UNIT 4 WAGE AND SALARY

ADMINISTRATION
Structure
4.0

Objectives

4.1

Introduction

4.2

Evolution of Wage Concepts

4.2.5

The Statutory Minimum Wage

The Bare Subsistence or Minimum Wage
The Concept of Living Wage
Fair Wage
Minimum Wage

4.2.6

Need-based Minimum Wage

4.2.1
4.2.2
4.2.3
4.2.4

4.3

Payment of Wages Act, 1936

Purpose of the Act
Applicability of the Act
4.3.3 Definition of Wages
4.3.4 Responsibility for Payment of Wages
4.3.5 Wage Period
4.3.6 Time of Payment of Wages
4.3.7 Mode of Payment
4.3.8 Deduction
4.3.9 Deductions Which May be Made From Wages
4.3.10 Limit on Total Amount of Deduction

4.3.1

4.3.2

4.4

4.5

Minimum Wage
4.4.1

Object

4.4.2

Scope and Coverage

4.4.3

Definition of Wages

Bonus
4.5.1
4.5.2
4.5.3

The Perspective
The Concept of Bonus
The Definitions of Bonus

4.6

Equal Remuneration for Men and Women

4.7

Let Us Sum Up

4.8

Answers to Check Your Progress

4.9

Further Reading

4.0 OBJECTIVES
After reading this unit you should be able to:
explain the concept of minimum wage, fair wage and living wage and make a
distinction between them;
define and explain the meaning c wages under different labour legislation;
define wage period, identify the persons responsible for payment of wages ind
enumerate the deductions authorised under the Payment of Wages Act;

describe the procedure for fixation of minimum wage and the effect of nonpayment or less payment;

Human Resource Management

explain the scope and coverage Gf the payment of bonus, set-off and set on and
describe the method for determination of bonus; and
describe the duties of employer to pay equal remuneration for men and women for
same work or work of similar nature and also not to make discrimination while
recruiting men and women workers.

4.1 INTRODUCTION
In the previous units you have studied the law relating to the management of welfare,
health and medical facilities and the union and management relations. In this Unit you
will study wage and salary administration. For a better salary admiriistration it is
necessary that the payment should be made at regular intervals and without any
arbitrary deductions. Further there should be no discrimination between men and
women in respect to wages paid to them for equal work. Quite apart from this law
must ensure minimum standards in respect to wages. To meet this situation the law
regulates these aspects. It is, therefore, necessary to enforce and administer the law
and the minimum standards laid down in this regard.

4.2 EVOLUTION OF WAGE CONCEPTS

Broadly speaking, wages have been classified into six broad categories:
i)

Statutory minimum wage

ii) Bare subsistence or minimum wage

iii) Living wage
iv) Fair wage
v) Minimum wage
vi) ~eed-basedminimum wage
The statutory minimum wage is determined according to the provisions of the
Minimum Wages Act, 1948, Category (ii) is the innovation of the Indian Judiciary,
Categories (iii), (iv) and (v) have been introduced in the Report of the Copnittee on
Fair Wages, Category (vi), i.e. need-based minimum wage has emtrged from the
Resolution of the 15th Session of the Indian Labour Conference. Let us discuss each
of these in some detail.

4.2.1 The Statutory Minimum Wage

The Minimum Wages ~ c t 1948
,
does not define the expression minimum wage. The
statutory minimum wage, however, is the minimum wage, providing for some measure
of education, medical requirements and amenities.

4.2.2 The Bare Subsistence or Minimum Wage

The bare minimum wage is a "wage which would be sufficient to cover the bare
physical needs of the worker and his family i.e. a rate which has got to be paid to the
workers irrespective of the capacity of the industry to pay".

4.2.3 The Concept of Living Wage v

The concept of the living wage which has influenced the fixation of wages in all
economically advanced countries is an old and well-established one. But most of the
current definitions are of recent origin. The most expressive definition of the living
wage is that of Justice Higgins of the Australian Commonwealth Court of Conciliation
in the Harvester casts. He defined the living wage as one appropriate for the "normal

needs of the average employee, regarded as a human being living in a civilised

community".
Article 43 of the Indian Constitution has also adopted the following as one of the
Directive Principles of State Policy:
The state shall endeavour to secure, by suitable legislation or economic
organisation or in any other way, to all workers, agricultural, industrial or
otherwise, work, a living wage, conditions of work ensuring a decent
standard of life and full enjoyment of leisure and social and cultural
opportunities.
This is the ideal to which the workers are hopefully looking forward to achieve.
In All Indian Bank Employees Association v. Reserve Bank of India, (1965) 2 L.L.J.
175 (S.C.), Hidayatullah, J. observed:
Our politital aim is living wage though in actual practice living wage has
been an ideal, which has eluded out efforts like an ever receding horizon
and will so remain for some time. Our general wage structure has at best
reached the lower levels of fair wage though some employers are paying
much higher wages than the general average.

4.2.4 Fair wage4

u

Fair wage is the mean between the living wage and the minimum wage. Said the
Committee on Fair wages:
While the lower limit of the fair wage must obviously be the minimum
wage, the upper limit is equally set by what may broadly be called the
capacity of industry to pay. This will depend not only on the present ,
economic position of the industry but on its future prospects. Between
these two limits the actual wage will depend on (i) the productivity of
labour, (ii) the prevailing rates of wages in the same or similar occupation
in the same or neighbouring localities, (iii) the level of the national income
and its dist$bution, and (iv) the place of the industry in the economy of the
country.

In Kamani Metals and Alloys Ltd v. Their Workmen, the Supreme Court observed that
fair wage lies between the minimum wage which must be paid in any event, and the
living wage which is the goal.

