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Effect of Labour Laws on Compensation Management

Effect of Labour Laws on Compensation Management. Presented by: Sumedha Rode (8106) Deepti Rokde (8119). Introduction. Compensation : the remuneration received by an employee in return for his/her contribution to the organization. An organized practice An integral part of HRM

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Effect of Labour Laws on Compensation Management

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  1. Effect of Labour Laws on Compensation Management Presented by: Sumedha Rode (8106) DeeptiRokde (8119)

  2. Introduction • Compensation: the remuneration received by an employee in return for his/her contribution to the organization. • An organized practice • An integral part of HRM • Balances the work-employee relation by providing monetary and non-monetary benefits. • Helps in motivating the employees and improving organizational effectiveness.

  3. Compensation systems depends on: -- Strategic goals, -- Business objectives, -- The job work and responsibilities.

  4. Need of Compensation Management

  5. Legal Environment • In India, compensation is regulated by following labor legislations:

  6. The Minimum Wages Act, 1948 • Extends to the whole of India. • Objectives: -- To pay minimum amount of wages according to work done. -- To protect rights of unorganized workers. -- to prevent exploitation of workers. • Fixation of wages: -- Appropriate Government fixes minimum rates of wages, -- Reviews/revises it every 5 years (Sec-3).

  7. Different minimum rates of wages fixed for: -- Different scheduled employments;  -- Different classes of work in the same scheduled employment;  -- Adults, adolescents, children and apprentices;  -- Different localities. • Minimum rate of wages: --A basic rate of wages -- Variable dearness allowance -- Value of other concessions. • Procedure for fixing and revising minimum wages: --By appointing committees, -- By issuing notification in the Official Gazette. The Minimum Wages Act, 1948

  8. Payment of Minimum Rates of Wages: The employer pay to employee wages at the rate not less than the minimum rates of wages fixed. (Section-12) • Hours of Work, Overtime: (Section-13 to 17) The Act provides for- -- Working hours, -- Overtime and overtime wages, -- Weekly holidays, -- Period and payment of wages, -- Deductions from wages. The Minimum Wages Act, 1948

  9. Claim by Employees: To be filed before authority within 6 months. • Penalty: -- Paying less than minimum rates of wages: Imprisonment up to 6 months or with fine up to Rs. 500/- or with both. -- Contravention of any provision relating to fixing hours for normal working day: Fine up to Rs.500. The Minimum Wages Act, 1948

  10. The Payment of Wages Act, 1936 • Extends to the whole of India. • Objectives: -- To provide wages in a particular form at regular interval. -- To prohibit unlawful & unauthorized deductions from wages. • Coverage of Employees: Drawing wages up to Rs. 10000/- pm. • Fixation of wage-periods: No wage-period shall exceed one month.

  11. Mode of Payment: -- Paid in current coin or currency notes or in both. -- Bank transfer can be resorted to only after the authorization to do so from employee. The Payment of Wages Act, 1936

  12. Time of payment of wages: -- By the 7th day of the subsequent month employing personnel less than 1000. -- By the 10th day of the subsequent month employing personnel more than1000. -- In case of termination, within 2 days from the day of termination. • Permissible Deductions: -- Total deductions not exceeding 50% of wages -- Total fine not exceeding 3% of wages. • Penalty: -- Fine of Rs. 1000 to 5000 /- for failing to maintain registers or records -- Imprisonment of 1 to 6 months &fine of Rs. 2000 to 15000 for failing or neglecting to pay wages. The Payment of Wages Act, 1936

  13. The Payment of Wages Act, 1936

  14. Equal Remuneration Act, 1976 • Extends to the whole of India. • Objective: -- To provide for payment of equal remuneration to men and women workers for work of similar nature. --To prevent discrimination on recruiting, promoting, transferring or training the men and women workers.

  15. Penalties: 1) Imprisonment up to one month or fine up to Rs. 10000 or both: -- Omits or fails to maintain any prescribed register or other document, -- Omits to furnish information or return, -- Omits or refuses to give any evidence or prevents others from giving evidence. 2) Fine of Rs. 10000 to 20000 or with imprisonment not less than 3 months, may extend to 1 year or both for the first offence, and with imprisonment up to 2years for the second: -- Makes any recruitment in contravention of the provisions of this Act, -- Makes any payment of remuneration at unequal rates to men and women workers, for the same work or work of a similar nature, or 3) Fine up to Rs. 500: -- Omits or refuses to produce to an Inspector any register or other document or to give any information. Equal Remuneration Act, 1976

  16. The Payment of Bonus Act, 1965 • Extends to the whole of India. • Applies to: -- Every factory wherein 10 or more persons with the aid of power or -- Every establishment in which 20 or more persons are employed without aid of power on any day during an accounting year. • Objectives: -- To share the profits of establishment with the workers, -- To increase their earnings & -- To improve their standard of living.

