Law of Wages and Principles of Wage Fixation

Law of Wages And Principles of Wage Fixation
UNIT - 1
THE MINIMUM WAGES ACT, 1948
SYNOPSIS NOTES
1. Introduction
2. Objectives of the Act
3. Procedure for Fixation and revision of rates of wages
4. Concept of dearness allowances and principles for determination
of dearness allowances
5. Offences and penalties
6. Conclusion
Introduction:
The Minimum Wages Act was passed in 1948 and it came into force
on 15th March, 1948. The National Commission on Labour has described
the passing of the Act as landmark in the history of labour legislation in the
country. The philosophy of the Minimum Wages Act and its significance in
the context of conditions in India, has been explained by the Supreme Court
in Unichoyiv. State of Kerala (A.I.R. 1962 SC 12), as follows:
“What the Minimum Wages Act purports to achieve is to prevent

exploitation of labour and for that purpose empowers the appropriate
Government to take steps to prescribe minimum rates of wages in the
scheduled industries. In an underdeveloped country which faces the
problem of unemployment on a very large scale, it is not unlikely that labour
may offer to work even on starvation wages. The policy of the Act is to
prevent the employment of such sweated labour in the interest of general
public and so in prescribing the minimum rates, the capacity of the employer
need not to be considered. What is being prescribed is minimum wage rates
which a welfare State assumes every employer must pay before he employs
labour”.
According to its preamble the Minimum Wages Act, 1948, is an Act to

provide for fixing minimum rates of wages in certain employments. The 3
Law of Wages and Principles of Wage Fixation employments are those
which are included in the schedule and are referred to as ‘Scheduled
The Minimum Wages Act, 1948 1
“Only for Private Circulation”

Employments’. The Act extends to whole of India.

Historical Background:
NOTES Statutory minimum wage regulation was first introduced in New
Zealand in 1894 and the Australian colony (soon to be a state) of Victoria
in 1896. Some attempt to control wages had been present since 19th century,
through collective agreement.
However, this meant that a uniform minimum was not possible. It was
not until the turn of the twentieth century that the first attempts to do this
were seen. The movement for a minimum wage was initially targeted at
stopping sweatshop labour.
At the international level the International Labour Organization
established Minimum Wage-Fixing Machinery Convention in 1928. Having
decided upon the adoption of certain proposals with regard to minimum
wage-fixing machinery, the principles of the convention were modified and
included in the Minimum Wage Fixing Machinery (Agriculture) Convention
1951 and Minimum Wage Fixing Convention 1970.
In India the question of fixation of minimum wages gained importance
due to the cheap and unorganized labour. The labour as whole in the country
was not able to put a face of collective bargaining and look after their
interests.
The period of acute depression was set in all industries towards the end
of 1922. The Ahmedabad Mill Owners Association thereupon, made the
first organized post war move for wholesale reduction of wages and a cut
of 20% in wages was announced with effect from 1stApril 1923. The strike
of Ahmedabad cotton mill workers, which followed the cut, involved nearly
50,000 workers. Similar situation prevailed in Bombay also. Not satisfied
4 Law of Wages and Principles of Wage Fixation with one cut, some mills
imposed another cut within the short period of few months.
In 1925, however, the Government of India came to the rescue of the
cotton textile workers. As a compromise formula, the wage cut proposal
was dropped after the Government announced the suspension of the excise
duty on the demand of mill owners.
Appointment of Royal Commission on Labour – 1929:

The year 1928 witnessed most disastrous strike of the period there was
complete stoppage of work for over six months in Bombay. Some other
such strikes were also witnessed in Jamshedpur and Sholapur. Continued
labour unrest in the country prompted the Government of India in the
middle of 1929, to appoint Royal Commission on Indian labour to enquire

into and report on the existing conditions of labour including the health,
efficiency and the standard of their living.
The Royal Commission on Labour considered the question of fixing
the minimum wages for bidi making, wool cleaning, mica factories, shellac NOTES
manufacturing and tanning. It recommended, “it would be necessary to
create a machinery for fixing minimum rates of wages in those trades in
which wages are lowest and where there is no question of collective
bargaining.” It further recommended that of industries which came within
its terms of reference, those dealing with unregulated factories be examined
in the first instance with a view to the need and possibility of instituting
minimum wage fixing machinery.
The Commission also emphasized on the need of enacting necessary
legislation on the subject. No steps, however, were taken for any legislative
measure to implement the recommendations of the Commission.
The question of setting up of statutory wage fixing machinery was
again discussed at the meetings of the Standing Labour Committee held in
May 5 Law of Wages and Principles of Wage Fixation 1943 and January
1944, respectively and also at the successive sessions of the Tripartite
Labour Conference in September 1943, October 1944 and November 1945.
Appointment of Rege Committee – 1944:

The appointment of Rege Committee in 1944 found after their survey
that the basic wage level in most Indian industries was extremely low.
Appointment of Central Pay Commission – 1946:

Government of India in 1946, appointed the Central Pay Commission
to enquire into and report on the conditions of service of central government
employees. The Pay Commission recommended that the Government
should take some steps forward in giving effect to the “living wage”
principle dealing with the employees who are virtually on the “poverty line”
and came to the conclusion that in no case a man’s wages should be less
than a living wage.
Minimum Wages Bill, 1946:

Simultaneously, with the appointment of the Central Pay Commission,
the Government of India, on February 11, 1946, introduced in the Indian
Legislative Assembly, the Minimum Wages Bill.
The Bill was referred to the Select Committee in March 1947, which

was reconstituted in November 1947. The Bill, as finally passed by the

Dominion Legislature on February 9, 1948 received the assent of the
Governor General on March 15, 1948 and it came to be known as the
NOTES Minimum Wages Act, 1948.
Minimum Wages Act, 1948:

The purpose of the Act is to ensure that the payment of wages at rates
not less than the prescribed minimum to those employed in scheduled
employment. The Act was enacted to give effect to the resolutions passed
by the Minimum Wages Fixing Machinery Convention held at Geneva in
1928. 46 Law of Wages and Principles of Wage Fixation
Objectives Of The Act:

The objectives of the Minimum Wages Act, 1948 are as follows:
a) To provide for fixation of minimum wages for the scheduled
employments.
b) To provide for periodical revision of minimum wage fixed.
c) To provide for a summary procedure for recovery of the balance with
penalty and subsequent prosecution of the offending party, in cases
where an employer pays less than the minimum wages fixed by the
government.
d) To provide for the appointment of Advisory Committees and Advisory
Boards, having equal representatives of employers and workers.
M. Unichoyi v. State of Kerala, 1961:

The Court held that the Act purports to prevent exploitation of labour
and for that purpose authorizes the appropriate government to take steps to
prescribe minimum rates of wages in the scheduled industries. In an
underdeveloped country which faces the problem of unemployment on a
very large scale, it is not unlikely that labour may offer to work even on
starvation wages. The policy of the Act is to prevent the employment of
such sweated labour in the interest of general public and so in prescribing
the minimum wage rates the capacity of the employer need not be
considered. What is being prescribed is minimum wage rates which a
welfare state assumes every employer must pay before he employs labour.

DEFINITIONS-[SECTION 2] Appropriate Government [Section 2(b)]:

“Appropriate Government” means :
i. in relation to any scheduled employment carried on by or under the NOTES
authority of the Central or a railway administration, or in relation to a
mine, oilfield or major part or any corporation established by a Central
Act, the Central Government, and
ii. in relation to any other scheduled employment, the State Government.
7 Law of Wages and Principles of Wage Fixation
Employee [Section 2(i)]:

“Employee” means any person who is employed for hire or reward to
do any work, skilled or unskilled, manual or clerical in a scheduled
employment in respect of which minimum rates of wages have been fixed;
and includes an outworker to whom any articles or materials are given out
by another person to be made up, cleaned, washed, altered, ornamented,
finished, repaired, adapted or otherwise processed for sale purpose of the
trade or business of that other person where the process is to be carried out
either in the home of the out-worker or in some other premises, net being
premises under the control and management of that person; and also
includes an employee declared to be an employee by the appropriate
Government; but does not include any member of Armed Forces of the
Union.
Employer [Section 2(e)]:

“Employer” means any person who employs, whether directly or
through another person, or whether on behalf of himself or any other person,
one or more employees in any scheduled employment in respect of which
minimum rates of wages have been fixed under this Act, and includes,
except, in sub-section (3) of Section 26 –
i. in a factory where there is carried on any scheduled employment in

respect of which minimum rates of wages have been fixed under this
Act, any person named under clause (f) of sub-section (1) of Section 7
of the Factories Act, 1948, as manager of the factory;
ii. in any scheduled employment under the control of any Government in
India in respect of which minimum rates of wages have been fixed
under this Act, the person or authority appointed by such Government
for the supervision and control of employees or where no person of

authority is so appointed, the Head of the Department;

iii. in any scheduled employment under any local authority in respect of
NOTES which minimum rates of wages have been fixed under this Act the
person appointed by such authority for the supervision and control of
employees or where no person is so appointed, the Chief Executive
Officer of the local authority; 8 Law of Wages and Principles of Wage
Fixation
iv. in any other case where there is carried on any scheduled employment
in respect of which minimum rates of wages have been fixed under this
Act, any person responsible to the owner of the supervision and control
of the employees or for the payment of wages.
The definitions of “employees” and “employer” are quite wide. Person
who engages workers through another like a contractor would also be an
employer (1998 LLJ I Bom. 629). It was held in Nathu Ram Shuklav. State
of Madhya Pradesh A.I.R. 1960 M.P. 174 that if minimum wages have not
been fixed for any branch of work of any scheduled employment, the person
employing workers in such branch is not an employer with the meaning of
the Act. Similarly, in case of LoknathNathuLalv. State of Madhya Pradesh
A.I.R. 1960 M.P. 181 an out-worker who prepared goods at his residence,
and then supplied them to his employer was held as employee for the
purpose of this Act.
Scheduled employment [Section 2(g)]:

“Scheduled employment” means an employment specified in the
Schedule or any process or branch of work forming part of such
employment.
Note: The schedule is divided into two parts namely, Part I and Part II.
When originally enacted Part I of Schedule had 12 entries. Part II relates to
employment in agriculture. It was realised that it would be necessary to fix
minimum wages in many more employments to be identified in course of
time. Accordingly, powers were given to appropriate Government to add
employments to the Schedule by following the procedure laid down in
Section 21 of the Act. As a result, the State Government and Central
Government have made several additions to the Schedule and it differs from
State to State.
Wages [Section 2(h)]:

“Wages” means all remunerations capable of being expressed in terms

of money, which would, if the terms of the contract of employment, express

of implied, were fulfilled, be payable to a person employed in respect of
his 9 Law of Wages and Principles of Wage Fixation
employment or of work done in such employment and includes house rent NOTES
allowance but does not include:
i. the value of:
a. any house accommodation, supply of light, water medical;
b. any other amenity or any service excluded by general or social
order of the appropriate Government;
ii. Contribution by the employer to any Pension Fund or Provides Fund
or under any scheme of social insurance;
iii. any travelling allowance or the value of any travelling concession;
iv. any sum paid to the person employed to defray special expenses
entailed on him by the nature of his employment;
Definition of “Wages”:
The term wages means payment made for the services of labour. Wage
is the return in cash or kind or partly in cash and partly in kind for the work
done by the employee.
Though Oxford Dictionary defines wage as ‘the amount paid
periodically, especially by day or week or month, for the time during which
workman or servant is at employer’s disposal.
But in the context of Indian legal situation Industrial Disputes Act
1947, Payment of Wages Act and Minimum Wages Act 1948, have enlarged
the conspectus of its meaning by defining it as-
All remuneration capable of being expressed in terms of money, which
would, if the term of employment, express or implied, were fulfilled, be
payable to a workman in respect of his employment or of work done in such
employment.”
Further these Acts clearly states about what is to be included and what
is to be excluded from the definition of “wages” respectively.
Types and kind of wage-[Section 3.1]:

Since 1948, several terms have been used with reference to the wages, viz,
a. Statutory minimum wage;

b. The bare or basic minimum wage;

c. The minimum wage;
NOTES d. The fair wage;
e. The living wage; and
f. The need-based minimum wage.
The first term owes its origin to the provision of the Minimum Wages
Act 1948, the second has generally been used in industrial awards and
judicial dicta of the courts, the next three have been introduced in the report
of the Committee on Fair Wages and the last one emerged in the resolution
of the 15th Session of the Indian Labour Conference in July 1957.
In common parlance we mostly refer to the levels of wages defined by
the Committee on Fair Wages, i.e. the living wage, fair wage and the
minimum wage. In an expanding economy, the contents of these expressions
also expand and vary. These levels naturally, do not represent a static,
inflexible concept; they would vary and expand according to the economic
development and compulsions of social justice. It is, therefore, very difficult
to describe accurately, the content of the terms ‘living wage’, ‘fair wage’ or
‘minimum wage’. These terms or their variants cannot and do not mean the
same thing in all countries, or even in different industries in the same
country. What may be a fair wage in a particular industry in one country
may be a living wage in the same industry in another country.
Similarly, what may be a fair wage in a given industry today may cease
to be fair and border on the minimum wage, in the future. In other words
these concepts would keep on changing with the circumstances, with the
growth, both of industries and of the economy, the living standards and
circumstances of the industries and the people.
(i) Minimum wage:

(a) Minimum wage in general:
The concept of minimum wage has recently undergone a progressive
change. It is no longer based upon the subsistence theory, according to
which minimum wage equals the cost of commodities necessary to feed and
clothe a worker and his family.
Hindustan Times Ltd. v. Their Workmen, 1962:

In this case Das Gupta J said, ‘at the bottom of the ladder is the

minimum basic wage, which the employer of any industrial labour must
pay in order to be allowed to continue an industry’.
NOTES
According to the Committee on Fair Wages, the minimum wage must
provide not merely for the sustenance of life, but for the preservation of the
efficiency of the worker. For this purpose, the minimum wage must also
accommodate some measure of education, medical requirements and
amenities.
The Committee had categorically stated that an industry which is

incapable of paying this minimum wage, has no right to exist and in cases
where the continued existence of such an industry is imperative, in the larger
interest of the country, it was the responsibility of the state to take steps to
enable that industry to pay at least the minimum wage. The Committee was
of the definite view that for fixing the minimum wage, no regard should be
paid to the capacity of the industry to pay and it should be based solely on
the requirements of the worker and his family.
In order to calculate the minimum wage, the Tripartite Committee of

the Indian Labour Conference, held in New Delhi in 1957, accepted the
following norms, and recommended that hey should guide all wage fixing
authorities, including Minimum Wage Committees, Wage Boards,
Adjudicators, etc.:
i. In calculating the minimum wage, the standard working class family
should be taken to consist of three consumption units for one earner,
Law of Wages and Principles of Wage Fixation 12 the earnings of
women; children and adolescents should be disregarded.
ii. Minimum food requirements should be calculated on the basis of a net
intake of calories, as recommended by Dr. Aykroyd for an average
Indian adult of moderate activity.
iii. Clothing requirement should be estimated as per 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 norm should be minimum rent charged by
Government in any area for houses provided under the subsidized
Industrial Housing Scheme for low income groups.
v. Fuel, lighting and other ‘miscellaneous’ items of expenditure should
constitute 20 percent of the total minimum wage.

vi. Children’s education, medical requirements, minimum recreation

including festivals/ ceremonies and provision for old age, marriage,
etc. should further constitute 25 percent of the total minimum wage.9
NOTES Express Newspapers Pvt. Ltd. v. UOI, 1985:
The standards of minimum wage as laid down by the committees, were
adopted by the Supreme Court also, in holding that the minimum wage must
provide not merely for the bare subsistence of life, but also for the
preservation of the efficiency of the worker and for this purpose, the
minimum wage must also provide for some measure of education, medical
requirements and amenities.
Workmen v. Reptakos Brett and Co. Ltd., 1991:

The Supreme Court finally settled the judicial policy hitherto expressed
in earlier decisions holding that the wage structure which approximately
answers the above six components is nothing more than a minimum wage
at subsistence level. The employees are entitled to the minimum wages 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.
(b) Statutory Minimum Wage:

The Statutory Minimum Wage owes its origin to the Minimum Wages
Act 1948, the historical background of which has been discussed earlier.
The statutory minimum wage is the minimum wage which is prescribed by
the relevant provisions of the Minimum Wages Act 1948. This applies to
the employments that are included in Parts 1 and 2 of the Schedule to the
Act.
The passing of Minimum Wages Act 1948 is a landmark in the history
of labour legislation in the country, which recognizes that the wages cannot
be left to be determined entirely by market forces. The main object of the
Act is to prevent ‘sweated’ labour, as well as to prevent the exploitation of
unorganized labour. It proceeds on the basis that it is the duty of the State
that, at least minimum wages are paid to the employees, irrespective of the
capacity of the industry or the unit, to pay the same.
The mandate of Art.43 of the Constitution is that the State should
endeavor to secure, by suitable legislation or economic organization or in
any other way, to all workers, agricultural, industrial or otherwise, work on
living wage, under conditions of work which ensure a decent standard of
life and full enjoyment of leisure and social and cultural opportunities. This

fixing of a minimum wage is just a first step in that direction. In the course
of time, the State has to take many more steps to implement that mandate.13
Bijay Cotton Mills Ltd v. State of Ajmer, 1954:
NOTES
In this case the Court dealing with a challenge to the constitutional
validity of the provisions of the Minimum Wages Act, relating to fixation
of minimum wages, on the grounds of repugnancy to Art19 (1) (g) observed
that, individual employers might find it difficult to carry on their business
on the basis of the minimum wage fixed under the Act, but this must be due
entirely to the economic conditions of these particular employers. That
cannot be a reason for striking down the law itself, as unreasonable.
14 Law of Wages and Principles of Wage Fixation Kamani Metals & Alloys
Ltd v. Their Workmen
Hidayatullah J remarked in this case that, “minimum wage which, in
any event, must be paid, irrespective of the extent of profits, the financial
condition of the establishment or the availability of workmen on lower
wages.” This minimum wage is independent of the kind of industry and
applies to all alike big or small. It sets the lowest limit below which wages
cannot be allowed to sink, in all humanity.
(c) Non Statutory Minimum Wage:

The minimum wage policy, as it has emerged in this country,
distinguishes between the organized industries and the sweated ones. The
Minimum Wage Act 1948 is an instrument which seeks to protect the
interest of the workers in the latter. In the organized sector, the concerned
authorities fix the wages considering the report of the Committee on Fair
Wages and the norms of the Tripartite Committee which is termed as non-
statutory minimum wage.
Ahmedabad Mill Owner’s Association v. Textile Labour Association,

1965:
The Supreme Court held that a basic minimum wage can be fixed by
an industrial tribunal when the statute has not fixed the minimum wage.
Section 3(2A) of the Minimum Wage Act 1948 does contemplate fixation
of minimum wage by industrial adjudication.
The basic concept on which the provisions of the Minimum Wages Act
are founded, is to prevent the sweating and exploitation of labour, through
payment of unduly low wages. It would, therefore, conceptually follow, that
just as in the case of scheduled industries, the employer in any establishment

not covered by the schedule, also pay to his employees, a minimum wage,
because what applies to the establishments included in the schedule to the
Minimum Wages Act, must, on principles of social justice, apply with equal
NOTES force, to industrial establishments not covered in the schedule as well. In
such cases, considerations of social justice play a major
15 Law of Wages and Principles of Wage Fixation role in shaping the social,
economic and industrial policies of a welfare state. This aspect has to be
borne in mind by industrial adjudicators in fixing the level of wages.
Crown Aluminum Works v. Their Workmen, 1955:

The Court held that in fixing the bare minimum wages and subsistence
wages, industrial adjudicators will have to consider the position from the
point of view of the worker, the capacity of the employer to pay such a wage
would be irrelevant.
(ii) Fair wage:

It stands in between the minimum wage and living wage. Fair wage is
said to be step towards the progressive realization of a living wage. A fair
wage is settled above the minimum wage and goes through the process of
approximating towards a living wage. It depends upon the present economic
position as well as the future prospects of that industry.
In the words of Hidayatullah J, ‘a fair wage, lies between the minimum
wage which must be paid in any event and the living wage, which is the
goal’.
Bhagwati J described a ‘fair wage’ as a mean between the living wage
and the minimum wage.Marshall considers the rate of wages prevailing in
an occupation as ‘fair’ if it is ‘about one level with the average payment for
tasks in other trades, which are of equal difficulty and disagreeableness,
which require equally rare natural abilities and an equally expensive
training’.
Prof. Pigouapply two degrees of fairness, in judging a wage rate, viz,
‘fair in the narrower sense’, and ‘fair in the wider sense’. A wage rate is
‘fair in the narrower sense’, when it is equal to the rate current for similar
workmen in the same trade and the neighbourhood, and ‘fair in the wider
sense’, when it
16 Law of Wages and Principles of Wage Fixation is equal to the
predominant rate for similar work throughout the country and in the
generality of trades.

