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Trade union as per Trade Union Act 1926 – “ Any combination formed primarily for
the purpose of regulating the relations between workmen and employers or workmen and
workmen or employers and employers or for imposing restrictive conditions on the
conduct of any trade or business and includes any federation of two or more trade
unions.”
From the above definition it is clear that Trade union is not just an association of
the workmen of a factory or a trade or a business but also can be formed by officers
and managers. Trade union movement in India was started and led by philanthropists
and social organizations and not by the workers.
Bombay Presidency - by servants of India societyEastern India - by Brahmo Samaj
South India centered around Madras - by Theosophical Society
The first phase falls between 1850 and 1900 during which the inception of trade unions
took place. During this period of the growth of Indian Capitalist enterprises, the working
and living conditions of the labour were poor and their working hours were long.
Capitalists were only interested in their productivity and profitability. In addition to long
working hours, their wages were low and general economic conditions were poor in
industries. In order to regulate the working hours and other service conditions of the
Indian textile labourers, the Indian Factories Act was enacted in 1881. As a result,
employment of child labour was prohibited. Mr. N M Lokhande organized people like
Rickshawalas etc., prepared a study report on their working conditions and submitted it to
the Factory Labour Commission. The Indian Factory Act of 1881 was amended in 1891
due to his efforts. Guided by educated philanthropists and social workers like Mr.
Lokhande, the growth of trade union movement was slow in this phase. Many strikes
took place in the two decades following 1880 in all industrial cities. These strikes taught
workers to understand the power of united action even though there was no union in real
terms. Small associations like Bombay Mill-Hands Association came up.
The second phase of The Indian trade union movement falls between 1900 and 1947.
this phase was characterized by the development of organized trade unions and political
movements of the working class. It also witnessed the emergence of militant trade
unionism. The First World War (1914-1918) and the Russian revolution of 1917 gave a
new turn to the Indian trade union movement and organized efforts on part of the workers
to form trade unions. In 1918, B P Wadia organized trade union movements with Textile
mills in Madras. He served strike notice to them and workers appealed to Madras High
Court because under ‘Common Law’, strike is a breach of law. In 1919, Mahatma Gandhi
suggested to let individual struggle be a Mass movement. In 1920, the First National
Trade union organization (The All India Trade Union Congress (AITUC)) was
established. Many of the leaders of this organization were leaders of the national
Movement. In 1926, Trade union law came up with the efforts of Mr. N N Joshi that
became operative from 1927.
The third phase began with the emergence of independent India (in 1947), and the
Government sought the cooperation of the unions for planned economic development.
The working class movement was also politicized along the lines of political parties. For
instance Indian national trade Union Congress (INTUC) is the trade union arm of the
Congress Party. The AITUC is the trade union arm of the Communist Party of India.
Besides workers, white-collar employees, supervisors and managers are also organized
by the trade unions, as for example in the Banking, Insurance and Petroleum industries.
LABOUR LAWS
1975 was the benchmark year in the Indian history because there was an emergency
declared in the Indian state by the Government and strikes by Trade unions were
prohibited. The year was International Women’s Year and the Government introduced
The Equal remuneration Act in 1976. The article 39d of the Indian Constitution i.e.
Directive Principles of State Policy says: ‘Equal pay for equal work for both men and
women.’ This was the connection of the Act with the constitution.
I should define ‘Same or Similar nature of work’ before going any further on the act. It
means “a work in respect of which the skill, effort and responsibility required are the
same when performed under similar working conditions by a man or a woman.”
Therefore, the Act says that no employers should pay to any workman who is employed
by him, a remuneration at rates less favourable than those at which the remuneration is
paid by him to a worker of opposite sex who is performing the same or similar nature of
work. In simpler terms, same remuneration is to be paid to both men and women workers
for same or similar nature of work.
The Act does not disturb ‘Wage Differential’ i.e. the differences in wages in the same
grade on the basis of length of service. The law is not universally applicable to all
industries. Till now 76 industries have been covered by the legislation. There will not be
any revision of service prior to the commencement of the Act.
The Act also encourages employment of Female workers. These workers will:
Be entitled to certain benefits amongst which the prominent one is The Maternity
benefit Act
Not be allowed to work between 7pm to 6am
Face severe restrictions between 10pm to 5am
Not be allowed to work in mines
Law obliges an employer to fix a wage period under this act. If the establishment is the
first type i.e. number of employees is less than 1000, then the wage period (the period
within which the wage to the employees has to be paid) is 7 days. If the establishment has
1000 or more employees, then the wage period is 10 days.
This would be clear with a small example as below:
Total deductions shall not exceed 50% of the wages. However, in case of Co-operative
societies it can go upto 75% of the wages.
Example:
Basic (Rs.) DA (Rs.) Allowances (Rs.) Total (Rs.)
1000 250 150 1400
If 10 or more employees refuse to work or go on a strike, then the deductions will not be
only on pro-rata basis but an additional deduction to the extent of 8 days wages will be
made. The employer has to issue a show-cause in case of deductions for damages and any
damage due to willful negligence is liable for deductions.
