Payment of Wages

Act 1936

Introduction:
In a country where even living wages are

not paid to workers, the need to protect the

wages earned by them can hardly be over
emphasized.
Before the Payment of Wages Act, 1936
was passed, evils of withholding wages,
delays in paying wages and making
unreasonable deductions out of wages
were quite prevalent.

Learning objectives:
Understand the definition of wages.
Determine the objectives and application

of the Act.
Explore the rules of the Wages Act.
Know the provisions of deductions from
wages.
Study the maintenance of registers and
records.
Know the method and procedure of
enforcement of the Wages Act.
Determine the claims arising out of the
deductions from the wages.

APPLICABILITY OF THE ACT

Persons employed in: Any factory (a saw mill, ginning factory,

godowns, yards etc as defined in Factories Act,

1948).

Tramway service or motor transport service

engaged in carrying passengers or good or

both by road for hire or reward.

Air transport service Dock, Wharf or Jetty,

Inland vessel, mechanically propelled

Mine, quarry or oil-field plantation

Workshop or other establishment etc.

WAGE
Wage includes any remuneration: Payable under any award or settlement between the

parties or order of a Court;

Over time work or holiday or any leave period;
Any additional remuneration under the terms of
employment.
Wage does not includes any bonus, pension fund or

provident fund, travelling allowance and any gratuity.

According to Sec2(vi) wages means all remuneration expressed in

terms of money or capable of being payable to a person for a work

done in such employment.

Rules for Payment of Wages

(Section 3 to 6)
Responsibility for payment of wages

(Sec. 3).
Every employer shall be responsible for the
payment to persons employed by him of all
wages required be paid under the Payment
of Wages Act (Sec. 3).
Fixation of wage-periods (Sec. 4)
Every person responsible for the payment
of wages under Sec. 3 shall fix periods,
known as wage-periods, in respect of which
such wages shall be payable {Sec. 4 (1)].

Time of payment of wages (Sec.5)

The rules relating to time of payment of

wages are as follows:

1. The wages of every person employed

is paid. When less than 1000 persons

are employed shall be paid before the
expiry of the 7th day of the following
month. When more than 1000 workers,
before the expiry of the 10th day of the
following month. {Section 5(1)}.

2. Wage in case of termination of employment: sec 5(2)

(i)Where the employment of any person is terminated by, or
a. On behalf of the employer,
b. Due to the closure of the establishment for any reason
other than weekly (or) recognized holiday,
The wage earned by him shall be paid before the expiry of
the 2nd day. (from the day on which his employment is so
terminated)
3. Exemption: Sec 5(3)
State government by general or Special order passed to exempt
the person responsible for the payment of wages from the
operation of the above provision.
4. Wages to be paid on a working day - All payment of wages
shall be made on a working day [Sec. 5 (4)].

Medium of payment of wages (Sec.

6).
All wages shall be paid in current coin or

currency notes or both (Sec. 6).

Payment of wages in kind is not permitted.

Deductions from Wages (Sec. 7 to

13)
Deductions which may be made from

wages (Sec. 7)
Sec. 7 provides that the wages of an
employed person shall be paid to him
without deductions of any kind except
those authorized by or under the Payment
of Wages Act, 1936 [Sec. 7 (1)].
Kinds of deductions:
Deductions for fines [Sec.7 (2) (a) and 8]
Deductions for absence from duty [Sec. 7
(2) (b) and 9]
Deductions for damage or loss [Sec. 7 (2)

The Payment
of
Bonus Act 1965

Learning objectives:
Understand the objects of Payment of

Bonus Act 1965.

Explore the application of the Bonus Act.
Know the definitions of the Bonus Act.
Study the eligibility and disqualifications for
bonus

Meaning:
The term 'Bonus' is not defined under the

Payment of Bonus Act,1965 nor there exists

any definition of bonus under any other
enactment.
Dictionary Meaning of the word 'Bonus' is

something to the good; especially extra

dividend to the shareholders of the company;
distribution of profits to the insurance
policyholders; gratuity to workmen beyond
their wages.
Its

an annual payment obligatory on the

employers to employees on the basis of

Object to the Act

To impose a statutory liability upon an

employer of every establishment covered by

the Act to pay bonus to employees in an
establishment.
To prescribe formula for calculating bonus.
To prescribe minimum and maximum
percentage of bonus.
To provide redressal mechanism.

