Welcome to Presentation

Legal framework on
Compensation Structure
Labour Legislations
 The Employee’s Provident Fund And Miscellaneous
Provisions Act, 1952
 The Employee State Insurance Act, 1948
 The Equal Remuneration Act, 1938
 The Industrial Disputes Act, 1947
 The Factory Act, 1948
 The Minimum Wages Act, 1948
 The Payment of Wages Act, 1936
 The Payment of Bonus Act, 1965
 The Payment of Gratuity Act, 1972
Introduction

Labour is one of the principal factors of production in

all kinds of establishments whether big or small,
organized or organized, industrial or commercial.

With a view to ensure job security and satisfaction

the lobour to give them their due wages alongwith
certain employment benefits and to prevent
exploitation of labour by the capitalists, several
legislations have been made covering a number of
aspects concerning labour
Employees Provident Fund Act
Objective
The act is enacted with the objective of instituting a
compulsory contributory fund for the future of the
employee after his / her retirement or for his / her
dependents in case of his / her early death
Scope
1. Every factory or establishment employing more than 20
employees
2. Once the Act applies to any organization, it shall continue
to be governed by the Act irrespective of the the fact that
the no. of employees fallen below20
Exemption from the Act

1. A newly established organization for the initial period of

3 years from the date of its set up
2. Cooperative society employing less than 50 employees
Eligibility of Employees
1. Every employee in receipt of wages upto Rs 5000/- pm
shall be eligible to be a member of Family Pension
scheme
2. In case his pay increases beyond Rs 5000/-, he
continued to be a member of Family pension scheme but
the contribution payable shall be limited to the amount
payable on monthly pay of Rs. 5000/-
3. An employee become a member of the scheme from the
date of joining the organization
4. An employee ceases to be a member after attaining the
age of 60 years
The Schemes under the Act

1. Employee Provident Fund Scheme

Establish provident fund for the employees
2. Employees Family Pension Scheme
Provide Family pension to the employees and their
family after superannuation / death or total permanent
disablement
3. Employees Deposit Linked Insurance Scheme
Provide life insurance benefit to the employees and
their family members
Terms related to the Act
Contribution
Employer’s contribution to PF & Pension Fund
12% of wages, etc
Employer’s contribution to EDLI Fund
0.5% of wages, etc
Employee’s contribution to PF & Pension Fund
12% of wages, etc
C. Govts contribution to Pension Fund
1.16% of wages, etc
Interest accrued
The amount deposited in PF, Pension Funs & EDLI Fund is invested
in specified securities. The rate of interest is determined by the C.
Govt which is 9% p.a. at present
Employee State Insurance Act

 Objective:
This is the first major legislation on Social Security to
provide protection to worker in contingences such as
illness, long term sickness or any other health risk due
to exposure to employment injury or occupational
hazards. Under the scheme medical facilities are also
made available to the legal dependents or insured
person. The scheme is extended to retired personnel
as well as to permanently disabled workers and their
family.
Employee State Insurance Act
 The act applies in the non seasonal organization
employing 20 or more persons or organization using
power & employing 10 or more persons

 The Employees covered are those whose earnings is

up to Rs. 6,500/- per month comes under its purview

 Every eligible organization has to get registered under

the ESIC

 The eligible employee has to fill up the declaration

form
Employee State Insurance Act
 The amount of contribution for a wage period shall be
as follows:

 Employer’s contributes equal to 4.75% of the wages

payable to an employee
 Employee Contributes a sum equal to 1.75% of the
wages payable to the employees

 If contribution is not paid in time, the rate of damages

is 5% to 25% and the prosecution by the State Govt.
Equal Remuneration Act
Objective:

 The equal remuneration act provides for payment of

equal remuneration to men and women workers and
for the prevention of discrimination on the ground of
sex against women in the matter of employment and
for matters connected therewith or incidental thereto.

 Under the act it is duty of employer to pay equal

remuneration to men and women workers for the
same work of a regular nature
Equal Remuneration Act
 No discrimination for wages or for recruitment &
selection process

 The employer is required maintain register in terms of

equal remuneration act

 There are heavy penalties ranging from Rs 500/- to

Rs, 5,000/-
Factories Act
Objective:
 The factory act is to provide safety measures and to
promote the health and welfare of workers employed
in factories

Applicability:
 The act applies to those industries which qualify the
definition of Factory under the act
Factories Act
 To safeguard the health and safety of worker and
extends to provided adequate plant machinery and
appliances, supervision over workers to provide
healthy and safe environment, proper system of
working and extends to give reasonable instructions
 The act talks about Health, Safety, Hazardous
processes, Welfare, Working hours of Adults,
Prohibition on employment of young persons, Annual
leave with wages
 The penalties are ranging from Rs 5000/- to Rs.
35,000/- and prosecution by State/Central Govt.
Industrial Disputes Act
Objective:

 The act aimed to brining conflicts between employer and

employee to an amicable settlement and at the same time it
makes provision for some of the other problems that may arise
from time to time in an industrial or commercial undertaking which
comes under the purview

 The ID act seeks to pre empts industrial tensions, provide the

mechanism of dispute resolutions and set up the necessary
infrastructure so that the energies of partner in production may
not be dissipated in counter productive battles and assurance of
Industrial justice may create a congenial climate
Industrial Disputes Act
 The Act talks about Works committee, Board of
Conciliation, Industrial courts/tribunals, Arbitration,
Prohibition on lock out and strikes, lay off,
retrenchment, transfer of undertakings, unfair labour
practices & closure

