payable by the employer to his

employees in any year?: When in any year the allocable surplus exceeds the amount
of minimum bonus payable to the employees, the maximum bonus payable by the
employer to his employees in that year is 20% of the salary or wage. {Section 11}

What is the meaning of "available surplus" and "allocable surplus" and What is
the connection between allocable surplus and bonus?: Bonus payable under the
Act is linked with profits. The employer has to calculate "gross profits" of
his establishment in the manner specified in section 4. Then from "gross profits" so
calculated he has to deduct the sums referred to in section 6 as prior charges. The
balance is called "available surplus". A percentage of the available surplus calculated in
accordance with the provisions of sub-section (4) of section 2 is called "allocable
surplus". (67%/60%). Where, in respect of any year the allocable surplus exceeds the
amount of minimum bonus payable to the employees, the employer must pay to every
employee in respect of that year bonus in proportion to the salary or wage earned by the
employee during the year subject to a maximum of twenty percent of such salary or
wage. {Subsection 2(4), 4 , 5, 6 & 11}

What is the principle behind fixing a minimum and maximum limit for payment
of bonus?: The principle behind fixing a minimum and maximum limit for payment of
bonus is that the rate of bonus should not fluctuate widely from year to year.

What is the principle of set on and set off of allocable surplus?: The principle of
set on and set off of allocable surplus is as follows:

Where for any year the allocable surplus exceeds the amount of maximum bonus
payable to the employees, then, the excess shall, subject to a limit of twenty percent of
the total salary or wages of the employees, be carried forward for being set on in the
succeeding year and so on to be utilized for the purpose of payment of bonus.

Where for any year there is no available surplus, or the allocable surplus in respect of
that year falls short of the amount of minimum bonus payable to the employees, and
there is no amount or sufficient amount carried forward and set on which could be
utilized for the purpose of payment of the minimum bonus, then, such minimum amount
or the deficiency, as the case may be, shall be carried forward for being set off in the
succeeding year and so on. {Section 15}

Can any amount be deducted from the bonus?: (1) If in any year the employer has
paid any amount to an employee as customary bonus, then he can deduct such amount
from payable to the employee for that year. (2) If an employee is found guilty of
misconduct causing financial loss to the employer, then the employer can deduct the
amount of loss from the amount of bonus payable to the employee for the year in which
he was found guilty of misconduct. {Subsection 17 & 18}

What is the meaning of customary bonus?: Customary bonus is bonus which is

being paid by way of tradition or custom at a uniform rate over a number of years and
which has no link with profit.

What is the time limit for making payment of bonus to the employees?: If there
is no dispute about payment of bonus, bonus must be paid within a period of 8 month
from the close of the accounting year. If there is a dispute about the payment of bonus
pending before any authority, bonus must be paid within one month from the date on
which the award in respect of such dispute becomes enforceable or the settlement in
respect of such dispute comes into operation. In all cases bonus must be paid in cash.
{Section 19}

What is the remedy provided under the Act for recovering bonus due but not
paid?: If any bonus is due to an employee under a settlement, award or agreement, he
can make an application for its recovery to the Government and the Government may
issue a certificate to the Collector to recover the same as an arrear of land revenue. Such
application should be made within one year from the date on which bonus became due to
the employee from the employer. {Section 21}

How to raise a dispute about bonus payable under the Act?: A dispute about
bonus payable under the Act will have to be raised by the employees concerned in
accordance with the provisions of the Industrial Disputes Act, 1947, or any corresponding
State law, as is applicable to them, as such a dispute is deemed to be
an industrial dispute within the meaning of such laws. {Subsection 22 & 39}

What are the offences under the Act and what is the punishment for them?: If
any person contravenes any provision of the Act or any rule made thereunder; or fails to
comply with any direction given to him; he would be punished with imprisonment upto 6
months, or with fine upto Rs. 1000.00 or with both. {Section 28}

Is is open to the employer to pay bonus based on production or productivity?: It

is open to any employer to pay bonus linked with production or productivity instead of
bonus based on profits, if there is an agreement to that effect between him and his
employees, but subject to the provisions of the Act in respect of payment of minimum
and maximum basis. {Section 31A}

Are there any categories of employees who are excluded from the application
of the Act?: The employees of LIC, RBI, UTI, Central Government and State Government
Industrial establishments and Universities and other educational institutions are some of
the excluded categories. {Section 32}

Is it open to employees and employers to agree for grant of bonus under a

formula different from that under the Act?: Employees can enter into an agreement
or a settlement with their employer for granting them 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.
{Subsection 31A & 34}

Is it permissible under the Act to exempt any establishment from the

provisions of the Act?: The Act permits the Government to exempt any establishment
from all or some of the provisions of the Act for a specified period and subject to
specified conditions if, having regard to the financial position and other relevant
circumstances of the establishment, it is of opinion that it will be in public interest to do
so. {Section 36}

Can an establishment whose application under Section 36 of the act for

exemption for a particular period is rejected by the Government, make a
second application for the same period?: The Government has no power to entertain
the second application for the same period.

