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TMI BlogTHE CODE ON WAGES, 2019 – PART IIX X X X Extracts X X X X X X X X Extracts X X X X ..... THE CODE ON WAGES, 2019 – PART II - By: - Mr. M. GOVINDARAJAN - Other Topics - Dated:- 19-8-2019 - - PAYMENT OF WAGES Chapter III of the Code deals with the payment of wages to the employees by the employers. The provisions of this Chapter shall not be applicable to the Government establishments. The Code provides that the wages shall be paid in- current coin; or currency notes; or by cheque; or by crediting in the bank account of the employee; or by the electronic mode. Wage period The wage period of the employee may be either daily or weekly or fortnightly or monthly. The employer shall fix the wage period of the employee. Different wage period may be there fixed for different establishments. Whatever the wage period may be the total wages shall not exceed one month wage. Time limit The wage shall be paid within the time limit specified in this Code, as detailed below- daily basis, at the end of the shift; weekly basis, on the last working day of the week, i.e., before the weekly holiday; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fortnightly basis, before the end of the second day after the end of the fortnight; monthly basis, before the expiry of seventh day of the succeeding month. If the employee is dismissed or removed from service or retrenched or resigned or became unemployed due to closure of the establishment, the wages shall be paid within two working days of such event. The appropriate Government may fix any other time limit for payment of wages if it considers reasonable having regard to the circumstance under which the wages are to be paid. The Code shall not affect any time limit for payment of wages provided in any other law for the time being in force. Deduction from wages No deduction shall be made from the wages by the employer except permitted under this Code. Any payment made by the employee to the employer or his agent shall be deemed to be a deduction from his wage. Any loss of wages to an employee, for a good and sufficient cause, resulting from- the withholding of increment, promotion, including the stoppage of the increment; the reduction to a lower post or time scale; or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the suspension shall not be deemed to be a deduction from wages in a case where the provisions made by the employer for such purposes are satisfying the requirements specified in the notification issued by the appropriate Government in this behalf. The deductions from the wages shall be made only in the following cases- fines imposed on him; deductions for his absence from duty; deductions for damage to or loss of goods expressly entrusted to the employee for custody; or for loss of money or which he is required to account, where such damage or loss is directly attributable to his neglect or default; deduction for house accommodation supplied by the employer or by any appropriate Government or any Housing Board etc., deductions for such amenities and services supplied by the employer as per the general order of the appropriate Government and such deductions shall not exceed an amount equal to the value of such amenities and services; deductions for advances of whatever nature and interest due or adjustment of overtime payment; deductions for the loan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s made from any welfare fund; deductions for house loan and interest due; deductions for subscription of provident fund, pension, health insurance fund; deductions for co-operative society payments; deductions for payment of union subscription under the authority of the employee; deductions for recovery of losses sustained by the railway administration on account of acceptance by the employee of counterfeit or base coins or mutilated or forged currency notes; deductions for recovery of losses sustained by the railway administration on account of the failure of the employee to invoice, to bill, to collect or to account for the appropriate charges due to the railway administration whether in respect of fares, freight, demurrage, wharfage and cranage or in respect of sale of food in catering establishments or in respect of commodities in grain shops or otherwise; deductions for recovery of losses suffered by the railway administration on account of any rebates or refunds incorrectly granted by the employee where such loss is directly attributable to his neglect or default; deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s made with the written authorization of the employee, for the contribution to the Prime Minister s National Relief Fund or to such other fund as the Central Government, by notification, may specify. Maximum deductions The total amount of deductions that may be made from the wages of the employee in any wage period shall not exceed 50% of such wages. If the deduction is made in excess of 50% of the employee by the employer, the excess may be recovered in the prescribed manner. Non remittance of deductions If the employer deducts any amount from the wage of the employer and does not remit to the concerned authority as required under the provisions of any act for the time being in force, then such employee shall be held responsible for such default of the employer. Imposing of fines Fines shall be imposed on the employees by the employer for the act of his omission in the course of his employment with the prior approval of the appropriate Government or such authority as may be prescribed. For imposing fines, the employer shall exhibit a notice in the premises specifying the acts and omissions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the employee. The employee shall be given a reasonable opportunity of filing reply to defend his case. The order for fine may be imposed after observing the procedure involved in this regard. The amount of find that can be imposed on the employee for one wage period shall not exceed 3% of wages payable to him in respect of that wage period. No fine shall be imposed on the employee whose age is below 15. No fine shall be recovered in installments and after the expiry of 90 days from the date of order imposing fines. Register of fines All fines and realizations are to be recorded in the register. Application of realization All such realizations shall be applied only to such purposes beneficial to the persons in the employment as are approved by the prescribed authority. Deductions for absence from duty An employee shall be deemed to be absent from the place where he is working, if although present in such places, he refuses, in pursuance of stay in strike or for any other cause which is not reasonable in the circumstances, to carry out his work. Such deduction from such person may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... include such amount not exceeding his wages for 8 days as may by any such terms be due to the employer in lieu of due notice. Deductions for loss or damage Deductions for loss or damage shall not be done unless a reasonable opportunity is given to the employee by a giving a show cause notice. Such deductions shall not exceed the amount of damage or loss caused. The details of such recovery shall be recorded in a register. Deduction for services rendered Such deductions shall not exceed an amount equivalent to the value of the house accommodation amenity or service supplied and shall be subject to such conditions as the appropriate Government may impose. Deductions for advances The deductions for recovery of advances given to an employer shall be subject to the following conditions- recovery of advance money given to the employee before the employment shall be made from the first payment of wages to him in respect of first complete wage period but no recovery shall be made such advances given for travelling expenses; recovery of advance money given after the employmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t shall be subject to such conditions as may be prescribed; recovery