LEGAL ASPECTS OF BUSINESS UNIT III - INDUSTRIAL LAW FACTORIES ACT, 1948 Factory :( sec 2 (m)) A factory is a premise

whereon 10 or more persons are engaged if power is used or 20 or more persons are engaged if power is not used, in manufacturing process. Objectives: To regulate working conditions in factories To ensure the basic minimum requirements for the safety, health welfare of the factory workers are provided To regulate the working hours, leave, holidays, overtime, employment of children, women and young persons Occupier: Occupier of a factory means the person who has ultimate control over the affairs of the factory. In case of a firm is partnership, any one of the partners or members thereof shall be deemed to be the occupier In case of a factory owned or controlled by the central government or any local authority, the persons appointed to manage the affairs of the factory by the central government or the local authority Duties of occupier: The provision and maintenance of plant and systems of work in the factory that are safe and without risks to health The arrangement in the factory for ensuring safety and absence of risks to health in connection with the use, handling, storage and transport of articles and substances The provisions of such information, instruction, training and supervision as are necessary to ensure the health and safety of all workers at work The maintenance of all places of work in the factory in a condition that is safe and without risks to health Prepare, revise, a written statement of this general policy with respect to the health and safety of the workers at work and

PROVSION OF THE FACTORIES ACT, 1948, RELATING TO HEALTH, SAFETY AND WELFARE: HEALTH MEASURES: To take care of the health of workers in factories, the Factories Act, 1948 has provided for certain measures which are stated below: (i) Cleanliness of the factory premises Every factory shall be kept clean and free from effluvia arising from any drain, privy or other nuisance. accumulations of dirt and refuse shall be removed daily The floor of every room shall be cleaned. This shall be done at least once every week by washing, or by some other effective method; floor is liable to become wet in the course of any manufacturing process all inside wall and partitions, all ceilings or tops of rooms and all walls, sides and tops of passages and staircases shall be painted or varnished, and repainted and revarnished at least once in a period of five years; (ii) Disposal of Wastes and Effluents Effective arrangement shall be made for the disposal of wastes and effluents arising out of manufacturing process in the factories. (iii) Ventilation and Temperature Effective and suitable measures shall be adopted for securing and maintaining in every room Adequate ventilation by the circulation of fresh air, and such a temperature as will secure to workers reasonable conditions of comfort, and prevent injury to health, and in particular the walls and roofs shall be of such material and so designed that such temperature shall not exceed but kept within reasonable limits. (iv)Dust and Fume In every factory, where due to manufacturing process, dust or fume or other impurity arise which is likely to be injurious to the health of workers employed, effective measures shall be taken to prevent its inhalation, and accumulation in any workroom.

If it is necessary to install exhaust appliances, it would be installed near the point of origin of the dust, fumes, or other impurity. Measures shall be taken to enclose such points.

(v) Artificial humidification In the factories, where humidity of the air is artificially increased, it is provided to make rules prescribing standard of humidification; regulating the methods used for artificially increasing the humidity of the air; (vi)Overcrowding No room in any factory shall be overcrowded to such an extent which becomes injurious to the health of the workers employed therein. The Chief Inspector of factories by order in writing shall fix the maximum member of workers to be employed in each room in the factory. (vii) Lighting The Factories Act provides for sufficient and suitable lighting, natural or artificial where workers are working or passing through. Provision of cleaning of inner and outer surface is provided for all glazed windows and skylights used for the lighting of the workrooms. (viii) Drinking Water In every factory, effective arrangement shall be made at suitable places for sufficient supply of wholesome drinking water. Such places shall be legibly marked Drinking Water in a language understood by a majority of the workers employed in the factory. In case of factories employing more than 250 workers, provisions shall be made for cooling drinking water during hot weather by effective means, and for its distribution. (ix) Latrines and Urinals The Factories Act requires that provision should be made for a) Sufficient latrine and urinal accommodation conveniently situated and accessible to workers while they are in the factory; b) Separate enclosed accommodation for male and female workers; c) Such accommodation being adequately lighted and ventilated;