  17. Coverage of Employees: Drawing wages up to Rs. 10000/- pm. • Eligibility for bonus: Every employee entitled only when he has worked for 30 working days in that year. • Time-limit for Payment of Bonus: Within 8 months from closing of accounting year. • Disqualification for bonus: On dismissal from service for- (a) Fraud; (b) Riotous or violent behavior on the premises of the establishment; (c) Theft, misappropriation or sabotage of any property of the establishment; (d) Misconduct causing financial loss to the employer. The Payment of Bonus Act, 1965

  18. Payment of minimum & maximum bonus: -- Minimum bonus 8.33% of the salary or Rs. 100, whichever is higher. -- Maximum bonus 20% of the salary. -- Payable by the employer on the completion of 5 yrs after 1st accounting year. • Amount of Bonus: -- Employees drawing the salary up to Rs. 3500 pm, the bonus payable on actual wages. -- Wages between Rs. 3500 & 10000 pm, bonus payable on Rs. 3500 pm. The Payment of Bonus Act, 1965

  19. Wages to Calculate Bonus: -- Basic Pay -- Dearness Allowance -- But no other allowances. • Recovery of Bonus: -- By the employee himself by making an application in writing OR -- By his assignee by making an application to the appropriate Government in the case of the death of the employee. • Penalty: -- Imprisonment up to 6 months or fine up to Rs. 10000 or both: Contravention of any provision of the Act. The Payment of Bonus Act, 1965

  20. Factories Act, 1948 • Extends to the whole of India. • Objective: -- To provide for occupational safety, health and welfare of workers at work places. • The act tells about: -- Working hours, resting hours, spread-over, -- Holidays, -- Overtime wages, -- Annual Leave with Wages, etc.

  21. Weekly hours: No adult worker allowed to work for more than 48 hrs in a week. • Weekly holidays: No adult worker allowed to work on the 1st day of the week unless he has a holiday on 1 of the 3 days immediately before or after the said day. • Daily hours: No adult worker allowed to for more than 9hrs in any day. Factories Act, 1948

  22. Extra wages for overtime: Works for more than 9 hrs in a day or for more than 48 hrs in a week, entitled to wages at the rate of twice his ordinary rate of wages. • Annual leave with wages: Every worker worked for a period of 240 days or more during a calendar year shall be allowed leave with wages for a no. of days calculated at the rate of- (i) If an adult: 1 day for every 20 days of work (ii) If a child: 1 day for every 15 days of work. In the case of a female worker: maternity leave for any no. of days not exceeding 12 weeks. Factories Act, 1948

  23. Termination or death while in service, he or his nominee entitled to wages according to the leave entitled immediately before the said day. • Mode of recovery of unpaid wages.- Any sum required to be paid but not paid by employer is recoverable as delayed wages under the Payment of Wages Act, 1936. Factories Act, 1948

  24. EMPLOYEES’ STATE INSURANCE ACT, 1948 • Extends to the whole of India. • Objective: To provide for certain benefits to employees in case of sickness, maternity and employment injury. • Applicability: Apply to all factories including Govt. factories other than seasonal factories.

  25. Employees' State Insurance Fund: --All contributions and all moneys received shall be paid into the ESI Fund. -- All fund paid into the Reserve Bank of India or such other bank approved by the Central Govt. to ESIC Fund Account. • Contributions: The employer's contribution and the employee's contribution shall be paid to the Corporation. Employees’ State Insurance Act, 1948

  26. Contribution: -- Employees’ contribution: 1.75% of the wages, -- Employer’s contribution: 4.75% of the wages. • Cash Benefits: 1) Sickness benefit: • The benefit becomes admissible after paying contribution for at least 78 days in a contribution period of 6 months. • Sickness benefit payable for a maximum of 91 days in 1year. • Payment is made by the local office within 7 days of certificate of sickness, which is not less than 50% of the wages. Employees’ State Insurance Act, 1948

  27. 2) Maternity benefit: • Payable to insured women in case of confinement or miscarriage or sickness. • An insured woman should have paid for at least 70 days in 1 year. • The benefit payable for 12 weeks, can be extended up to 16 weeks on medical grounds. 3) Disablement benefit: • Payable to insured employees suffering from physical disablement due to employment injury or occupation disease. • Temporary disablement benefit at 70% of the wages till it lasts. • Permanent disablement, benefit is payable for life. Amount payable is on the basis of earning capacity. Employees’ State Insurance Act, 1948

  28. Employees Provident Fund and Miscellaneous Provisions Act, 1952 • Extends to the whole of India except the State of J&K. • Objective: -- To provide for the institution of provident funds, pension fund and deposit linked insurance fund for employees in factories and other establishments.

  29. Contributions in the Provident Scheme: -- The employer’s and employees' contribution: 12% of the ‘B+DA’ and retaining allowance (if any). • Penalties: -- Imprisonment for one year or fine of Rs. 5000 or both: For avoiding any payment under the Scheme OR enabling any other person to avoid such payment OR knowingly makes any false statement or false representation. -- Imprisonment up to 6 months not less than 1 month and fine up to Rs. 5000 . For contravening any of the provisions under the Act. Employees’ Provident Fund Act, 1952

  30. Payment of Gratuity Act, 1972 • Extends to the whole of India except the State of J&K. • Objective: To provide for a scheme for the payment of gratuity to employees engaged in factories, mines, oilfields, plantations, ports, railway companies, shops or other establishments.