Are the newly set up establishments exempted from paying bonus to their
employees?: The newly set up establishment is exempted from paying bonus to its
employees in the first five years following the year in which the employer sells the goods
produced or manufactured by him. If, however, the employer derives profit in any of the
first five year, he has to pay bonus for that year. The provisions of set on and set off are
not applicable in such cases. {Section 16}
Can an establishment be deemed to be newly set up by reason of a change in
the ownership of the establishment?: When the ownership of an establishment is
transferred from one person to another, the establishment remains the same and it
cannot be said to be a new establishment in the hands of the transferee.

In what circumstances an employee is disqualified from receiving bonus?: If an

employee is dismissed from services for:
(a) fraud;
(b) riotous or violent behaviour while on the premises of the establishment;
(c) theft, misappropriation, or sabotage of any property of the establishment; he is
disqualified form receiving bonus. {Section 9}

Is an employee, who is illegally dismissed from service and whose dismissal is

set aside by the Labour Court, entitled to get bonus for the years during which
he was out of service due to the dismissal, despite the provision of Section 8 of
the Act that an employee is entitled to be paid in an accounting year, bonus
provided he has worked in the establishment for not less than thirty working
days in that year?: Section 8 of the Act speaks of an employee working in the
establishment for not less than thirty working days in an year to make him eligible for
bonus for that year. But, when an employee, for no fault of his and involuntary, is
prevented from working in the establishment for the prescribed number of days, it does
not automatically follow that he is ineligible for bonus.

Is an employee, who is dismissed from service on the ground that he had

committed theft, fraud and dishonesty in connection with the business of
the establishment in the accounting year 1984-85, disqualified from claiming
bonus for the accounting year 1981-82?: If the employee is entitled to bonus for the
accounting year 1981-82,the employer cannot say that the payment will not be made
because the employee is dismissed on some future date.

Is an employee entitled to be paid bonus for the period during which he is laid
off and is paid lay off compensation?: According to section 14 of the Act an employee
shall be deemed to have worked on the days on which he has bee laid off. During the
period of lay-off he is paid lay-off compensation which is not excluded from the purview
of the definition of wages under the Act. He is therefore entitled to be paid bonus for the
period.

If a management has a number of departments, undertakings or branches,

should they be treated as separate establishments or as one composite
establishment?: If an establishment consists of different departments or undertakings
or has branches, whether situated in the same place or in different places, unless a
separate balance-sheet and profit and loss account are prepared and maintained in
respect of them, all such departments of undertakings or branches should be treated as
parts of the same establishment for the purpose of computation of bonus, and once they
are treated as parts of the same establishment, they should be continued to be treated
as such. {Section 3}

Is the employer required to maintain any registers under the Act?: Every
employer is required to maintain, in the prescribed form, the following three registers:
a. a register showing the computation of the allocable surplus;
b. a register showing the set-on and set-off of the allocable surplus;
c. a register showing the details of the amount of bonus payable to each of
employees, the amount of deductions if any, and the amount actually paid.
The employer is also required to send, in the prescribed form, an annual return to the
Inspector appointed under the Act. The time limit for sending the annual return is thirty
days from the expiry of the time limit specified in section 19 for payment of bonus.
{Section 26 & Rule 4 and 5}
Note-11

Payment of Gratuity Act, 1972

An Act to provide for a Scheme for the payment of gratuity to employees engaged in
factories, mines, oilfields, plantations, ports, railway companies, shops or other
establishments and for matters connected therewith or incidental thereto

Objective: The objects of the Payment of Gratuity Act, 1972 are mentioned below-
i) To provide for a Scheme for the payment of Gratuity to employees.
ii) To provide for matters connected with or incidental to the Scheme for payment of
Gratuity.
iii) To provide retiring benefits to employees who have rendered continuous services to
his employer and thereby contributed to his prosperity.
iv) To define the principles of payment of gratuity according to the prescribed formula.
v) To provide machinery for the employment of liability for payment of gratuity.

Circumstances in which Payment of gratuity becomes payable (Sec.4)-

(1) Gratuity shall be payable to an employee on the termination of his employment after
he has rendered continuous service for not less than five years--
(a) on his superannuation, or
(b) on his retirement or resignation, or
(c) on his death or disablement due to accident or disease:
Provided that the completion of continuous service of five years shall not be necessary
where the termination of the employment of any employee is due to death or
disablement:

Provided further that in the case of death of the employee, gratuity payable to him shall
be paid to his nominee or, if no nomination has been made, to his heirs, and where any
such nominees or
heirs is a minor, the share of such minor, shall be deposited with the controlling authority
who shall invest the same for the benefit of such minor in such bank or other financial
institution, as may be prescribed, until such minor attains majority

(2) For every completed year of service or part thereof in excess of six months, the
employer shall pay gratuity to an employee at the rate of fifteen days' wages based on
the rate of wages last drawn by the employee concerned:

Provided that in the case of a piece-rated employee, daily wages shall be computed on
the average of the total wages received by him for a period of three months immediately
preceding the termination of his employment, and, for this purpose, the wages paid for
any overtime work shall not be taken into account

Provided further that in the case of "an employee who is employed in a seasonal
establishment and who is not so employed throughout the year", the employer shall pay
the gratuity at the rate of seven days' wages for each season

(3) The amount of gratuity payable to an employee shall not exceed Rs.10 lacs.