4.2.5 Minimum wage;J

The Committee on Fair Wages expressed the view that the minimum wage must
provide not merely for the subsistence of life, but for the preservation of the efficiency
of the worker. For this purpose, the minimum wage must also provide for some
measure of education, medical requirements and amenities. The committee also stated
that an industry which was incapable of paying this minimum wage had no right to
exist and for fixing the minimum wage, no regard should be paid to the capacity of the
industry to pay and it should be based on the requirements of the worker and his
family.
InDHydro(Engineers) Pvt. Ltd v. Their Workmen, the Supreme Court, while upholding
the findings of the Committee observed that the minimum wage rates must ensure not
only the mere physical needs of the worker and those of his family but also preserve
his efficiency as a workman.

4.2.6 Need-based Minimum Wage

According to 15th Indian Labour Conference (July, 1957), the need-based minimum
wage "should ensure the minimum human needs" of the industrial worker, irrespective
of any other consideration. The Fair Wage Committee adopted the following norms for
the calculation of "need-based wage for industrial labour" which should guide all wage
fixing authorities:

i)

In calculating the minimum wage, the standard working class family should be

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taken to consist of 3 consumption units for one earner; the earnings of women,
children and adolescents should be discared.
ii) Minimum food requirements should be calculated on the basis of a net intake of
2,700 calories. as recommended by Dr. Aykroyd for an average Indian adult of
moderate activity.
iii) Clothing requirements should be estimated at a per capita consumption of 18 yards
per annum which would give for the average worker's family of four, a total of 72
yards.
iv) In respect of housing, the norms should be the minimum rent charged by
Government in an area for houses provided under the Subsidised Industrial
Housing Scheme for Low Income Groups.

v) Fuel, lighting and other 'miscellaneous' items of Expenditure should constitute 20

per cent of the total minimum wage.
Of these, point (ii) refemng to the nutritional requirements in the aforesaid norms has
been the subject of much controversy.
In Workmen v. Management of Reptakar Brett & Co. the Supreme Court observed:
The concept of "minimum wage" is no longer the same as it was in 1936.
Even 1957 is way behind, a worker's wage is no longer a contract between
an employer and an employee. It has the force of collective bargaining
under the labour laws. Each category of the wage structure has to be tested
at the anvil of social justice which is the live fibre of our society today.
Keeping in view the socio-economic aspect of fie wage structure, we are of
the view that it is necessary to add the following additional component as a
guide for fixing the minimum wage in the industry:
(iv) Children education, medical requirement, minimum recreation including
festivals/ceremonies and provision for old age, marriages etc. should further
constitute 25% of the total minimum wage.
The Court added:
The wage structure which approximately answers the above six components
is nothing more than a minimum wage at all times and under all
circumstances. An employer who cannot pay the minimum wage has no
right to engage labour and no justification to run the industry.
Check Your Progress 1
Fill in the blanks:
i)

Fair wage lies between the

............ wage and the ............ wage.

ii) Statutory minimum wage is determined in accordance with the provision of the

4.3 PAYMENT OF WAGES ACT, 1936

4.3.1 Purpose of the Act
The object of the Act is to eliminate all avoidable delays in the payment of wages to
workmen within the meaning of this Act and to protect them from unlawful deductions
in the payment of their wages.

4.3.2 Applicability of the Act

The Payment of Wages Act applies to the persons mentioned hereunder:
a) persons employed in a factory
b) persons employed otherwise than a factory
c) persons employed upon any Railway by Railway administration, either directly or
through a sub-contractor fulfilling a contract with Railway administation.

Wage and Salary Administration

d) persons employed in an industrial or other establishment specified in sub-classes (a)

to (g) of clause (ii) of Section 2.

4.3.3 Definition of Wages

Section 2 (vi) of the Payment of Wages Act, 1936 defines "wages" as all
remuneration, including salary, allowance, or otherwise expressed in terms of money or
capable of being so expressed, which would, if the terms employment express or
implied were fulfilled, be payable to a person employed in respect of his employment,
and includes:
a) any remuneration to which the person employed is entitled in respect of overtime
work or holidays or any leave period;
b) any remuneration payable under any award of settlement between the parties or
order of Court;
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 withint 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 the sums mentioned hereunder shall not include:
i)

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;

ii) the value of any house accommodation, or of 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;
iii) any contribution paid by the employer to any pension or provident fund, and the
interest which may have accured there on;
v) any sum paid to the employed person to defray special expenses entailed on him
by the nature of his employment; or
vi) any gratuity payable on the termination of employment in'cases other than
specified in sub-clause (d).

4.3.4 Responsibility for Payment of Wages

The Act imposes an obligation on every employer to make payment of all wages
required to be paid under this Act to persons employed by him. In addition, for person
employed (otherwise than by a contractor), the following persons so named, nominated,
or responsible to the employer, jointly and severally, are responsible for such payment:

i)

In factories the person named as manager

ii) In industrial or other establishments the person who is responsible to the employer
for the supervision and control of the industrial or other establishment.
iii) In railways (otherwise than in factories) the person who has been so nominated in
this behalf for the local area concerned by the railway administration.
L

4.3.5 Wage Period

Section 4 of the Payment of Wages Act, 1936 provides that every person responsible
for the payment of wages under Section 3 of the Act shall fix wage periods in respect
of which such wages shall be paid. Wage period may be fixed as payable daily, weekly,
fortnightly or monthly. Employer is bound to fix wage periods. No wage period shall
exceed one month.

Hurnaa Resource Management

4.3.6 Time of Payment of Wages

Section 5 lays down the rules as to the time of payment of wages. The payment must
be made at regular intervals. Every person employed upon or in:
a)

any railway, factory, or industrial or other establishments or in which there are less
than one thousand employees, the wages shall be paid before the expiry of the
seventh day; and

b) any other railway, factory or industrial or other establishment shall be paid before
expiry of the tenth day after the last day of the wage period in respect of which
the wages are payable.
In the case of persons employed on a dock, wharf, or jetty, or in a mine, the balance of
wages found due on completion of the final tonnage account of the ship or wage
loaded or unloaded, as the case may be, shall be paid before the expiry of the seventh
day from the day of such completion.
,

Where the employment of any person is terms by or on behalf of the employer, the
wages earned by him be paid before the expiry of the second working day from the
day on which his employment is terminated.