of advances of wages to an employee not already earned shall be subject to such conditions as may be prescribed. Deductions for loans Deductions for recovery of loans and the interest payable thereon shall be such as may be prescribed. PAYMENT OF BONUS Chapter IV of the Code deals with the provisions for bonus payment. Non applicability The provisions of this Code in relation to Bonus shall not be applicable to the following- employees of LIC; seamen, defined under section 3(42) of the Merchant Shipping Act, 1958; employees under the Dock Workers (Regulation of Employment) Act, 1948; employees of Central Government or State Government or Local Authority; employees of Indian Red Cross Society, universities and other educational institutions, institutions including hospitals, chamber of commerce and social welfare institutions; employees of Reserve Bank of India; employees of public sector financial institutions, other t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... han a banking company, which the Central Government notify; employees of inland water transport establishments; employees of any other establishments as notified by the Central Government. Applicability The provisions of this chapter shall apply to such establishment in which 20 or more persons are employed or were employed on any day during accounting year. Eligibility for bonus Bonus shall be paid to every employer drawing wages not exceeding such amount per mensem, as determined by the appropriate Government by Notification. To get bonus an employee is to serve at least 30 days in an accounting year. If the wages exceeding the limit prescribed by the appropriate Government, then the bonus payable is as if his wages were such amount so determined by the appropriate Government or the minimum wage fixed by the appropriate Government, whichever is higher. If the employee has not worked for the full accounting year and the bonus is payable is more than 8.33% of the wage of the days such employee has worked in that accounting year, shall be proportionately reduced. Minimum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and maximum The minimum bonus payable is 8.33% of the annual wages of the employer or ₹ 100/- whichever is higher whether or not the employer has allocable surplus during the previous accounting year. If the allocable surplus exceeds the amount of minimum bonus payable, then the employer is to pay pension proportion to the excess allocable surplus subject to the maximum of 20%. Productivity bonus Any demand of bonus in excess of the minimum bonus either on the basis of production or productivity in an accounting year, the bonus shall be determined by the agreement or settlement between the employer and the employees subject to the condition that the payment of bonus shall not exceed 20% of the wages of the employee in the accounting year. Relaxation In the first five accounting years in which the employer sells the goods produced or manufactured or renders service, the bonus is payable in respect of an accounting year during which profit is earned. If there is loss it is not required to pay even the minimum bonus. But set off is not allowed in these cases. From the 6 th year set off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or set on can be applied for the fifth and sixth accounting years. For the 7 th accounting year set off or set on can be made taking into account the excess or deficiency of the allocable surplus set on or set off in respect of the 5 th , 6 th and 7 th accounting years. From the 8 th year on wards the provisions relating to set on or set off is fully applicable to the establishments. Payment of bonus out of allocable surplus The bonus shall be paid out of the allocable surplus which shall be equal to 60% for a banking company and 67% in case of other establishments. The audited accounts of the company are not to be question in calculation of bonus. In case of dispute the appropriate Government may call upon the employer to produce the balance sheet before it but the said information shall not be disclosed unless the employer agreed to. Computation of gross profit The gross profit shall be calculated for the banking company or other establishments as per the procedure as prescribed by the Central Government. The following sums shall be deducted from the gross profit as prior charges- any a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount of depreciation as allowed under the provisions of Income Tax Act, 1961 or agricultural income tax law; any income tax payable by the employer; such further sums as prescribed by the Central Government. Computation of available surplus The available surplus for an accounting year shall be the gross profit after making the deduction as mentioned in the previous para. The available surplus in respect of the accounting year commencing on any day in a year after the commencement of this Code and in respect of every subsequent year shall be the aggregate of- the gross profit after deducting the direct tax payable; and an amount equal to difference between- the direct tax in respect of an amount equal to gross profits of the employer for the immediately preceding accounting year; and the direct tax calculated in respect of an amount equal to the gross profits of the employer for such preceding accounting year after deducting there from the amount of bonus which the employer has paid or is liable to pay to his employees for that year. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Set on and set off of allocable surplus Where for any accounting year, the allocable surplus exceeds the amount of minimum bonus payable, then the excess shall subject to a limit of 20% of that total wages of the employees be carried forward for being set on in the succeeding accounting year and so on up to and inclusive of fourth accounting year to be utilized for the purpose of payment of bonus. In any accounting year if there is no allocable surplus and there is no amount to set on from the previous accounting year, then such minimum amount or deficiency shall be carried forward for setting off in the succeeding accounting year and so on up to and inclusive of fourth accounting year. Time limit for payment of bonus The bonus shall be paid by crediting in the bank account of the employee by the employer within 8 months from the close of the accounting year. In case the employer is unable to pay the bonus within 8 months, the employer may apply to the appropriate authority, intimating the reasons for him unable to pay the bonus within the time, requesting to extend the period for making payment of bonus. The appropriate Gove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnment, if it believes that there was sufficient cause for the employer unable to pay bonus in time, may extend for the period or periods as it desires and such extension shall not exceed more than 2 years. In case of a dispute in regard to payment of bonus is pending before any authority, such payment shall be made within one month from the date on which the award becomes enforceable or settlement comes into operation in respect of such dispute. If the dispute is for higher rate, the employer shall pay the minimum bonus within 8 months from the close of the accounting year. Adjustment In case any interim bonus is paid to the employees, the employer can adjust the interim bonus paid to the employees from the eligible bonus payable and the employee is entitled to receive only the balance amount as bonus. Deduction from bonus In any accounting year the employee is found guilty of misconduct causing financial loss to the employer, then it is lawful for the employer to deduct such loss from the bonus of the employee in respect of that accounting year and the employee is entitled to receive only the balance amount as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bonus. - - Scholarly articles for knowledge sharing authors experts professionals Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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