(4) For the purpose of computing the gratuity payable to an employee who is employed,
after his disablement, on reduced wages, his wages for the period preceding his
disablement shall be taken to be the wages received by him during that period, and his
wages for the period subsequent to his disablement shall be taken to be the wages as so
reduced.

(5) Nothing in this section shall affect the right of an employee receive better terms of
gratuity under any award or agreement or contract with the employer.

(6) Notwithstanding anything contained in sub-section (1),--

 a) the gratuity of an employee, whose services have been terminated for any act,
wilful omission or negligence causing any 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;

b) the gratuity payable to an employee may be wholly or partially forfeited--

(i) if the services of such employee have been terminated for his riotous or
disorderly conduct or any other act violence on his part, or

(ii) if the services of such employee have been terminated for any act which
constitutes an offence involving moral turpitude, provided that such offence is
committed by him in the course of his employment.

Determination of the amount of gratuity (Sec.7):

As soon as gratuity becomes payable, the employer shall determine the amount of
gratuity and give notice in writing to the person to whom the gratuity is payable and also
to the controlling authority specifying the amount of gratuity so determined

The employer shall arrange to pay the amount of gratuity within thirty days from the
date it becomes payable to the person to whom the gratuity is payable

If the amount of gratuity payable is not paid by the employer within the period specified,
the employer shall pay, from the date on which the gratuity becomes payable to the date
on which it is paid, simple interest at such rate, not exceeding the rate notified by the
Central Government from time to time for repayment of long-term deposits:
Provided that no such interest shall be payable if the delay in the payment is due to the
fault of the employee and the employer has obtained permission in writing from the
controlling authority for the delayed payment on this ground

If there is any dispute as to the amount of gratuity payable to an employee under this Act
or as to the admissibility of any claim of, or in relation to, an employee for payment of
gratuity, or as to the person entitled to receive the gratuity, the employer shall deposit
with the controlling authority such amount as he admits to be payable by him as gratuity.

Where there is a dispute with regard to any matter as aforesaid, the employer or
employee or any other person raising the dispute may make an application to the
controlling authority for deciding the dispute.

The controlling authority shall, after due inquiry and after giving the parties to the
dispute a reasonable opportunity of being heard, determine the matter or matters in
dispute and if, as a result of such inquiry any amount is found to be payable to the
employee, the controlling authority shall direct the employer to pay such amount or, as
the case may be, such amount as reduced by the amount already deposited by the
employer.

The controlling authority shall pay the amount deposited, including the excess amount, if
any, deposited by the employer, to the person entitled thereto.

Recovery of gratuity (Sec.8)

If the amount of gratuity payable under this Act is not paid by the employer, within the
prescribed time, to the person entitled thereto, the controlling authority shall, on an
application made to it in this behalf by the aggrieved person, issue a certificate for that
amount to the Collector, who shall recover the same, together with compound interest
thereon at such rate as the Central Government may, by notification, specify, from the
date of expiry of the prescribed time, as arrears of land revenue and pay the same to the
person entitled thereto:
Provided that the controlling authority shall, before issuing a certificate under this
section, give the employer a reasonable opportunity of showing cause against the issue
of such certificate:

Provided further that the amount of interest payable under this section shall, in no case
exceed the amount of gratuity payable under this Act.

Note 12

THE EQUAL REMUNERATION ACT, 1976

The Equal Remuneration Act is a gift of "the International Women's Year" to women
workers. It is enacted to give effect to the provision of Article 39 of the Constitution of
India which contains a directive principle of equal pay for equal work for both men and
women. The Act provides for the payment of equal remuneration to men and women
workers for the same work or work of a similar nature and for the prevention of
discrimination on the ground of sex against women in the matter of employment. The
main provisions of the Act are as follows.

Equal pay for equal work: No employer shall pay to any worker employed by him
remuneration at rates less favourable than those at which remuneration is paid by him to
the workers of the opposite sex for performing the same work or work of similar nature.
{Section 4(1)}

No discrimination to be made while recruiting men and women: No employer

shall make any discrimination against women while making recruitment for the same
work or work of a similar nature. {Section 5}

Exceptions: The provisions of the Act shall be inapplicable when special treatment is
given to women under any law or when special treatment is accorded to women in
connection with the birth of a child. {Section 15}

Claims and Complaints:

a. Complaints with regard to the contravention of any provision of the Act and claims
arising out of non-payment of wages at equal rates to men and women workers
for the same work or work of similar nature shall be heard and decided by an
authority appointed by the appropriate Government. An appeal shall lie against
any order of the authority to an appellate authority appointed by the appropriate
Government {Section 7}

b. Monies due from an employer arising of the decision of the authority or the
appellate authority can be recovered by making an application under Section 33-
C(1) of the Industrial Disputes Act, 1947. {Section 7(8)}

Penalties: If any employer:

(a) makes any recruitment in contravention of the provisions of the Act, or
(b) makes any payment of remuneration at unequal rates to men and women workers,
for the same work or work of a similar nature, or
(c) makes any discrimination between men and women workers in contravention of the
provisions of the Act,
he would be punished with fine upto Rs. 10000.00 {Section 10}

Maintenance of Register: Every employer shall maintain in the prescribed form a

register in relation to the workers employed by him. {Section 8 & Rule 6}

What is meant by equality of work?: The equality of work is not based on the
designation or the nature of work alone. There are several other factors, which are
equally relevant. They are qualifications, responsibilities, reliabilities, experience,
confidentiality, functional need and requirements commensurate with the position in the
hierarchy.