Where the employment of any person in an establishment is terminated due to the

closure of the establishment for any reason other than a weekly or the recognised
holiday, the wages earned by him shall be paid before the expiry of the second day
from the day on which his employment is so tenninated.
Under Section 5(3), the State Government may, subject to such condition as specified
and to such extent as may be specified in the order, ,exempt the person responsible for
the payment of wages to the person employed upon any railway, (otherwise than a
factory), or persons employed as daily rate in the Public Works Department of the
CentraUState Government.

4.3.7 Mode of Payment

Section 6 lays down that all wages shall be paid in current coins or currency notes or
in both. The employer may, after obtaining the written authorisation of the employed
person, pay the wages whether by cheque or by crediting the wages in his bank
account.

4.3.8 Deduction
Every payment made by the employed person to the employer or his agent shall be
deemed to be a "deduction" for the purpose of this Act, as is made clear by
Explanation I to Section 7. Reduction of wages on account of change in lower cadre
would amount to deduction of wages.
According to Explanation I1 to Section 7, the penalties mentioned hereunder are not
deductions if imposed for good and sufficient cause:
a) the witholding of increment or promotion including the stoppage of the increment
at an efficiency bar;
b) the reduction to a lower post or time-scale or to a lower stage in a time scale or
suspension

c)

4.3.9 Deductions Which May be Made From Wages

Section 7 of the Act provides that 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

62

c) deductions for damages to or loss of goods expressly entrusted to the employed

9
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 emplbyer.

e) deductions for amenities and service supplied by the employer.

f) deduction for recovery of advances of whatever nature and the interest due in
respect thereof or for adjustment of over payment of wages.
g) deductions for recovery of loans and interest due in respect thereof.
h) deductions for recovery of loans granted for house building and the interest due in
respect thereof.
i)

deductions of Income Tax payable by the employed person.

j)

deductions required to be made by order of a Court or other competent

authority.

k) deductions for subscription to and for payment of advances from any provident
fund.

1) deduction for payment to co-operative societies or to scheme of Insurance

maintained by the Indian Post Office.

.m)

deductions made for payment of any premium on the Life Insurance Policy to the
Life Insurance Corporation of India.

n) deductions made, with the written authorisation of employed person for the
payment of employees contribution to any fund constituted for the welfare of the
employed persons or the members of their families or both.
o) deductions made, with the written authorisation for payment of the fees payable by
the employee for the membership of any trade union registered under the Trade
Union Act, 1926.
p) deductions for payment of insurance premium on fidelity Guarantee Bonds.

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

of acceptance by the employed person of counterfiet or base coins mutilated or
forged.
r)

deductions for recovery of losses sustained by the 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 in respect of fares, freight, demurrage
wherfage and Carnage or in respect of sale of goods in catering establishments or
in respect of commodities in grainshops or otherwise.

S) deductions for recovery of losses sustained by a railway administration on

account of any rebates or refunds is correctly attributable to his neglect or
default.
t)

deductions made for contribution to the Prime Minister's National Relief

Fund or to such other fund with the written authorisation of the employed
person.

u) deductions for contribution to any insurance scheme framed by the Central

Government for the benefit of its employees.

4.3.10 Limit on Total Amount of Deduction

Section 7 (3) provides that the total amount of deddion which may be made in any
wage period from the wage of an employed person shall not exceed:
i)

75% of such wages where such deductions are wholly or partly made for payment.
to co-operative societies

ii) in any other case, 50% of such wages.

Where, however, total deductions authorised under the section exceeds 75% as the case
may, the excess may be recovered in such manner as may be prescribed.

Wage and Salary Administ-

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Check Your Progress 2

1)

Who is responsible for payment of wages in factcwies under the Pavment of Wages
Act. 1Y36?

............................................................................................................................................
2) Can wage period exceed one month under the Payment of Wages Act, 1936?

3)

Can wages he paid through cheque?

1.4 MINIMUM WAGE

4.4.1 Object
The Minimum Wages Act was enacted in the year 1948 to give effect to the
recommendation adopted by the International Labour Conference in the year 1928. The
fixation of minimum rates of wages is directed against exploitation of the ignorant, less
organised and less privileged members of the society by the capitalist class. The anxiety
on the party of the society to improve the general economic conditions of some of its less
favoured members has resulted in enactment of the Minimum Wages Act. 1948.

4.4.2 Scope and Coverage

The Minimum Wages Act, 1948 extends to the whole of India. However, under Section
3 (I), the appropriate Government fixes the minimum rates of wages payable to
workers employed in job specified in Part I or Part I1 of the Schedule and in any other
employment added to wither part by notification under Section 27.
The employments are listed in Parts I and I1 of the Schedule appended to the Act
which are as follows:
Employment in any:
1) Woolen carpet making or shawl weaving establishment;
2) Rice mill, flour mill or dal mill.
3) Tobacco (including bidi-making) manufacturing.
4) Plantation, that is to say, any estate which is maintained for the purpose of growing
cincona, rubber, tea, or coffee.

5 ) Oil mill

6) Lac manufacturing

7) Mica works
8) Public motor transport .
9) Tanneries and leather manufacturing
10) Employment under any local authority
11) Employment on the construction and maintenance of roads or in building operations
12) Employment in stone-breaking or stone-crushing

13) Employinent in the mines of: (i) Gypsum, (ii) Barytes, (iii) Bauxite, (iv) Manganese,
(v) China clay, (vi) Kyanite and, (vii) Mangnesite.
Part 11 of the Schedule includes employment in agriculture, that is to say, in any
farming, including the cultivation and tillage of the soil. dairy-farming production,
cultivation, growing and harvesting of any agricultural or hmkultural commodity, the
raising of live-stock; bees and poultry, and any practice performed by a farmer or on
farm as incidental to or in conjunction with farm operations i'ncluding any forestory or

timbering operations and the preparation for market any de1ive.q to storage or to
market or to carriage for transportation to market or farm produce.