(x) Spittoons Sufficient number of spittoons must be provided in every factory and maintained in clean and hygienic condition. WELFARE MEASURES: (i) Washing facilities: The Factories Act provides for a) Adequate and suitable facilities for washing for the use of workers in the factories. b) Separate and adequately screened washing facilities for the use of male and female workers. c) Such facilities being conveniently accessible, and being kept clean. (ii) Facilities for storing and drying clothes: A suitable place for keeping clothes not worn during working hours shall be provided in every factory. Facilities shall also be provided for the drying of wet clothes. (iii) Facilities for sitting: For workers who are to work in a standing position, suitable arrangement for sitting shall be provided in the factories. This is to enable workers to take advantage of any opportunity for rest which may occur in the course of their work. (iv First-aid appliances: First-aid boxes or cupboards equipped with the required contents should be provided for workers in every factory. This should be readily accessible to them during all working hours. The number of such first aid boxes shall not be less than one for every 150 workers employed in the factory. In factories employing more than 500 workers, there shall be an ambulance room. It should contain the prescribed equipments, and be in the charge of such medical and nursing staff as may be prescribed. (v) Canteens: In factories employing more than 250 workers, there shall be a canteen for the use of workers.

(vi)Shelter, restrooms and lunch rooms: Adequate and suitable shelters, rest rooms, and lunch rooms with drinking water facility shall be made in factories employing 150 workers or more. (vii) Crches: In every factory, where more than 50 women workers are employed, provision shall be made for suitable and adequate room for the use of children under the age of six years of such women. Such a room shall be adequately lighted and ventilated. It shall be maintained in clean and sanitary conditions under the charge of a woman trained in the care of children and infants. (Viii) Welfare Officer: The factories Act also provides for employment of welfare officers with prescribed qualification to look into the implementation of various facilities provided for. Such a provision exists in every factory employing more than 500 workers. SAFETY MEASURES: 1. Fencing of Machinery In every factory, measures should be taken for secured fencing of machinery. Every moving part of a prime mover; Headrace and tailrace of every water-wheel and water turbine; Every part of an electric generator, a motor or a rotary convertor; Every part of transmission machinery; and every dangerous part of any other machinery. 2. Work on or near Machinery in Motion While the machinery is in motion, such examination shall be carried out only by specially trained adult male workers. Such workers shall wear tight fitting clothing and their names shall be recorded in the register prescribed in this connection. No woman or young person shall be allowed to clean, lubricate or adjust any part of a prime mover or transmission machinery, while the machinery is in motion.

3. Employment of Young Persons on Dangerous Machines The Factories Act prohibits employment of young persons on certain types of machines. They can work only after they have been fully instructed as to the dangers arising in connection with the machines and the precautions to be observed. They should be under adequate supervision by a person who has a thorough knowledge and experience of the machines. 4. Striking Gear and Devices for cutting off Power In every factory i) Suitable striking gear or other efficient mechanical appliances shall be provided and maintained, and used to move driving belts to and from fast and loose pulleys which form part of transmission machinery. ii) In every factory, suitable devices for cutting off power in emergencies from running machinery shall be provided and maintained in every workroom. 5. Self-acting Machine No traversing part of a self-acting machine in any factory, and no material carried thereon shall, if the space over which it runs, is a space cover which any person is liable to pass, whether in the course of his employment or otherwise, be allowed to run on its outward or inward traverse within a distance of eighteen inches from any fixed structure which is not a part of the machine. 6. Prohibition of Employment of Women and Children near Cotton openers No women or child shall be employed in any part of a factory where pressing a cottonopener is at work. 7. Hoists and Lifts In every factory i) Hoists and lifts shall be of good mechanical construction, sound material and of adequate strength; ii) They shall be properly maintained, and shall be thoroughly examined by a competent person at least once in every period of six months. A register shall be kept containing the prescribed particulars of each such examination;