The lower limit of the fair wage must obviously the minimum wage;
the upper limit is set out by what may be called, the capacity of the 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 NOTES
wage will be fixed on a consideration of the following factors:-
a) The productivity of labour;
b) The prevailing rates of wages in the same industry for similar
occupations in the same neighbouring locality;
c) The level of national income and its distribution; and
d) The place of industry in the economy of the country.22
Novex Dry Cleaners v. Workmen, 1962:

The Court observed that it is now well settled principle that in fixing a
minimum wage, the capacity of the industry to pay is not relevant, but in
fixing a fair wage, the capacity of the industry to bear the burden of the said
wage is very relevant and important factor. Where wage structure is being
fixed with reference to those in other similar industries in the region, the
standing of the industries, strength of labour employed, extent of customers,
profits and loss must be taken into account. It is also necessary to assess
whether the employer would be able to meet the additional liability.
Express Newspaper (Pvt.) Ltd. and another v. Union of India and

others, 1985:
The Court held that unusual profit made by the industry for a single
year as a result of adventitious circumstances, or unusual loss incurred by
it for similar reasons, should not be allowed to play major role in the
calculations to the construction of wage structure. Another aspect of the
matter which cannot be ignored is that if a fair wage is construed by the
industrial adjudication, and in course of time if the employer cannot bear
the burden of such wage structure, industrial
17 Law of Wages and Principles of Wage Fixation adjudication can and in
a proper case, should revise the wage structure, though such revision may
result in the reduction of wages paid to the employees. The conflicting
claims of the labour and capital must be harmonized on a reasonable basis.
Crown Aluminium Works v. Their Workmen, 1957:

Gajendragadkar J said: It would not be correct to say that in no

conceivable circumstances, can the wage structure be revised to the

prejudice of workmen. But he added further that, ‘theoretically, no wage
structure can or should be revised to the prejudice of workmen, if the
NOTES structure in question falls in the category of the bare subsistence or the
minimum wage’. In connection with the wage structure of a higher category,
the Court said that, ‘it would be open to the employer to claim revision,
even to the prejudice of the workmen, provided a case for such revision is
made out on merits, to the satisfaction of the tribunal’.
(iii) Living wage:

The term living wage has not been defined under the provisions of the
Minimum Wages Act. However, an instance of statutory definition of living
wage is provided in South Australian Act of 1912 which states the “living
wage” means a sum sufficient for the normal and reasonable needs of the
average employee living in a locality where the work under consideration
is done or is to be done.
Justice Higgins, the Australian Commonwealth Court of Arbitration,
while disposing Harvester case visualized a living wage as a sum which is
adequate to satisfy the normal needs of the average employee regarded as
human being in a civilized community.
Another definition of living wage is found in the Queensland Industrial
Conciliation and Arbitration Act which states that a basic (i.e. living) wage
paid to an adult male employee shall not be less than what is sufficient to
maintain a well conducted employee of average health, strength and
18 Law of Wages and Principles of Wage Fixation competence and his wife
and a family of three children in a fair and average standard of comfort,
having regard to the conditions of living prevailing among employees in
the calling in respect of which such wage is fixed, and provided that in
fixing such basic wage the earnings of the children or wife of such employee
shall not be taken into account. Living wage consists of amount of
necessaries, comforts and luxuries, the quantum of goods and services
which an individual considers necessary for decent existence.28
There are several definitions of ‘living wage’, attempted in the recent
past. The quintessence of all these definitions is that a living wage should
enable the male earner to provide for himself and his family, not merely the
bare essentials of food, clothing and shelter, but also a measure of frugal
comfort, including education for the children, protection against ill health,
requirement of essential social needs and a measure of insurance against
the more important misfortunes, including old age.
According to the Committee on Fair Wages, the living wage represents the

higher level of wage and naturally, it would include all amenities which a
citizen living in a modern civilized society is entitled to, when the economy
of the country is sufficiently advanced and the employer is able to meet the
expanding aspirations of his workers.29 NOTES
All India Reserve Bank Employees Assn. v. RBI, 1965:

In this case Hidayatullah J stated that ….our political aim is ‘living
wage’, though in actual practice, living wage has been an ideal which has
eluded our efforts like an ever-receding horizon and will so remain for some
time to come. 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.
Workmen v. Management of Reptakos Brett & Co. Ltd., 1991:

Kuldip Singh J stated that, a living wage has been promised to the workers
under the Constitution. A ‘socialist’ framework, to enable the working
people
19 Law of Wages and Principles of Wage Fixation a decent standard of life,
has further been promised by the 42nd Amendment. The workers are
hopefully looking forward to achieve the ideal. The promises are piling up
but the day of fulfillment is nowhere in sight. Industrial wage, looking as
whole, has not yet risen higher than the level of minimum wage.
Living wage at present is only a Directive Principle enshrined in the
Constitution which cannot be achieved at one stroke but only after a
continuous and progressive economic development.
(D) Wage determination:

(a) Fixing of minimum rates of wages-[(Section 3)]:
Under Section 3(1) of the Act, the appropriate Government has been
empowered to:
a. Fix the minimum rates of wages payable to employees employed in an
employment specified in Part I or Part II of the schedule.
b. Review and revise at such intervals not exceeding 5 years.
Provided that the appropriate government may, in respect of employees
employed in an employment specified in Part II, instead of fixing minimum
rates for the whole State, fix such rates for a part of the State or for any
specified class or classes.

Provided that where for any reason the appropriate government has not
reviewed the minimum rates of wages fixed by it, within any interval of 5
years, nothing contained in this clause shall prevent it from reviewing and
NOTES revising the minimum rates after the expiry of the said period of 5 year.
Until they are so revised, the minimum rates in force immediately before
the expiry of the said period of 5 years shall continue in force.
The appropriate government may refrain from fixing minimum rates
of wages in respect of scheduled employment in which there are in the
whole 20 Law of Wages and Principles of Wage Fixation State, less than
thousand employees are engaged in such employment. If the appropriate
government finds after inquiry that number of employees in any scheduled
employment has risen to 1000 or more, it shall fix minimum rates of wages
in such employment as soon as may be after such inquiry.
It has been provided under Section 3(2) of the Act that the appropriate
government may fix:
a) Time Work Rate –
A minimum rate of wages for time work.
b) Piece Work Rate –
A minimum rate of wages for piece work.
c) Guaranteed Time Rate –
A minimum rate of remuneration for such employees who are
employed on piece work but for the purpose of securing to such
employees a minimum rate of wages on a time work basis.
d) Overtime Rate –
A minimum rate (whether a time rate or a piece rate) to apply in
substitution for the minimum rate which would otherwise be payable, in
respect of overtime work done by employees.
Section 3(2A) of the Act puts a limitation on the powers of appropriate
government to fix or revise minimum rates of wages under certain
circumstances which are as follows:
Section 3(2A)
provides that during the pendency of any proceeding before the
Industrial Tribunal or National Tribunal or any other competent authority
relating to rates of wages, no order can be issued to fix or revise the
minimum rates of wages. It also provides that if an award is in operation
no such order fixing the minimum rates or revising the minimum rates can

be issued.
21 Law of Wages and Principles of Wage Fixation Section 3(3) of the Act
further provides that in fixing or revising the minimum rates of wages under
this section: NOTES
(a) Different minimum 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
(b) Minimum rates of wages may be fixed by:
(i) The hour
(ii) The day
(iii) The month, or
(iv) Such other longer wage 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, may be
indicated.
Provided that where any wage periods have been fixed under section
4 of the Payment of Wagers Ac, 1936, minimum wages shall be fixed in
accordance therewith.32
M/s The Indure (P) Ltd. v. State of U.P. and others, 2011:
The Court held that when wages of workers are more than the
minimum rates of wages, as fixed and/or revised under the Minimum Wages
Act, no separate VDA (Variable Dearness Allowance) as declared by the
Authorities under Minimum Wages Act will be applicable since the total
pay package is more than the pay package under the said government order.
Jaydip Industries v. Workmen, 1971:

The Court held that the Tribunal is not bound by the fixation of
minimum wage rates by the government and can fix higher rates as
minimum wages in its award. Tribunal can take into account rates of
minimum wages fixed in other awards.
22 Law of Wages and Principles of Wage Fixation Chandra Bhawan
Boarding and Lodging, Bangalore v. State of Mysore, 1969:

The Supreme Court observed that fixing of different rates of minimum

wages for different industries or in different localities by dividing State into
zones is not opposed to Section 3(3) of the Act but the government is not
NOTES allowed to fix or revise minimum rates of wages in an arbitrary manner.
(b) Minimum rate of wages-[(Section 4)]:

Section 4(1) of the Minimum Wages Act 1948 provides that any minimum
rates of wages fixed or revised by the appropriate Government in respect
of scheduled employments under Section 3 may consist of:
a. A basic rate of wages and a special allowance at a rate to be adjusted,
at such intervals and in such a manner as the appropriate government
may direct, or
b. A basic rate of wages with or without the cost of living allowance and
the cash value of the concessions in respect of supplies of essential
commodities at concession rates, where so authorized, or
c. An all-inclusive rate allowing for the basic rate, the cost of living
allowance and the cash value of the concessions, if any.
Section 4(2)
The cost of living allowance and the cash value of the concessions in
respect of supplies of essential commodities at concession rates shall be
computed by the competent authority at intervals and in accordance with
the directions issued by the appropriate government.
Karnataka Film Chamber of Commerce v. State of Karnataka, 1986:

The Court observed that Section 4 of the Act is a definite indication
that basic wage is an integral part of the minimum wage. The Minimum
Wages Act 1948 is a beneficial piece of social legislation which protects
the day to day living condition of the workmen employed at the lowest level
of wages in 23 Law of Wages and Principles of Wage Fixation sweated
labour. Though the minimum wages are fixed statutorily, it does not measure
up either to the fair wage or either to the living wage. Therefore the Court
cannot interfere with notifications issued under the Act unless the grounds
are substantial.
Jaswant Rai Beri and others v. State of Punjab, 1958:

The Court held that the Act makes no specific mention of the term

dearness allowance (DA) but it is well known that it refers to an allowance

paid for rise of cost of living.
NOTES
M. C. Mehta v. State of Tamil Nadu, 1996:
The Court expressed that the children doing the work of “sorting out
manufactured product and processing the same for packing” in a match
factory, should be given at least 60 percent of the prescribed minimum
wages for an adult, for the same job. But indicating the minimum wage does
not stand in the way of prescription of a higher rate if the State is satisfied
that a higher rate is viable.
(c) Procedure for fixing and revising minimum wages-[(Section 5)]:

In fixing minimum rates of wages in respect of any scheduled
employment for the first time or in revising minimum rates of wages, the
appropriate Government can follow either of the two methods described
below.
First Method [Section 5(1)(a)]:

This method is known as the ‘Committee Method’. The appropriate
Government may 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. After considering the advise of the
committee or committees, the appropriate Government shall, by notification
in the Official Gazette fix or revise the minimum rates of wages. The wage
rates shall come into force from such date as may be specified in the
notification. If no date is specified, wage rates Law of Wages and Principles
of Wage Fixation 24 shall come into force on the expiry of three months
from the date of the issue of the notification.
Note: It was held in Edward Mills Co. v. State of Ajmer (1955) A.I.R. SC,
that Committee appointed under Section 5 is only an advisory body and that
Government is not bound to accept its recommendations. As regards
composition of the Committee, Section 9 of the Act lays down that it shall
consist of persons to be nominated by the appropriate Government
representing employers and employee in the scheduled employment, who
shall be equal in number and independent persons not exceeding 1/3rd of
its total number of members. One of such independent persons shall be
appointed as the Chairman of the Committee by the appropriate

Government.
NOTES Second Method [Section 5(1)(b)]:

The method is known as the ‘Notification Method’. When fixing
minimum wages under Section 5(1)(b), the appropriate Government shall
by notification, in the Official Gazette publish its proposals for the
information of persons likely to be affected thereby and specify a date not
less than 2 months from the date of notification, on which the proposals
will be taken into consideration. The representations received will be
considered by the appropriate Government. It will also consult the Advisory
Board constituted under Section 7 and thereafter fix or revise the minimum
rates of wages by notification in the Official Gazette. The new wage rates
shall come into force from such date as may be specified in the notification.
However, if no date is specified, the notification shall come into force
on expiry of three months from the date of its issue. Minimum wage rates
can be revised with retrospective effect. [1996 II LLJ 267 Kar.].
Section 5(2) –
After considering the advice of the committee or committees so
appointed or after considering all representations received before the date
specified in the 25 Law of Wages and Principles of Wage Fixation
Notification, the appropriate Government shall, by notification in the
Official Gazette, fix or revise the minimum rates of wages in respect of each
scheduled employment, and unless such Notification otherwise provides, it
shall come into force on the expiry of three months from the date of its
issue.
However in case of revision of minimum rates of wages under clause
1(b) mentioned above the appropriate government shall consult the
Advisory Board also.
Chandra Bhawan Boarding and Lodging v. State of Mysore, 1969:

The Advisory Board is constituted to co-ordinate the work of the
committees and sub-committees and to advise the Government generally
in the matter of fixing and revising the minimum rates. However, in the
initial fixation of minimum wages, consultation with the Advisory Board
is not compulsory.

Jaswant Rai Beri v. State of Punjab

The committee appointed under section 5 is only an advisory body and the
government is not bound to accept any of its recommendations.
NOTES
(d) Advisory board-[(Section 7)]:
The appropriate government shall appoint an Advisory Board for the
purpose of coordinating the work of committees and sub-committees
appointed under section 5 and advising the appropriate government
generally in the matter of fixing and revising minimum rates of wages.
(e) Composition of committees and advisory boards-[(Section 9)]:

Each of the committees, sub-committees and Advisory Board shall
consist of persons to be nominated by the appropriate governments
representing employers and employees in the scheduled employments,
who shall be equal in number and independent persons not exceeding
1/3 of its total number of members, one of such independent persons
shall be appointed as Chairman by the appropriate government.
N. K. Jain v. Labour Commissioner Rajasthan, 1956:

Compliance in procedure must be real and not for the name sake. The
constitution of a committee by the State Government consisting of six of
its officers, with no representation of either employers or of the employees
in the scheduled employment and the notification issued for fixing
minimum wages on the advice of the said committee, was held to be having
no force and effect as in reality there was no committee.
(f) Central advisory board-[(Section 8)]:

The Central Advisory Board is constituted by the Central Government
under section 8 of the Act for the following purposes:
a) To advise the Central and State Governments in the matter of fixation
and revision of minimum rates of wages;
b) To advise on any matters within the scope of this Act and
c) To co-ordinate the work of the Advisory Boards.
Composition of committees etc.-[Section 9]:

The Central Advisory Board shall consist of persons to be nominated

by the Central Government representing employers and employees in the

scheduled employments, who shall be equal in number and independent
persons not exceeding 1/3 of its total number of members, one of such
NOTES independent persons shall be appointed the Chairman of the Board by the
Central Government.
K. T. Appanah v. State of Mysore, Section 9 does not require that there

should be on those Boards, representatives of employers and employees in
each of the many employments which were in the schedule or were
subsequently added to it, to insist that it should be so, would be to make the
Advisory Board unmanageable and unwieldy and to make its composition
impracticable.
Eastern Bihar Chamber of Commerce and Industries v. State of Bihar,

1988:
Nomination of representatives from each category of employers is not
necessary.
Ministry of Labour and Rehabilitation v. TiffinsBarytes Asbestos and

Paints Ltd., 1985:
‘Independent persons’ are persons who belong neither to the category of
employers nor to that of employees.
Correction of errors-[Section 10]:

1. The appropriate government may at any time by notification in the
Official Gazette correct clerical or arithmetical mistakes in any order fixing
or revising minimum rates of wages under this Act or errors arising therein
from any accidental slip or omission.
2. Every such notification shall as soon as may be after it is issued be
placed before the Advisory Board for information
Minimum wage – whether to be paid in cash or kind-[Section 11]:

Section 11 of the Act provides that minimum wages payable under the
Act shall be paid in cash. But where it has been the custom to pay wages
wholly or partly in kind, the appropriate Government, on being satisfied,
may approve and authorize such payments. Such Government can also
authorize for supply of essential commodities at concessional rates. Where

payment is to be made in kind, the cash value of the wages in kind or in the
shape of essential commodities on concessions shall be estimated in the
prescribed manner.
NOTES
Payment of minimum wages is obligatory on employer-[Section 12]:
Payment of less than the minimum rates of wages notified by the
appropriate Government is an offence. Section 12 clearly lays down that
the employer shall pay to every employee engaged in a scheduled
employment under him such wages at a rate not less than the minimum rate
of wages 28 Law of Wages and Principles of Wage Fixation fixed by the
appropriate Government under Section 5 for that class of employment
without deduction except as may be authorized, within such time and
subject to such conditions, as may be prescribed.
Fixing hours for a normal working day-[Section 13]:

Fixing of minimum rates of wages without reference to working hours may
not achieve the purpose for which wages are fixed. Thus, by virtue of
Section 13 the appropriate Government may –
a) fix the number 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 or to any specified class of employees and
for the payment of remuneration in respect of such day of rest;
c) provide for payment of work on a day of rest at a rate not less than the
overtime rate.
The above stated provision shall apply to following classes of employees

only 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 prevented;
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 intermittent;
d) Employees engaged in any work which for technical reasons, has to

be completed before the duty is over; e) Employees engaged in any

work which could not be carried on except at times dependent on the
irregular action of natural forces.
NOTES For the purpose of clause (c) employment of an employee is essentially
intermittent when it is declared to be so by the appropriate Government on
29 Law of Wages and Principles of Wage Fixation ground that the daily
hours of the employee, or if these be no daily hours of duty as such for the
employee, the hours of duty, normally includes period of inaction during
which the employee may be on duty but is not called upon to display either
physical activity or sustained attention. There is correlation between
minimum rates of wages and hours of work. Minimum wages are to be fixed
on basis of standard normal working hours, namely 48 hours a week;
BenodeBihari Shah v. State of W.B. 1976 Lab I.C. 523 (Cal).
Payment of overtime-[Section 14]:

Section 14 provides that when an employee, whose minimum rate of
wages is fixed under this Act by the hours, the day or by such longer wage
period as may be prescribed, works on any day in excess of the number of
hours constituting a normal working day, the employer shall pay him for
every hour or part of an hour so worked in excess at the overtime rate fixed
under this Act or under any other law of the appropriate Government for
the time being in force whichever is higher. Payment for overtime work can
be claimed only by the employees who are getting minimum rate of wages
under the Act and not by those getting better wages. (1998 LLJ I SC 815).
Wages of a worker who works less than normal working day-[Section

15]:
Where the rate of wages has been fixed under the Act by the day for
an employee and if he works on any day on which he employed for a period
less than the requisite number of hours constituting a normal working day,
he shall be entitled to receive wages for that day as if he had worked for a
full working day.
Provided that he shall not receive wages for full normal working day –
i. if his failure to work is caused by his unwillingness to work and not
by omission of the employer toprovide him with work, and
ii. such other cases and circumstances as may be prescribed.
Wages for two or more classes of work-[Section 16]:
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 of work wages at not less than the minimum rate in force in respect of
each such class. NOTES
Minimum time – rate wages for piece work-[Section 17]:

Where an employee is engaged in work on piece work for which
minimum time rate and not a minimum piece rate has been fixed, wages
shall be paid in terms of Section 17 of the Act at minimum time rate.
Maintenance of registers and records-[Section 18]:

Apart from the payment of the minimum wages, the employer is required
under Section 18 to maintain registers and records giving such particulars
of employees under his employment, the work performed by them, the
receipts given by them and such other particulars as may be prescribed.
Every employee is required also to exhibit notices, in the prescribed from
containing particulars in the place of work. He is also required to maintain
wage books or wage-slips as may be prescribed by the appropriate
Government and the entries made therein will have to be authenticated by
the employer or his agent in the manner prescribed by the appropriate
Government.
Inspector
Appointment and power of Inspector-[Section 19]:
The Appropriate Government can appoint by notification in the Official
Gazette an Inspectorfor the purpose of this Act (section 19), and define the
local limits within which the Inspector shall exercise their function. The
power and function of the Inspectors appointed under this act are very much
similar to those of the Inspectors appointed under The Payment of wages
Act, 1936.
Power and Function of Inspector:

The inspector can within his local limit-
a) enter at all reasonable hours, with such assistant ( if any ) or any local
or other public authority ,as think fit any premises or place of premises
where employees are employed or for the purpose of examining any
register, record of wages or notices required to be kept;

b) examine any person he find in such premises or depending on any

reasonable causes believe is an employee or an employee who given
out his work from therein;
NOTES c) require any person giving out work or any out-workers to give any
information, which in his power to give with respect to the names and
addresses of the persons from or to whom the work is given out or
received and with respect to the payment to be made for the work.
d) seize or takes copies of the register, record of wages or notices in
respect of any offence under the Act.
e) exercise such other powers as may be prescribed. Within the meaning
of section 175 and 176 under Indian Penal Code, any document or
information given by the inspector shall be deemed to be legally bound.
The inspector shall be deemed to be a public servant within the
meaning of Indian Penal Code. The employee can claims for minimum
wages (under section 20):
1. The Appropriate Government may by notification in the Official

Gazette, appoint
a) any Commissioner for Workmen’s Compensation, or
b) any officer of the Central Government exercising functions as a
Labour Commissioner for any region,
c) any officer of the State Government not below the rank of the
Labour Commissioner or, any other officer.Such person should
have an experience as a judge of a Civil Court or as a stipendiary
Magistrate to hear or decide any claims arising out of the payment
of less than the minimum rates of wages.
2. Again for any claims of the employees under section 3, the employees
himself or any legal practitioner or any official of a registered trade
union or inspector can apply to such Authority and the application shall
present to them within six month from the date on which the minimum
wages became payable.
3. After the necessary enquiry, the Authority shall hear the applicant and
the employer and give them opportunity of being heard. If the wages
is paid of less than the minimum rates of wages, than the Authority
may asked to the employer to pay exceed the actual amount which has
to pay in addition with compensation not exceeding ten times the
amount of such excess for such act. In any other case, if the payment
become due than the employee will get together with the payment of
such compensation as the Authority may think fit not exceeding ten

rupees.
4. If under this section the Authority hearing any claim and found that it
was either malicious or vexatious, it may direct penalty not exceeding
fifty rupees to the employer by the person presenting the application. NOTES
5. Under this section if any amount is directed to be paid than as if it were
a fine imposed by the Authority as a Magistrate or if he is not
Magistrate than to such person whom the Authority makes application
in this behalf as if were a fine imposed by such Magistrate.
6. Every direction is final under this section.
7. Every Authority appointed shall have all powers of a Civil Court under
the Code of Civil Procedure, 1908.
Authority And Claims

[Section 20-21]:
Under Section 20(1) of the Act, the appropriate Government, may
appoint any of the following as an authority to hear and decide for any
specified area any claims arising out of payment of less than the minimum
rate of wages or in respect of the payment of remuneration for the days of
rest or of wages at the rate of overtime work:
a) any Commissioner for Workmen’s Compensation; or
b) any officer of the Central Government exercising functions as Labour
Commissioner for any region; or
c) any officer of the State Government not below the rank of Labour
Commissioner; or
d) any other officer with experience as a Judge of a Civil Court or as the
Stipendiary Magistrate.
The authority so appointed shall have jurisdiction to hear and decide
claim arising out of payment of less than the minimum rates of wages or in
respect of the payment remuneration for days of rest or for work done on
such days or for payment of overtime.
The provisions of Section 20(1) are attracted only if there exists a
disputed between the employer and the employee as to the rates of wages.
Where no such dispute exists between the employer and
employees and the only question is whether a particular payment at the
agreed rate in respect of minimum wages, overtime or work on off days is
due to an employee or not, the appropriate remedy is provided by the

Payment of Wages Act, 1936.
NOTES Claims-[Section 20]:

1. The appropriate Government may, by notification in the Official
Gazette, appoint 1[any Commissioner for workmen's Compensation or
any officer of the Central Government exercising functions as a
Labour Commissioner for any region, or any officer of the State
Government not below the rank of Labour Commissioner or any] other
officer with experience as a judge of a Civil Court or as a stipendiary
Magistrate to be the Authority to hear and decide for any specified area
all claims arising out of the payment of less than the minimum rates of
wages 2[or in respect of the payment of remuneration for days of rest
for work done on such days under clause (b) or clause (c) of sub-section
(1) of section 13 or of wages at the overtime rate under section 14,] to
employees employed or paid in that area.
2. Where an employee has any claim of the nature referred to in
subsection (1)], the employee himself, or any legal practitioner or any
official of a registered trade union authorised in writing to act on his
behalf, or any Inspector, or any person acting with the permission of
the Authority appointed under sub-section (1), may apply to such
Authority for a direction under subsection (3):
Provided that every such application shall be presented within six
months from the date on which the minimum wages 4[or other
amounts] became payable:
Provided further that any application 5[may be admitted after the said
period of six months when the applicant satisfies the Authority that he
had sufficient cause for not making the application within such period.
3. When any application under sub-section (2) is entertained the Authority
shall hear the applicant and the employer, or give them an opportunity
of being heard, and after such further inquiry, if any, as it may consider
necessary, may, without prejudice to any other penalty to which the
employer may be liable under this Act, direct-
i. . in the case of a claim arising out of payment of less than the
minimum rates of wages, 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;
ii. in any other case, 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 NOTES
the disposal of the application.
4. If the authority hearing any application under this section is satisfied
that it was either malicious or vexatious, it may direct that a penalty
not exceeding fifty rupees be paid to the employer by the person
presenting the application
a. Any amount directed to be paid under this section may be
recovered-if the Authority is a Magistrate, by the Authority as if
it were a fine imposed by the Authority as a Magistrate,
b. if the Authority is not a Magistrate, by any Magistrate, to whom
the Authority makes application in this behalf, as if it were a fine
imposed by such Magistrate.
5. Every direction of the Authority under this section shall be final.
6. Every Authority appointed under sub-section (1) shall have all the
powers of a Civil Court under the Code of Civil Procedure, 1908 (5 of
1908), for the purpose of taking evidence 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 (5 of 1898).
Single application in respect of a number of employees-[Section 21]:

1. [Subject to such rules as may be prescribed, a single application] may
be presented under section 20 on behalf or in respect of any number of
employees employed in the scheduled employment in respect of which
minimum rates of wages have been fixed and in such cases the
maximum compensation which may be awarded under sub-section (3)
of section 20 shall not exceed ten times the aggregate amount of such
excess, 2[or ten rupees per head as the case may be].
2. The Authority may deal with any number of separate pending
applications presented under section 20 in respect of employees in the
scheduled employments in respect of which minimum rates of wages
have been fixed, as a single application presented under sub-section
(1) of this section and the provisions of that sub-section shall apply
accordingly.

Penalties for certain offences-[Section 22]:

Any employer who
NOTES a. Pays to any employee less than the minimum rates of wages fixed for
that 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: Provided
that 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.
General provision for punishment of other offences-[Section 22A]:

Any employer who contravenes any provision of this Act or of any rule
or of order made thereunder shall if no other penalty is provided for such
contravention by this Act, be punishable with fine which may extend to five
hundred rupees.
Cognizance of Offences-[Section 22B]:

1. No Court shall take cognizance of a complaint against any person for
an offence-
a. under clause (a) of section 22 unless an application in respect of
the facts constituting such offence has been presented under
section 20 and has been granted wholly or in part, and the
appropriate Government or an officer authorised by it in this
behalf has sanctioned the making of the complaint;
b. under clause (b) of section 22 or under section 22-A, except on a
complaint made by, or with the sanction of, an Inspector.
2. No Court shall take cognizance of an offence –
a. under clause (a) or clause (b) of section 22, unless complaint
thereof is made within one month of the grant of sanction under
this section;
b. under section 22-A, unless the complaint thereof is made within
six months of the date on which the offence is alleged to have been
committed.

Offences by companies-[Section 22C]:

1. If the person committing any offence under this Act is a company,
every person who at the time the offence was committed was in charge
of, and was responsible, to the company for the conduct of the business NOTES
of the company as well as the company shall be deemed to
Law of Wages and Principles of Wage Fixation 38 be guilty of the
offence and shall be liable to be proceeded against and punished
accordingly;
Provided that nothing contained in this sub-section shall render any
such person liable to any punishment provided in this Act if he proves
that the offence was committed without his knowledge or that he
exercised all due diligence to prevent the commission of such offence.
2. . Notwithstanding anything contained in sub-section (1), where any
offence under this Act has been committed by a company and it is
proved that the offence has been committed with the consent or
connivance of, or is attributable to any neglect on the part of any
director, manager, secretary or other officer of the company, such
director, manager, secretary or other officer of the company shall also
be deemed to be guilty of that offence and shall be liable to be
proceeded against and punished accordingly.
Explanation -For the purposes of this section-
a. “Company” means anybody corporate and includes a firm or other
association of individuals, and
b. “Director” in relation to a firm means a partner in the firm.
Payment of undisbursed amounts due to employees-[Section 22D]:

All amounts payable by an employer to an employee as the amount of
minimum wages of the employee under this Act or otherwise due to the
employee under this Act or any rule or order made thereunder shall, if such
amounts could not or cannot be paid to the employee on account of his death
before payment or on account of his whereabouts not being known, be
deposited with the prescribed authority who shall deal with the money so
deposited in such manner as may be prescribed.
Protection against attachment of assets of employer with Government-
[Section 22E]:
Any amount deposited with the appropriate Government by an
employer to secure the due performance of a contract with that Government

and any other amount due to such employer from that Government in
respect of such contract shall not be liable to attachment under any decree
or order of any Court in respect of any debt or liability incurred by the
NOTES employer other than any debt or liability incurred by the employer towards
any employee employed in connection with the contract aforesaid.
Application of Payment of Wages Act, 1936, to scheduled employments-

[Section 22 F]:
1. Notwithstanding anything contained in the Payment of Wages Act,
1936 (4 of 1936), the appropriate Government may, by notification, in
the Official Gazette, direct that, subject to the provisions of sub-section
(2), all or any of the provisions of the said Act shall with such
notifications, if any, as may be specified in the notification, apply to
wages payable to employees in such scheduled employment as may be
specified in the notification.
2. Where all or any of the provisions of the said Act are applied to wages
payable to employees in any scheduled employment under sub-section
(1), the Inspector appointed under this Act shall be deemed to be the
Inspector for the purpose of enforcement of the provisions so applied
within the local limits of his jurisdiction.
Exemption of employer from liability in certain cases-[Section 23]:

Where an employer is charged with an offence against this Act, he shall
be entitled, upon complaint duly made by him, to have any other person
whom he charges as the actual offender, brought before the Court at the
time appointed for hearing the charge; and if, after the commission of the
offence has been proved, the employer proves to the satisfaction of the
Court-
a. that he has used due diligence to enforce the execution of this act, and
b. that the said other person committed the offence in question without
his knowledge, consent or connivance, that other person shall be convicted
of the offence and shall be liable to the like punishment as if he were the
employer and the employer shall be discharged:
Provided that in seeking to prove, as aforesaid, the employer may be
examined on oath, and the evidence of the employer or his witness, if any,
shall be subject to cross examination by or on behalf of the person whom
the employer charges as the actual offender and by the prosecution.

Bar of suits-[Section 24]:

No Court shall entertain any suit for the recovery of wages in so far as
the sum so claimed-
NOTES
a. forms the subject of an application under section 20 which has been
presented by or on behalf of the plaintiff, or
b. has formed the subject of a direction under that section in favour of
the plaintiff, or
c. has been adjudged in any proceeding under that section not to be due
to the plaintiff, or
d. could have been recovered by an application under that section.
Contracting out-[Section 25]:

Any contract or agreement, whether made before or after the
commencement of this Act, whereby an employee either relinquishes or
The Minimum Wages Act, 1948 Sec. 26 reduces his right to a minimum
rate of wages or any privilege or concession accruing to him under this Act
shall be null and void in so far as it purports to reduce the minimum rate of
wages fixed under this Act.
Exemptions and Exceptions-[Section 26]:

1. The appropriate Government may, subject to such conditions if any as
it may think fit to impose, direct that the provisions of this Act shall
not apply in relation to the wages payable to disabled employees.
2. The appropriate Government may, if for special reasons it thinks so fit,
by notification in the Official Gazette, direct that [subject to such
conditions and] for such period as it may specify the provisions of this
Act or any of them shall not apply to all or any class of employees
employed in any scheduled employment or to any locality where there
is carried on a scheduled employment.
[(2-A) The appropriate Government may, if it is of opinion that, having
regard to the terms and conditions of service applicable to any class of
employees in a scheduled employment generally or in a scheduled
employment in a local area [or to any establishment or a part of any
establishment in a scheduled employment] it is not necessary to fix
minimum wages in respect of such employees of that class [or in
respect of employees in such establishment or part of any
establishment] as are in receipt of wages exceeding such limit as may
be prescribed in this behalf, direct by notification in the Official Gazette

and subject to such conditions, if any, as it may think fit to impose, that
the provisions of this Act or any of them shall not apply in relation to
such employees;
NOTES 3. Nothing in this Act shall apply, to the wages payable by an employer
to a member of his family who is living with him and is dependent on
him.
Explanation -In this sub-section a member of the employer's family shall
be deemed to include his or her spouse or child or parent or brother or sister
Power of the appropriate Government to add to Schedule:
Power of State Government to add to Schedule-[Section-27]:

Provides that the appropriate Government may, by notification in the
Official Gazette, add to either part of the schedule any employment in
respect of which it is of opinion that minimum rate of wages should be fixed
– under this Act. But before doing so the Government concerned shall give
three months’ notice by an Official Gazette notification of its intention to
do so. After notice and subsequent addition any employment in the
schedule, the Schedule shall deemed to be amended accordingly in respect
of that state.
Power of Central Government to give directions-[Section 28]:

Central Government may give directions to a State Government as to
the carrying into execution of this Act in the State.
Power Of The Central Government To Make Rules-[Section 29]:

Section 29 provides that Central Government may by notification in the
Official Gazette make rules for carrying out the purpose of this Act in
respect of the following:
a. Prescribe the term of office of the members.
b. The procedure to be followed in conduct of business.
c. The method of voting.
d. The manner of filling up casual vacancies in the membership of the
Central advisory Board and
e. The quorum necessary for a transaction of business of the Central
Advisory Board.

Power of the appropriate Government to make rules-[Section 30]:

The appropriate Government may, subject to the condition of ‘the previous
publication’, by notification in the Official Gazette, make rules for carrying
out the purpose of this Act. [Section 30(1)]. Section 30(2) confers special NOTES
powers for making rules for carrying out the purpose of this Act. Such rules
may –
a) prescribe the term of office of the members, the procedure to be

followed in the conduct of business, the method of voting, the manner
of filling up casual vacancies in membership and the quorum necessary
for the transaction of business of the committees, sub-committees, and
the Advisory Board.
b) prescribe the method of summoning witness, production of document
relevant to the subject-matter of the enquiry before the committees,
sub-committees, and the Advisory Board;
c) prescribe the mode of computation of the cash value of wages in kind
and of concessions in respect of supplies of essential commodities at
concessional rates;
d) prescribe the time and conditions of payment of, and the deduction
permissible from wages;
e) provide for giving adequate publicity to the minimum rate of wages
fixed under the Act,
f) provide for a day of rest in every period of seven days and for the
payment of remuneration in respect of such day;
g) prescribe the number of hours of work which shall constitute a normal
working day;
h) prescribe the cases and circumstances in which an employee employed
for a period of less than the requisite number of hours constituting a
normal working day shall not be entitled to receive wages for a full
normal working day;
i) prescribe the form of registers and records to be maintained and the
particulars to be entered in such registers and records;
j) provide for the issued of wage books and wage slips and prescribe the
manner of making and authenticating entries in wage books and wage
slips;
k) prescribe the powers of Inspectors for purpose of this Act; l) regulate
the scale of costs that may be allowed in proceedings under section 20;
m) prescribe the amount of court fees payable in respect of proceedings

under section 20, and

n) Provide for any other matter which is to be or may be prescribed.
NOTES
Rules made by Central Government to be laid before Parliament-
[Section 30A]:
Every rule made by the Central Government under this Act shall be laid as
soon as may be after it is made before each House of Parliament while it is
in session for a total period of thirty days which may be comprised in one
session or two successive sessions and if before the expiry of the session in
which it is so laid or the session immediately following both Houses agree
in making any modification in the rule or both Houses agree that the rule
should not be made the rule shall thereafter have effect only in such
modified form or be of no effect as the case may be so however that any
such modification or annulment shall be without prejudice to the validity
of anything previously done under that rule.
Validation of fixation of certain minimum rates of wages-[Section 31]:

Where during the period –
a. commencing on the 1st day of April 1952 and ending with the date of
the commencement of the Minimum Wages (Amendment) Act 1954
(26 of 1954); or
b. commencing on the 31st day of December 1954 and ending with the
date of the commencement of the Minimum Wages (Amendment) Act
1957 (30 of 1957); or
c. commencing on the 31st day of December 1959 and ending with the
date of the commencement of the Minimum Wages (Amendment) Act
1961 (31 of 1961) minimum rate of wages have been fixed by an
appropriate government as being payable to employees employed in
any employment specified in the Schedule in the belief or purported
belief that such rates were being fixed under clause (a) of sub-section
(1) of section 3 as in force immediately before the commencement of
the Minimum Wages (Amendment) Act 1954 (26 of 1954) or the
Minimum Wages (Amendment) Act 1957 (30 of 1957) or the
Minimum Wages (Amendment) Act 1961 (31 of 1961) as the case may
be suchLaw of Wages and Principles of Wage Fixation 45rates shall
be deemed to have been fixed in accordance with law and shall not be
called in question in any court on the ground merely that the relevant
date specified for the purpose in that clause had expired at the time the
rates were fixed :

Provided that nothing contained in this section shall extend or be construed

to extend to affect any person with any punishment or penalty whatsoever
by reason of the payment by him by way of wages to any of his employees
during any period specified in this section of an amount which is less than NOTES
the minimum rates of wages referred to in this section or by reason of non-
compliance during the period aforesaid with any order or the rule issued
under section 13.
Compliances under the Act:

The establishment must ensure following compliances under the Act. These
compliances are not exhaustive but illustrative.
1. The Establishment is covered by the definition “Scheduled
Employment” with effect from…….
2. The Government revised the minimum wages once/twice/ thrice during
the financial year under reference and the Establishment has paid to
all its employees minimum wages in accordance with the rates at
respective point of time and at the respective rates specified in
notification under Section 5 of the MWA.
3. The Establishment has issued wage slips to all its employees in respect
of each of the wage period………..
4. Where the services of any employee were terminated for any reason
whatsoever, the wages were paid within two working days from the
date of such termination.
5. The Establishment did not make any unauthorized deduction from the
wages of any of its employees. Further, the deductions if any, made
were within the limits of fifty percent (or seventy five percent in case
of cooperatives) of wages earned by such employees during the period
under reference.
6. Where the Establishment was constrained to impose any fine or deduct
wages on account of damages caused by any employee, the latter was
given an opportunity of being heard in the presence of a neutral person
and was also communicated the amount of fine imposed or deduction
made from the wages.
7. The Establishment has eight working hours per day, inclusive of half
an hour of interval.
8. All claims under Section 20 of the MWA were paid within the time
limit specified in the Order.

CONCLUSION:
Wage fixation is a social welfare programme. With the advent of the
doctrine of a welfare state, which is based on notions of progressive social
NOTES philosophy the theory of demand and supply which were allowed free scope
under the doctrine of laissez faire, have become obsolete in construing the
wage structure. The conception of minimum wages is based on the
principles of equity and social justice. Its underlying idea is that "he who
works is entitled to a fair remuneration which may enable him to live a life
consistent with human dignity".
Employers are, therefore, under an obligation, (economic or social), to
provide their employees safe, healthy and comfortable living, employment
and working conditions. It is only when\they failed to honour this obligation
that the Government stepped in to safeguard the interest of workmen by
enacting suitable legislation. This has happened all over the world, and in
India also the Government has recognized its duty to undertake legislation
to protect workers from being exploited
The various advantages of the minimum wage fixation can be summarized
as follows:
a) It increases the standard of living for the poorest and most vulnerable
class in society.
b) Motivates and encourages employees to work harder.
c) It stimulates consumption, by putting more money in the hands of low-
income people, who spend their entire paychecks. d) It decreases the
cost of government social welfare programs by increasing incomes for
the lowest-paid. e) Encourages people to join the workforce rather than
pursuing money through illegal means, e.g., selling drugs.
The minimum wage fixation has played a significant role in getting at least
minimum wages to workers. Let us hope we will reach living wages in short
time which has been guaranteed by Article 43 of the Constitution.
CASE LAWS:
1. President Cinema Workers Union Affiliated to
BharatiyaMazdoorSangh vs. The Secretary Social Welfare and Labor
Department, 2005 LLR 648 (Karn He)
It was held that inaction on the part of the Government in not revising
minimum wages for 13 years will not be justified hence revision be
made within 6 months.

