CONTENTS
· Components of salary to be considered for various benefits & payments
· CPI Numbers
· Change in Bank Account details - M/s. R&M Associates
· Note on recent judgement of Karnataka High Court on age of retirement
“Luck is not in your hands but decision is. Your decision can make luck but luck cannot make your decision.”
COMPONENTS OF SALARY TO BE CONSIDERED FOR VARIOUS BENEFITS & PAYMENTS
Almost all industries have been covered under the Minimum Wages Notifications issued by the State Governments.
While the Minimum Wages Act, 1948 is a Central Act, States have been empowered to notify the Minimum Wages for different industries from time to time and as per the Central Act these have to be revised at least once in FIVE (5) years.
The Minimum Wages Act, 1948, also has provisions for payment in kind and rates can be fixed per hour, per piece, per month, etc. Therefore Piece Rates are permitted. However most Unions oppose this as it is directly connected with production and efforts.
All Minimum Wage Notifications are notified with a dichotomy of “Basic + DA.”
One of the tricks followed by Government / Department of Labour from time to time is to amalgamate the DA into the Basic wages and neutralize the amount to the existing / contemporary C.P.I (Consumer Price Index) figures and the counting of DA commences once again. By this scheme Workers are ensured that DA rates do not fall (if at all at any time it falls).
It is however not a sacrosanct that Wages have to be given on a basis of dichotomy of Basic + DA. The elements of Basic + DA could be merged and called “Consolidated Wages” (including DA).
In our practice over the last 50 years, we have seen that the confusion among the Employers, Unions, Workmen, Department of Labour and other concerned authorities has arisen because every Act has its definition of Wages, Basic Wages, DA, etc.
For example, Employees’ State Insurance Act, 1948, has defined “Wages” in its own way; The Employees’ Provident Fund and Miscellaneous Provisions Act, 1952, defines “Basic Wages” separately; The Payment of Bonus Act, 1965, defines “Basic Wages” separately; The Payment of Gratuity Act, 1972, defines “Basic Wages” separately, etc.
For the benefit and reference of all our Clients we have provided below a ready reference of the components of salary to be considered in various given circumstances such as payment of Lay-off compensation, Retrenchment compensation, Gratuity, Bonus, etc.
Components of salary to be considered for various benefits & payments:
-SL. NO.
-BENEFIT / PAYMENT
-COMPONENT INCLUDED
-NOT INCLUDED
1.Employees’ Provident Fund contribution
On Basic + DA
The cash value of any food concession, DA, HRA, OT allowance, Bonus, any presents made by the employer
2.
Employees’ State Insurance contribution
GROSS Wages
Any contribution paid by the employer to any pension fund or provident fund, or under this Act, any travelling allowance or any travelling concession, any sum paid towards special expenses to the employee by virtue of nature of his employment, any gratuity payable on discharge; any payment made over a period of more than two months.
3.Gratuity
According to the Hon’ble Supreme Court formula - Basic+DA/26 x 15 x No of years of continuous service
Any other components of salary other than Basic & DA.
4.
Bonus
Minimum of 8.33% on Basic & DA and a maximum of 20% of Basic & DA, paid annually during the accounting year
Any other components other than Basic & DA.
5.
Overtime
Twice the ordinary rates of wages, Basic+DA including all allowances; according to Sec. 59(2) of the Factories Act, 1948 -“ordinary rates of wages” means - the basic wages plus such allowances, including the cash equivalent of the advantage accruing through the concessional sale to workers of food grains and other articles, as the worker is for the time being entitled to.
A bonus and an Overtime wage already paid
6.
Lay-Off Compensation
On Basic + DA
Any other components other than Basic + DA
7.
Retrenchment Compensation
Compensation includes the following –
a. One Month’s pay in lieu of Notice -GROSS
b. 15 days’ average pay per every completed year of service - GROSS
c. Gratuity, if any; Compensation shall be payable only if the worker has continuous service of one year in the preceding calendar year
8.