8. Lifting Machines, Chains, Ropes and Lifting Tackles a) All parts including the working gear of every lifting machine and every chain, rope or lifting tackle shall be of good construction, sound material and adequate strength, and free from defect; properly maintained ; and thoroughly examined by a competent person at least once in every period of twelve months. 9. Revolving Machinery A notice indicating the maximum safe working peripheral speed of revolving machinery shall be put up in every room in a factory in which the process of grinding is carried on. 10. Floors, Stairs, and Means of Access In every factory all floors, steps, stairs and passages shall be of sound construction and properly maintained, and where it is necessary to ensure safety, steps, stairs, and passages shall be provided with substantial hand rails; 11. Pits, Sumps, openings in floor etc. which may be a source of danger shall be either securely covered or securely fenced. Securely fencing a pit means covering or fencing it in such a way that it ceases to be a source of danger. 12. Excessive Weights No person shall be employed in any factory to lift, carry or move any load so heavy as to be likely to cause him an injury. 13. Protection of Eyes Effective screens or suitable goggles shall be provided for the protection of persons employed on, or in the immediate nearness of, the process. 14. Precautions against Dangerous Fumes and use of Portable Light No person shall enter any chamber, tank, vat, pit, pipe or other confined space in a factory in which dangerous fumes are likely to be present to such an extent as to cause risk of persons being overcome thereby;

15. Precautions in case of fire Every door, window or other exit affording a means to escape in case of fire shall be distinctively marked in a language understood by the majority of the workers. Such marking should be in red letters of adequate size or by some other effective and clearly understood sign. Effective measures shall be taken to ensure that in every factory all workers are familiar with the means of escape in case of fire and have been adequately trained in the routine to be followed in such a case. 16. Safety of Building and Machinery In case it appears that any building, machinery or plant in a factory is in such a condition that it is dangerous to human life or safety, the manager of the factory may be served an order specifying measures to be adopted as prescribed. PROVISIONS OF THE FACTORIES ACT REGARDING THE EMPLOYMENT OF YOUNG PERSONS AND WOMEN Employment of young person: Prohibition of employment of young children: No child who has not completed his 14 th year shall be required or allowed to work in a factory Non-adult workers to carry tokens: A child who has completed his 14 th year on the adolescent may be allowed to work in a factory provided a certificate of fitness is in the custody of the occupier and such child carries a token giving a reference to such certificate Certificate of fitness: It is a certificate granted to a young person by a certifying surgeon after examining him and ascertaining his fitness for work in a factory. The certificate is valid for 12 months from the date of issue and can be renewed Time of work: No female adolescent or a male adolescent who has not attained the age of 17 years but who has been granted a certificate of fitness to work as an adult shall be required or allowed to work except between 6a.m and 7p.m

Working hours and notice of periods of work for children: No child shall be employed or permitted to work in a any factory for more than 4.5 years in any day during the night The period of work of all children employed in a factory shall be limited to 2 shifts, which shall not overlap or spread over more than 5 hours each. The provisions of weekly holidays shall applicable to child workers also No child shall be required or allowed to work in any factory on any day on which he has already been working in another factory No female child shall be required or allowed to work in any factory except between 8a.m and 7p.m A notice shall be displayed and maintained in every factory showing clearly for every day the periods during which children may be required to work Register of child workers: The occupier or manager of every factory in which children are employed shall maintain a register of child workers showing The name of each child worker The nature of his work The group in which he is included Where his group works on shifts The number of his certificate of fitness

Power to require medical examination: An inspector may direct the manager of a factory to have a person or young person medically examined by certifying surgeon if he is working without a certificate fitness Safety provisions for young person: No young persons shall work or near machinery in motion, on dangerous machines and near cotton openers.

No young persons shall be employed on any operation carried on in a factory which exposes the young person to a serious risk of bodily injury, poisoning or disease

Employment of women: No women or young person shall be allowed to clean, lubricate or adjust any part of machinery in motion if it would expose the woman to risk of any injury from any moving part. No woman or child shall be employed in any part of a factory for pressing cotton in which a cotton-opener is at work. However, they may be employed if the cotton-opener I separated and the feed-end is partitioned. In every factory wherein more than 30 women workers are ordinarily employed, there shall be provided and maintained a suitable room or rooms for use of children under the age of 6 years of such women. Working hours: A woman shall not be required or allowed to work in a factory for more than 48 hours in any week or 9 hours in any day. Restriction on employment of women: A woman shall be required to work in a factory only between the hours of 6 am and 7 pm and no woman is allowed to work between the hours of 10 pm and 8 am. Certificate of fitness: No female adolescent who has not attained the age of 17 years but who has been granted a certificate of fitness to work in a factory as an adult shall be required to work in any factory except between 6 am and 7 pm. Dangerous operations: Where the state government is of opinion that any operation carried on in a factory exposes any person employed in it to a serious risk of bodily injury, poisoning or disease, it may make rules prohibiting the employment of women in that operation.