Principal of equal pay for equal work is not applicable in professional services.
No Employer shall, for the purpose of complying with the provisions of this act, reduce
the rate of remuneration of any worker.

Note 13

THE MINIMUM WAGES ACT, 1948

What is the object of the Minimum Wages Act, 1948?: The object of the Act is to
provide for fixing and revising minimum wages in certain employments in order to stop
sweated labour and prevent the exploitation of unorganized labour.

Which employments are intended to be benefited by fixation of minimum rates

of wages?: The Government is required to fix minimum rates of wages payable to
employees employed in the employments specified in Part I or Part II of the Schedule
appended to the Act. {Section 3}

Is the list of employments specified in the Schedule to the Act exhaustive?: The
list is not an exhaustive one. The appropriate Government can add any employment to
either part of the Schedule. {Section 27}

Is it competent for a government to bring a teacher within the purview of the

Act by amending the Schedule to the Act?: A teacher would not come within the
definition of "employee" given under Section 2(i) of the Act. It is beyond the competence
of a Government to bring the teachers of an educational institution under the purview of
the Act.

Is the Act applicable to daily rated employees?: The Act is expected to fix the
minimum wages in respect of employees whether they are casual, daily rated, temporary
or permanent. The Act is applicable to daily rates employees also.

What is the procedure the Government has to follow for fixing and revising
minimum wages?: The Government has to fix and revise minimum wages either-
a. by appointing one or more committees and sub-committees consisting of
representatives of employers and employees and also of independent persons to
hold necessary enquiries and by taking into consideration the advice tendered by
the committee or committees; or
b. by formulating and publishing its proposals and taking into consideration the
representations received in response to the proposals. {Section 5}

Is the task of the Government over once it fixes minimum rates of wages
payable to employees employed in a scheduled employment?: The task of the
Government is not over once it fixes minimum rates of wages payable to employees
employed in a scheduled employment. The minimum rates of wages of fixed are required
to be reviewed and, if necessary, revised by the Government at intervals not exceeding
five years. {Section 3(1)(b)}

Is it permissible for the employer to pay minimum wages in kind?: As a rule

minimum wages payable under the Act must be paid in cash. The employer, however,
can pay them in kind with the permission of the appropriate Government. {Section 11}

Can the supply of essential commodities at concessional rates from part of the
minimum wage?: Such supply cannot form part of the minimum wage unless it is
authorized by the appropriate Government by a notification in the Official Gazette under
section 11(3) of the Act.
What is the obligation of the employer in respect of payment of wages under
the Minimum Wages Act, 1948?: Where minimum wages are fixed and enforced under
section 5 of the act in respect of any employment covered by the Act, the employer is
bound to pay to every employee engaged in that employment wages at a rate not less
than the minimum rate to fixed and enforced. {Section 12}

Are the employees covered by the Act entitled to overtime wages?: If an

employee covered by the Act works for more than 9 hours on any day or 48 hours in any
week, he is in respect of overtime work entitled to wages at double the ordinary rate of
wages. {Section 14 & Mah. Rule 26}

What is the position of the employer who is unable to pay minimum wages
fixed under the Act?: The employer is bound pay minimum wages fixed under the Act
and it is irrelevant whether he has the capacity to pay them or not.

What is the procedure the employee has to follow for making a claim under the
Act?: The procedure for making a claim is as follows:
a. An employee having any claim under the Act has to make an application to the
Authority appointed under the Act.
b. Such application can be made by the employee himself, or any legal practitioner
or any official of a registered trade union.
c. Such application has to be made within six months from the date on which the
claim amount became payable.
d. In appropriate case the Authority can, over and above directing the payment of
the difference between minimum wages payable and wages actually paid, award
compensation upto ten times the amount of the difference.
e. The amount directed to be paid by the Authority can be recovered as if it were a
fine imposed by a Magistrate.
f. Every direction of the Authority will be final. {Section 20}
Can the Authority appointed under the Act to decide the claims of the
employees award compensation to the tune of ten times of the amount of the
difference between wages payable and wages actually paid, in every case?:
The limit of "ten times the amount of such excess" mentioned in section 20(3)(i) of the
Act is the maximum limit. When the Authority awards heavy compensation under the
said section, it must give reasons for doing so.