 The penalties ranges from Rs. 1000/- to Rs. 5000/-

and prosecution up to 6 months for violation of rules
Minimum Wages Act
 Wages are remuneration which the workers are
entitled for the work performed by them

 The employers always think of how to decrease the

employee/production costs, while the workers see
wages in terms of their preoccupation, better housing,
children education, medical requirements, minimum
recreations, provision for old age, marriage etc

 The Govt. also enjoins in regulating the wags in the

country through Minimum Wages Act to protect the
interest of workers
Minimum Wages Act
Objectives
 To provide for fixing minimum rates of wages in certain
employment and the provisions of the act are intended
to achieve the object of doing social justice to the
workers employed in the scheduled employment by
prescribing minimum rates of wages for them
 The act prevents exploitation of labour as such the
authorities under the act are empowered to announce
and fix the minimum wages from time to time keeping
in view the market inflation and cost of living index.
Minimum Wages Act
The act prescribes the minimum wages of different
category of employee.

 It provides the basic rates of wages and special

allowance i.e. cost of living allowance

 Cash value of concessions for supplied of essential

commodities

 An all inclusive rates

Minimum Wages Act
 The other provisions such as the wages must be paid
in cash, manner & procedure of fixing and revising
minimum rates of wages , Hours of work and holidays,
Extra wages for overtime, Rest day, Employer’s
obligations and maintenance of records

 It also talks about penalties & prosecution for any

violation of provision prescribed under the act.
Payment of Bonus Act
 The payment of Bonus Act applies to certain person
employed in every factory and establishment
employing not less than 20 person on any day during
an accounting year

 An employee under the act means any person

engaged for hire/reward other than apprentice
including supervisory, managerial staff drawing salary/
wages not exceeding Rs.3,500/- per month. However,
in case of the employees in he salary/wages range of
Rs, 2,500/- to Rs 3,500/- per month for the purpose of
payment of bonus, their salaries/wages would be
deemed be Rs 2,500/- per month
Payment of Bonus Act
 The organization covered under the act are required to
pay Bonus minimum of 8.33% and maximum of 20%
 The infancy benefit for the new establishment is for the
first 5 accounting years in which the employer sells
goods/services
 The overtime is not wages as such no bonus on
overtime
 The commission paid to employee is not remuneration
as such no bonus on Commissions
 The Dearness Allowance is part of wages and attract
Bonus
Payment of Bonus Act
 The bonus is calculated basis allocable surplus in the
accounting year as per the accuracy of Balance Sheet
& Profit & Loss Account

 The bonus can be forfeited if the employee is sacked

on account of fraud, riotous or violent behavior at the
premises of the establishment or for theft

 The act provides penalties & prosecution for any

violations of provisions/rules
Payment of Gratuity Act
 The act applies to every shop & establishment in which 10 or
more person are employed or were employed on any day of the
preceding 12 months. Once covered will continue to be under
coverage even if the employee number goes down

 The act applies to all person drawing a salary up to Rs. 3,500/-.

The maximum limit of gratuity is Rs 3,50,000/-

 Gratuity is payable to an employee on termination of his

employment after he has rendered continuous service for not less
than 5 years on reaching the age of superannuation or on his
retirement/resignation or on his death or disablement due to
accident or disease.
Payment of Gratuity Act
 Gratuity is calculated on Basic Rate plus Dearness
Allowance but does not include any bonus,
commission, house rent allowance, overtime wages
and any other allowance

 In case of a monthly rated employee, the fifteen days

wages shall be calculated by dividing the monthly rate
of wages last drawn by him by twenty six and
multiplying the quotient by fifteen
Payment of Gratuity Act
 Forfeiture of Gratuity can be done only if the service of
employee is terminated for his riotous or disorderly
conduct or any act of violence on his part or any act of
moral turpitude provided such an act is conducted
during the course of employment
 The payment mode is by Cheque or Bank Draft in
Favour of employee or his legal heirs
 The act provides penalties for violation of provisions
and right to appeal
 The time limit for claiming gratuity is 12 months and 60
days for filling an appeal
Payment of Wages Act
 The payment of wages act regulates the payment of
wages to certain classes of person employed in
industry and its importance cannot be underestimated
 The act not only guarantees, payment of wages in
time and without any deduction except those
authorized under the act
 The act provides the responsibility for payment of
wages, fixation of wage period, time and mode of
payment of wages, permissible deductions as also
casts upon the employer a duty to seek the approval
and permission for the fine imposed, if any
Payment of Wages Act
 Wages under this act means all remuneration
expressed in term of money and includes over time,
bonus holiday or any other leave period

 The payment has to be made before the expiry of the

seventh day after the last day of the wages period if
less than 1000 workmen are employed and in other
case on the 10th day

 Payment is to made on working day and that too in

cash and by Cheque where the employee has given
consent in writing
Payment of Wages Act
 The deduction allowed are fines, deduction for actual
period of absence, for willful damages to goods &
property, for house accommodation, for amentias
provided. All deduction to be made within 60 days and
the total deduction should not exceed 50% of the total
wage. The total deduction in the case of Cooperative
society should not exceed 75%. The fine should not
exceed 3%.

 The employer has to maintain register for record/

evidence and required to deposit the unpaid wages/
bonus with the labour department