2. Executive Engineer, Rural Works Division, Mayurbhanj vs. Addl.

District Magistrate, Mayurbhanj, 2005 LLR 121 (Ori HC),
It was held that, under the Minimum Wages Act, it is the liability of
principal employer to pay difference of wages to the employees of the NOTES
contractor.
3. Agricultural Produce Market Committee vs. Weighmens Association,
Tiptur, 2007 LLR (SN) 333 (Kam He).
It was held that in the absence of relationship of master and servant,
the weigh men will not be entitled to minimum wages.
4. Birla Institute of Technology vs. State of Bihar, 2007 LLR (SN) 330,
It was held that Birla Institute of Technology will be liable to pay the
wages as per The Minimum Wages Act, 1948.
5. Delhi Council for Child Welfare v. Sheela Devi, 2006 LLR 1181 (Del
He),
It was held that A Society is liable to pay minimum wages to its
employees.
6. Sonu vs. Municipal Corporation of Delhi, 2005 LLR 778 (Del He),
It was held that Minimum wages to the safaikaramcharis cannot be
denied on the ground that they work on part-time basis.
7. Security Chamber Pvt. Ltd. vs. Mysore KirloskJIr Ltd., (2006) ( (SC),
It was held that private security guards through contractor will not be
entitled to minimum wages in the absence of scheduled employment.
Lesson round up:

– The Minimum Wages Act empowers the Government to fix minimum
wages for employees working in specified employments. It provides
for review and revision of minimum wages already fixed after suitable
intervals not exceeding five years.
– It extends to the whole of India and applies to scheduled employments
in respect of which minimum rates of wages have been fixed under this
Act. – The appropriate government shall fix the minimum rates of
wages payable to employees employed in a scheduled employment.
– It may review at such intervals not exceeding five years the minimum
rates of wages so fixed, and revise the minimum rates if necessary.
– The employer shall pay to every employee in a scheduled employment
under him wages at the rate not less than the minimum rates of wages

fixed under the Act.

– The Act also provides for regulation or working hours, overtime,
weekly holidays and overtime wages. Period and payment of wages,
NOTES and deductions from wages are also regulated.
– The Act provides for appointment the authorities to hear and decide all
claims arising out of payment less than the minimum rates of wages or
any other monetary payments due under the Act. The presiding officers
of the Labour court and Deputy Labour Commissioners are the
authorities appointed.

Questions
1. Discuss the object and scope of the Minimum Wages Act. NOTES
2. Who is authorize to fix minimum wages and in what manner?
3. What points should be taken into consideration while fixing minimum

wages?
4. Discuss claims under The Minimum Wages Act, 1948?
5. Enumerate the procedure for fixing and revising the minimum wages.
6. What registers and records are required to be maintained under The

Minimum Wages Act, 1948?
7. Write a note on:

a. Living wages
b. Fixation of minimum rates of wages
c. Wages

UNIT - 2
THE PAYMENT OF WAGES ACT, 1936
NOTES
SYNOPSIS
1. Introduction
2. Objectives of the Act
3. Responsibility for payment of wages.
4. Authorised deductions of wages and delay in payment.
5. Offences, their trial procedure and penalties.
6. Enforcement machinery under the Act- their powers and
functions.
7. Conclusion
Introduction:
In an economy where even minimum wages were not paid to the workers,
the need to protect the wages was felt in the early years of twentieth century.
With a view to achieve this object, a private Bill called “Weekly Payment
Bill” was introduced in the legislature in the year 1925. The bill aimed at
to remove some of the evils prevalent in the economy, e.g., exploitation of
labour by imposing arbitrary fined, delay in payment of wages and
unauthorized deductions from wages. The bill was withdrawn on the
assurance of the Government that the matter was under consideration. The
desirability for putting up legislation was keenly felt in the year 1926 to
regulate the extent of fines and other unauthorized deductions. The question
was again considered by Royal Commission on Labour in India.
The Commission made the following important recommendations:

i. Children should be exempt from fines.
ii. The maximum amount deducted in fines should not exceed in any
month half an anna in the rupee of workers’ earnings.
iii. The sums realized from fines should be utilized from a purpose
beneficial to the employees as a whole and should be approved by
some recognized authority.
iv. A notice clearly mentioning the acts and omissions, in respect of which
The Payment of Wages Act, 1936 42

fines may be imposed, should be posted and other fines shall be

deemed to be illegal.
v. Any deduction made on account of damage or loss to goods should not
NOTES
exceed the wholesale price of goods damaged.
vi. Deductions may be allowed on account of provision for housing
accommodation and of tools and raw material.
vii. In all cases the amount of deductions should not exceed the equivalent
of service rendered.
viii. Impositions of a deduction not permitted by law should be made penal.
The bill of Payment of Wages Act based on the above recommendations
was passed in 1936.
Thereafter this Act has been amended twice in 1937 and again in 1940,
1964, 1965, 1970, 1976 and the last amendment being made by Payment
of Wages (Amendment) Act, 1982. The Amending act comes into force
w.e.f. 15th October, 1982. The application of the Act is now extended to
cover persons whose average wages are below Rs. 1600. The need for
amending the Act was felt as a large number of workers previously covered
by the Act got exclude with the upward revision of pay scales and increase
in D.A. and other allowances in recent years.
The Payment of Wages (Amendment) Act, 2005

The Act was lastly amended in 2005 (w.e.f 9-772005). The Act applies to
wages payable to an employed person in respect of a wages period if such
wages for that wage period so not exceed six thousand five hundred rupees
per month or such other higher sum which, on the basis of figures of the
Consumer Expenditure Survey published by the National Sample Survey
Organization, the Central Government may, after every five years, by
notification in the Official Gazette, specify.
Section 3 of the Act – Responsibility for payment of wages – was totally
amended.
Section 8(6) was amended and it now reads, “No fine imposed on any
employed person shall be recovered from him by instalments or after the
expiry of 90 days from the day on which it was imposed.”
Penalty was enhanced from Rs. 50 to Rs. 375 for malicious or vexatious
claims uls 15 of the Act.
‘Claims arising out of deductions from wages or delay in payment of wages
and penalty from malicious or vexations claims (Section 15) was thoroughly

amended.’
Penalty for offences under the Act was enhanced many times. Object. As
stated in the preamble to the Act, the object of the Act is to regulate the
NOTES payment of wages to certain class of persons employed in industry. The
regulation contemplated by the Act is of two kinds:
1. About the date of payment of wages, and
2. About deductions from wages whether fine or otherwise.
The words “certain class of persons” in the preamble are important, for the
Act applies to persons drawing on an average less than one thousand six
hundred rupees an month. [Section 1(6)]
APPLICATION OF THE ACT:

The Payment of Wages Act, 1936 extends to the whole of India. It comes
into force on 28th March, 1937. It applies to the payment of wages to:
1. Persons employed in any factory.
2. Persons (otherwise than a factory) employed in any railway by railway
administration or either directly or through a contractor or by persons
fulfilling a contract with railway administration.
Appropriate Government is empowered to make the Act applicable to any
class of person employed in any industrial establishment or in any class or
group of industrial establishment subject to the following two conditions.
Law of Wages and Principles of Wage Fixation 54
i. Issue of three months notice of its intention of doing so; and
ii. Notification of extension in the Official Gazette.
Provided that in relation to any such establishment owned by the Central
Government, no such notification shall be issued except with the
concurrence of that Government.
This Act applies to wages payable to an employed person in respect of a
wage period if such wages for that wage period do not exceed. Six thousand
five hundred rupees per month or such other higher sum which, on the basis
of figures of the Consumer Expenditure Survey published by the National
Sample Survey Organization, the Central Government may after every five
years, by notification in the Official Gazette, specify.
OBJECT OF THE ACT:

The main objects of the Act are-

1. To avoid unnecessary delay in payment of wages to the employees,
2. To prevent unauthorized deduction from the wages, NOTES
3. To require to employer to pay wages on working day and not on
holiday,
4. To prevent the employer from making payment of wages in kinds,
5. To regulate the payment of wages to certain class of persons employed
in industries.
DEFINITIONS: SECTION 2
Employed person-[Section 2 (i)]:
Employed person includes the legal representative of a deceased employed
person;
Employer-[Section 2 (ia)]:
Employer includes the legal representative of a deceased employer;
Industrial or other establishment- [Section 2 (ii)]:

According to Section 2 (ii) of this Act Industrial or other establishment
means any –
a) Tramway service or motor transport service engaged in carrying
passengers or goods or both by road for hire or reward; aa)air transport
service other than such service belonging to or exclusively employed
in the military naval or air forces of the Union or the Civil Aviation
Department of the Government of India;
b) Dock wharf or jetty;
c) Inland vessel mechanically propelled;
d) Mine quarry or oil-field;
e) Plantation;
f) Workshop or other establishment in which articles are produced
adapted or manufactured with a view to their use transport or sale;
g) establishment in which any work relating to the construction
development or maintenance of buildings roads bridges or canals or
relating to operations connected with navigation irrigation or to the

supply of water or relating to the generation transmission and

distribution of electricity or any other form of power is being carried
on;
NOTES h) any other establishment or class of establishments which the Central
Government or a State Government may having regard to the nature
thereof the need for protection of persons employed therein and other
relevant circumstances specify by notification in the Official Gazette.
Wages- [Section 2 (iv)]:

means all remuneration (whether by way of salary allowances or otherwise)
expressed in terms of money or capable of being so expressed which would
if the terms of employment express or implied were fulfilled by payable to
a person employed in respect of his employment or of work done in such
employment and includes –
a) any remuneration payable under any award or settlement between the
parties or order of a court;
b) any remuneration to which the person employed is entitled in respect
of overtime work or holidays or any leave period;
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 within 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 does not include-
1. any bonus (whether under a scheme of profit sharing or otherwise)
which does not from 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;
2. the value of any house-accommodation or of the 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;
3. any contribution paid by the employer to any pension or provident

fund and the interest which may have accrued thereon;

4. any travelling allowance or the value of any travelling concession;
5. any sum paid to the employed person to defray special expenses NOTES
entailed on him by the nature of his employment; or
6. any gratuity payable on the termination of employment in cases
other than those specified in sub-clause (d).
Responsibility For Payment Of Wages-[Section 3]:

Section 3 provides that every employer shall be responsible for the payment
to persons employed by him of all wages required to be paid under this Act.
n In the case of the factory, manager of that factory shall be liable to pay
the wages to employees employed by him.
n In the case of industrial or other establishments, persons responsibility
of supervision shall be liable for the payment of the wage to employees
employed by him.
n In the case of railways, a person nominated by the railway
administration for specified area shall be liable for the payment of the
wage to the employees.
n In the case of contractor, a person designated by such contractor who
is directly under his charge shall be liable for the payment of the wage
to the employees. If he fails to pay wages to employees, person who
employed the employees shall be liable for the payment of the wages.
The person so named, the person responsible to the employer, the person
so nominated or the person so designated, as the case may be shall be
responsible for such payment.
Notwithstanding anything contained in sub-section (1), it shall be the
responsibility of the employer to make payment of all wages required to be
made under this Act in case the contractor of the person designated by the
employer fails to make such payment.
In P.C. Agarwala Vs. Payment of Wages Inspector M.P. and Others (2005)
II LLJ 1077 (S.C.), Jiyajirao Cotton Mills became a sick company. It owed
to its workmen wages for certain periods. Payment of wages Inspector
initiated action u/s 15 of the Act against the directors of the company. The
Authorities under the Act held the directors personally liable to pay the
wages. That was affirmed by the H.C. The directors filed appeal challenging
the judgment of the H.C. They were allowed and the appeal filed by the

functionaries under the Act discussed.

Referring to the provision of the Act, as amended by M.P. Act, 1964 the
S.C. observed that the H.C. held the appellant directors liable by introducing
NOTES the expression “occupier used in the Factories Act, 1948 and not in the
Payment of Wages Act 1936.” The basic premises on which the H.C.
proceeded were clearly in tenable. On a plain reading of the Payment of
Wages Act it could not be held that directors had any personal liability.
Fixation of wage-periods-[Section 4]:

Every person responsible for the payment of wages under section 3 shall
fix periods in respect of which such wages shall be payable. No wage-period
shall exceed one month. That means wage can be paid on daily, weekly,
fortnightly (for every 15 days) and monthly only. Wage period for payment
of wages to employees by employer should not exceed 30days i.e. one
month according to this act. But wages cannot be paid for quarterly, half
yearly or once in a year.
Time of payment of wages-[Section 5]:

n In railway factory or industrial or other establishment, if there are less
than 1600 employees, wages of employees should be paid before the
expiry of the 7th day after the last day of the wage period. (ex:- wages
should be paid on starting of present month within 7 days i.e. before
7th date if wage is paid on 1st in previous month )
n In other railway factory or industrial or other establishment, if there
are more than 1000 employees, wages of employees should be paid
before the expiry of the 10th day after the last day of the wage period.
(ex:- wages should be paid on starting of present month within 10 days
i.e. before 10th date if wage is paid on 1st in previous month )
n For employees of port area, mines, wharf or jetty, wages of employees
should be paid before the expiry of the 7th day after the last day of the
wage period.
[Sec 5 (2)]
If the employee is terminated or removed for the employment by the
employer the wage of that employee should be paid within 2 days from the
day on which he was removed or terminated.
Illustration: if the employee was terminated or removed from the
employment by the employer on 10th of this month, his wage should be

paid within 2 days from the day on which he was removed or terminated,
i.e. his/her wage should be paid by 12th date of this month and this date
should not exceed.
NOTES
[Sec 5 (3)]
With the consultation of the central government, state government having
power and can change the person responsible for the payment of the wages
in Railways, or person responsible to daily-rated workers in the Public
Works Department of the Central Government or the State Government.
[Sec 5 (4)]
Except the payment of wage of the terminated employee, all the wages of
the employees should be paid by their employer on the working day only.
Wages to be paid in current coins or currency notes-[Section 6]:

Section 6 provides that all wages shall be paid in current coins or currency
notes or in both. Payment of wages in kind is not permitted.
Provided that the employer, after obtaining the written authorization of the
employed person, pay him the wages eithera.
By cheque; or b. By crediting the wages in his bank account.
The wages of A, an employee, whose services were terminated, were paid
by a cheque on the sixth day. It was held that employee was entitled to
receive wages in current coins or currency notes before the expiry of 2nd
working day.
In case of S.R.T. Corporation v. Industrial court (A.I.R 1971 M.P.54) it was
held that anything agreed to be paid in kind, capable of being expressed in
terms of money and paid in coins or currency will come within the ambit
of Section 6.
Deductions From Wages-[Section 7]:

At the time of payment of the wage to employees, employer should make
deductions according to this act only. Employer should not make deductions
as he like. Every amount paid by the employee to his employer is called as
deductions.

The following are not called as the deduction

n Stoppage of the increment of employee.
NOTES n Stoppage of the promotion of the employee.
n Stoppage of the incentive lack of performance by employee.
n Demotion of the employee
n Suspension of the employee
The above said actions taken by the employer should have good and
sufficient cause.
Deductions-[Sec 7 (2)]:
Deduction made by the employer should be made in accordance with this
act only. The following are said to be the deductions and which are
acceptable according to this act.
a) Fines, Deductions for absence from duty
b) Deductions for absence from duty,
c) Deductions for damage to or loss of goods made by the employee due
to his negligence,
d) Deductions for house-accommodation supplied by the employer or by
government or any housing board,
e) Deductions for such amenities and services supplied by the employer
as the State Government or any officer,
f) Deductions for recovery of advances connected with the excess
payments or advance payments of wages, Deductions for recovery of
loans made fromg) Deductions for recovery of loans made from
welfare labour fund,
h) Deductions for recovery of loans granted for house-building or other
purposes,
i) Deductions of income-tax payable by the employed person,
j) Deductions by order of a court,
k) Deduction for payment of provident fund, Deduction for payment to
co-operative societies approved by the State Government
l) Deductions for payments to co-operative societies approved by the
State Government,
m) Deductions for payments to a scheme of insurance maintained by the

Indian Post Office

n) Deductions made if any payment of any premium on his life insurance
policy to the Life Insurance Corporation with the acceptance of
employee, NOTES
o) Deduction made if any contribution made as fund to trade union with
the acceptance of employee, Deduction for insurance premier on
Fidelity Guarantee Bonds
p) Deductions, for payment of insurance premier on Fidelity Guarantee
Bonds with the acceptance of employee, Deductions for recovery of
losses
q) Deductions for recovery of losses sustained by a railway administration
on account of acceptance by the employee of fake currency,
r) Deductions for recovery of losses sustained by a railway administration
on account of failure by the employee in collections of fares and
charges,
s) Deduction made if any contribution to the Prime Minister’s National
Relief Fund with the acceptance of employee,
t) Deductions for contributions to any insurance scheme framed by the
Central Government for the benefit of its employees with the
acceptance of employee,
Limit for deductions-[Section 7 (3)]:

The total amount of deductions from wages of employees should not exceed
50%, but only in case of payments to co-operative societies, deduction from
wages of employee can be made up to 75%.
Fines- [Section 8]:

Fine should be imposed by the employer on employee with the approval of
the state government or prescribed authority. Employer should follow the
rules mentioned below for and before imposing of fine on the employee.
1. Notice board of fines on employee should be displayed in the work
premises and it should contain activities that should not be made by
employee.
2. Fine should not be imposed on the employee until he gives the
explanation and cause for the act or omission he made.

3. Total amount of fine should not exceed 3% of his wage.

4. Fine should not be imposed on any employee who is under the age of
15 years.
NOTES
5. Fine should be imposed for one time only on the wage of the employee
for the act or omission he made.
6. Fines should not be recovered in the way of installments from the
employee.
7. Fine should be recovered within 60 days from the date on which fine
were imposed.
8. Fine should be imposed on day act or omission made by the employee.
9. All fines collected from the employee should be credited to common
fund and utilize for the benefit of the employees.
Deductions for absence from duty-[Section 9]:

n Deductions can be made by the employer for the absence of duty by
the employee for one day or for any period.
n The amount deducted for absence from the duty should not exceed a
sum which bears the same relationship to the wage payable in respect
of the wage-period as this period of absence does to such wage-period.
(Example: if the salary of an employee is 6000/- per month and he was
absent for duty for one month. Deduction from the salary for absence
of duty should not exceed 6000/-)
n Employee present for the work place and refuses to work without
proper reason shall be deemed to be absent from duty.
n If 10 or more persons together absent for the duty without any notice
and without reasonable cause, employer can make 8 day of wages as
deduction from their wage.
Deductions for damage or loss-[Section 10]:

Employer should give an opportunity to the employee to explain the reason
and cause for the damage or loss happened and deductions made by
employer from the employee wage should not exceed the value or amount
of damage or loss made by the employee.
[Sec 10 (2)] :
All such deduction and all realizations thereof shall be recorded in a register

to be kept by the person responsible for the payment of wages under section
3 in such from as may be prescribed.
NOTES
Deductions for services rendered-[Section 11]:
House-accommodation amenity or service provided by the employer should
be accepted by the employee, than only the employer can make deduction
from the wage of the employee. Deduction should not exceed an amount
equivalent to the value of the house-accommodation amenity or service
supplied.
Deductions for recovery of advances-[Section 12]:

In case of advance paid to the employees by the employer before
employment began, such advance should be recovered by the employer
from the first payment of the wages /salary to the employee. But employer
should not recover the advance given for the travelling expense for the
employee.
Deductions for recovery of loans-[Section 12a]:

Deductions for recovery of loans granted for house-building or other
purposes shall be subject to any rules made by the State Government
regulating the extent to which such loans may be granted and the rate of
interest payable thereon.
Deductions for payments to co-operative societies and insurance

schemes-[Section 13]:
Deductions for payments to co-operative societies or deductions for
payments to scheme of insurance maintained by the Indian Post Office or
with employee acceptance deductions made for payment of any premium
on his life insurance policy to the Life Insurance Corporation shall be
subject to such conditions as the State Government may impose.
Maintenance of registers and records-[Section 13a]:

Every employer should maintain such registers and records giving such
particulars of persons employed by him, the work performed by them, the
wages paid to them, the deductions made from their wages, the receipts
given by them and such other particulars and in such from as may be

prescribed.
Every register and record required to be maintained and preserved for a
period of three years after the date of the last entry made therein. It means
NOTES for every transaction made within employer and employee should have 3
years of record.
INSPECTOR
For the purpose of enforcing compliance with the provision of this Act,
Section 14 provides –
1. An Inspector of Factories shall be an inspector for the purpose of this
Act and in respect of all factories with the local limits assigned to him.
2. The Appropriate Government may appoint inspectors for the purpose
of this Act in respect of all persons employed upon a railway.
3. The Appropriate Government may, by notification in the Official
Gazette, appoint such other person, as it thinks fit, to be Inspectors for
the purpose of this Act and may define the local limits within which
and the class of factories and industrial establishment in respect of
which they shall exercise their functions.
[Section 14]:
The state government may appoint an inspector for purpose of this act.
Every Inspector shall be deemed to be a public servant within the meaning
of the Indian Penal Code, 1860 [Sec 14(5)]. The inspector of this act is
having powers mentioned below-
1. Inspector can make enquiry and examination whether the employers
are properly obeying the rules mentioned under this act.
2. Inspector with such assistance, if any, as he thinks fit, enter, inspect
and search any premises of any railway, factory or industrial or other
establishment at any reasonable time for the purpose of carrying out
the objects of this Act.
3. Inspector can supervise the payment of wages to persons employed
upon any railway or in any factory or industrial or other establishment.
4. Seize or take copies of such registers or documents 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 an employer.