What are the offences under the Act and what is the punishment for them?: If
any employer -
a. pays to any employee less than the minimum rates of wages fixed for that
employees' class of work; or
b. contravenes any rule or order made by the appropriate Government under
Section 13 regarding hours of work;
he would be punished with imprisonment upto five years or with fine upto Rs. 10000.00
or with both. The offences under Section 22 of this Act shall be cognizable and non-
bailable. {Section 22, 22B}

Is it permissible for an employee to relinquish his rights under the Act?: An

employee is prohibited from contracting out of the Act, i.e. from giving up any of his
rights under the Act and any contract or agreement made by him relinquishing or
reducing his right to a minimum rate of wages or any privilege or concession accruing to
him under the Act is null and void. {Section 25}

Note 14

The Child Labour (Prohibition and regulation) Act, 1986

Objective : An Act to prohibit the engagement of children in certain employments and to
regulate the conditions of works of children in certain other employments.

Statement of object & Reasons :

There are a number of Acts which prohibit the employment of children below 14 yrs in
certain specified employments. However there is no procedure laid down in any law for
deciding which employments, occupations or processes in which the employment of
children should be banned. There is no law to regulate the working conditions of children
in most of the employments where they are not prohibited from working and are working
under exploitative conditions.
This bill intends to
1) ban the employment of children in specified occupations and processes;
2) regulate the conditions of work of children in employments where they are not
prohibited from working
3) lay down enhanced penalties for employment of children in violation of the
provisions of this Act, and other Act which forbid the employment of children;
4) to obtain uniformity in the definition of child in the related laws.

Child means a person who has not completed his 14 years of age.

Child Labour means the employment of children in an industry or business, especially

when illegal or considered exploitative

Children are prohibited to work in any of the occupation specified in Part A of the
schedule or in any processes set forth in Part B of the schedule Provided that nothing in
this section shall apply to any workshop wherein any process is carried on by the
occupier with the aid of his family or to any school established by or receiving assistance
or recognition from, Government.

7. Hours and period of work

(1) No child shall be required or permitted to work in any establishment in excess of such
number of hours as may be prescribed for such establishment or class of establishments.
(2) The period of work on each day shall be so fixed that no period shall exceed three
hours and that no child shall work for more than three hours before he has had an
interval for rest for at least one hour.
(3) The period of work of a child shall be so arranged that inclusive of his interval for rest,
under sub-section(2), it shall not be spread over more than six hours, including the time
spent in waiting for work on any day.

(i) No child shall be permitted or required to work between 7 p.m. and 8 a.m.

(ii) No child shall be permitted or required to work overtime.

(iii) No child shall be permitted or required to work in any establishment on any day on
which he has already been working in another establishment.

8. Weekly holidays Every child employed in an establishment shall be allowed in each

week, a holiday or one whole day, which day shall be specified by the occupier in a
notice permanently exhibited in a conspicuous place in the establishment and the day so
specified shall not be altered by the occupier more than once in three months.

Note 15

THE PAYMENT OF WAGES ACT, 1936

What is the object of the Payment of Wages Act, 1936?: The main object of the Act
is to avoid unnecessary delay in the payment of wages and to prevent unauthorized
deductions from the wages.
Are all wages covered or protected by the Act?: Wages averaging less than Rs.
6500.00 per month only are covered or protected by the Act with effect from 11th
September 2005. {Section 1(6)}

Are overtime wages to be taken into account for deciding the applicability of
the Act?: Wages means contractual wages and not overtime wages. They are not to be
taken into account for deciding the applicability of the Act in the context of section 1(6)
of the Act.

Can any employer fix a period longer than one month for paying wages to a
person employed by him?: The period to be fixed for paying wages to an employed
person must not exceed one month. That means, an employer can choose to pay wages
to a person employed by him for a period of every week or every fortnight, but not for a
period of every two months or every three months, {Section 4}

What are the requirements of the Act in respect of time of payment of wages?:
The following are the requirements of the Act in respect of time of payment of wages:
a. Wages must be paid on a working day and not on a holiday.
b. Establishments employing less than 1000 persons must pay wages before the
expiry of the 7th day of every month and other establishments must pay wages
before the expiry of the 10th day of every month.
c. When the employment of any person is terminated, the wages earned by him
must be paid before the expiry of the second working day from the day of
termination. {Section 5}

What is the provision of the Act regarding deductions from the wages payable
to an employed person?: The Act prohibits all kinds of deductions except those which
are authorized by or under the Act. {Section 7}

What are the provisions of the Act regarding the imposition of fines on the
employed person?:
a. The employer must exhibit on his premises a list of acts or omissions for which
fines can be imposed.
b. Before imposing a fine on an employed person he must be given an opportunity of
showing cause against the fine.
c. The amount of fine must not exceed 3 percent of the wages.
d. A fine cannot be imposed on an employed person who is under the age of 15
years.
e. A fine cannot be recovered by instalments or after 90 days from the day of the act
or omission for which it is imposed.
f. The moneys realized from fines must be applied to purposes beneficial to
employed persons. {Section 8}
Is the employer free to impose fines in respect of any act of omission on the
part of employed persons?: Fines can be imposed in respect of only those acts or
omissions of the employed persons which are approved by the authority prescribed
under section 8(1) of the Act. {Rules 10 to 12}