If an employer fines, then the following procedure has to be followed by him:
Employer will have to develop a list of acts and conditions for which fine can be
imposed
The list should be approved by the appropriate government
It should be displayed at a conspicuous place
As and when the employee commits such act, a show-cause notice is to be issued
asking for explanations
The explanation considered, if found satisfactory, ends the matter then and there
Otherwise, fine may be imposed by the employer
Contracting out:
Any agreement between the employer and employee outside the provisions of the
Payment of Wages Act, shall be considered null and void.
Example: If an employer is going through acute financial losses and the employee enters
into an agreement with the employer to receive the wages after 2 months, then the
agreement will be null and void and wages payment has to be made within the stipulated
time period of 7 or 10 days as the case may be.
The claims made by employees on account of payment made not within time or on
account of unauthorized deductions, will be settled by an authority appointed by the
Government called Payment of wages authority.
Wage is nothing but the price of labour sold by labourers to employers. Its rate is
determined by the forces of demand & Supply in the market. Since supply of labour is
high in the Indian market and the rates are low, Government enacted The Minimum
Wages act to fix the minimum wage rate to be paid by the employer.
Minimum rates of wages may differ from employment to employment, from location to
location and also amongst different classes of workmen (Adults, children, adolescents)
It is one of the most flexible legislations and can be very seldom challenged in the Court
of Law.
There are two alternative procedures for fixing or revising minimum wage rate, out of
which the government can adopt any one.
After the fixation or revision of minimum wage rate, it has to be published in the official
gazette.
An authority appointed by the Government called Payment of wages authority will settle
the claims made by employees.
Contracting out is not allowed in this Act also.
THE MINIMUM WAGES ACT, 1948 THE PAYMENT OF WAGES ACT, 1936
Wage rate is fixed by government which Wage rate is fixed by Collective Bargaining
can be daily, weekly monthly or Industrial Tribunal or Wage Board
Nothing is mentioned about wage period in Wage period is fixed by employer and can be
the Act weekly, monthly etc.
The Act is applicable to Scheduled The Act is applicable to all Industrial
employments only which is an unorganized establishments, which is an organized sector.
sector
Empowerment Enactment
Bonus payment started much before the law was enacted in Ahmedabad textile mills both
in cash and kind. It was a payment to employees to face the rigours at work. Gradually by
1929-30, large number of employers all over the country started it out of his own sweet
will. It was an ex-gratia concept. By 1930’s, the union started clamoring for such
payments on claims that they are also entitled to a share in company’s profits since they
contribute a great deal to earn it. Hence, the concept changed from ex-gratia to Profit
sharing. The problem now faced by the management was computation of accurate
profits. A High court Commission was ordered to compute the profits. In 1961, Bonus
Commission was set up by the Government of India. Later unions felt that bonus should
be paid to everyone and devised a new concept called Deferred Wages. The argument
was that their wages were so low that they were unable to save any sum of money.
Demand under deferred wages was 13 months wages for 12 months i.e. 1 month wage to
be paid during festivals.
In the Law, Concept of Profit sharing and Deferred wages was integrated and the
Payment of Bonus Ordinance, 1965 was converted to The Payment of Bonus Act, 1965.
The law is applicable to factories and other establishments employing 20 or more
persons.
Since, the main concept of the act is Profit sharing, Bonus is calculated on the basis of
trading results of an establishment during a particular accounting year. Each accounting
year is a unit and there is no relationship between last and next accounting year.
Only those employees who are drawing a salary/wage not more than Rs. 3500 per month
are covered under this act. Capacities of the employees on the basis of skilled/unskilled
are not taken into consideration.
Therefore, 10% of the wage bill (Rs. 4,50,000) will be paid as bonus to the employees
with salary not more than Rs. 3500/month.
45,00,000 4,50,000
If wage bill is Rs. 90,00,000, then allocable surplus of Rs. 4,50,000 would form only 5%
of the wage bill. This is less than the minimum amount of bonus payable i.e. 9.33% of
wage bill. The minimum amount to be paid is Rs. 7,50,000 (8.33% of Rs. 90,00,000) and
the allocable surplus is Rs. 4,50,000. A shortfall of (Rs. 7,50,000 - Rs. 4,50,000) Rs.
3,00,000 is created which is set off against next accounting year’s allocable surplus.
Hence, Set off can be defined as – When there is no Available surplus or the Allocable
surplus is insufficient to pay the minimum Bonus payable, then that shortfall will be
carried forward to the next accounting year and upto and including four consecutive
accounting years.
Similarly, if the wage bill is Rs. 9,00,000, the allocable surplus of Rs. 4,50,000 forms
50% of the wages paid. Maximum bonus that can be paid is 20% of the wage bill i.e. Rs.
1,80,000. So, the excess allocable surplus of Rs. 2,70,000 (Rs, 4,50,000 – Rs. 1,80,000)
will be set on to the next accounting year and upto and including four accounting years
subject to a maximum of 20% of the wages. This means that only Rs. 1,80,000 will be set
on for the next accounting year and the rest Rs. 90,000 will get cancelled.
The Bonus on a wage of Rs. 2500 and upto Rs. 3500 will be calculated on the amount of
Rs. 2500.
Hypothetical example.
Employee C will get a bonus on Rs. 30,000 (Rs. 2500 *12) @ 10% i.e. Rs. 3000 whereas
Employee D is not eligible for a bonus as his salary exceeds the maximum amount of Rs.
3500 per month.