Facilities to be afforded to Inspectors-[Section 14A]:

Every employer shall afford an Inspector all reasonable facilities for making
any entry, inspection, supervision, examination or inquiry under this Act. NOTES
Claims arising out of deductions from wages or delay in payment of wages
and penalty for malicious or vexatious claims-[Section 15]: (2005
amendments)
To hear and decide all claims arising out of deductions from the wages, or
delay in payment of the wages, of persons employed or paid, including all
matters, incidental to such claims, there will be a officer mentioned below
appointed by the appropriate government.
a) any Commissioner for Workmen's Compensation; or
b) any officer of the Central Government exercising functions as –
i. Regional Labour Commissioner; or
ii. Assistant Labour Commissioner with at least two years'
experience; or
c) any officer of the State Government not below the rank of Assistant
Labour Commissioner with at least two years' experience; or
d) a presiding officer of any Labour Court or Industrial Tribunal,
constituted under the Industrial Disputes Act, 1947 (14 of 1947) or
under any corresponding law relating to the investigation and
settlement of industrial disputes in force in the State; or
e) any other officer with experience as a Judge of a Civil Court or a
Judicial Magistrate, as the authority to hear and decide for any
specified area all claims arising out of deductions from the wages, or
Law of Wages and Principles of Wage Fixation 67 delay in payment
of the wages, of persons employed or paid in that area, including all
matters incidental to such claims: Appropriate Government considers
it necessary so to do, it may appoint more than one authority for any
specified area and may, by general or special order, provide for the
distribution or allocation of work to be performed by them under this
Act.
[Section 15(2)]:
If any employer does opposite to the provisions of this act, any unreasonable
deduction has been made from the wages of an employed person, or any
payment of wages has been delayed, in such case any lawyer or any

Inspector under this Act or official of a registered trade union authorized to

write an application to the authority appointed by government for direction
of payment of wages according to this act. Every such application shall be
NOTES presented within 12 months from the date on which the deduction from the
wages was made or from the date on which the payment of the wages was
due to be made. Time of making an application can be accepted if there is
reasonable cause.
[Section 15(3)]:
After receiving of the application the authority shall give an opportunity to
hear the applicant and the employer or other person responsible for the
payment of wages and conducts the enquiry if necessary. It is found that
there is mistake with employer; authority shall order the employer for
payment of the wage or refund to the employee of the amount deducted
unreasonably or the payment of the delayed wages, together with the
payment of such compensation as the authority may think fit. There will
not be any compensation payable by employer if there is a reasonable and
genuine cause in delay in the payment of wages.
Single application in respect of claims from unpaid group- [Section 16]:

There is no necessity of many applications if there are many employees
whose wages has not been paid. Such all employees can make one
application to the authority for payment of wages according to this act.
APPEAL - [Section 17]:

In the following situation the parties who ever dissatisfied can appeal to the
district court
n If the application dismissed by above authorities
n Employer imposed with compensation exceeding 300/- rupees by the
authorities.
n If the amount exceeding 25/- rupees withheld by the employer to single
unpaid employee. 50/- in case of many unpaid employees
Powers of authorities appointed- [Section 18]:

1. Every authority appointed under sub-section (1) of section 15 shall
have all the powers of a Civil Court under the Code of Civil Procedure,
1908 (5 of 1908), for the purpose of taking evidence 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 of 1[Chapter XXVI of
the Code of Criminal Procedure, 1973 (2 of 1974)]. NOTES
2. The State Government may, either on their own motion or on an

application made in this behalf, order the transfer of any matter arising
out of any proceedings pending before an authority to such other
authority for disposal. Such authority to whom the matter is so
transferred may, subject to any direction in the order of transfer,
proceed either de novo or from the stage at which it is so transferred.
3. The State Government may, by general or special order, authorise any

officer of the Labour Department not below the rank of Deputy
Commissioner of Labour to exercise such of their powers specified in
sub-section (1)”. [Vide Tamil Nadu Act 38 of 1999, sec. 2 (w.e.f. 1-10-
1999)].
Obligations Of Employer Under The Act:

The obligations of an employer under this Act are as under-
1. To pay wages to the persons employed by him.
2. To fix wage-periodwhich shall not exceed 1 month.
3. To pay wages before the expiry of 7th day after the last day of wage
period where the number of persons employed is less than 1,000.
4. Not to make deductions of any kind except those authorized by the Act.
5. To pay wages in current coin or currency notes or both
6. To maintain registers and records giving particulars of persons
employed, the work performed by them, the wages paid to them and
the deduction made from their wages.
7. Not to enter into any agreement with the employed person where by
the relinquishes any right conferred b the Act.
8. To display a notice containing abstracts of the Act and the rules made
thereunder in English and in the language of the majority of the
employed person.
Penalty For Offences Under The Act

[Section 20] (2005 amendments):

Reasons and penalty
NOTES n Delay in payment of wages
n Un reasonable deductions
n Excess deduction for absence of duty
n Excess deduction for damage or loss to employer
n Excess deduction for house-accommodation amenity or service
Punishable with fine which shall not be less than 1000/- rupees but
which may extend to 7500/- rupees
n If Wage period exceed one month.
n Failure in payments of wages on a working day.
n Wages not paid in from of current coin or currency notes or in both.
n Failure to maintain record for collected fines from employee.
n Improper usage of fine collected from employees.
n Failure of employee to display notice containing such abstracts of this
Act and of the rules made.
Punishable with fine which may extend 3000/- rupees
n Whoever obstructs an Inspector in the discharge of his duties under
this Act
n Whoever wilfully refuses to produce on the demand of an Inspector
any register or other document?
n Whoever refuses or wilfully neglects to afford an Inspector any
reasonable facility for making any entry, inspection, examination,
supervision, or inquiry authorized by or under this Act Punishable with
fine which shall not be less than 1000/- rupees but which may extend
to 7500/- rupees Whoever repeats the same offence committed before.
Imprisonment for a term which shall not be less than one month but
which may extend to 6 months and fine which shall not be less than
3750/- rupees but which may extend 20500/-rupees.
Procedure In Trial Of Offences-[Section 21]

1. Section 21(1) provides that Court will not take cognizance of a
complaint against any person for an offence under Section 20 (1) unless
the following condition are satisfied –
i. An Application in respect of the offence has been presented under

Sec. 15;
ii. The authority empowered under Section (15) or the appellate court
granting such application must have sanctioned the making of the
complaint. NOTES
2. But before sanctioning the making of complaint against any person
from an offence under sub-section (1) of Section 20, the authority
empowered Law of Wages and Principles of Wage Fixation 71under
Section 15 or the appellate authority, as the case may, shall give such
person an opportunity of showing cause against the granting of such
sanction. The sanction shall not be granted if such person satisfies the
authority or Court that his default was due to:
a. a bona fide error or bona fide dispute as to the amount payable to
the employed person, or
b. the occurrence of an emergency of existence of exceptional
circumstances such that the person responsible for the payment of
the wages unable though exercising reasonable diligence to make
prompt payment; or
c. the tenure of the employed person to apply for or accept payment.
3. No court shall take cognizance of any offence punishable under
subsection (3) or (4) of Section 20 except on a complaint made by or
with sanction of any Inspector under this Act. [Sub-section (3-A)]
4. In imposing any fine for an offence under Sub-section (1) of Section
20, the court shall take into consideration the amount of compensation
already awarded against the accused in any proceedings taken under
section 15.
CONTRACTING OUT-[Section 23]:

Section 23 lays down that any contact, agreement, whether made before or
after the commencement of this act whereby an employed person
relinquishes any right conferred by this Act shall be null and void in so far
as it purports to deprive him of such right.
In Dine Ram v. Divisional Manager – A.I.R. 1958 Assam 77, the employer
revised the wage structure of his workmen by increasing the basic wages
and dearness allowance hitherto payable and deducting servant allowance
but with the result that the total wages to workmen were not reduced. It was
held that mere deduction of servant allowance either partial or whole cannot
be said to contravene Section 23 of the Act.
It was held in the case R.M.M Singh v. B.A.F.- A.I.R. 1971 Bombay 31that

a genuine and valid compromise made between an employee and Law of

Wages and Principles of Wage Fixation 72 employer in connection with the
dispute between them as regards the true and correct amounts of illegal
NOTES deductions payable to the employer cannot beheld to be relinquishment of
rights conferred by the Act. Such an agreement is not null and void.
It was observed in the case of F.W. Heilger & Co. v. Nagesh Chander
Chakravarthi and others – A.I.R 1949 F.C. 142 that Section 23 only prevents
the employer from contracting away the rights which are given to him by
the Act and that it does not prevent him from entering into an agreement
advantageous or beneficial to him. An agreement to grant bonus to the
employee does not violate the provision of Section 20 and 23.
Where an employee has been given a right to file an application under
section 15, any agreement depriving the employee of this right is null
andvoid (Union of India v. Kundan Lal – A.I.R. 1957 All. 362).
Display by notice of abstracts of the Act-[Section 25]:

The person responsible for the payment of wages of persons employed in a
factory or an industrial or other establishment shall cause to be displayed
in such factory or industrial or other establishment a notice containing such
abstracts of this Act and of the rules made thereunder in English and in the
language of the majority of the persons employed in the factory, or industrial
or other establishment as may be prescribed.
Payment of undisbursed wages in case of death of employed person-

Section 25a]:
n Paid by the employer to the person nominated by the employee.
n Wage deposited by the employer with the prescribed authority, the
employer shall be discharged of his liability to pay those wages.
n Where no such nomination has been made or where for any reasons
such amounts cannot be paid to the person so nominated, be deposited
with the prescribed authority that shall deal with the amounts so
deposited in such manner as may be prescribed.
Rule-making power-[Section 26]:

1. The State Government may make rules to regulate the procedure to be
followed by the authorities and courts referred to in sections 15 and
17.

2. The State Government may by notification in the Official Gazette make

rules for the purpose of carrying into effect the provisions of this Act.
3. In particular and without prejudice to the generality of the foregoing
power rules made under sub-section (2) may - NOTES
a. require the maintenance of such records registers returns and
notice as are necessary for the enforcement of the Act prescribe
the form thereof and the particulars to be entered in such registers
or records;
b. require the display in a conspicuous place on premises where
employment is carried on of notices specifying rates of wages
payable to persons employed on such premises;
c. Provide for the regulate inspection of the weights measures and
weighing machines used by employers in checking or ascertaining
the wages of persons employed by them;
d. prescribe the manner of giving notice of the days on which wages
will be paid;
e. prescribe the authority competent to approve under sub-section
(1) of section 8 acts and omissions in respect of which fines may
be imposed;
f. prescribe the procedure for the imposition of fines under section
8 and for making of the deductions referred to in section 10;
g. prescribe the conditions subject to which deductions may be made
under the proviso the sub-section (2) of section 9;
h. prescribe the authority competent to approve the purposes on
which the proceeds of fines shall be expended;
i. prescribe the extent to which advances may be made and the
instalments by which they may be recovered with reference to
clause (b) of section 12; o (ia) prescribe the extent to which loans
may be granted and the rate of interest payable thereon with
reference to section 12A; o (ib) prescribe the powers of Inspectors
for the purposes of this Act;
j. regulate the scales of costs which may allowed in proceedings
under this Act;
k. prescribe the amount of court-fees payable in respect of any
proceedings under this Act
l. prescribe the abstracts to be contained in the notices required by
section 25; o (la) prescribe the form and manner in which
nominations may be made for the purposes of sub-section (1) of

section 25A the cancellation or variation of any such nomination

or the making of any fresh nomination in the event of the nominee
predeceasing the person making nomination and other matters
NOTES connected with such nominations; o (lb) specify the authority with
whom amounts required to be deposited under clause (b) of sub-
section (1) of section 25A shall be deposited and the manner in
which such authority shall deal with the amounts deposited with
it under that clause;
m. provide for any other matter which is to be or may be prescribed.
4. In making any rule under this section the State Government may
provide that a contravention of the rule shall be punishable with fine
which may extend to two hundred rupees.
5. All rules made under this section shall be subject to the condition of
previous publication and the date to be specified under clause (3) of
section 23 of the General Clauses Act 1897 (10 of 1897) shall not be
less than three months from the date on which the draft of the proposed
rules was published.
6. Every rule made by the Central Government under this section shall
be laid as soon as may be after it is made before each House of
Parliament while it is in session for a total period of thirty days which
may be comprised in one session or in two or more successive sessions
and if before the expiry of the session immediately following the
session or the successive sessions aforesaid both Houses agree in
making any modification in the rule or both Houses agree that the rule
should not be made the rule shall thereafter have effect only in such
modified form or be of no effect as the case may be; so however that
any such modification or annulment shall be without prejudice to the
validity of anything previously done under that rule.
Lesson Round Up:

The Payment of Wages Act, 1936 is a central legislation which has been
enacted to regulate
n The payment of wages to workers employed in certain specified
industries and to ensure a speedy andeffective remedy to them against
illegal deductions and/or unjustified delay caused in paying wages
tothem.
n It applies to the persons employed in a factory, industrial or other
establishment or in a railway,whether directly or indirectly, through a
sub-contractor.

n Every employer shall be responsible for the payment to persons

employed by him of all wagesrequired to be paid under the Act and
every person responsible for the payment of wages shall fixwage-
periods in respect of which such wages shall be payable. No wage- NOTES
period shall exceed onemonth.

Questions
NOTES 1. State the object and scope of the Payment of Wages Act and describe
the categories of persons to whom the Act applies?
2. Define ‘factory’ and ‘industrial or other establishment’ under the

Payment of wages Act, 1936.
3. What are the deductions from wages which have been authorized by
The Payment of Wages Act 1936?
4. Briefly explain the obligations of employer under the Payment of

Wages Act, 1936.
5. Discuss the provisions regarding fixation of wage period under the

Payment of Wages Act, 1936.
6. Who is liable for payment of wages under the Act?
7. Discuss about maintenance of Register and Record under the Payment

of wages Act, 1936.
8. Discuss the power and jurisdiction of the Authority under the payment
of wages Act, 1936.
9. Write a note on:

a. Time of payment
b. Wage period
c. Wages
d. Impositions of fines

UNIT - 3
THE PAYMENT OF BONUS ACT, 1965
NOTES
SYNOPSIS
1 Introduction
2 Objectives of the act
3 Concept of Profit Sharing-Desirability.
4 Difficulties in Implementation.
5 Interpretation by Indian Courts and Tribunals.
6 Basis for the calculation of Bonus under the Payment of Bonus
Act,1965
7 Eligibility for Bonus, minimum and maximum bonus.
8 Set on and Set off of allocable.
9 Conclusion
Object And Scope Of The Act:

The object of the Act is to provide for the payment of bonus to persons
employed in certain establishments and for matters connected therewith.
Shah J. observed in Jalan Trading Co. (Pvt.) Ltd. v. Mill Mazdoor Sabha,
AIR 1967 S.C. 691, that the “object of the Act being to maintain peace and
harmony between labour and capital by allowing the employees to share
the prosperity of the establishment and prescribing the maximum and
minimum rates of bonus together with the scheme of “set-off” and “set on”
not only secures the right of labour to share in the profits but also ensures
a reasonable degree of uniformity”.
On the question whether the Act deals only with profit bonus, it was
observed by the Supreme Court in Mumbai KamgarSabhav.
AbdulbhaiFaizullabhai, (1976) II LLJ 186, that “bonus” is a word of many
generous connotations and, in the Lord’s mansion, there are many houses.
There is profit based bonus which is one specific kind of claim and perhaps
the most common. There is customary or traditional bonus which has its
emergence from long, continued usage leading to a promissory and
expectancy situation materialising in a right. There is attendance bonus and
what not. The Bonus Act speak and speaks as a whole Code on the sole
subject of profit based bonus but is silent and cannot, therefore, annihilate
by implication, other distinct and different kinds of bonuses, such as the
The Payment of Bonus Act, 1965 65

one oriented on custom. The Bonus Act, 1965 as it then stood does not bar
claims to customary bonus or those based on conditions of service. Held, a
discerning and concrete analysis of the scheme of the Bonus Act and
NOTES reasoning of the Court leaves no doubt that the Act leaves untouched
customary bonus. The provisions of the Act have no say on customary
bonus and cannot, therefore, be inconsistent therewith. Conceptually,
statutory bonus and customary bonus operate in two fields and do not clash
with each other (Hukamchand Jute Mills Limited v. Second Industrial
Tribunal, West Bengal; 1979-I Labour Law Journal 461).
Application Of The Act:

According to Section 1(2), the Act extends to the whole of India, and as per
Section 1(3) the Act shall apply to
a) every factory; and
b) every other establishment in which twenty or more persons are
employed on any day during an accounting year.
Provided that the appropriate Government may, after giving not less than
two months notice of its intention so to do, by notification in the Official
Gazette apply the provisions of this Act with effect from such accounting
year as may be specified in the notification to any establishment including
an establishment being a factory within the meaning of sub-clause (ii) of
clause (m) of Section 2 of the Factories Act, 1948 employing such number
of persons less than twenty as may be specified in the notification; so,
however, that the number of persons so specified shall in no case be less
than ten.
Save as otherwise provided in this Act, the provisions of this Act shall, in
relation to a factory or other establishment to which this Act applies, have
effect in respect of the accounting year commencing on any day in the year
1964 and in respect of every subsequent accounting year:
Provided that in relation to the State of Jammu and Kashmir, the reference
to the accounting year commencing on any day in the year 1964 and every
subsequent accounting year shall be construed as reference to the
accounting year commencing on any day in the year 1968 and every
subsequent accounting year.
Provided further that when the provisions of this Act have been made
applicable to any establishment or class of establishments by the issue of a
notification under the proviso to sub-section (3), the reference to the

subsequent accounting year, or, as the case may be,the reference to the
subsequent accounting year, shall, in relation to such establishment or class NOTES
of establishments, be construed as a reference to the accounting year
specified in such notification and every subsequent accounting year [Section
1(4)].
An establishment to which this Act applies shall continue to be governed
by this Act notwithstanding that the number of persons employed therein
falls below twenty, or, as the case may be, the number specified in the
notification issued under the proviso to sub-section (3).
Definitions-[Section 2]:
Accounting Year-[Section 2(1)] “Accounting Year” means
i. in relation to a corporation, the year ending on the day on which the
books and accounts of the corporation are to be closed and balanced;
ii. in relation to a company, the period in respect of which any profit and
loss account of the company laid before it in annual general meeting is
made up, whether that period is a year or not;
iii. in any other case
a. the year commencing on the 1st day of April; or
b. if the accounts of an establishment maintained by the employer
thereof are closed and balanced on any day other than the 31st
day of March, then, at the option of the employer, the year ending
on the day on which its accounts are so closed and balanced;
Provided that an option once exercised by the employer under paragraph