What is the procedure prescribed for the imposition of fine and for making
deductions for damage or loss?: Any person desiring to impose a fine on an
employed person or to make a deduction for damage or loss shall explain personally or in
writing to the said person the act or omission, or damage or loss in respect of which the
fine or deduction is proposed to be imposed, and the amount of fine or deduction, which
it is proposed to impose, and shall hear his explanation in the presence of at least one
other person, or obtain it in writing. {Subsection 8(3), 10(1-A) & Rule 15}

What is the procedure an employed person has to follow for claiming deducted
or delayed wages?:
a. If contrary to the provisions of the Act any deduction has been made from the
wages of an employed person or any payment of wages has been delayed, he has
 to make an application for claiming the same to the Authority appointed under the
Act.
b. Such application can be made by the employed person himself or a legal
practitioner or an official of a registered trade union.
c. Such application has to be made within a period of 12 months from the date on
which the date on which the deduction from the wages was made or from the
date on which the payment of the wages was due to be made.
d. When any application under Subsection (2) is entertained, the authority shall hear
the applicant and the employer or other person responsible for the payment of
wages under Section 3, or give them an opportunity of being heard, and, after
such further enquiry, if any, as may be necessary, may, without prejudice to any
other penalty to which such employer or other person is liable under this Act,
direct the refund to the employed person of the amount deducted, or the payment
of the delayed wages, together with the payment of such compensation as the
authority may think fit, not exceeding ten times the amount deducted in the
former case and not exceeding three thousand rupees but not less than one
thousand five hundred rupees in the latter, and even if the amount deducted or
delayed wages are paid before the disposal of the application, direct the payment
of such compensation, as the authority may think fit, not exceeding two thousand
rupees.
e. The amount directed to be paid by the Authority ca be recovered as if it were a
fine.
f. If the employed person is not satisfied with the order of the Authority, he himself
or a legal practitioner or an official of a registered trade union, if the amount
claimed by him is more than Rs. 25.00, can, within 30 days from the date of the
order prefer an appeal to the Appellate court. {Subsection 15 & 17}

If any employee is prevented from making an application for payment of

deducted or delayed wages within the prescribed period of limitation of twelve
months, can the Authority admit his application after the expiry of the said
period?: Under the second proviso to Section 15(2) of the Act the Authority is given
power to condone the delay in making the application within the said period if sufficient
cause is shown by the applicant for not making the application within the said period.

Is it correct to contend that the expression "ten times the amount deducted"
appearing in Section 15(3) of the Act means that the compensation awarded
under that section must be always in multiples of the wages deducted?: The
compensation awarded under section 15(3) may not be in multiples of the wages
deducted. The Authority is free to fix such compensation at the proportionate rate which
it may think to be fair and just subject to the maximum of ten times the amount
deducted.

Is the compensation awarded under section 15(3) of the Act penal or in the
nature of recompensation?: Compensation awarded under section 15(3) is not penal
but is in the nature of a payment by way of recompensation for loss or privation by
reason of deduction from the wages paid.

Can any employed person relinquish his rights under the Act?: An employed
person is prohibited from contracting out of the Act, i.e. from giving up any right
conferred upon him by the Act, and any contract or agreement made by him
relinquishing such rights is null and void. {Section 23}

Is an agreement between an employer and his employees authorising the

deduction of union subscription from the salaries of the employer null and void
under Section 23 of the Act?: Such agreement being beneficial and advantageous to
the employees is not null and void under Section 23 of the Act.

Is deducting some amount or union levies from wages of employees and paying
the same to the union invalid under section 7 of the Act?: If such deduction and
payment is made with the consent of the employees and / or with the approval of a
competent Court, it is not invalid under Section 7 of the Act.

What are the conditions imposed on deductions for recovery of advances of

wages?:
1. An advance of wages shall not exceed four months wages.
2. The advance may be recovered in installments by deduction from wages spread
over not more than 18 months.
3. No installment shall exceed one-third of the wages for the month.
4. The rate of interest charged for advances shall not exceed 6 1/4% per annum.
{Rule 18}

Section 2(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;
(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;
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;
(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 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 in cases other than those
specified
in sub-clause (d).

Sec.7: Deductions which may be made from wages:-

(1) The wages of an employed person shall be paid to him without deductions of any kind
except those authorised by or under this Act.

(2) Deductions from the wages of an employed person shall be made only in accordance
with the provisions of this Act, and may be of the following kinds only, namely:--

(a) fines;

(b) deductions for absence from duty;

(c) deductions for damage to or loss of goods expressly entrusted to the
employed person for custody, or for loss of money for which he is required to account,
where such damage or loss is directly attributable to his neglect or default;

(d) deductions for house-accommodation supplied by the employer or by

Government or any housing board set up under any law for the time being in force
(whether the Government or the board is the employer or not) or any other authority
engaged in the business of subsidising house-accommodation which may be specified in
this behalf by the State Government by notification in the Official Gazette;

(e) deductions for such amenities and services supplied by the employer as the
State Government or any officer specified by it in this behalf may, by general or special
order, authorise.
Explanation.--The word "services" in this clause does not include the supply of tools and
raw materials required for the purposes of employment;