Application of the Act

The Act extends to the whole of India [Sec.

1(2)].
It applies to: a) every factory [as defined in
Sec. 2(m) of the Factories Act, 1948];
b) every other establishment in which 20 or
more persons are employed on any day
during any accounting year [Sec. 1(3)].

EXEMPTIONS

Small factories and establishments having

less than twenty or ten persons.
Establishments excluded by sec.32, e.g.,
LIC, Hospitals.
Establishments where employees have
entered into an agreement with the
employer.
Establishments specifically exempted by
the appropriate government like sick units.

Definitions:
Accounting year [Sec. 2(1)].
Allocable surplus [Sec.2 (4)]

-(60 per cent

of the available surplus. )

The allocable surplus is the workers share
in the available surplus as defined in Sec.2
(6).
Available surplus (Sec. 2(6)].
Payment of minimum bonus 8.33 % of

gross salary.
Payment of maximum Bonus
gross salary.

20% of

ELIGIBILITY FOR BONUS [Sec 8]

Every employee receiving salary or
wages up to RS.10,000 p.m.
He has worked for at least 30
working days in that year.

DISQUALIFICATION FOR BONUS

[Sec 9]

In case of :
Fraud,
Violent behavior while on the premises
of the establishment,
Theft, sabotage of any property of
establishment.

INDUSTRIAL
DISPUTE
ACT 1947

Learning objectives:
Understand the definitions in Industrial

Disputes Act.
Determine the objectives of the Act.
Procedure for Settlement of Industrial
Disputes and Authorities under the Act.
Know the Conciliation Machinery.

Object of the Act:

1) to secure industrial peace:
a) by preventing and settling industrial disputes
between the employers and workmen.
b) by securing and preserving amity and good
relations between the employers and workmen
through an Internal Works Committee, and
c) by promoting good relations through an external
machinery of conciliation, Courts of Inquiry, Labour
Courts, Industrial Tribunals and National Tribunals.
2) to ameliorate the condition of workmen in industry:
a) by redressal of grievances of workmen through a
statutory machinery, and
b) by providing job security

What is an Industrial Dispute?

An Industrial dispute means any dispute

or difference between:
i) employers and employees,
ii) employers and workmen or
iii) workmen and workmen, which is
connected with
(a) the employment or non-employment
(b) the terms of employment
or
(c) the conditions of labour of any person.

Industry
As per section 2 (J) of industrial disputes act

1947, Industry mean any systematic activity

carried on by cooperation between an employ
and his work man for the production supply or
distribution of goods and services with a view
of satisfy human wants or needs.

Procedure for the Settlement of Industrial

Disputes and Authorities under the Act:
(Chapter II, Secs. 3 to 9)
The industrial disputes Act intends, by

making various provisions, the prevention

and settlement of industrial disputes. The
Act, in its Preamble, has also emphasized
this point by saying that the Act is for the
investigation and settlement of industrial
disputes.
The Act provides elaborate and effective

machinery for bringing about industrial

peace by setting up various authorities for
the investigation and settlement of
industrial disputes. These authorities are:

1. Works Committees (Sec. 3).

2. Conciliation Officers (Sec. 4).
3. Boards of Conciliation (Sec. 5).
4. Courts of Inquiry (Sec. 6).
5. Labour Courts (Sec. 7).
6. Industrial Tribunals (Sec. 7-A).
7. National Tribunal (Sec. 7-B)
. The Act provides for the following modes of

settlement of disputes under the Act:

1. Voluntary settlement and conciliation.
2. Adjudication and
3. Arbitration.

INDUSTRIAL DISPUTE RESOLUTION

MECHANISM

Industrial
Undertaking

Works Committee

Conciliation officer
CG/State Govt.
Board

Tribunal
Labour court

Arbitral Tribunal

27

AWARD