(b) of this sub-clause shall not again be exercised except with the previous
permission in writing of the prescribed authority and upon such conditions
as that authority may think fit.
Allocable Surplus-[Section-2 (4)
It means –
a. in relation to an employer, being a company (other than a banking
company) which has not made the arrangements prescribed under the
Income-tax Act for the declaration and payment within 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.
NOTES
Available Surplus-[Section 2(6)]
It means the available surplus under Section 5.
Award-[Section 2(7)]
“Award” means an interim or a final determination of any industrial dispute
or of any question relating thereto by any Labour Court, Industrial Tribunal
or National Tribunal Constituted under the Industrial Disputes Act, 1947 or
by any other authority constituted under any corresponding law relating to
investigation and settlement of industrial disputes in force in a State and
includes an arbitration award made under Section 10A of that Act or under
that law.
Corporation-[Section 2(11)]
“Corporation” means anybody corporate established by or under any
Central, Provincial or State Act but does not include a company or a co-
operative society.
Employee-[Section 2(13)]
“Employee” means any person (other than an apprentice) employed on a
salary or wages not exceeding Rs. 10,000 per mensem in any industry to
do any skilled or unskilled, manual, supervisory, managerial, administrative,
technical or clerical work of hire or reward, whether the terms of
employment be express or implied. Part time permanent employees working
on fixed hours are employees (1971 (22) FLR 98).
Employer-[Section 2(14)]
“Employer” includes:
i. in relation to an establishment which is a factory, the owner or occupier
of the factory, including the agent of such owner or occupier, the legal
representative of a deceased owner or occupier, and where a person has
been named as a manager of the factory under Clause (f) of Sub-section
7(1) of the Factories Act, 1948, the person so named; and
ii. in relation to any other establishment, the person who, or the authority
which, has the ultimate control over the affairs of the establishment

and where the said affairs are entrusted to a manager, managing director
or managing agent, such manager, managing director or managing
agent.
NOTES
Establishment in Private Sector-[Section 2(15)]
It means any establishment other than an establishment in public sector.
Establishment in Public Sector-[Section 2(16)]
It means an establishment owned, controlled or managed by:
a. a Government company as defined in Section 617 of the Companies
Act, 1956;
b. a corporation in which not less than forty percent 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.
Salary or Wage-[Section 2(21)]

The “salary or wage” means all remuneration (other than remuneration in
respect of over-time work) capable of being expressed in terms of money,
which would, if the terms of employment, express or implied, were fulfilled,
be payable to an employee in respect of his employment or of work done
in such employment and includes dearness allowance (that is to say, all cash
payments, by whatever name called, paid to an employee on account of a
rise in the cost of living) but does not include:
a) any other allowance which the employee is for the time being entitled
to;
b) the value of any house accommodation or of supply of light, water,
medical attendance or other amenity or of any service or of any
concessional supply of food grains or other articles;
c) any travelling concession;
d) any bonus (including incentive, production and attendance bonus);
e) any contribution paid or payable by the employer to any pension fund
or provident fund or for the benefit of the employee under any law for
the time being in force;

f) any retrenchment compensation or any gratuity or other retirement

benefit payable to the employee or any ex-gratia payment made to him;
NOTES g) any commission payable to the employee.
The Explanation appended to the Section states that where an employee is
given in lieu of the whole or part of the salary or, wage payable to him, free
food allowance or free food by his employer, such food allowance or the
value of such food shall, for the purpose of this clause, be deemed to form
part of the salary or wage of such employee.
The definition is wide enough to cover the payment of retaining allowance
and also dearness allowance paid to the workmen. It is nothing but
remuneration (Chalthan Vibhag Sahakari Khand Udyog v. Government
Labour Officer AIR 1981 SC 905). Subsistence allowance given during
suspension is not wages. However lay-off compensation is wages.
Meaning of Establishment-[Section3]:
Section 3 of the Act provides that the word establishment shall include all
its departments, undertakings and branches wherever it has so whether
situated in the same place or in different places and the same shall be treated
as parts of the same establishment for the purpose of computation of bonus
under this Act:
Provided that where for any accounting year, a separate balance-sheet and
profit and loss account are prepared and maintained in respect of any such
department or undertaking or branch then such department, undertaking or
branches shall be treated as a separate establishment for the purpose of
computation of bonus under this Act for that year, unless such department,
or undertaking or branch was, immediately before the commencement of
that accounting year treated as part of establishment for the purpose of
computation of bonus.
For example Sudarshan Chemical Industries has three different production
units in the State of Maharashtra in three different localities, but the Balance
Sheet is common thus the Bonus payment will be common for all the three
units. But in case the Company starts preparing separate balance sheet then
it can treat each unit as a separate unit. (Workmen of HMT & another v.
Presiding Officer, National Tribunal Calcutta and another – 19733 (26) FLR
311.
Calculation Of Amount Payable As Bonus:

The Act has laid down a detailed procedure for calculating the amount of

bonus payable to employees. First of all, Gross Profit is calculated as per

First or Second Schedule. From this Gross Profit, the sums deductible under
Section 6 are deducted. To this figure, we add the sum equal to the
difference between the direct tax calculated on gross profit for the previous NOTES
year and direct tax calculated on gross profit arrived at after deducting the
bonus paid or payable to the employees. The figure so arrived will be the
available surplus. Of this surplus, 67% in case of company (other than a
banking company) and 60% in other cases, shall be the “allocable surplus”
which is the amount available for payment of bonus to employees. The
details of such calculations are given below.
1. Computation of gross profits-[Section 4]
As per Section 4, the gross profits derived by an employer from an
establishment in respect of any accounting year shall:
a. in the case of banking company be calculated in the manner
specified in the First Schedule.
b. in any other case, be calculated in the manner specified in the
Second Schedule.
2. Computation of available surplus-[Section 5]

The available surplus in respect of any accounting year shall be the
gross profits for that year after deducting therefrom the sums referred
to in Section 6. Provided that the available surplus in respect of the
accounting year commencing on any day in the year 1968 and in
respect of every subsequent accounting year shall be the aggregate of
a. the gross profits for that accounting year after deducting therefrom
the sums referred to in Section 6;and
b. an amount equal to the difference between
i. the direct tax, calculated in accordance with the provisions
of Section 7, in respect of an amount equal to the gross profits
of the employer for the immediately preceding accounting
year; and
ii. the direct tax calculated in accordance with the provisions of
Section 7 in respect of an amount equal to the gross profits
of the employer for such preceding accounting year after
deducting therefrom the amount of bonus which the
employer has paid or is liable to pay to his employees in
accordance with the provisions of this Act for that year.
(Section 5)

3. Deductions from gross profits-[Section 6]

According to Section 6, the sums deductible from gross profits include
NOTES a. any amount by way of depreciation admissible in accordance with
the provisions of Section 32(1) of the Income-tax Act, or in
accordance with the provisions of the Agricultural Income-tax
Law, as the case may be:
Provided that where an employer has been paying bonus to his
employees under a settlement or an award or agreement made
before the 29th May, 1965, and subsisting on that date after
deducting from the gross profits notional normal depreciation,
then, the amount of depreciation to be deducted under this clause
shall, at the option of such employer (such option to be exercised
once and within one year from that date) continue to be such
notional normal depreciation.
What is deductible under Section 6(a), is depreciation admissible
in accordance with the provisions of Section 32(1) of the Income-
tax Act and not depreciation allowed by the Income-tax Officer
in making assessment on the employer.
b. any amount by way of development rebate, investment allowance,
or development allowance which the employer is entitled to
deduct from his income under the Income Tax Act.
c. subject to the provisions of Section 7, any direct tax which the
employer is liable to pay for the accounting year in respect of his
income, profits and gains during the year.
d. such further sums as are specified in respect of the employer in
the Third Schedule.
4. Calculation of direct tax payable by the employer-[Section 7]

Under Section 7, any direct tax payable by the employer for any
accounting year shall, subject to the following provisions, be calculated
at the rates applicable to the income of the employer for that year,
namely:
a. in calculating such tax no account shall be taken of
i. any loss incurred by the employer in respect of any previous
accounting year and carried forward under any law for the
time being in force relating to direct taxes;
ii. any arrears of depreciation which the employer is entitled to

add to the amount of the allowance for depreciation for any

following accounting year or years under sub-section (2) of
Section 32 of the Income-tax Act;
iii. any exemption conferred on the employer under Section 84 NOTES
of the Income-tax Act or of any deduction to which he is
entitled under sub-section (1) of Section 101 of that Act, as
in force immediately before the commencement of the
Finance Act, 1965;
b. where the employer is a religious or a charitable institution to
which the provisions of Section 32 do not apply and the whole or
any part of its income is exempt from tax under the Income-tax
Act, then, with respect to the income so exempted, such institution
shall be treated as if it were a company in which the public are
substantially interested within the meaning of that Act;
c. Where the employer is an individual or a Hindu undivided family,
the tax payable by such employer under the Income-tax Act shall
be calculated on the basis that the income derived by him from
the establishment is his only income.
Eligibility For Bonus And Its Payment:

Eligibility for bonus-[Section 8]
Eligibility the employee must work for at least 30 working days in a year
(A worker suspended or on suspension pending enquiry will be treated as
having worked if the decision of the management on suspension is not
upheld)
Note: It is not necessary that 30 days of work shall be a continues period.
An employee suspended bus subsequently reinstated with full back wages
cannot be treated to be ineligible for bonus for the period of suspensions.
[Project Manager, O.N.G.C. v. Sham Kumar Sehgal and Another (1995) 1
LLJ 863 (Guj.)].
It was held in H. P. State Electricity Board and Another v. Ranjeet Singh
and others (2008) II LLJ 629 (SC) that the labour court under the Payment
of Bonus Act. Bonus appears as item 5 in third schedules. Therefor the
question of entitlement to bonus could not have been decided by the labour
court. It could only decide the quantum of bonus and not its playability.
Disqualification for bonus-[Section 9]:
An employee will be disqualified from receiving bonus under the Payment
of Bonus Act, 1965, if he is dismissed from service (after enquiry) for-

a. Fraud (e. g. forging signature on the cheques and en-cashing it),

or
b. Riotous or violent behaviour while on the premises of the
NOTES establishment ( E.G> Slapping the superior on the premises of the
establishment),
c. Theft , misappropriation or sabotage of any property of the
establishment.
This provision is based on the recommendation of the Bonus Commission
which observed-“After all, bonus can only be shared by those workers who
promote the stability display nobel tendencies. Onus certainly carries with
it the obligation of good behaviour.
Payment of bonus will be forefeited if a bus conductor is guilty of reissuing
sold tickets and misappropriation of even Rs. 1.60 only. [
PandyanRoadways Corporation Ltd. V. Labour Court, 1997 LLR 83: 1996:
II LLJ 1229 (Mad. HC)]
If a workman is dismissed from service for violent behaviour while on
premised of the establishment as per section 9 of the payment of Bonus Act,
he is not entitled to bonus. In view of the finding of Labour Court that the
workman concerned is involved in the violent behaviour , the workman are
disqualified to receive bonus by virtue of Section 9(b) of the Act, [Bharat
Motors, N. R. Private Ltd V. Presiding Officer, Labour Court (1998) 4 LLN
323: (1998) 1 LLJ 907 (Mad.)]
Payment of minimum bonus-[Section 10]:

From any accounting year commencing on any day in he 1979 and then in
respective subsequent accounting years a minimum bonus which shall be
8.33 per cent of the salary or wage earned by the employee during the
accounting year or Rs100/-(it was Rs.60/-earlier) whichever is higher
whether or not the employer has any allocable surplus or not.
The minimum limit of Rs.100 is now meaningless as now a day’s no one
employed for a wage of Rs.100/-of less than Rs. 100/-per month (100X12
X* 8.33% = 100) In the case of seasonal employees the amount of Rs. 100
stands if actual bonus is less than Rs100/-
Here the Act contemplates that the employee had been paid for all the
daysof the year.If the employee has not been paid fully for the year these
amounts willproportionately reduce.

Payment of maximum bonus-[Section 11]:

20 per cent if the allocable surplus exceeds the amount for minimum bonus
at 8.33% then employees will be eligible higher bonus not exceeding 20%
( If the allocable surplus is equal to say 11% the employees will be paid NOTES
bonus at the rate of 11%).
While calculating allocable surplus an account should be taken of the
amount of set on or the amount of set off as per provisions of section 15 be
taken into account.
Calculation of bonus with respect of certain employees-[Section 12]:

(With effect from 1/4/1993) where the salary of an employee exceeds
Rs2500/-p.m. the bonus payable to such an employee (whether at the rate
of minimum or maximum), shall be calculated as if his salary or wage were
Rs2,500.00 p.m. ( prior to 1/4/93 these figures were 2500/-and 1600
respectively)
By this section the legislature has ensured that for payment of bonus the
eligibility will be the monthly salary of Rs.3500/-p.m. but the bonus will
be calculated as if his salary was at the rate of Rs2500/-p.m. The Payment
Of Wages Act has raised the limit for coverage from Rs1600/-p.m. to Rs.
6500/-p.m, The ESI Act has raised the coverage limit to Rs7500/-p.m. and
the group of ministers are understood to have considering to raise the limit
for eligibility for Bonus. One should keep a watch on the amendments to
labour laws.
Proportionate reduction in bonus in certain Cases-[Section 13]:

If the employee had not worked (including his paid leave) for the full work
days during a year, the minimum bonus amount will proportionately reduce.
For example in a year there were 300 paid days and Mr X was paid for only
150 days then the minimum bonus of Rs100 will be reduced to Rs50/-i.e.
50% as he was paid for only 50% of days paid during the year.
Computation of number of working days-[Section 14]:

In the following situations the employee will be presumed to have worked
for the purposes of Section 13
a) If on Lay off / or laid –off, under an agreement,( provided permitted
under Standing Orders , whether model or certified-as per the Industrial
Employment ( standing Orders ) act, 1946 or under the Industrial
disputes Act,1947 -For an industry employing over 100 workmen the

layoff should be with written permission from the appropriate authority.

b) On Paid leave c) Absent due to temporary disablement caused by an
accident arising out of and during the course of employment d) The
NOTES employee has been on maternity leave with salary or wage during
accounting year
Set On And Set Off Of Allocable Surplus-[Section 15]:

This section is very important as it lays down the procedure for payment of
bonus I respect of newly formed companies as well as for existing
companies.
Section 15 (1) If in any accounting year the calculations of the of the
allocable surplus (as per the provisions of Sections 4,5,6,7), is in excess
after providing for maximum onus vide Section 11 ( i.e. 20% of the
salary/wages in any accounting year) then the excess shall , subject to a
limit of 20% of the total salary/ wages of the employees employed in the
establishment( here one has to take into consideration the salary/ wage of
the ex employees separated during the accounting year and not on the rolls
of the company on the last working day of the accounting year) shall be
carried forward for being set on ( Set on means the excess than the required
amount is set aside for adjustment in future, if required.) in the succeeding
year and so on upto and inclusive of the fourth accounting year to be utilised
for the purpose of payment of bonus in the manner illustrated in the fourth
schedule. ( that means if in accounting year 1999-2000 after paying bonus
at 20 % amounting to Rs say 20 lacs there is a balance of 40 lacs in
allocable surplus then out of Rs40 lacs only to the extent of that years
maximum total bonus amount that is equal to Rs 20 lacs will be treated as
set on and carried forward in the year 2000-2001 for second year 2001-02
the third,02-03 the fourth and then it will not be carried forward, but the
carry forward is subject to payment upto short fall in any accounting year
for minimum amount of bonus that is 8.33% in each subsequent years from
the next year after 1999-2000 year and from this carried forward amount.
Short fall in any one subsequent years will be first adjusted from the 1999-
2000 carried forward amount and then the remaining set on will be carried
forward to subsequent years. So however there will be no carry forward of
the set on in the year 1999-2000 in the year 03-04 and so on.
Section 15 (2)
Where for any accounting year the allocable or the allocable surplus in
respect of that year falls short of the amount of minimum bonus payable to

the employees in the establishment under Section 10 ( Payment of minimum

bonus) , and there is no amount or sufficient amount carried forward and
set on under sub section (1) (of this section 15) which could be utilized for
the purpose of the payment of the minimum bonus then, such minimum NOTES
amount or the deficiency , as the case may be , shall be carried forward for
being set off in the succeeding accounting year and so on up to and inclusive
of the fourth accounting year in the matter illustrated in the fourth schedule.
But in any accounting year there is sufficient balance then a maximum
bonus will be paid by utilizing the short fall during that year. i.e. if any a
year there is an allocable surplus but it is less than amount equal to 20%
bonus the set on will be utilized to that extent.
Illustration: -If in the year say 2000-01 the allocable surplus is nil and
8.33 % amount would be Rs 1 lac then employees will be paid bonus of Rs
1 and this amount of one lac will be carried forward in the year 01-02 as set
off to be adjusted from available set on.
Section 15 (3)
This principle of set on and set off, as illustrated in the fourth schedule shall
apply to all other cases not covered by Section 15 (1 and 2 ) for the purposes
of payment of bonus under this Act.
Section 15 (4)
Where in any accounting year any amount has been carried forward and set
on or set of under this section, then, in calculating bonus for succeeding
accounting year, the amount of set on or set off carried forward from the
earliest accounting year shall first be taken into account.
Special provisions with respect to certain establishments-[Section 16]:
This section is giving relief to newly established establishments from the
provision of payment of minimum bonus. It is introduced from 25/9/1975
by Act 23 of 1976 in place of Section 12 sub section (1) and explanation
there to.
Section 16(1)
Employees of the newly established establishment will be entitled to be
paid bonus under this Act, in accordance with the provisions of sub-section
(1-A), (1-B), and (1-C).
Section 16 (1-A)
In the first five years the provisions of this act will apply only when the
establishment earns a profit. If an establishment has not earned any profit
upto first three years then no bonus is due for the first three years. But if it

earns profit in the fourth year then bonus as per the Act is to be paid, without
applying provisions of set off and or set on.
NOTES
Section 16 (1-B)
For the 6th and 7th years following the accounting year in which the
employers sells the goods produced or manufactured by him or renders
services as the case may be, from such establishment , the provisions of
Section 15 shall apply subject to the following modification
Here the provisions are beneficial to the establishment which have started
establishing business or service. There is a protection from payment of
bonus to a new concern for first five years provided it earns no profit during
these first five years.
The Section 16 (1-B)