(f) deductions for recovery of advances of whatever nature (including advances for
travelling allowance or conveyance allowance), and the interest due in respect
thereof, or for adjustment of over-payments of wages;

(ff) deductions for recovery of loans made from any fund constituted for the
welfare of labour in accordance with the rules approved by the State Government, and
the interest due in respect thereof;

(fff) deductions for recovery of loans granted for housebuilding or other purposes
approved by the State Government, and the interest due in respect thereof;

(g) deductions of income-tax payable by the employed person;

(h) deductions required to be made by order of a Court or other authority

competent to make such order;

(i) deductions for subscriptions to, and for repayment of advances from any
provident fund to which the Provident Funds Act, 1925 (19 of 1925), applies or any
recognised provident fund as defined in section 58A of the Indian Income-tax Act, 1922
(11 of 1922), or any provident fund approved in this behalf by the State Government,
during the continuance of such approval;

(j) deductions for payments to co-operative societies approved by the State Government
or any officer specified by it in this behalf or to a scheme of insurance maintained by the
Indian Post Office; and
(k) deductions, made with the written authorisation of the person employed for
payment of any premium on his life insurance policy to the Life Insurance
Corporation of India established under the Life Insurance Corporation Act, 1956 (31 of
1956), or for the purchase of securities of the Government of India or of any State
Government or for being deposited in any Post Office Savings Bank in furtherance of any
savings scheme of any such Government.

(kk) deductions made, with the written authorisation of the employed person, for
the payment of his contribution to any fund constituted by the employer or a
trade union registered under the Trade Unions Act, 1926 for the welfare of the
employed persons or the members of their families, or both, and approved by the State
Government or any officer specified by it in this behalf, during the continuance of such
approval;

(kkk) deductions made, with the written authorisation of the employed person,
for payment of the fees payable by him for the membership of any trade union
registered under the Trade Unions Act,
1926;

(l) deductions for payment of insurance premia on Fidelity Guarantee Bonds;

(m) deductions for recovery of losses sustained by a railway administration on account of
acceptance by the employed person of counterfeit or base coins or mutilated or forged
currency notes;

(n) deductions for recovery of losses sustained by a railway administration on account of

the failure of the employed person to invoice, to bill, to collect or to account for the
appropriate charges due to that administration; whether in respect of fares, freight,
demurrage, wharfage and cranage or in respect of sale of food in catering establishments
or in respect of sale of commodities in grain shops or otherwise;

(o) deductions for recovery of losses sustained by a railway administration on account of

any rebates or refunds incorrectly granted by the employed person where such loss is
directly attributable to his neglect or default;

(p) deductions, made with the written authorisation of the employed person, for
contribution to the Prime Minister's National Relief Fund or to such other Fund as
the Central Government may, by notification in the Official Gazette, specify;

(q) deductions for contributions to any insurance scheme framed by the Central
Government for the benefit of its employees.

Note- 15

Trade Union is an organized association of workers in a trade, group of trades,

or profession, formed to protect and further their rights and interests.

The four procedure involved in registration of trade unions are as follows: 1. Appointment
of Registrar 2. Mode of Registration 3. Rights and Duties of Registrar 4. Legal Status of
Registered Trade Union.

1. Appointment of Registrar:

Section 3 of the Trade Union Act, 1926 empowers the appropriate Government to appoint
a person to be registrar of Trade Unions. The appropriate Government be it State or
Central, as the case may be is also empowered to appoint additional and Deputy
Registrars as it thinks fit for the purpose of exercising and discharging the powers and
duties of the Registrar. However, such person will work under the superintendence and
direction of the Registrar. He may exercise such powers and functions of Registrar with
local limit as may be specified for this purpose.

2. Mode of Registration:

Any seven or more persons who want to form trade union, can apply for its registration to
the Registration of Trade Unions under Section 4 (1) of the Trade Unions Act, 1926. These
applicants must be members of a trade union.

In order to check the multiplicity of trade unions, one school of thought has proposed the
number of persons farming a trade union for the purposes of registration be reasonably
increased to 10 per cent of employees of the unit, subject to minimum of seven persons
employed therein This is expected to strengthen the trade union movement. The
application for registration must be sent to the Registrar of Trade Unions in Form A as
required by the Trade Union Act, 1926 under Section 5.
Every application must be accompanied with the following particulars:

1. The names, occupations and addresses of the members making application.

2. The name of the trade union and the address of its head office.

3. The titles, names, ages, addresses and occupations of the office bearers of the trade
union.

4 If a trade union has been in existence for more than one year prior to application of its
registration, a financial statement showing its assets and liabilities prepared in the
prescribed form has also to be submitted to the Registrar along with the application for
registration.

5. Besides, every application must be accompanied with a copy of Rules of Trade union
complying with the items as specified under Section 6 of the Trade Unions Act, 1926.