4.4.3 Definition of Wages

The Minimum Wages Act does not define the term "minimum wage". However
Section 2(b), defines "wages" mean all remuneration capable of being expressed in
terms of money, which would, if the terms of the contract 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 include:
i)

the value of:

a) Any house accommodation, supply of light, water, medical attendance, or
b)

Any other amenity or any service excluded by general or special order of the
appropriate Government.

ii) Any contribution paid by the employer to any Pension Fund or Provident Fund or
under any scheme of social insurance.
iii) Any travelling allowance of the value of any travelling concession.

iv) Any sum paid to the person employed to defray special expenses entailed upon
him by the nature of his employment; or
V) Gratuity payable on discharge.

Fixation of minimum rates of wages

C

Section 3 lays down the provisions with respect to fixation of wages. The appropriate
Government shall fix the minimum rates of wages payable to the employees employed
in an employment specified in Part I1 of the Schedule and in an employment added to
either part by notification under Section 27.
But regarding employees employed in an employment specified in Part I1 of the
Schedule, the appropriate Government may instead of fixing minimum rates of wages
under Section 3 (1) (a) for the whole state, fix such rates for a part of the state or for
any specified class or classes of such employment in the whole of the state or any part
thereof.

Review and Revision: The minimum rates of wages so fixed shall be reviewed by the
appropriate Government at such intervals as it may think fit. Such intervals shall not
exceed five years. However if the appropriate Government has not reviewed or revised
the minimum rates within a period of five years, it may do so after the expiry of the
said period of five years.
Sub-section (2) of Section 3 provides that the appropriate Government may fix:

i)

a minimum rates of wages for %me-work, to be known as minimum time rate;

ii) a minimum rate of wages for piece-work to be known as a minimum piece-rate;

iii) a minimum rate of remuneration to apply in the case of employees employed on
piece-work for the purpose of securing to such employees a minimum rate of
wages on a time work basis to be known as "guranteed time-rate".
iv) a minimum rate to apply in substitution for minimum rate which would otherwise
be applicable in respect of overtime work done by employees, to be known as
"overtime rate".
Section 3 (2-A) lays down that the fixed or revised rates of wages shall not apply to
any of the cases mentioned here under when either the dispute is pending or an award
by the tribunal is in operation:
i)

Where a dispute in respect of rates of wages is pending before a Tribunal or

National Tribunal under the Industrial Disputes Act or before any like authority
under any other law; or

ii) Where such a Tribunal has made an award which is in operation.

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From this it appears that an Industrial Tribunal is not bound by the fixation or revision
of minimum rates of wages by the Government during the pendency of proceedings
before it.
Section 3 (3) provides that in fixing and revising minimum rates of wages, different
rates of wages may be fixed for i)

different scheduled employments;

ii) different classes of work in the same scheduled employment;

iii) adults, adolescents, children and apprentices;
iv) different localities.
Minimum rates of wages may be fixed by one or more of the following wage periods,
namely
i)

by the hour;

ii) by the day;

iii) by the month; or
iv) by such other longer period as may be prescribed;
Where such rates are fixed by the day or by the month, the manner of calculating
wages for a month or for a day, as the case may be indicated, but where any wage
periods have been fixed under Section 4 of the Payment of Wages Act, 1936,
minimum wages shall be fixed in accordance therewith.
Minimum rates of wages: The minimum rates of wages fixed or revised by the
appropriate Government in respect of scheduled employments under Section 3 may
consist, according to Section 4, of:

i)

a basic rate of wages and a special allowance at a rate to be adjusted, at such

intervals and in such manner as the appropriate Government may direct, to accord
as nearly as practicable with the variation in the cost of living index number
applicable to such workers (hereinafter referred to as the "cost of living
allowances"); or

ii) a basic rate of wages with or without the cost of living allowance, and the cash
value of the concession in respect of supplies of essential commodities at
concessional rates where so authorised; or
iii) an all inclusive rate allowing for the basic rate, the cost of living allowance and
the value of the concession, if any.
The cost of living allowance and cash value of the concessions in respect of supplies of
essential commodities at concession rates shall be computed by the competent authority
at such intervals and in accordance with such directions as may be specified or given
by the appropriate Government.

Procedure for f i i n g and revising minimum wages: Section 5 lays down the
procedure for fixing and revising the minimum rates of wages. The appropriate
Government shall adopt any of the following procedures in fixing minimum rates of
wages in respect of Scheduled employment for the first time or for revising it:
a)

appoint as many committees and sub-committees, as it considers necessary. to hold

enquiries and advise it in respect of such fixation or revision as the case may be.or

b) by notification in the official Gazette, publish proposals for the information of

persons likely to be affected thereby, and specify a date not less than two ~ o n t h s
from the date of notification, on which the proposals will be taken into
consideration.
After considering the advise of the committee or committees appointed and all
representations received by it, before the date specified in the official Gazette, the
appropriate Government by notification in the official Gazette may fix or, as the case
may be revise the minimum rates of wages in respect of each scheduled employment,
which shall come into force after the expiry of three months, unless differently
mentioned in the said notification.

The appropriate Government shall consult the Advisory Board if it proposes to revise
the minimum rates of wages by the mode provided under clause (b) above.