  31. Payment of gratuity: Payable to an employee on the termination of his employment after rendering continuous service for not less than 5 years, - (a) on his superannuation, or (b) on his retirement or resignation, or (c) on his death or disablement due to accident or disease. • Completion of continuous service of 5 years not necessary where the termination of the employment is due to death or disablement. Payment of Gratuity Act, 1972

  32. For every completed year of service or part thereof in excess of 6 months, gratuity is paid at the rate of 15 days wages based on wages last drawn by the employee concerned. • In the case of a piece-rated employee, daily wages shall be computed on the average of the total wages received by him for last 3 months. • For employee employed in a seasonal establishment, gratuity is paid at the rate of 7 days wages for each season. • The amount of gratuity up to Rs. 3.5 lakhs is non-taxable. Payment of Gratuity Act, 1972

  33. 15 days wages calculated by dividing the monthly rate of wages last drawn by him by 26 and multiplying the quotient by 15. • The gratuity of an terminated employee for any act shall be forfeited to the extent of the damage or loss so caused. • Every employer shall obtain an insurance for his liability for payment towards the gratuity from the LIC of India. • Organization should submit 4.8% of total wages paid (B+DA) every month with LIC. Payment of Gratuity Act, 1972

  34. Workmen's Compensation Act, 1923 • Extends to the whole of India. • Objective: To provide for, in the case of an employment injury, compensation to the injured workman and in case of his death to his dependants. • Amount of compensation : 1)In case of death:- an amount equal to 50% of the monthly wage multiplied by the relevant factor or Rs. 80,000/- whichever is more. 2) In case of permanent total disablement: 60% or Rs. 90,000/- whichever is more 3) In case of permanent partial disablement: compensation is proportionate to the disability arrived as at (2) above.

  35. Employer’s liability to pay compensation: In case a personal injury by accident arising out of and in the course of his employment within 30 days otherwise liable to pay interest and penalty also. • This act is applicable where the ESIC Act is not applicable. Workmen Compensation Act, 1923

  36. The Maternity Benefits Act, 1961 • Extends to the whole of India except the State of J&K. • Objective: To regulate the employment of women in certain establishments for certain periods before and after childbirth and to provide for maternity benefits and certain other benefits. • Prohibited Period of Employment or Work: The employment of women during the 6 weeks immediately following the day of her delivery or her miscarriage (sectiion-4).

  37. Payment of Maternity Benefit: -- Every women entitled to payment of maternity benefit at the rate of average daily wage for the period of her actual absence. -- In addition, every women also entitled to receive a medical bonus of Rs.250/- if no prenatal confinement and post natal care is provided free of charge. • Eligibility for Maternity Benefit: -- Worked in an establishment for a period of not less then 80 days in the preceding 12 months of the date of her expected delivery. Maternity Benefits Act, 1961

  38. Maximum Period of Maternity Benefit: -- Maximum 12 weeks of which not more then 6 weeks shall proceed the date of her expected delivery. • Other Benefits: Act also provides provisions for leave for miscarriage, leave for illness arising out of pregnancy or delivery, miscarriage and nursing breaks for nursing the child until the child attained the age of 15 months. • Deduction of Wages: No employer shall deduct from the usual daily wages of a women entitled to maternity benefits. • Penalty: -- Imprisonment not less than 3 months but may extend to 1 year and fine not less than Rs.2000 but may extend to Rs 5000 for contravening any of the provisions under the Act.. Maternity Benefits Act, 1961

  39. THE INDUSTRIAL DISPUTES ACT, 1947 • Extends to the whole of India. • Objective: To make provision for the investigation and settlement of industrial disputes. • Payment of Full Wages to Workman Pending Proceedings in Higher Courts. • Right of Workmen Laid Off for Compensation: Whenever a workman (other than a badli workman or a casual workman) who has completed not less than one year of continuous service under an employer is laid off, he shall be paid by the employer for all days during which he is so laid off, equal to 50% of the total of B+DA .

  40. Conditions Precedent to Retrenchment: The workman be paid at the time of retrenchment, compensation be equivalent to15 days' average pay for every completed year of continuous service or any part thereof in excess of six months. • Compensation to Workmen in Case of Transfer of Undertakings or Closing Down: Where the ownership or management of an undertaking is transferred, every workman who has been in continuous service for not less than one year in that undertaking immediately before such transfer shall be entitled to notice and compensation as if the workman had been retrenched. Industrial Dispute Act, 1947

  41. Industrial Employment (Standing Orders) Act, 1946 • Extends to the whole of India. • Objective: To provide for better service conditions to the workers. • Payment of Subsistence Allowance: In case of suspension, pending investigation charges of misconduct, the employer shall pay subsistence allowance – • at the rate of 50% of the wages for the first 90 days of suspension; • at the rate of 75% of such wages for the remaining period of suspension.

  42. Thank You For Patience!

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