INDUSTRIAL DISPUTE ACT, 1947 Industry: Industry means any business, trade, undertaking, manufacture or calling of employers and includes any calling, service, employment of workmen. Industrial dispute: An industrial dispute means any dispute or difference between employers and employers, or between employers and workmen, or between workmen and workmen, which is connected with the employment or non-employment or the terms and conditions of employment of any person An industrial dispute has three ingredients, There should be real and substantial dispute The dispute must be between employers and workmen The dispute must be connected with the employment or non-employment or terms of employment. Objective of industrial dispute Act: To prevent and settle industrial disputes between the employers and workmen To secure and preserve amity and good relations between the employers and workmen through internal machinery called works committee. To provide job security

Modes of settlement of disputes under the Act: 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. Voluntary settlement and conciliation: Works committee Conciliation officers Boards of conciliation

Arbitration Courts of enquiry

Adjudication machinery Labour courts Industrial tribunals National tribunals

VOLUNTARY SETTLEMENT AND CONCILIATION: Conciliation is a process by which representatives of workers and employers are brought together before a third person or a group of persons with a view to persuading them to arrive at an agreement by mutual discussion between them. WORKS COMMITTEES: If the establishment has 100 or more workmen are employed to constitute a works committee consist of representatives of employers and workmen of the establishment. The number of employers representatives and workers representatives should be equal and it should not exceed 20. Employers representatives are nominated by other employers or the person who has close relation to the establishment. Workers representatives are selected by election. Powers: Promote measures for securing and preserving amity and good relations between the employers and workmen Comment upon matters of their common interest and concern Supervision of such matters like welfare of workers, supervision of recreational facilities and crches and hospitals, their training, wages, hours or work, bonus, gratuity, holidays and working conditions. Conciliation officers: The appropriate government may, by notification in the official gazette, appoint such number of persons as it thinks fit to be conciliation officers to mediate in and promote the settlement of industrial disputes.

Duties: To hold conciliation proceedings in the following manner, Conciliators opening statement Parties opening statement Joint exploratory session Private meetings Conclusion To investigate the dispute and all matters affecting the merits and the right settlement thereof To send a report and memorandum of settlement to appropriate government To send a full report to the appropriate government setting forth steps taken by him in case no settlement is arrived at The conciliation officer may for the purposes of inquiry into the industrial dispute have power to enter premises and to call for and inspect documents of the industrial establishment. Board of conciliation: The appropriate government by notification in the official gazette constitutes a board of conciliation for promoting the settlement of an industrial dispute. The board shall consist of a chairman an independent person and 2 or 4 other members appointed in equal number to represent the parties to the dispute. Duties: To bring about a settlement of the dispute To send a report and memorandum of settlement to the appropriate government setting forth the steps taken by the board incase no settlement is arrived at. To communicate reasons to the parties if no further reference made

To report within 2 months of the date on which the dispute was referred to it

The board may for the purpose of inquiry into the industrial dispute have the power to enter premises of the establishment and shall have the same powers as are vested in civil court. ARBITRATION: Arbitration is a process in which a dispute is submitted to a impartial outsider who makes a decision which is usually binding on both the parties. It means securing an award on a conflict issue by reference to a third party. Before an industrial dispute is referred to a labour court or tribunal the employer and workmen may refer the dispute to arbitration of any person or persons of their choice, by means of a written arbitration agreement. A copy of arbitration agreement, signed by representatives of both the parties representing majority of each party, should be forwarded to government and the conciliation officer. The arbitrators shall investigate into the dispute and submit the arbitration award to the government, who shall within one month of the receipt thereof, publish the same in official gazette.

Courts of inquiry:
A court may consist of one independent person and if it consists of 2 or more persons, one of them shall be appointed as the chairman. Duties: To inquire into the matters referred to it To send the report of inquiry to the appropriate government ordinarily within a period of 6 months from the commencement of this inquiry A member of a court may for the purpose of inquiry into the dispute has the power to enter premises after giving reasonable notice to the establishment. ADJUDICATION MACHINERY: Adjudication involves intervention in the dispute by a third party appointed by the government for the purpose of deciding the nature of final settlement.