Wage and Salary AdmiislrPtion

composition of Committees: Section 9 lays down that each of committee, subcommittees and the Advisory Board shall consist of persons to be nominated by the
appropriate Government, representing employers and employees in the scheduled
employments, who shall be equal in number and independent persons not exceeding one
third of its total number, one of such independent person shall be appointed the
Chairman by the appropriate Government.
Wages in kind: Section 11 of the Minimum Wages Act, 1948 provides that minimum
wages payable under this Act shall be paid in cash. However, where it has been the
custom to pay wages wholly or partly in kind, the appropriate Government may, by
notification in the official Gazette, authorise the payment of minimum wages either
wholly or partly in kind. Likewise the appropriate Government may, by notification in
the official Gazette, authorise the provision of supplies of essential commodities at
concessional rates.
Payment of minimum rates of wages: Section 12 provides that where in respect of
any scheduled employment a notification under Section 5 is in force, the employer shall
pay to every employee engaged in a scheduled employment under him wages at a rate
not less than the minimum rates of wages fixed by such notification for that class of
employees in that employment without any deduction except as may be authorised
within such time and subject to such conditions as may be prescribed.
Fixing hours for a normal working day etc.:
1)

In regard to any scheduled employment minimum rates of wages in respect of

which have been fixed under this Act, the appropriate Government may:
a)

Fix the number of hours of work which shall constitute a normal working day,
inclusive of one or more specified intervals;

b)

provide for a day of rest in every period of seven days which shall be allowed
to all employees on any specified class of employees and for the payment of
remuneration in respect of such days of rest;
4

c)

provide for payment for work on a day of rest at a rate not less than the overtime
rate.

2) The aforesaid provisions shall apply to the following classes of employees to such
extent and subject to such conditions as may be prescribed:
a)

employees engaged on urgent work, or in any emergency, which could not have
been foreseen or prevent;

b)

employees engaged in work in the nature of preparatory or complementary work

which must necessarily be carried on outside the limits laid down for the general
working in the employment concerned;

c)

employees whose employment is essentially intennittant;

d)

employees engaged in any work which for technical reasons has to be .completed
before the duty is over;

e)

employees engaged in a work which could not be carried on except at times

action of natural forces.
dependent on the i~~egular

3) For the purposes of clause (c) of sub-section 72) employment of an employee is

essentially intermittent when it is declared to be so by the appropriate Government on
the ground that the daily hours of duty as such for the employee the houm duty,
normally includes periods of in action during which the employee may be on duty but
is not called upon to display either physical activity or sustained attention.
Wage for two or more classes of work: Section 16 of the Act provides where an
employee does two or more classes of work to each of which a different minimum
rate of wages is applicable, the employer shall pay to such employee in respect of
the time respectively occupied in each. Such class work, wages at not less than the
minimum rate in-force in respect of each such class.

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4) Maintenance of registers and records: Every employer shall maintain such

register and records giving such particulars of employees employed by him, the
work performed by them, the wages paid to them, the receipts given by them and
such other particulars and in such form as may be prescribed. Further he is
required to be exhibited, in prescribed manner in the factory, workshop or place
where the employees in the scheduled employment may be employed, or in the
case of out-workers, in such factory, workshop or place as may be used for giving
out work to them notices in prescribed form containing prescribed particulars.
5) The appropriate Government may, by rules made under this Act, provide for the
issue of wage books or wage slip to employees employed in any scheduled
employment in resepct of which minimum rates of wages have been fixed, and
prescribed the manner in which entries shall be made and authenticated in such
wage books or wage slip by the employer or his agent.
Minimum time rate wages for piece-work
Overtime: Section 14 lays down that where an employee whose minimum rate of
wages is fixed under this Act by the hour, by the day, or by such longer wage period
as may be prescribed, works on any way, in excess of the number of hours constituting
a normal working day the employer shall pay him for every hour or part of an hours so
worked in excess at the overtime rate fixed under this Act or under any law of the
appropriate Government for the time being in force, whichever is higher.
Wages of a worker who works less than the normal
Section 15 provides that if an employee whose minimum rate of wages has been fixed
under this Act "by the day" works on any day on which he was employed for a period
less than the requisite number of hours constituting a normal working day, he shall be
entitled to receive wages in respect of work done by him on that day as if he had
worked for a full normal working day. But he shall not be so entitled to receive wages
for a full normal working day:
i)

If his failure to work is caused by his unwillingness to work, and not by the
omission of the employer to provided him with work, and

ii) such other case and circumstances as may be prescribed.

Minimum time rate wages for piece-work
Section 17 provides that where an employee is employed on piece-work of which
minimum time-rate and not a minimum piece rate has been fixed under this Act, the
employer shall pay to such employee wages at not less than the minimum time rate.
Adjudication of Claims
Under Section 20 (I), any one of the following persons may be appointed as an
authority under the Minimum Wages Act to entertain and decide claims arising out of
payment of less than the minimum rates of wages in a particular area by the
appropriate Government:

i)

Any Commissioner for Workmen's Compensation; or

ii) Any officer of the Central Government exercising functions as Labour

Commissioner for any region; or
iii) Any officer of the State Government not below the rank of Labour Commissioner;
or
iv) Any officer with experience as a judge of Civil Court; or
v) Any Stipendiary ~ a ~ i s k a t e .
Procedure
An Application for claim under Section 20 (2) may be made by an employee regarding:
a) Payment of remuneration for days of rest; or

b) Remuneration for work done on such days of rest; or

'

c)

Wages at the overtime rate under section'l4.

