Answer 1

1) Which category of employees are entailed get bonus under the Code on Wages and
whether the employees were entitled to claim bonus dehors the Code on Wages,
2019?

The Code on wages encourages an environment between the administrative bodies and the
employers. It does so by emphasizing on compliance rather the imposition of penal action.
The Code on wages, 2019 was established as a necessary step to streamline labour laws in
India. As the decrease in the multitude of regulators, there can be improved and fast
resolution of issues in relation to compliance and the inspection can also be expected to
become easy and simple.

In the context to the above question, first thing is to understand is who can be referred as an
employee under the code. According to Section 2 (k) , employee is defined as any person
other than apprentice who is employed on wages by an establishment to do certain
work, irrespective of terms of employment being express or implied, or any other
person declared by the Government to be employee. Sectiom 26(1) states that every
employee drawing wages, who has worked for at least 30 days in an accounting year, is
entitled to the Bonus.

The case of Mr Shachindra Kumar v. State of Karnataka (2013) it was derived there was no
mention of Contract Labourers in either of the Sections. According to the above 2 provisions
and considering the scheme of the code it can be concluded that only Regular employees are
entitled to get bonus under the Code of Wages,2019.

As the code covers entire bonus related legislation, Employees are entitled to claim bonus
dehors the Code on wages because the scheme of the code doesn’t permit it.

2) Whether contract labourers are entitled to get bonus in the Code on Wages, 2019?

Below three provisions that reflects light on each other suggests that Contract Labourer
does not fall within the definition of “employee”.
  A Contract Labour under Section 2 (g) is defined as a worker who is employed
through a contractor to work in establishment or in connection of any work
of the establishment even if without the knowledge the principal employer.
 An employee under Section 2 (K) is defined as any person other than the
apprentice who is employed on wages by an establishment to do certain work,
irrespective of the terms of employment being express or implied, or any
other person declared by the Government to be employee.
 Section 26(1) mentions that every employee drawing wages, who has worked
for at least 30 days in an accounting year, is entitled to the Bonus.
The conclusion is that Contract Labourers are NOT entitled to get bonus under the Code on
Wages, 2019. As in the case of Mr Shachindra Kumar v. State Of Karnataka (2013) , on
the same provisions the court held that contract labourer cannot be treated equal with regular
employees for the purpose of Payment of Bonus.

4) How bonus is computed under the Code on Wages, 2019?

The Act states that a minimum bonus of 8.33% of the salary or the wage earned by the
employee during the accounting year or Rs. 100 whichever is higher should be paid to an
employee. [section 26(1) of the Code]. It is important to note that the Act stipulates an upper
limit of 20% of the salary or wage earned by the employee during an accounting year for the
payment of maximum bonus. [section 26(3)] , since the bonus is paid out of the surplus
profits of the organizations, if the surplus exceeds the amount of minimum bonus payable the
employer should pay high bonus.

Below four steps must be followed in order to derive the amount of bonus:

 Step I : Net profit - It is arrived at by net profit shown in the profit and loss account
and balance-sheet.

 Step II : Gross profit - In order to determine the gross profit, the Code provides that
for banking company the calculations must be made in the manner as may be
prescribed by Central Government, and in other cases, be calculated according to the
manner as prescribed by Central Government. This gross profit would be a notional
gross profit because it would be arrived at by the process provided in the Code.
  Step III : Available Surplus – For the computation of Available surplus, Section 33 of
the code is referred. All the gross profits for the particular year after deducting the
sums referred in section 34 of the code, Available surplus can be identified. Section
34 lists all the sums that shall be deducted from gross profits as prior charges:
i) Direct Taxes
ii) Depriciation
iii) Further sums described by the government.

 Step IV: Allocable surplus- section 31(1) of the Code, allocable surplus shall be an
amount equal to sixty per cent. in case of a banking company and sixty-seven per
cent. in case of other establishment, of the available surplus.
Section 26 of the Code can be used to determine the amount of bonus to be paid
the employee:

i) if Salary is equal to or less than the amount as notified by the Central Government,
then the bonus is calculated on the actual amount by using the formula:  Bonus =
Salary x 8.33/100

ii) If Salary is more than the amount as notified by the Central Government then the
bonus is calculated such amount by using the formula: Bonus =  Amount notified by
Central Government x 8.33/100

Please note that salary means Basic salary +Dearness Allowance.

5) Whether the cognizance taken by JMFC for violation of Section 26 punishable
under Section 54 of the Code is bad in law and without jurisdiction?

As mentioned previously, Contract Labourers are not employee under Section 2 (K) and
therefore out of the scope of Section 26 (1) which deals with payment of wages, that states
there is no obligation on the part of employer to pay bonus to them on par with regular
employees.
The Cognizance taken by JMFC for violation of Section 26 punishable with Section 54 of the
code is bad in law and also without jurisdiction .Section 54 of the code is a penal provision
and as per the fact ,no case is made out against the Factory Manager/ the factory.

the case of Mr Shachindra Kumar v. State Of Karnataka (2013) the court observed the same
as and stated, “continuance of the prosecution in such circumstance where there is no
jurisdiction with the Magistrate to take cognizance would result in abuse of process of Court
and the same results in unnecessary hardship to the petitioners.”