If a dispute is not settled by negotiations or conciliation, and the parties do not agree to refer the dispute to arbitration, the government may, on its own discretion, or on an application by the parties to the dispute representing the majority, separately or jointly. The authorities under the adjudication machinery are Labour courts Industrial tribunals and National tribunals

Labour courts:
The appropriate government may, by notification in the official gazette, constitute one or more labour court for adjudication of industrial disputes. A judge of a high court may be appointed as presiding officer of a labour court Duties: To adjudicate upon industrial disputes To give award within the specified period The award should be signed by its presiding officer and be published in such manner as the appropriate government thinks fit Powers: The presiding officer after giving a prior reasonable notice may enter the premises occupied by any establishment to which the dispute relates A labour court shall have the same powers as are rested in a civil court

Industrial tribunals:
The appropriate government may by notification, constitute one or more industrial dispute relating to any matter specified in the second and third schedule and for performing such other functions as may be assigned to them under this Act. A person of the rand of a judge of high court may be appointed as a presiding officer of the tribunal.

Duties: The tribunal shall hold its proceedings expeditiously of the referred dispute and submit its award to the appropriate government within a specified period The award shall be in writing and signed by its presiding officer and be published Powers: The presiding officer may after giving reasonable notice enter the premises occupied by any establishment to which the dispute relates A tribunal shall have the same powers as are rested in a civil court The tribunal may, if it so thinks fit, appoint one or more persons having special knowledge of the matter under the consideration as assessors to advise it in the proceeding before it. The cost of any proceedings before a tribunal shall be determined at the discretion of the tribunal

National tribunals:
The central government may, by notification, constitutes one or more national industrial tribunals for the adjudication of industrial disputes which involves questions of national importance or of such a nature that industrial establishments situated in more than one state are likely to be interest in, or affected by, such disputes A judge of high court shall be appoint as one person to a national tribunal by the central government Duties: The tribunal shall hold its proceedings expeditiously of the referred dispute and submit its award to the appropriate government within a specified period The award shall be in writing and signed by its presiding officer and be published Powers: The presiding officer may after giving reasonable notice enter the premises occupied by any establishment to which the dispute relates A tribunal shall have the same powers as are rested in a civil court

The tribunal may, if it so thinks fit, appoint one or more persons having special knowledge of the matter under the consideration as assessors to advise it in the proceeding before it.

The cost of any proceedings before a tribunal shall be determined at the discretion of the tribunal

STRIKES AND LOCKOUTS: Strike and lock-out are two coercive measures resorted to by the employees and the employers, respectively, for compelling the employers or employees to accept their demands or conditions of service. Strike: Strike means cessation of work by a group of employees employed in any industry, acting in combination. Lock-out: There is a temporary closing of the place of employment, or suspension or withholding of the work by the employer in some form Circumstances on which strikes and lock-outs are prohibited: No person employed in a public utility service shall go on strike in breach of contract Without giving to the employer notice of strike, within 6 weeks before striking Before the expiry of the date of strike specified in any such notice as aforesaid During the pendency of any conciliation proceedings and 7 days after the conclusion of such proceedings No employer carrying on any public utility service shall lock-out any of his workmen Without giving them notice of lock-out, within 6 weeks before locking-out During the pendency of any conciliation proceedings and 7 days after the conclusion of such proceedings

No workmen who is employed in any industrial establishment shall go on strike and no employer of any such workman shall declare a lock-out During the pendency of conciliation proceedings before a board of conciliation of 7 days after the conclusion of such proceedings During the pendency of arbitration proceedings before an arbitrator and 2 months after the conclusion of such proceedings 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. ILLEGAL STRIKE AND ILLEGAL LOCK-OUTS: Any strike or lock-out commenced or declared or continued, in contravention of any of the above restrictions or any prohibitory order of the government shall be illegal No person should knowingly finance any illegal strike or lock-out A strike is also said to be illegal if it is commenced or declared in contravention LAY-OFF AND RETRENCHMENT: Lay-off: Lay-off means the failure, refusal or inability of an employee to give employment to workman whose name is borne on the muster rolls of his industrial establishment and who has not been retrenched. It may be due to, Shortage of coal, power or raw materials The accumulation of stocks The breakdown of machinery Natural calamity or for any other connected reasons