Who may apply: Under Section 2 0 (2) an application may be made by (i) the
employee himself or (ii) any legal practitioner, (iii) or any official of a registred trade
union, (iv) persori authorised in writing to act on his behalf, or (v) any Inspector, or
(vi) any person acting with the permission of the authority.
Limitation: Such an application may be made within six months from the date on
which the minimum wages or other payment became payable. On showing sufficinet
cause for not making it within time, it may be entertained even after his period.
Procedure and hearing of the parties: On presentation of an application under
Section 20 (2), for claim, it has to be admitted. After admission, notice may be issued
to the employer to show cause why the application should be allowed. If the employer
does not appear an ex parte order may be passed. If the employer appears the Authority
will hear both parties, make any further enquiry, and if necessary, make direction to the
employer under Section 20 (3).

a)

In the case of a claim arising out of payment of less than the minimum rates of
wages for the payment to the employee of the amount by which the minimum
wages payable to him exceed the amount actually paid together with the payment
of such compensation as the Authority may think fit, not exceeding ten times the
amount of such excess;

b) In any other case, for the payment of the amount due to the employee, together
with the payment of such compensation as the Authority may think fit not
exceeding ten rupees, and the Authority may direct payment of such compensation
in cases where the excess or the amount due is paid by the employer to the
employee before the disposal of the application.
Finality of the direction: A direction of the Authority under Section 20 (3) shall be
final. It is not appealable.
Penalty for malicious or vexatious claims: Section 20 (4) lays down that if the
Authority hearing any application under this section is satisfied that it was either
malicious or vexations, it may direct that a penalty not exceeding fifty rupees be paid
to the employer by the person presenting the application.
Powers of Authority: Section 20 (7) provides that every Authority appointed under
section 20 (1) shall have all the powers of a Civil Court under the Code of Civil
Procedure, 1908, for the purpose of taking eviilence and of enforcing the attendance of
witnesses and compelling the production of documents, and every such Authority shall
be deemed to be a Civil Court for all the purposes of Section 195 and Chapter XXXV
of the Code of Criminal Procedure, 1898.
Single application in respect of a number of employees: Section 21 provides that a
single applicat~onmay be presented under section 20 on behalf or in respect.of any
number of employees, employed in the scheduled employed in respect of which
minimum rates of wages have been fixed. Under Section 20 (3), the maximum
compensation to be awarded shall not exceed ten times the aggregate amount of such
excess or ten rupees per head as the case may be.
Recovery of the amount payable: Sub-section (5) of Section 20 provides that any
amount directed to be paid under this section may be recovered:

a) if the Authority is a Magistrate, by the Authority as it were a fine imposed by the

Authority as a Magistrate, or
b) if the Authority is not a Magistrate, by any Magistrate to whom the Authority
makes application in this behalf as it were a fine imposed by such Magistrate.
Inspection

Section 19 (2) lays down that subject to any rules made in this behalf, an Inspector
may, within the local limits for which he is appointed:
a)

enter, at all reasonable hours. with such assistants, if any, being persons in the

Wage and Salary Administration

Human Resource Management

service of the Government, or any local or other public authority, as he thinks fit,
any premises or place where employees are employed or work is given out to
workers in any scheduled employment in respect of which minimum rates of wages
have been fixed under Act, for the purpose of examining any register, record of
wages or notice required to be kept or exhibited by or under this Act or rules made
thereunder, and require the production thereof for inspection;
b) examine any person whom he finds, in any premises or place and who, he has
reasonable cause to believe, is an employee employed therein or an employee to
whom work is given out therein;
c)

require any person given out-work and any out workers, to give any information,
which is in his power to give, with respect to the names and addresses of the
persons to, for and from the work is given out or received, and with respect to the
payments to be made for work;

d)

seize or take copies of such register, record of wages or notice or portions thereof
as he may consider relevant in respect of an offence under this Act which he has
reason to believe has been committed by employer; and

e)

exercise such other powers as may be prescribed.

Every Inspector shall be deemed to be a public servant with in the meaning of the
India Penal Code. Any person required to produce any document or thing to give any
information by an Inspector under Section 19 ( 2 ) , as mentioned above shall be deemed
to be legally bound to do so within the meaning of Section 175 and Section 176 of the
1ndian Penal Code.

Offences and Penalties

Section 22 provides that any employer who:
a)

pays to any employee less than the minimum rates of wages fixed for the
employee's class of work, or less than the amount due to him under the provisions
of this Act, or

b)

contravenes any rule or order made under Section 13

shall be punishable with imprisonment for a term which may extend to six months, or
with fine which may extend to five hundred rupees, or with both. But in imposing any
fine for an offence under this section the Court shall take into consideration the amount
of any compensation already awarded against the accused in any proceedings taken
under Section 20.

Check Your Progress 3

1) When the minimum wages be revised'?

...........................................................................................................................................
2) Is the capacity of einployer to pay relevant in fixation of minimum wage'!

............................................................................................................................................
3 ) Can the minimum wage be paid in kind'?

4) Can single application he made in respect of a number of employees before the

authority under the Minimum Wages Act, 1948.

4.5

BONUS

Wage and Salary Administration

4.5.1 The Perspective

The problem of bonus has assumed great significance in the present-day industrial setup of India. Unlike personal disputes which, because of political, ideological and
personnel rivalries between the unions are generally confined to a section of the
establishment, bonus disputes tend to affect the entire labour force in the establishment
and sometimes even the entire industry in the affected region.

4.5.2 The Concept of Bonus

The concept of bonus has undergone a marked change since the end of the World
War I. Originally, it meant gratuitous payment made by the employer to his workmen at
his pleasure to keep the worker contented. With the efflux of time, judicial wisdom has
transformed it into a legitimate claim which the workers can demand as a matter of
right.

4.5.3 The Definitions of Bonus

The term 'bonus' has not been defined in any legislative enactment. However, various
Committees and Commissions and Courts have attempted to define the term. The
Textile Labour Inquiry Committee defined bonus as follows:
"

The term "bonus" is applied to a cash payment made in addition to wages. It

generally represents the cash incentive given conditionally on certain standards
of attendance and efficiency being attained.