Closure Compensation
Compensation includes the following –
a. One Month’s pay in lieu of Notice -GROSS
b. 15 days’ average pay per every completed year of service - GROSS
c. Gratuity, if any;
Proviso to Section 25-FFF provides that if any undertaking is closed down on account of unavoidable circumstances beyond the control of the employer, the compensation to be paid to the workmen shall not exceed his average pay for THREE MONTHS; compensation shall be payable only if the worker has continuous service of one year in the preceding calendar year
9.
Annual Leave / Earned Leave
GROSS Wages. Annual encashment to be done on GROSS Wages.
A bonus and an overtime Wage
10.
Casual Leave
GROSS Wages
A bonus and an overtime Wage
11.
Sick Leave
GROSS Wages
A bonus and an overtime already paid
12.
Maternity Benefit
GROSS Wages
Any bonus other than incentive bonus, overtime earnings and any deduction or payment made on account of fines, any contribution paid or payable by the employer to any pension fund or provident fund or for the benefit of the woman under any law for the time being in force and any gratuity payable on the termination of service
CONSUMER PRICE INDEX NUMBER
The Consumer Price Index Number for the Working class of Bangalore Centre, Simla Series (Base Year 1960=100) for MAY 2018 = 7327 Points
CHANGE IN BANK ACCOUNT DETAILS – R&M ASSOCIATES
Kind Attention: Accounts Department
Please note that our Bank Account number for online payment of retainer fees to M/s. R&M Associates has now been changed to new Account No: 10530210002421
Kindly update the changes in your records.
NOTE ON RECENT JUDGEMENT OF THE KARNATAKA HIGH COURT ON AGE OF RETIREMENT
The Hon’ble High Court has, on 29th June, 2018, dismissed a batch of writ petitions filed by some of the industrial establishments challenging the notification dated 27.3.17 issued by the Government of Karnataka whereby the Karnataka Industrial Employment (Standing Orders) Rules, 1961, came to be amended and the words and figures `58’ years under entry at Sl. No. 15(A) and entry at Sl. No. 22(A) of model standing orders came to be substituted with the words and figures `60’ years, thereby enhancing the age of retirement from 58 years to 60 years. This judgement applies only to the petitioners before the Court. Those establishments who have not challenged the amendment are not going to be affected by the judgement.
The industrial establishments having certified standing orders will continue to be governed by the age of retirement stipulated in their Certified Standing Orders, and the recent judgement will have no impact on them.
The industrial establishments not having certified standing orders will be governed by the Model Standing Orders. However, in these establishments, if the age of retirement stipulated in the letter of appointment is 58 years, the amendment will have no effect, since such establishments will be governed by the age of retirement stipulated in the letter of appointment. These establishments may continue to retire their employees at the age stipulated in the letter of appointment that is 58 years.
Industrial establishments employing less than 50 workmen need not have any concern since the age of retirement in such establishments will be governed by the terms of letter of appointment as the Industrial Employment (Standing Orders) Act, 1946 will not apply to such establishments.
The impact of the recent judgement is only on those establishments who were before the Court as Petitioners. If the Petitioners before the Court had 58 years as their age of retirement in their certified standing orders, they will have to now consider the impact of the judgement which has upheld the notification and directed the Petitioners who had benefit of the stay of the notification to pay wages to the workmen who have been retired on reaching 58 years of age for the period till they reach the age of 60 years. This would mean that the establishments who had 58 years as the age of retirement will have to follow the directions of the Hon’ble High Court in view of the judgement clearly stipulating that the employees retiring at 58 years will have to be paid wages till they reach the age of 60 years. If these industrial establishments which had 58 years as their age of retirement in the certified standing orders had not approached the Hon’ble High Court, they could have continued to retire workmen at the age of 58 years.
One long term adverse impact of the judgement on the industry as a whole is, that the trade unions will now seek amendment to the certified standing orders of the industrial establishments seeking enhancement of the age of retirement from 58 years to 60 years quoting the judgement. In the course of the judgement, the Learned Judge has referred to the various judgements of the Hon’ble Supreme Court which have held that Indian labour could work till the age of 60 years. This portion of the judgement would be highlighted by the unions and the Certifying Officer will not have much of a choice to decide each case on its individual merits, though at one stage in the judgement, the Learned Judges does say that each case will have to be looked into on the facts of the case.
- S.N.MURTHY
SENIOR ADVOCATE
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