Retrenchment Retrenchment means termination by the employer, of the service of a workman for any reason whatsoever, but excludes: Dismissal inflicted by way of disciplinary action Voluntary retirement of the workmen Termination as a result of non-renewal of contract of employment Termination due to continued ill-health of the workman

PAYMENT OF WAGES ACT, 1936 Purpose of payment of wages Act: The main purpose of the Payment of Wages Act, 1936 is to ensure regular and timely payment of wages to the employed persons and to prevent unauthorized deductions being made from wages and arbitrary fines being imposed on the employed persons. Wages: Wages means all remuneration (whether by way of salary, allowance or otherwise expressed in terms of money or capable of being so expressed which would, be payable to a person employed in respect of his employment or work done in such employment. It does not include, Any bonus Contribution to any pension and provident fund Any travelling allowance Any gratuity payable on the termination of employment

Objectives: To ensure regular and timely payment of wages to the employed persons To prevent the evils of withholding wages To avoid delays in paying wages To prevent unauthorized deductions from wages To prevent arbitrary fines being imposed on the employed persons To regulate the payment of wages to certain classes of persons employed in industry To ensure every employer responsible for the payment of wages to persons employed by him.

Time of payments of wages:

Wages to be paid before 7th day of the following month if less than 1000 persons are employed Wages to be paid before 10th day of the following month if more than 1000 persons are employed If any person is terminated from his employment, his wages to be paid before the expiry of the 2nd working day from the day on which his employment is terminated All wages shall be paid on a working day

Medium of payment of wages: All wages shall be paid in current coin or currency notes or both The employer may after obtaining the written authorization of the employed person, pay him the wages either by cheque or by crediting the wages in his bank account

Deductions: Every payment made by the employed person to the employer is known as deductions. There are three kinds of deductions Mandatory deduction Recommendatory deduction Deduction under court of authority

DEDUCTIONS UNDER THE PAYMENT OF WAGES ACT, 1936: Fines (sec 7 (2) a) Fine is imposed by the employer to the employee for their default activities which is related to their job. The provisions of fines are, Any fine that is imposed on an employee by an employer for any act of default on his part from discharging his duty must have the sanction and approval of the state government or prescribed authority An employee on whom a fine is imposed must be given an opportunity of showing cause as to why such fine may not be recovered

A fine can be imposed only on a person who has completed the age of 15 The total amount of fine imposed on the employee shall not exceed 3% of the wages payable to him in respect of the wage period Such fines shall not be recovered from the employee after the expiry of 60 days from the day on which it was imposed All fines , that are realized from out of the salary of the employee shall be duly recorded in a register by such authority The amount shall be applied only for the welfare of the employees in the factory.

Deduction for absence from duty (sec 7 (2) b) Normal dictum is no work no pay. Wages may be cut for work not done proportionately. So the employer is entitles to deduct full days wages and this will not be considered as illegal If 10 or more persons acting in combination without due notice and without any reasonable cause abstain themselves from attending the work, then the employer is entitled to impose a fine by way of penalty for such amount not exceeding their wages for 8 days in addition to the actual working days on which they were absent. Absence of employee on the account of dismissal or suspension is not said to be a voluntary act of absence and hence no deduction could be made.

Deduction for damage or loss (sec 7 (2) c) If the machine may be mishandled on account of negligence of the employee resulting in damage to the property, the employer is entitled to deduct such sums from out of the wages of the employee, not exceeding the loss occasioned to the employer. Before imposing any such deductions against damages caused to the employer, reasonable opportunity must be given to the employee to explain his position The total amount of deductions under this head should not exceed the actual amount of damage.

Deductions for house-accommodation (sec 7 (2) d)

Deduction is allowed in respect of house-accommodation provided by any of the following Employer Government Any other authority engaged in the business of subsidizing accommodation with the permission of state government house-

Deduction for other amenities and services (sec 7 (2) e) The employed person may be provided with various amenities and services like transport, supply of electricity, water etc. The deductions can be made for such facilities with the following provisions The amenity has been accepted by the employed person as term of employment The state government or any officer should authorize the supply of such facilities The amount of deduction should not exceed an amount equivalent to the value of such amenities

Deductions for recovery of advances (sec 7 (2) f) It is very often that money may be advanced to the employed person to meet out various types of expenses in respect of marriage, death, religious functions, etc. hence the authorities have rights to deduct The recovery of advance The interest due on such advance

Deductions for the recovery of loans (sec 7 (2) ff) If a loan is made from any fund constitute for the welfare of the labour, deductions from wages can be made for the recovery of such loan together with the interest due in respect thereof.