The Bonus Commission has also defined bonus as follows:

The concept of bonus is difficult to define in rigid tehns, but it is possible to
urge that once profits exceed a certain base, labour should legitimately have a
share in them. In other words, we think it proper to construe the concept of
bonus as sharing by the workers in the prosperity of the concern in which they
are employed. This has also the advantage that in the case of low paid
workers such sharing in prosperity augments their earnings and so helps to
bridge the gap between the actual wage and the need-based wage.
I

The Payment of Bonus Act, 1965

The Object of the Act

I
I

The scheme of the Payment of Bonus Act, 1965, broadly stated, has four objectives:
i)

To impose statutory obligation upon the employer of every establishment covered

by the Act to pay bonus to employees in the establishment.

ii) To define principle of payment of bonus according to the prescribed formula.

iii) To provide for payment of minimum+and maximum bonus and link the payment of
bonus with the scheme of set-off and set-on.
iv) To provide for enforcement of the liability for payment of bonus.
The Scope of the Act

The Act covers all persons who are employed for hire or reward to do any work,
skilled, manual, supervisory, managerial, administrative, technical or clerical work
drawing a salary or wage not exceeding Rs. 25000 per month, in any factory or
establishment employing more than 20 or more persons. The Act covers the
probationer, but does not cover apprentice as he is not included within the term
employee under Section 2 (13).
Applicability of t h e ' ~ c t
I

The Act applies to every factory and every other establishment in which 20 or more

71

Human Resource Management

persons are employed on any day during accounting. However, the appropriate
Government is empowered to apply the provisions of the Act to any factory1
establishment employing less than 20 but not less than 10 persons during the accounting
year, after giving two months notice in the Official Gazette.
Section 2 (16) defines "establishment in public sector" as:
"establishment in public sector means an establishment owned, controlled or managed
by:
a) a Government company as defined in Section 617 of the Companies Act, 1965
b) a corporation in which not less than forty per cent of its capital is held (whether
singly or taken together) by:
i) the Government or
ii) the Reserve Bank of India, or
iii) a corporation owned by the Government or the Reserve Bank of India
And Section 2 (15) defines "establishment in private sector" to mean an establishment
other than an establishment in public sector.
The provision of this Act shall in relation to a factory or other establishment to which
the Act applies, have effect of the accounting year commencing on any day in the year
1964, and subsequent accounting year. The Act once applicable to an establishment
shall continue to apply notwithstanding that the number of persons employed therein
falls below 20.
Calculation of Amount of Bonus

Section 10 of the Payment of Bonus Act, 1965 makes it obligatory on every employer
in respect s f the accounting year to pay minimum bonus which shall be 8.33 per cent
of the salary or wage earned by the employee during the accounting year or one
hundred rupees, whichever is higher, whether or not the employer has any allocable
surplus in the accounting year. But where an employee has not completed fifteen years
of age at the beginning of the accounting year, he shall be paid sixty rupees.
But where the allocable surplus of any accounting year exceeds the amount of minimum
bonus payable to the employees, the employer shall in lieu of minimum bonus be
bound to pay every employee in respect of that accounting year bonus which shall be
an amount in proportion to the salary or wage by the employee during the accounting
year subject to a maximum of 20% of such salary or wage.
Thus under the Act, in the absence of any allocable surplus in any accounting year the
minimum bonus of 8.33% payable. But if the allocable surplus is available the amount
of bonus shall be to a maximum of 20% of the salary or wage.
In computing the allocable surplus the amount set on or the amount set off under the
qrovisions of Section 15 shaM be taken into account.
Allocable surplus has been defined to mean:
a)

in relation to an employer being a company other than a banking Company, which

has not made the arrangement prescribed under the Income Tax Act for the
declaration and payment ,with in India of the dividends payable out of its profits in
accordance with the provisions of Section 194 of that Act, sixty seven per cent of
the available surplus in an accounting year;

b) in any other case sixty per cent of such available surplus.

Rule of set on and set off of allocable surplus: The available allocable surplus for the
relevant accounting year has to be arrive3 at after taking into account the figures of set
on and set off in the previous year. It is as follows (Section .IS):
1)

72

Where in any accounting year, the allocable surplus exceeds the amount of
maximum bonus payable under the Act to the employees in the establishment then
the excess shall subject to a limit of 20% of the total salary or wages.of the
employees employed in'the establishment in that accounting year, be carried

forward for being set on in the succeeding accounting year and sooil up to and
inclusive of the fourth accounting year to be utilised for the purpose of payment of
bonus.
2) Where in any accounting year there is no available surplus or the allocable surplus
in that year falls short of the amount of minimum bonus payable to the employees
in the establishment and there is no amount or sufficient amount carried forward
and set on which could be utilised 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 accounting year up to and
inclusive of the fourth accounting year.
3) This principle shall apply to all other cases not covered by the above provisions for
the payment of bonus.
4) wherein any accounting year any amount has been carried forward and is set on
or set off, then in calculating bonus for the succeeding accounting year, the
amount carried forward from the earliest accounting yeat shall first be taken into
account.
Special provisions: Under the Act bonus is payable to employees drawing wages
exceeding Rs. 25001- per mensem provided he has worked in the establishment for not
less than thirty working days in that year (Section 8). Where however the salary or
wage of an employee exceeds Rs. 16001- per mensem, bonus for him shall be
calculated as if his salary or wage is Rs. 16001- per mensem (Section 12).

2) Where an employee has not worked for all working days in any accounting year,
then the minimum bonus of one hundred rupees or sixty rupees as the case may be
if that bonus is higher than 8.33 per cent of his salary or wage or wage for days
he has worked shall be proportionately reduced (Section 13).
3) Where in any accounting year:
a)

an employer has paid any puja bonus or other customary bonus to an

employee; or .

b)

an employer has paid a part of the bonus payable to an employee under this
Act, before the date on which the bonus becomes payable.