Rules of a Trade Union:

A trade union can be registered only when its constitution fulfils the following
rules:

1. Name of the trade union;

2. The whole of the objects for which the trade union has been established;

3. The whole of the purposes for which the general funds of a trade union shall be
applicable.

4. The maintenance of a list of the members of the trade union and adequate facilities for
the inspection thereof by the office-bearers and members of trade union;

5. The payment of a subscription by members of the trade union which shall be not less
than 25 naya paise per month per member;

6. The manner in which rules will be amended varied and/or rescinded;

7. The manner in which the members of the executive and the other office-bearers of the
trade union shall be appointed and removed;

8. The manner in which the funds of the trade union shall be kept and audited and
inspection of the books of accounts by the office bearers and members of the trade union
be made;

9. The conditions under which any member shall be entitled to have benefits under the
rules and under which fine or forfeiture shall be imposed on the members; and The
manner in which the trade union shall be dissolved.
3. Rights and Duties of Registrar:

Section 7 of the Act empowers the Registrar of Trade Union to make, if required so,
further enquiries on receipt of an application for registration to fully satisfy himself that
the application complies with the provisions of section 5. However, such enquiries can be
made only from the application and not from any other source.

The duties of the Registrar of Trade Unions in matters of registration of trade union are
laid down under Section 8 of the Act. On having being satisfied with the requirements for
the registration of the union, the Registrar shall register the trade union by entering in a
register. The letter to this effect will be issued to the Trade Union. In case of non-
satisfaction of registrar with the compliance of requirements, the refusal for registration
will be issued to the trade union.

No time limit for the grant or refusal of registration has been prescribed in the Trade
Union Act, 1926. However, there are legal directives issued by the Court to the Registrar
of Trade Unions to perform me statutory duty imposed upon mm under sections 7 and 8
to deal with the application of the Trade Union according to law at an early date

The National Commission on Labour has suggested 30 days excluding the time which the
Union takes in answering queries from the Registrar for the grant or refusal of
registration by the Registrar. The Trade Unions (Amendment) Bill, 1982 has provided for
insertion of the words within a period of 60 days from the date of such compliance after
the words Register the Trade Unions in Section 8 of the Trade Unions Act, 1926. Where,
however, Registrar refuses to grant registration to a trade union, he is under an
obligation to state reasons for refusing to grant registration.

The Societies of Registration Act, 1860, Co-operative Societies Act, 1912 and the
Companies Act, 1956 do not apply to trade unions and registration thereof under any of
these Acts is void ab initio.

4. Legal Status of Registered Trade Union:

Upon the registration, a trade union assumes to a corporate body by the name under
which it is registered. A registered trade union shall have perpetual succession and its
common seal. A registered trade union is an entity distinct from the members of which,
the trade union is composed of It enjoys power to contract and to hold property both
moveable and immoveable and to sue and be sued by the name in which it is registered.

Sec.15 : Objects on which general funds may be spent.

The general funds of a registered Trade Union shall not be spent on any other objects
than the following, namely:--

(a) the payment of salaries, allowances and expenses to office-bearers of the Trade
Union;
(b) the payment of expenses for the administration of the Trade Union, including audit of
the accounts of the general funds of the Trade Union;

(c) the prosecution or defence of any legal proceeding to which the Trade Union or any
member thereof is a party, when such prosecution or defence is undertaken for the
purpose of securing or protecting any rights of the Trade Union as such or any rights
arising out of the relations of any member with his employer or with a person whom the
member employs;

(d) the conduct of trade disputes on behalf of the Trade Union or any member thereof;

(e) the compensation of members for loss arising out of trade disputes;

(f) allowances to members or their dependants on account of death, old age, sickness,
accidents or unemployment of such members;

(g) the issue of, or the undertaking of liability under, policies of assurance on the lives of
members, or under policies insuring members against sickness, accident or
unemployment;

(h) the provision of educational, social or religious benefits for members (including the
payment of the expenses of funeral or religious ceremonies for deceased members) or
for the dependants of members;

(i) the upkeep of a periodical published mainly for the purpose of discussing questions
affecting employers or workmen as such;

(j) the payment, in furtherance of any of the objects on which the general funds of the
Trade Union may be spent, of contributions to any cause intended to benefit workmen in
general, provided that the expenditure in respect of such contributions in any financial
year shall not at any time during that year be in excess of one-fourth of the combined
total of the gross income which has up to that time accrued to the general funds of the
Trade Union during that year and of the balance at the credit of those funds at the
commencement of that year; and

(k) subject to any conditions contained in the notification, any other object notified by the
appropriate
Government in the official Gazette

Sec 10: Cancellation of registration:-

A certificate of registration of a Trade Union may be withdrawn or cancelled by the
Registrar--

(a) on the application of the Trade Union to be verified in such manner as may be
prescribed, or

(b) if the Registrar is satisfied that the certificate has been obtained by fraud or mistake,
or that the Trade Union has ceased to exist or has wilfully and after notice from the
Registrar contravened any provision of this Act or allowed any rule to continue in force
which is inconsistent with any such provision, or has rescinded any rule providing for any
matter provision for which is required by section 6:

Provided that not less than two months' previous notice in writing specifying the ground
on which it is proposed to withdraw or cancel the certificate shall be given by the
Registrar to the Trade Union before the certificate is withdrawn or cancelled otherwise
than on the application of the Trade Union