Where the loans have been granted for house or other purposes approved by the State government, deductions can be made for the recovery of such loan together with interest due thereon

Deductions for income-tax (sec 7 (2) g) It is the responsibility of the employer to see that deductions on account of incometax are made before the wages are paid to any employed person Deductions under the order of a court of authority (sec 7 (2) h) Deduction from wages can be made under the order of a court Deductions in respect of PF (sec 7 (2) i) An employed person may contribute to a scheme of provident fund. He may also be granted advances from such provident fund. Deductions for payment to co-operative societies (sec 7 (2) j) Deduction for any payment to co-operative societies is allowed under the following conditions The co-operative society is approved by the state government The deductions are in conformity with rules laid down by the state government in this respect

Deductions for payment to a scheme of insurance of Post Office (sec 7 (2) j) Deductions for payments to a scheme of insurance maintained by the Indian Post Office, is allowed Deductions for payment of Life Insurance Premium (sec 7 (2) k) Deductions can be made for payment of any premium to the Life Insurance Corporation of India, on the life insurance policy of the employed person. But the deduction is subject to following condition, Deductions should be made with written authorization of the employed person

Deductions for the purchase of government securities (sec 7 (2) k) Deductions are allowed for the purchase of securities of The government of India or any State Government

Such deductions are subject to similar conditions specified in case of deductions for payment of life insurance premium Deductions for payment of Post Office Saving Bank (sec 7 (2) k) These deductions are subject to The written authorization of the employed person Such conditions as may be imposed by the state government

Deductions for payment of contributions to certain funds (sec 7 (2) kk) Deductions can be made with the written authorization 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 employed persons of the members of their families or both, and approved by State government. Deduction for payment of certain fees (sec 7 (2) kkk) Deduction can be made, with the written authorization of the employed person, for payment of the fees payable by him for the membership of any trade union registered under the Trade Union Act 1926. Limit on deductions (sec 7 (3)) The total amount of all categories of deductions from the wages of any employed person, in any wage-period, should not exceed the following limits, 75% of the wages payable in case where such deductions of wholly or partly made for payments to Co-operative societies 50% of the wages payable in any other case

PAYMENT OF BONUS ACT, 1965

Definition: Bonus means an obligatory annual payment on the employers to employees on the basis of profits or on the basis of production. Bonus was regarded as an ex gratia payment (payment as an act of grace) made by an employer to his workers to provide a stimulus for extra effort by them in the production process.

Objectives:

The objective of the Payment of Bonus Act is to maintain peace and harmony between labour and capital by allowing the employees, in recognition of their right, to share in the prosperity of the establishment reflected by the contributions made by capital, management and labour. To provide for the payment of bonus to persons employed in certain establishment and for matters connected therewith.

Applicability: It applies to every factory in which 20 more persons are employed on any day during any accounting year. Persons drawing up to Rs. 3500 are eligible to get bonus and such employee should have worked in that establishment for a period not less than 30 days in that year.

Disqualification: An employee shall be disqualified from receiving bonus under this Act if his service has been terminated for fraud, for violent behavior, for theft, misappropriation of any property of the establishment.

BONUS FORMULA: The following schematic view gives the simple bonus formula

Compute the Gross Profit

Calculate the Available Surplus

Determine the Allocable Surplus

Distribute the allocable surplus as bonus

Compute the Gross Profit (non-banking establishment): The starting point in the computation of the gross profits in such cases is the net profit as shown in the Profit and Loss Account after making usual and necessary provisions. Items to be added to net profit: Provision for bonus to employees and bonus paid in respect of previous accounting years Provision for depreciation Provision for direct taxes for previous accounting year Provision for development rebate Provision for any other reserves, to the extent charged to profit and loss account The amount debited in respect of gratuity paid Donation in excess of the amount admissible for income tax Any annuity due or commuted value of any annuity due Capital expenditure (other than capital expenditure on scientific research) and capital losses (other than losses on sale of capital assts on which depreciation has been allowed for income-tax) Losses related to, any business situated outside India