Then the employer would deduct the amount of bonus so paid from the amount of
bonus payable to the employee in respect of the accounting year and the employee
would be entitled to receive the balance only (Section 17).
4) Where in any accounting year the employee is found guilty of misconduct causing
financial loss to the employer then it shall be lawful for the employer to deduct the
amount of loss from the amount of bonus payable by him to the employee under *
this Act, in respect of the accounting year and the employee shall be entitled to
receive the %alance, if any (Section 18).
The process of computation of the amount of bonus is as follows:
i)

Gross Profit - Authorised deduction = available surplus

ii) Allocable surplus - Company (other than Banking Company) = 67% of available
surplus and in others 60% of available surplus.
iii) Allocation surplus - Bonus already paid to employees = balance to be paid.
I f there is allocable surplus then the maximum of it at the rate 20% of the wage or
salary. If there is no allocable surplus then the minimum bonus.at the rate of 8.33 per
cent of wages or salary of Rs. 100 which is higher.
Disqualification for bonus: Under Section 9 of the Act a person is disqualified to
receive bonus if he is dismised from service for:

a) fraud; or
b) riotous or violent behaviour while on the premises of the establishment; or
c) theft, misappropriation or sabotage of any property of the establishment.

Wage and Salary Administration

Human Resource Management

Check Your Progress 4

1)

Is the employer bound to pay minimum bonus even in case of loss in the
establishment? If so how much?

2) Whether the Payment of Bonus Act prescribes the maximum bonus? If so how
much?

3 ) Is the person disqualified to receive bonus if he is dismissed from service for

violent behaviour?

4.6 EQUAL REMUNERATION FOR MEN AND WOMEN

Equal pay for men and women for equal work is one of the significant human rights
set out in the Universal Declaration of Human Rights which the General Assembly of
.the United Nations adopted and proclaimed on December 10, 1948 (wit5 not a single
country voting against it) as a common standard of achievement of all people and all
nations. The Declaration stipulates that "everyone without discrimination, has a right to
equal pay for equal work. In 1958 the L O concluded Convention No. 111 against
discrimination in matters of employment and profession.
In September 1958, India ratified the L O Convention No. 111 concerning equal
remuneration for men and women workers for work of equal value which requires a
member-State ratifying the Convention to promote as well as ensure the application or
regulations legally established or recognised machinery for wage determination,
collective agreements between employers and workers, or a combination of these
measures. It is significant to note that notwithstanding the ratification of the
Convention in 1958, India incorporated, eight years prior to its ratification, Article 39
(d) of the Constitution of India which proclaims "equal pay for equal work for both
men and women" as a Directive Principle of State Policy which has to be read into the
fundamental rights as a matter of interpretation. Article 14 of the Indian Constitution
enjoins the State not to deny any person equality before the law or equal protection of
the Laws, and Article 16 declares that there shall be equality of opportunity for all
citizens in matters relating to employment or appointment to any office under the State.
The Equal Remuneration Act, 1976 seeks to provide for the payment of equal
remuneration to male and female workers and prevent discrimination pn the ground of
sex against women in matters of employment. Section 2, (g) defines "Remunerations" to
mean the basic wage or salary and 'any additional emoJuments whatsoever payable
either in cash or in kind, to a person employed in re pect of employment or work done
in such employment, if the terms of the contract of employment, express or implied,
were fulfilled.

And Section 2 (h) defines "same work' or work of similar nature" to mean:
work-in respect of which the skill, and responsibility required are the same
when performed under similar wprking csnditions, by a man or a woman and
the differences, if any, between the skill effort and responsibility required of a
man and those required of a woman are not of practical importance in relation
to the terms and conditions of employment.
Section 3 of the Act gives overriding effects to the provisions of this Act. Section 4
incorporates the basic principle of parity of payment for equal work when it provides,
itnter alia that
i)

no employer shall pay to any worker, employed by him in an establishment

--

or employment, remuneration, whether payable in cash or in kind at rates

less favourable than those at which remuneration is paid by him to the
workers of the opposite sex in such establishment or employment for
performing the same work or work of a similar nature.
ii)

no employer shall, for the purpose of complying with the provisions of subsection (1) reduce the rate of remuneration of any worker.

Section 5 attempt? to check the discrimination in recruitment in future on the basis of

sex except where the employment of women in such work is prohibited or restricted
by or under any law. Section 6 provides establishment of an Advisory Committee for
the purpose of providing increasing employment opportunities for authority to hear and
decide complaints and claims arising from the non payment of equal pay to both men
and women. The Act ilso provides for appointment of Appellate Authority to hear
appeal against the decision of the authority. Section 16 makes an exception where
difference in remuneration of men and women workers in any establishment is based
on factors other than sex.

Check Your Progress 5

1)

C a n the ernployer reduce the rate of remuneration of any workers for the purpose
of complying with the provisions of the Equal Remuneration Act, 1976?

2 ) Can the enlployer discriminate women when recruiting workers?

...........................................................................................................................................

..........................................................................................................................,.

4.7 LET US SUM UP

From the above study, you may draw several conclusions. The legislation concerni~g
minimum wages and bonus seeks to assure minimum standards of living for the
workers covered therein. However its coverage is very limited. Again the payment of
wages seeks to ensure payment of wages at regular interval without any unauthorised
deduction. But again the scope and coverage of the Act is narrow. However the
Equal Remuneration Act which seeks to ensure equal pay for equal work is wider in
its scope and coverage.

4.8 ANSWERS TO CHECK YOUR PROGRESS

Check Your Progress 1
1) Minimum, Living
2) Minimum Wages Act, 1948

Check Your Progress 2

1)

Manager

2) No
3) Yes, provided there is a writtkn authorisation of the employed person

Check Your Progress 3

1)

At an interval not exceeding 5 years

2) No
3) Yes, provided there is a custom.
4) Yes

Wage andI Salary Administration

Human Resource Management

c h i c k Your Progress 4

1) Yes, 8.33% of wages d&ng the accounting y e q

2) Yes, 20% of the salary or wages in the accounting year.
3) Yes
Check Your Progress 5

1) No

2) No, unless prohibited under law

4.9 FURTHER READING

Srivastava, S.C. (1997),Commentaries and Payment of Bonus Act, 1965, Universal
Book Co.: New Delhi.
'