Makes provision for 6th and 7th years from the effective output for sale by
the new establishment. Here one has to note that the new unit must have
actually sold, goods or services, produced by it and yet has not earned profit
still then the new establishment has to pay bonus from the 6thand 7th year
as provisions of Explanation (i) and (ii). of sub section (1-B)of Section 16.
These provisions are as under:-
i. “For the 6th Accounting year”:_ Set on or set off, as the case may be,
shall be made in the manner illustrated in 4th schedule taking into
account the excess or deficiency, if any, as the case may be, of the
allocable surplus set on or set off in respect of the 5th and 6th
accounting year.
ii. “ For the 7th Accounting year”:_ Set on or set off, as the case may be,
shall be made in the manner illustrated in 4th schedule taking into
account the excess or deficiency , if any, as the case may be, of the
allocable surplus set on or set off in respect of the 5th, 6th and 7th
accounting year.
Section 16 (1-C)
from the 8th accounting year following the accounting year in which the
employer sells the goods produced or manufactured by him or renders
services, as the case may be, from such establishment, the provision of
Section 15 (Set on and Set off) shall apply in relation to such establishment
as they apply in relation to other establishment.
The proviso of Section 16 (1) makes it clear that only because of change in

location, management; name ownership the unit will not be a new unit.
The profit in any one of the first 5 years of the establishment means that
the employer has made provision for depreciation for that year as per
Income tax Act or The agricultural Income Tax Act. Or has set off the arrears NOTES
of loss and or depreciation for the establishment, for previous accounting
years, from the profits.
What it means is if the establishment has a profit before providing for
depreciation or arrears of losses of earlier years, and after such deduction
from profits there is no balance, still then it is presumed that the
establishment has earned profit for the purposes of the Payment of Bonus
aact, 1965.
This sections’ Explanation III makes it clear that the trial runs output if
soldis no sale at all. In case of dispute on this matter the
AppropriateGovernments’ decision will be final.The provisions of
Section16 (1 A, B, and C) shall apply to new, departments,undertakings or
branches set up by the existing establishment.
The Payment of Bonus Act, 1965 does not spell out any customary bonus;
therefore it can not annihilate such other kinds of bonus. Hence the Act does
not bar claim to customary bonus or bonus based on conditions of service
(this was the conclusion of the case in Mumbai KamgarSabha, Bombay V
AbdulbhaiFaizullabhi and others – 1976 II LLJ 186).
Adjustment of Customary or Interim Bonus against Bonus Payable

under the Act-[Section 17]
If in any accounting year the employer has paid any Puja or customary
bonus to an employee or if he has paid a part of the bonus payable under
this Act to an employee before the date on which such bonus is payable,
the employer shall be entitled to deduct such amount (Puja bonus/
Customary Bonus/ Advance amount on account of due bonus) from the
bonus amount payable to him under this Act.
In spite the above provision there is no bar on the employees to claim further
amount byway of other type of bonus/ such as one time bonus on account
highest export earnings, New major order, early completion of the order
etc.
However it should be noted that no authority under the Payment of Bonus
Act, 1965 and or under the Industrial Disputes Act, 1947 would entertain
any claim for increasing quantum of Bonus or eligibility for claiming
Bonus, than provided under the Payment of Bonus Act, 1965
Normally no recovery could be made other than that provided by the Act

vide Section 17 i.e. part or full advance payment out of due bonus. However
this Act enables an employer to recover the loss caused to the business vide
section 18
NOTES
Deductions of certain amounts from bonus-[Section 18]:
If the employee is found guilty of misconduct causing financial loss to the
company the company/ employer is in opposition to recover the amount of
loss so caused and the employee will be entitled to receive the balance.
For claiming the above referred to loss following conditions must be full-
filled:
1) There must be a provision under the contract of employment to recover
such a loss.
2) The employee must be given an opportunity to show cause as to why
the loss should not be recovered from his bonus amount. A domestic
enquiry into the alleged misconduct be made and if the enquiry officer
finds the employee guilty then such a recovery could be made. If the
case is crystal clear, the employer. if permitted otherwise can recover
the loss caused from the due bonus based on a show cause, written
explanation from the employee and the order of the manager on
considering the show cause as well as the written explanation
3) The amount loss should not be at the cost value of the article/ good
lost/ damaged but it must be based on the depreciated value of the
concerned article/ good
4) Such a deduction must be recorded in the register under the Payment
of Bonus Act,1965 ( as per From C ( Vide the Payment of Bonus
Act,1965) under Serial NO 11” deduction on account of financial loss
, if any, caused by the misconduct of the employee ”as well as payment
of wages Act
The Industrial Employment Standing Orders Act is applicable in
Maharashtra State to industries and establishments employing 50 or
more employees. If the employees are less than 50, the right/ authority
for deduction on account of the loss suffered by the company due to
negligence of the employee must be otherwise obtained either by letter
of appointment/ settlement or by contract covering employees.
Time limits for payment of bonus-[Section 19]:
The bonus be paid in cashIf a dispute on Bonus is pending before an
authority then within one month from the date of awardIf no dispute is
pending the bonus must be paid within a period of eight months from the

close of accounting year.
The appropriate Government has an authority to extend this limit of eight NOTES
months upto two years if it is satisfied with the reasons given by an
employer in his written application for extending the time limit for payment
of bonus.
Points to be remembered.
Why period of eight months is given?
The Audited Balance sheet of any Limited company is to be approved by
its share holders and for this the time limit is 6 months from the close of
the accounting years. Then the dividend, if approved in such annual General
Body Meeting of the company must be paid within 45 days from approval
by the meeting. Thus period of eight months is given, as without approval
of the Balance sheet, by the share holders the accounts have no legal
sanctity.
Application of the act to establishments in public sector-[Section 20]:
1 If a public sector units in any year sells the goods manufactured or its
services in competition with private sector and earns an income from
sales of goods or services equal to or more than 20% of the gross
income of the establishment in the public sector then the provisions of
this Act shall apply in relation to such establishment in public sector
as they apply in relation to a like establishment in the private sector.
2 Save as provided in sub-section (1) , nothing in this Act shall apply to
the employees employed by any establishment in public sector.
This provision has been made in view of the philosophy of establishment a

public sector unit. Such units need huge capital and the gestation period for
profit is very large spread over many years.
Such as construction of a dam, the profits may be made after 10 to15 years
if everything goes as planned. Most of the Public sector units are in losses
and these are run in the interest of the public therefore the government does
not intend to take extra burden on account of bonus.
Recovery of bonus due from the employer-[Section 21]:

The bonus must be due to the employee (under the Act) or under a
settlement or an award. The concerned employee if he did not receive the
bonus, (as due above) he (his legal heir, assignee on his death) can make an

application to the appropriate Government for the recovery of the money (

on account of bonus) due to him. The appropriate government or the
authority appointed by the Government, if satisfied that any money is so
NOTES due, it shall issue a ‘certificate’ for that amount to the controller , who shall
proceed to recover the same in the same manner as an arrear of Land
Revenue.
Arrear of land revenue:

Under this process the Controller will have to inform the Collector of the
revenue authority (Dy. Collector, Mamledar etc.) and then this official can
recover the amount even by attaching the property and then auctioning it.
Such an official has also a power to seal the safe of the company or even
take possession of articles/ goods of the employer. They may seal Managers’
office also.
The time limit for such an application by the aggrieved employee is one
year from the due date.
The appropriate Government or the authority may condone the delay in
filing the application, if it is satisfied by the reasons put forth by the
applicant.
For the purposes of the recovery of bonus, for making case under the act
and for questioning the accounts before an authority, the term employee
shall include a person who is entitled to the payment of bonus under this
Act but who is no longer in employment. That is an ex employee whose
separation may natural or forced( by termination/ resignation etc).
Reference of disputes under the act-[Section 22]:

A dispute between the employer and employees on the Bonus shall deemed
to be an Industrial Dispute and shall be solved as provided under the
Industrial Disputes Act,1947 or any such corresponding law (say BIR
Act,1946) relating to investigation and settlement of Industrial Dispute, in
force in a state. The above provision has been made as the Labour is in
concurrent list of the constitution of India. And for the items under this list
both the centre as well as State Governments can enact laws, therefore the
above enabling provision has been made.
Presumption about accuracy of balance sheet and profit and loss
account of corporations and companies-[Section 23]:
Duly audited balance-sheets by the Comptroller & Auditor –General of
India in respect of balance sheets of the Corporations and by the auditors

for the companies will be accepted and will not be questioned. Before any
Arbitrator or Tribunal in the case of a Dispute, provided the authority is
satisfied. In the event the authority having doubts may proceed and may
take steps to find out the accuracy of the required statements In case in trade NOTES
union/employees raise objection in writing, the authority, if satisfied may
direct the employer to furnish such clarifications as directed by the authority.
Audited accounts of the banking companies not to be questioned-

[Section 24]:
If a dispute is referred to Under Section 22 of this Act, the authority will
not permit the trade union or employees to question the correctness of the
balance –sheet, but may on the application get the clarifications for
verification of amount due as bonus. But the information which is not be
disclosed under the provisions of Section 34 A of the banking Regulation
Act, 1949 will be allowed to be disclosed to a trade union/employees.
Audit of accounts of employers, not being corporations or companies-

[Section 25]:
If these are audited by a certified auditor then it will be subject to the
provisions under Section 23 If these are not properly audited the authority
may direct the employer to get the accounts duly audited. Within the
specified time limit. If the employer fails to comply with the directions of
the authority the authority may get the accounts audited by an auditor
decided by the authority. The expenses for such an audit will be paid by the
employer.
Maintenance of registers and records-[Section 26]:

These will be maintained in such forms and in the manner as may be
prescribed. The appropriate Government prescribes the records, registers
and forms and books to be maintained and the manner in which these are
to be maintained.The Payment of Bonus Rules 1975 (Central) under Rule
No 4 prescribes following forms to be maintained
From A (Rule 4 (a)) Computation of the allocable surplus under Section
2(4)
From B (Rule 4 (b)) Set on and Set off of allocable surplus under Section
15
From C (Rule (4 (c)) Bonus paid to employees for the accounting year
ending on--

From D (Rule 5) Annual Return Bonus paid to employees for the accounting
year ending on---------. This return is to be sent within 230 days from the
last date for payment of bonus.
NOTES
INSPECTORS-[Section 27]: Section 27 (1)
The appointment by notification in the gazette, prescribing the local area
of operation. Such an inspector will have to work in the defined jurisdiction
only. Every inspector under the Labour Laws, including the Payment of
Bonus Act,1965 is a public servant. (S.27 (3))
Rights/ duties and responsibilities of the inspectors Section 27(2)

(1) He has to ensure that due compliance of the provisions of this act is
made. For this
a. require an employer to furnish the information , as he may
consider necessary
b. he can enter the premises of the employer at any reasonable time
with an assistant, require the person in-charge at that time to be
produced before him for examination of any accounts, books,
registers and other documents relating to the employment of
persons or the payment of salary and or wages or bonus in the
establishment.
c. examine the agent and also an employee of the employer for above
matters.
d. make copies of or take extract from any book, register or other
document maintained in the establishment.
e. or exercise any other powers as may be prescribed (by the Act, or
by his boss)
Section 27 (5)
In respect of banking companies his rights are subject to restrictions under
the provisions of the Section 34 A of the banking Regulation Act, 1949 (
10of 1949)
Bonus Linked With Production Or Productivity:
Section 31A enables the employees and employers to evolve and operate a
scheme of bonus payment linked to production or productivity in lieu of
bonus based on profits under the general formula enshrined in the Act.

However, bonus payments under Section 31A are also subject to the
minimum (8.33 per cent) and maximum(20 per cent).
In other words a minimum of 8.33 per cent is payable in any case and the
maximum cannot exceed 20 per cent. (Section 31-A) NOTES
Power of exemption:
If the appropriate Government, having regard to the financial position and
other relevant circumstances of any establishment or class of
establishments, is of opinion that it will not be in public interest to apply
all or any of the provisions of this Act thereto, it may, by notification in the
Official Gazette, exempt for such period as may be specified therein and
subject to such conditions as it may think fit to impose, such establishment
or class of establishments from all or any of the provisions of this Act.
(Section 36) Government should consider public interest, financial position
and whether workers contributed to the loss, before grant of exemption
(J.K.Chemicals v. Maharashtra, 1996 III CLA Bom. 12).
Penalty-[Section 28]:
If any person contravenes any of the provisions of this Act or any rule made
there under; he shall be punishable with imprisonment for a term which
may extend to six months (6 months), or with fine which may extend to one
thousand rupees (1000/-), or with both. Likewise if any person, to whom a
direction is given or a requisition is made under this Act, fails to comply
with the direction or requisition, he shall be punishable with imprisonment
for a term which may extend to six months (6 months), or with fine which
may extend to one thousand rupees (1000/-), or with both.
Offences By The Companies-[Section 29] :

If the person committing an offence under this Act is a company, every
person who, at the time the offence was committed, was in charge of, and
was responsible to, the company for the conduct of business of the company,
as well as the company, shall be deemed to be guilty of the offence and shall
be liable to be proceeded against and punished accordingly.
Further, if an offence under this Act has been committed by a company and
it is proved that the offence has been committed with the consent or
connivance of, or is attributable to any neglect on the part of any director,
manager, secretary or other officer of the company, such director, manager,
secretary or other officer shall also be proceeded against and punished

accordingly. ‘Company’ means anybody corporate and includes a firm or

other association of individuals, and ‘director’, in relation to a firm, means
a partner in the firm.
NOTES
Cognizance of offences-[Section 30]: Who can make a complaint?
Authority appointed by the appropriate Government or by an Officer so
appointed by the appropriate Government (Not below the rank of a Labour
Commissioner) specially authorised by the Government.
Who can be presiding officer?

No court inferior to that of presidency magistrate ort magistrate of the First
Class shall try any offence punishable under this Act This means if any court
or authority lower than the authority prescribed above tries the offence the
employer can raise an objection.
Section 31:
If the Government or its officer commits an error in good faith, no action
shall against it/him.
Section 31 A:
This section allows employees to have a right for any other bonus or profit
sharing scheme linked with production/productivity before the
commencement of the Payment of Bonus Act, (Amendment) 1976.
The Act disallows any contracting out from the provisions of this Act. (Any
agreement relinquishing the right, fully or partially, for minimum bonus
under Act is null and void.)Employees shall not be entitled to be paid such
bonus in excess of 20% of the salary/ wage earned by them
Act not to apply to certain classes of employees-[Section 32]:

Section 32 of this Act provides that the Act shall not apply to the following
classes of employees:
i. employees employed by any insurer carrying on general insurance
business and the employees employedby the Life Insurance
Corporation of India;
ii. Seamen as defined in clause (42) of Section 3 of the Merchant Shipping
Act, 1958;

iii. employees registered or listed under any scheme made under the Dock
Workers (Regulation ofEmployment) Act, 1948 and employed by
registered or listed employers;
iv. employees employed by an establishment engaged in any industry NOTES
called on by or under the authorityof any department of Central
Government or a State Government or a local authority;
v. employees employed by
a) the Indian Red Cross Society or any other institution of a like
nature including its branches;
b) universities and other educational institutions;
c) institutions (including hospitals, chambers of commerce and social
welfare institutions) established not for the purpose of profit;
(vi) & (vii) …..(omitted).
(viii) employees employed by the Reserve Bank of India;
(ix) employees employed by
h) the Industrial Finance Corporation of India;
i) any Financial Corporation established under Section 3, or any
Joint Financial Corporation establishedunder Section 3A of the
State Financial Corporations Act, 1951;
j) the Deposit Insurance Corporation;
k) the National Bank for Agriculture and Rural Development;
l) the Unit Trust of India;
m) the Industrial Development Bank of India;
a. the Small Industries Development Bank of India established

under Section 3 of the Small Industries Development Bank
of India Act, 1989;
b. the National Housing Bank;
n) any other financial Institution (other than Banking Company)
being an establishment in public sector, which the Central
Government may by notification specify having regard to
(i) its capital structure; (ii) its objectives and the nature of its activities; (iii)
the nature and extent of financial assistance or any concession given to it
by the Government; and (iv) any other relevant factor;
(x) ……..(omitted).

(xi) employees employed by inland water transport establishments

operating on routes passing through any other country. Apart from the
above, the appropriate Government has necessary powers under
NOTES Section 36 to exempt any establishment or class of establishments from
all or any of the provisions of the Act for a specified period having
regard to its financial position and other relevant circumstances and if
it is of the opinion that it will not be in the public interest to apply all
or any of the provisions of this Act thereto. It may also impose such
conditions while according the exemptions as it may consider fit to
impose.
Saving-[Section 35]:
Nothing contained in this Act shall be deemed to affect the provisions of
the Coal Mines Provident Fund and Bonus Schemes Act, 1948 (46 of 1948),
or of any scheme made thereunder.
Power of exemption-[Section 36]:

If the appropriate Government, having regard to the financial position and
other relevant circumstances of any establishment or class of
establishments, is of opinion that it will not be in public interest to apply
all or any of the provisions of this Act thereto, it may, by notification in the
Official Gazette, exempt for such period as may be specified therein and
subject to such conditions as it may think fit to impose, such establishment
or class of establishments from all or any of the provisions of this Act.
Power to make rules-[Section 38]:

1 The Central Government may make rules for the purpose of carrying
into effect the provisions of this Act.
2. In particular, and without prejudice to the generality of the foregoing
power, such rules may provide for
a. the authority for granting permission under the proviso to sub-
clause (iii) of clause (1) of section 2;
b. the preparation of registers, records and other documents and the
form and manner in which such registers, records and documents
may be maintained under section 26;
c. the powers which may be exercised by an inspector under clause
(e) of sub-section (2) of section 27

d. any other matter which is to be, or may be, prescribed.
2 Every rule made under this section shall be laid as soon as may be after NOTES
it is made, before each House of Parliament while it is in session for a total
period of thirty days, which may be comprised in one session 1*[or in two
more successive sessions], and if before the expiry of the session
2*[immediately following the session or the successive sessions aforesaid],
both Houses agree in making any modification in the rule or both Houses
agree that the rule should not be made, the rule shall thereafter have effect
only in such modified form or be of no effect, as the case may be; so,
however, that any such modification or annulment shall be without
prejudice to the validity of anything previously done under that rule.
Application of certain laws not barred-[Section 39]:

Save as otherwise expressly provided, the provisions of this Act shall be in
addition to and not in derogation of the Industrial Disputes Act, 1947 (14
of 1947), or any corresponding law relating to investigation and settlement
of industrial disputes in force in a State.
Repeal and saving-[Section 40]:

1 The Payment of Bonus Ordinance, 1965 (3 of 1965), is hereby
repealed.
2 Notwithstanding such repeal, anything done or any action taken under
the said Ordinance shall be deemed to have been done or taken under
this Act as if this Act had commenced on the 29th May, 1965.
Compliances under the act:

The establishment must ensure following compliances under the Act. These
compliances are not exhaustive but illustrative.
1 The total numbers of employees who are entitled to bonus in
department/ undertaking (a) are ….. and (b) are ……
2 The total numbers of employees who are not entitled to bonus in view
of their having worked for less than thirty days during the accounting
year in case of department (a) are …. and (b) are ……
3 The Establishment did not pay bonus to …. Employees in view of their
dismissal from service for (a) fraud or (b) riotous behaviour on the
premises of Establishment or (c) theft, misappropriation or sabotage

of any property of the establishment.

4 The Establishment has made deductions from the amount of bonus
payable under PBA in respect of……. employees in view of their being
NOTES found guilty of misconduct causing financial loss to theEstablishment.
The quantum of deduction was only to the extent of amount of loss
suffered by the Establishment.
5 The Establishment has computed the gross profit and available surplus
in accordance with the provisions of the Act read with the rules made
thereunder.
6 In relation to the year ended 31st March 20...., the Establishment paid
bonus in cash/cheque(s) or electronic clearance system (ECS) or other
electronic mode to its employees at the rate of …… which is not less
than the minimum statutory requirement as specified under PBA on
15th January 20...., which is within eight months from the close of the
accounting year.
7 During the accounting year, the Establishment opened a separate bank
account for transfer of unpaid/ unclaimed bonus in respect of
employees who have either not been paid bonus for any reason or not
collected their bonus for the accounting year ended on 31st March 20....
with ……. Bank (Branch) ….. The unpaid/unclaimed bonus has been
deposited with the concerned welfare Board.
8 During the year, the Establishment transferred on …… to Labour
Welfare Fund a sum of Rs. …. Being the unpaid/unclaimed bonus of
……. employees, whose entitlement under PBA remained unpaid/
unclaimed since …… being the last date on which the bonus was to be
paid to those …. for the year ended 31st March 20....
9 In relation to the year ended 31st March 20...., the Establishment has
filed Annual Return with the Inspector appointed under the Act on …
…., which is within thirty days from the date of payment of bonus
under Section 19 of the PBA.
Lesson Round Up
n The Payment of Bonus Act provides for payment of bonus to persons
employed in certain establishments on the basis of profits or on the
basis of production or productivity and for matters connected therewith.
n It extends to the whole of India and is applicable to every factory and
to every other establishment where 20 or more workmen are employed
on any day during an accounting year. The Act does not apply to certain
classes of employees specified therein.

n The Act has laid down a detailed procedure for calculating the amount
of bonus payable to employees.
Every employee shall be entitled to be paid by his employer in an
NOTES
n
accounting year, bonus, in accordance with the provisions of this Act,
provided he has worked in the establishment for not less than thirty
working days in that year.
n An employee shall be disqualified from receiving bonus under this Act,
if he is dismissed from service for fraud; or riotous or violent behaviour
while on the premises of the establishment; or theft, misappropriation
or sabotage of any property of the establishment.
n Every employer shall be bound to pay to every employee in respect of
any accounting year a 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.
n In case of newly set up establishments provisions have been made
under Section 16 for the payment of bonus.
n If there is a dispute regarding payment of bonus pending before any
authority under Section 22, all amounts payable to an employee by way
of bonus under this Act shall be paid in cash by his employer, within a
month from the date from which the award becomes enforceable or the
settlement comes into operation, in respect of such dispute.
n In any other case, the bonus should be paid within a period of eight
months from the close of the accounting year.
n If any dispute arises between an employer and his employee with
respect to the bonus payable under this Act or with respect to the
application of this Act to an establishment in public sector, then, such
dispute shall be deemed to be an industrial dispute within the meaning
of the Industrial Disputes Act, 1947, or any corresponding law relating
to investigation and settlement of industrial disputes in force in a State
and provisions of that Act, shall, save as otherwise expressly provided,
apply accordingly.
n The Act enables the employees and employers to evolve and operate a
scheme of bonus payment linked to production or productivity in lieu
of bonus based on profits under the general formula enshrined in the
Act.