Income, profits or gains credited directly to reserves other than 1. Capital receipts and capital profit (including profits on the sale of capital assets on which depreciation has not been allowed for income-tax) 2. Profits of, and receipts relating to, any business situated outside India

3. Income from foreign investments Items to be deducted: Capital receipts and capital profits (other than profits on the sale of assets on which depreciation has been allowed for income tax) Profits of and receipts relating to, any business situated outside India, to the extent credited to profit and loss account Income of foreign concerns from investments outside India, to the extent credited to profit and loss account Foreign concerns overhead expenses Refund of any direct tax paid for previous accounting years Cash subsidy if any given by the government

The resultant figure is the gross profit for the purposes of bonus Determination of available surplus: After determination of gross profits in the manner discussed above, is the determination of available surplus. The available surplus in respect of any accounting year shall be the gross profits for that year after deducting there from. Sums deductible from gross profit Any amount by the way of depreciation Any amount by way of development rebate Any direct tax which the employer is liable to pay for the accounting year in respect of his income, profits during that year. The dividends payable on its preference share capital for the accounting year calculated at the actual rate at which such dividends are payable 8.5 percent of its paid-up equity share capital as at the commencement of the accounting year 6 percent of its reserves shown in its balance sheet as at the commencement of accounting year

Determination of allocable surplus: After determining the available surplus the employees share known as allocable surplus. In case of a company other than a banking company, allocable surplus means 67% of the available surplus in an accounting year of the company which has not made the arrangements prescribed under the Income-tax Act. In all other cases 60% of such available surplus Distribution of bonus: Minimum bonus: Every employer shall be bound to pay every employee in respect of accounting year a minimum bonus which shall be 8.33% of the salary or wage earned by the employee or Rs. 100 whichever is higher In case of employees below 15 years of age Rs. 60 should be paid Whether employer has not any allocable surplus in the accounting year, minimum bonus is payable compulsorily. Even if an employer suffers losses during an accounting year, he is bound to pay minimum bonus

Maximum Bonus: Where the allocable surplus exceeds minimum bonus, the employer is bound to pay to every employee proportionately on the basis of the salary earned by an employee. This is of course subject of maximum of 20% of such annual salary. Calculation of bonus with regard to employees: Whose salary is more than Rs.3500, this Act is not applicable. Here, salary here means Basic pay plus Dearness Allowance. Such of persons who are drawing a salary of Rs.3500, their salary for calculation of bonus will be treated as Rs.2500. In other words, even though an employee may be drawing more than Rs.2500, bonus for such employee would be calculated, treating his salary Rs.2500.

Set on and set off allocable surplus: It may happen that in some years, the allocable surplus is more than the amount paid to employees as bonus calculating it @20%. Such excess

allocable surplus is carried forward to next year for calculation purposes. This is called set on. Similarly, in a particular year, there may be lesser allocable surplus or no allocable surplus at all even for payment of 8.33% bonuses. Such short fall is also carried forward to next year. This is called set off. Thus in every year allocable surplus is calculated. To this amount, set on from previous year is added. Similarly, set off, if any, from previous years is deducted. This process gives amount continuously which is available for distribution as bonus.

The set off, set on provisions are subject to following: The amount set on is carried forward only up to and inclusive of the fourth accounting year. If the amount carried forward is not utilized in that period, it lapses. Similarly, amount set off is carried forward only up to fourth accounting year In respect of newly set up establishment, set off and set on provisions do not apply for first five years.

Deductions of certain amounts from bonus Wherein any accounting year, an 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. Time limit for payment of bonus: Bonus amount must be paid within a period of 8 months from the close of the accounting year i.e. within November. The government can extend this period beyond 8 months for sufficient reasons upon the application made to it by the employer Delayed payment of bonus would attract interest at the rate of 9 per cent per annum on such arrears till such date of payment.

Penalty: For violating any other provisions of the Act or failure to comply with the direction or requisition made under this Act shall be punishable with imprisonment for a term which may extend to 6 months or fine which may exceed to Rs.1000 or with both.