Questions
NOTES 1. Explain the provisions of the payment of Bonus Act, 1965 relating to
the following:
a. eligibility for bonus
b. time limit for payment of bonus; and
c. admissible deduction from bonus
1 How many schedules are there in the Payment of Bonus Act, 1965?
What matters are provided for therein?
2 When is an employee disqualified from receiving bonus under the

Payment of Bonus Act, 1965?
3 Explain the Salient feature of the Payment of Bonus Act.
4 Explain the following under Payment of Bonus Act, 1965:

a. Employer and Employee
b. Available surplus
c. Disqualification
d. Eligibility for Bonus

UNIT - 4
THE EQUAL REMUNERATION ACT, 1976
NOTES
SYNOPSIS
1 Introduction
2 Objectives of the act
3 Payment of Remuneration at equal rates to Men and Women
workers and other matters.
4 Duties of the employer
5 Penalties
6 Conclusion
Introduction:
The Constitution of India contains several provisions regarding equal
treatment of men and women workers in the field of economic activity.
Article 39 for the Constitution envisages that the State shall direct its policy,
among other things, towards securing that there is equal pay for equal work
from both men and women. To give effect to this constitutional provision,
the President promulgated on the 26th September 1975, the Equal
Remuneration Ordinance 1975, so that provisions of Article 39 of
Constitution may be implemented in the year which is being celebrated as
International Women’s Year.
The ordinace was replaced by Equal Remuneration Act, 1976. According
to the preamble, the Act seeks to provide for payment of equal remuneration
to men and women workers and prevention of discrimination on the ground
of sex, against women in the matter of employment and from matters
connected therewith or incidental thereto.
The Act extends to the whole of India. It shall come into force on such date
not being later than three years from the passing of this Act, as the Central
Government may, by notification appoint and different dates may be
appointed from different establishments or employments. Initially, the Act
was enforce in plantations covered under the Plantation Labour Act 1951
with effect from 15th October, 1975. It was then extended to local
authorities from 1-1-1976. Since then the Act has been extended to several
employments and establishments. This is a continuous process and
notifications continue to be issued from time to time, extending the Act to
various establishments or employments. The Act was lastly amended in
The Equal Remuneration Act, 1976 93

1987 ( Act 49 of 1987).
NOTES The Equal Remuneration (Amendment) Act, 1987 made the following
important changes in the Act:
1. The Scope Section 5 was enlarged : No employer shall, while making
recruitment for the same work or work of similar nature, [r in any
condition of service subsequent to recruitment such as promotions,
training or transfer] make any discrimination against women except
where……
a. Penalty under section 10(1) was enhanced, as “with simple
imprisonment for a term which may extend to one month or with
fine which may extend to ten thousand rupees or with both.”
Previously, it was only “with fine which may extend to one
thousand rupees.”
b. Penalty under section 10(2) was also enhanced as “with fine which
shall be not less than ten thousand rupees but which may extend
to twenty thousand rupees or with imprisonment for a term which
shall be not less than three months but which may extend to two
years or with both for the first offence, and with imprisonment
which may extend to two years for second and subsequent
offences.” Previously, it was only “with fine which may extend to
five thousand rupees.”
1 Section 12 – ‘Cognizance and trial of offences’ was substituted.

2 Section 15 – ‘Acts not to apply in certain cases’ was also suitable
amended.
In Randhir Singh v. Union of India (1982) LLJ 334, the S.C has observed:
“The principle of equal work though not a fundamental right is certainly a
constitutional goal and, therefore, capable of enforcement through
constitutional remedies under Article 32 of the Constitution.” The Act
comes into force in respect of employments in the following establishment
on the under –mentioned dates:
1. Plantation --15.10.1975
a. (1-A) Local authorities --1.1.19766
b. (1-B) Employees under Central and State Governments --
12.1.1976

1 Hospitals, nursing homes and dispensaries ---27.1.1976

2 Banks, insurance and other financial institutions – 8.3.1976
3 Educational and teaching institutions --5.4.1976 NOTES
4 Mines --1.5.1976
5 Employees’ P.F. Organization, the E.S.L Corporation and Coal Mines
P.F. Organization. – 1.5.1976
6 F.C.I and C.W.C. and State Warehousing Corporations 1.7.1976
7 Employments in the manufacture of textiles and textile products. –
15.7.1976
8 Employments in the manufacture of electrical and electronic
machinery, apparatus and appliances – 27-8-1976
9 Factories located in plantations – 27-8.1976
10 Employments in the manufacture of chemical and chemical products
– 8.10.1976
11 Employments in land and water transport – 8.10.1976
12 Employments in the manufacture of food products – 10.2.1977
13 Employments in the manufacture of beverages, tobacco and tobacco
products; wood and wood products, furniture and fixtures; paper and
paper products and printing publishing and allied industries; leather
and leather products and fu products, non-metallic mineral products;
basic metal and alloys industries; metal products and their parts;
machinery, machine tools and parts; transport equipment and their parts
– 14.3.1977
14 Employment in relation to electricity, gas (including steam) and water
– 1.4.1977
15 Employment in wholesale and retail trade, restaurants and hotels –
1.7.1977
16 Employment in relation to agriculture and activities allied to agriculture
– 2.10.1977
17 Employments on construction and in activities connected therewith –
2.10.1977
18 Employment in air transport, storage, warehousing and communication
– 2.10.1977
19 Employment in air transport industry --26.1.1978
20 Employment in real estate and business services and legal services --

6.3.1978
21 Employments in relation to community, social and personal services -
-3.6.1978.
NOTES
Definitions: [Section 2]:

(a) “Appropriate Government” means –
i. in relation to any employment carried on by or under the authority
of the Central Government or a railway administration, or in
relation to a banking company, a mine, oilfield or major port or
any corporation established by or under a Central Act, the Central
Government, and
ii. in relation to any other employment, the State Government.
{section 2(a)}
(d) “Man” and “Woman”mean-male and female human beings,
respectively, of any age. {section 2(d)}
(g) “Remuneration” means-the basic wage or salary, and any additional
emoluments whatsoever payable, either in cash or in kind, to a person
employed in respect of employment or work done in such employment,
if the terms of the contract of employment, express or implied, were
fulfilled. {Section 2(g)}
(h) “Same work or Work of a similar nature” :
means-work in respect of which the skill, effort and responsibility required
are the same, when performed under similar working conditions, 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 womanare not of
practical importance in relation to the terms and conditions of employment.
{section 2(h)}
Act to have overriding effect-[Section 3]:

Section 3 of the Act provides that the provisions of the Act shall have effect
notwithstanding anything inconsistent therewith contained in any other law
or in the terms of any award, agreement or contract of service, whether
made before or after the commencement of the Act, or in any instrument
having effect under any law for the time being in force.
Duty of employer to pay equal remuneration to men and women
workers for same work or work of a similar nature-[Section 4]:
Section 4 of the Act provides that 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 NOTES
of a similar nature and employer shall not reduce the rate of remuneration
of any worker.
It may be noted that as per Section 2(g) “remuneration” means the basic
wage or salary, and any additional emoluments whatsoever payable, either
in cash or in kind, to a person employed in respect 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 a similar nature” means work in respect of which the skill, effort
and responsibility required are the same, when performed under similar
working conditions, 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 woman are not of practical importance in relation to the terms
and conditions of employment :
Discrimination not to be made while recruiting men and women

[Section 5]:
As per section 5 employer while making recruitment for the same work or
work of a similar nature, or in any condition of service subsequent to
recruitment such as promotions, training or transfer, shall not make any
discrimination against women except where the employment of women in
such work is prohibited or restrictedby or under any law for the time being
in force.
However, above mentioned section shall not affect any priority or
reservation for Scheduled Castes or Scheduled Tribes, ex-servicemen,
retrenched employees or any other class or category of persons in the matter
of recruitment to the posts in an establishment or employment.
Advisory Committee-[Section 6]:

1 For the purpose of providing increasing employment opportunities for
women, the appropriate Government shall constitute one or more
Advisory Committees to advise it with regard to the extend to which
women may be employed in such establishments or employments as
the Central Government may, by notification, specify in this behalf.
2 Every Advisory Committee shall consist of not less than ten persons,
to be nominated by the appropriate Government, of which one-half

shall be women.
3. In tendering its advice, the Advisory Committee shall have regard to
the number of women employed in the concerned establishment or
NOTES employment, the nature of work, hours of work, suitability of women
for employment, as the case may be, the need for providing increasing
employment opportunities for women, including part-time
employment, and such other relevant factors as the Committee may
think fit.
4. The Advisory Committee shall regulate its own procedure.
5. The appropriate Government may, after considering the advice
tendered to it by the Advisory Committee and after giving to the
persons concerned in the establishment or employment an opportunity
to make representations, issue such directions in respect of employment
of women workers, as the appropriate Government may think fit
Power of appropriate Government to appoint authorities for hearing

and deciding claims and complaints-[Section 7]:
1. The appropriate Government may, by notification, appoint 2 Inserted
by Act 49 of 1987, S.2 5 such officers, not below the rank of a Labour
Officer, as it thinks fit to be the authorities for the purpose of hearing
and deciding-
a. complaints with regard to the contravention of any provision of
this Act;
b. claims arising out of non-payment of wages at equal rates to men
and women workers for the same work or work of a similar nature,
and may, by the same or subsequent notification, define the local
limits within which each, such authority shall exercise its
jurisdiction.
1 Every complaint or claim referred to in sub-section (1) shall
be made in such manner as may be prescribed.
2 If any question arises as to whether two or more works are of
the same nature or of a similar nature, it shall be decided by
the authority appointed under sub-section (1).
3 Where a complaint or claim is made to the authority
appointed under sub-section (1) it may, after giving the
applicant and the employer an opportunity of being heard,
and after such inquiry as it may consider necessary, direct,-
i. in the case of a claim arising out of a non-payment of

wages at equal rates to men and women workers for the

same work or work of a similar nature, that payment be
made to the worker of the amount by which the wages
payable to him exceed the amount actually paid;
NOTES
ii. in the case of complaint, that adequate steps be taken by
the employer so as to ensure that there is no
contravention of any provision of this Act.
1 Every authority appointed under sub-section (1) shall have all the
powers of a Civil Court under the Code of Civil Procedure, 1908 (5 of
1908), for the purpose of taking evidence 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 XXVI of the Code of Criminal
Procedure, 1973 (2 of 1974).
2 Any employer or worker aggrieved by any order made by an authority
appointed under sub-section (1), on a complaint or claim may, within
thirty days from the date of the order, prefer an appeal to such authority
as the appropriate Government may, by notification, specify in this
behalf, and that authority may, after hearing the appeal, confirm,
modify or reverse the order appealed against and no further appeal shall
lie against the order made by such authority.
3 The authority referred to in sub-section (6) may, if it is satisfied that
the appellant was prevented by sufficient cause from preferring the
appeal within the period specified in 6 sub-section (6), allow the appeal
to be preferred within a further period of thirty days but not thereafter.
4 The provisions of sub-section (1) of Section 33-C of the Industrial
Disputes Act, 1947 (14 of 1947), shall apply for the recovery of monies
due from an employer arising out of decision of an authority appointed
under this section.
Maintenance of Registers-[Section8]:
As per section 8 it is the duty of every employer, to maintain registers and
other documents in relation to the workers employed by him in the
prescribed manner.
Inspectors-[Section 9]:
1 Appropriate Government may, by notification, appoint such persons

as it think fit to be Inspectors for the purpose of making an

investigation as to whether the provisions of this Act, or the rules made
thereunder, are being complied with by employers, and may define the
NOTES local limits within which an Inspector may make such investigation.
2 Every Inspector shall be deemed to be a public servant within the
meaning of Section 21 of the Indian Penal Code (45 of 1860).
3. An Inspector may, at any place within the local limits of his
jurisdiction-
a. enter, at any reasonable time with such assistance as he thinks fit,
any building, factory, premises or vessel:
b. require any employer to produce any register, mister-roll or other
documents relating to the employment of workers, and examine
such documents;
c. take on the spot or otherwise, the evidence of any person for the
purpose of ascertaining whether the provisions of this Act are
being, or have been, complied with:
d. examine the employer, his agent or servant or any other person
found in charge of the establishment or any premises connected
therewith or any person whom the Inspector has reasonable cause
to believe to be, or to have been a worker in the establishment;
e. make copies, or take extracts from, any register or other document
maintained in relation to the establishment under this Act.
4 Any person required by an Inspector to produce any register or other
document or to give any information shall comply with such
requisition.
PENALTIES-[Section 10]:
1. If after the commencement of this Act, any employer, being required
by or under this act, so to do
a. omits or fails to maintain any register or other document in relation
to workers employed by him, or
b. omits or fails to produce any register, muster-roll or other
document relating to the employment of workers, or
c. omits or refuses to gives any evidence or prevents his agent,
servant, or any other person in charge of the establishment, or any
worker, from giving evidence, or
d. omits or refuses to give any information, he shall be punishable 3

[with simple imprisonment for a term which may extend to one

month or with fine which may extend to ten thousand rupees or
with both].
2. If, after the commencement of this Act, any employer— NOTES
a. makes any recruitment in contravention of the provisions of his
Act, or
b. makes any payment or remuneration at unequal rates to men and
women worker, for the same work or work of a similar nature, or
c. makes any discrimination between men and women workers in
contravention of the provisions of this Act, or
d. omits or fails to carry out any direction made by the appropriate
Government under sub-section (5) of Section 6. he shall be
punishable 4 [with fine which shall not be less than ten thousand
rupees but which may extend to twenty thousand rupees or with
imprisonment for a term which shall be not less than three months
but which may extend to one year or with both for the first offence,
and with imprisonment which may extend to two years for the
second and subsequent offences].
3. If any person being required so to do, omits or refuses to produce to
an Inspector any register or other document or to give any information,
he shall be punishable with fine, which may extend to five thousand
rupees.
Offences By Companies-[Section 11]:

1 Where an offence under this Act has been committed by a company,
every person who, at the time the offence was committed, was in charge
of, and was responsible to, the company, for the conduct of the business
of the company, as well as the company, shall be deemed to be guilty
of the offence and shall be liable to be proceeded against and punished
accordingly: Provided that nothing contained in this sub-section shall
render any such person liable to any punishment, if he proves that the
offence was committed without his knowledge or that he had exercised
all due diligence to prevent the commission of such offence.
2 Notwithstanding anything contained in sub-section (1), where any
offence under this Act has been committed by a company and it is
proved that the offence has been committed with the consent or
connivance of, or is attributable to, any neglect on the part of any
director, manager, secretary or other officer of the company, such
director, manager, secretary or other officer shall be deemed to be guilty

of that offence and shall be liable to be proceeded against and punished

accordingly.
NOTES
Explanation– For the purposes of this section-
a. “Company” means anybody corporate and includes a firm or other
association of individuals; and
b. “Director”, in relation to a firm, means a partner in the firm.
Cognizance and trial of offences-[Section 12]:

1 No court inferior to that of a Metropolitan Magistrate or a Judicial
Magistrate of the first class shall try any offence punishable under this
Act.
2. No court shall take cognizance of an offence punishable under this Act
except upon—
a. its own knowledge or upon a complaint made by the appropriate
Government or an officer authorized by it in this behalf; or
b. a complaint made by the person aggrieved by the offence or by
any recognized welfare institution or organization.
Explanation–For the purposes of this sub-section “recognized welfare
institution or organization” means a social welfare organization or
institution recognized in this behalf by the Central or State Government.]
Power to make rule-[Section 13]:

1 The Central Government may, by notification, make rules for carrying
out the provisions of this Act.
2. In particular and without prejudice to the generality of the foregoing
power, such rules may provide for all or any of the following matters,
namely
a. the manner in which complaint or claim referred to in sub-section
(1) of Section 7 shall be made;
b. registers and other documents which an employer is required under
Section 8 to maintain in relation to the workers employed by him;
c. any other matter which is required to be, or may be, prescribed.
3. Every rule made by the Central Government under this Act shall be
laid, as soon as may be after it is made, before each House of

Parliament while it is in session, for a total period of thirty days which

may be comprised in one session or in two or more successive sessions,
and if, before the expiry of the session immediately following the
session or the successive sessions aforesaid, both Houses agree in NOTES
making any modification in the rule or both Houses agree that the rule
should not be made, the rule shall thereafter have effect only in such
modified from or be of no effect, as the case may be; So however, that
any such modification or annulment shall be without prejudice to the
validity of anything previously done under that rule.
Power of Central Government to give directions-[Section 14]:

The Central Government may give directions to a State Government as to
the carrying into execution of this Act in the State.
Act not to apply in certain special cases-[Section 15]:

Nothing in this Act shall apply-
a. to cases affecting the terms and conditions of a woman’s employment
in complying with the requirements of any law giving special treatment
to women, or
b. to any special treatment accorded to women in connection with-
i. the birth or expected birth of a child, or
ii. the terms and conditions relating to retirement, marriage or death
or to any provision made in connection with the retirement,
marriage or death].
Power to m ake declaration-[Section 16]:

Where the appropriate Government is, on a consideration of all the
circumstances of the case, satisfied that the differences in regard to the
remuneration, or a particular species of remuneration, or men and women
workers in any establishment or employment is based on a factor other than
sex, it may, by notification, make a declaration to that effect, and any act of
the employer attributable to such a difference shall not be deemed to be
contravention of any provision of this Act.
Power to remove difficulties-[Section 17]:

If any difficulty arises in giving effect to the provisions of this Act, the

Central Government may, by notification, make any order, not inconsistent

with the provisions of this Act, which appears to it to be necessary for the
purpose of removing the difficulty:
NOTES Provided that every such order shall, as soon as may be after it is made, be
laid before each House of Parliament.
Repeal and saving-[Section 18]:

1 The Equal Remuneration Ordinance, 1975 (12 of 1975) hereby
repealed.
2 Notwithstanding such repeal, anything done or any action taken under
the Ordinance, so repealed (including any notification, nomination,
appointment, order or direction made thereunder) shall be deemed to
have been done or taken under the corresponding provisions of this
Act, as if this Act were in force when such thing was done or action
was taken.

Questions
1 State the objects of the Equal Remuneration Act, 1976. NOTES
2 Explain the case to which the Equal Remuneration Act does not apply.
3 State the powers of an Inspector under the Equal Remuneration Act,

1976.
4 Who is competent to take cognizance of an offence under the Equal

Remuneration Act, 1976?
5 Discuss the provision relating to ‘advisory committee’ under the Equal

Remuneration Act, 1976.

NOTES
Self-instructional Material 106

NOTES

NOTES

Law of Wages and Principles of Wage Fixation

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Law of Wages And Principles of Wage Fixation

“What the Minimum Wages Act purports to achieve is to prevent

According to its preamble the Minimum Wages Act, 1948, is an Act to

The Minimum Wages Act, 1948 1

“Only for Private Circulation”

Employments’. The Act extends to whole of India.

Appointment of Royal Commission on Labour – 1929:

The Minimum Wages Act, 1948 2

“Only for Private Circulation”

Appointment of Rege Committee – 1944:

Appointment of Central Pay Commission – 1946:

Minimum Wages Bill, 1946:

The Minimum Wages Act, 1948 3

“Only for Private Circulation”

was reconstituted in November 1947. The Bill, as finally passed by the

Minimum Wages Act, 1948:

Objectives Of The Act:

M. Unichoyi v. State of Kerala, 1961:

The Minimum Wages Act, 1948 4

“Only for Private Circulation”

DEFINITIONS-[SECTION 2] Appropriate Government [Section 2(b)]:

Employee [Section 2(i)]:

Employer [Section 2(e)]:

i. in a factory where there is carried on any scheduled employment in

The Minimum Wages Act, 1948 5

“Only for Private Circulation”

authority is so appointed, the Head of the Department;

Scheduled employment [Section 2(g)]:

Wages [Section 2(h)]:

The Minimum Wages Act, 1948 6

“Only for Private Circulation”

of money, which would, if the terms of the contract of employment, express

Types and kind of wage-[Section 3.1]:

The Minimum Wages Act, 1948 7

“Only for Private Circulation”

b. The bare or basic minimum wage;

(i) Minimum wage:

Hindustan Times Ltd. v. Their Workmen, 1962:

The Minimum Wages Act, 1948 8

“Only for Private Circulation”

The Committee had categorically stated that an industry which is

In order to calculate the minimum wage, the Tripartite Committee of

The Minimum Wages Act, 1948 9

“Only for Private Circulation”

vi. Children’s education, medical requirements, minimum recreation

Workmen v. Reptakos Brett and Co. Ltd., 1991:

(b) Statutory Minimum Wage:

The Minimum Wages Act, 1948 10

“Only for Private Circulation”

(c) Non Statutory Minimum Wage:

Ahmedabad Mill Owner’s Association v. Textile Labour Association,

The Minimum Wages Act, 1948 11

“Only for Private Circulation”

Crown Aluminum Works v. Their Workmen, 1955:

(ii) Fair wage:

The Minimum Wages Act, 1948 12

“Only for Private Circulation”

Novex Dry Cleaners v. Workmen, 1962:

Express Newspaper (Pvt.) Ltd. and another v. Union of India and

Crown Aluminium Works v. Their Workmen, 1957:

The Minimum Wages Act, 1948 13

“Only for Private Circulation”

conceivable circumstances, can the wage structure be revised to the

(iii) Living wage: