Cheat Sheet: Wages and Monetary Benefits

1. Minimum Wages Act, 1948

1.1 Key Definitions

1.2 Objectives and Scope

• Prevent exploitation of labour through unduly low wages
• Ensure living wages for workers in scheduled employments
• Applies to employees in employments listed in Schedule (agriculture, mining, manufacturing, services)
• Covers both organized and unorganized sectors
• Extends to whole of India

1.3 Fixing and Revising Minimum Wages

• Minimum wages reviewed and revised at intervals not exceeding 5 years
• Advisory boards constituted for coordination and advice
• Wages may be fixed by time, piece-rate, or guaranteed time rate

1.4 Components of Minimum Wage

• Basic rate of wages + special allowance (cost of living adjustment)
• Basic rate + cost of living allowance + cash value of concessions
• All-inclusive rate (basic + allowances)
• Different rates for different classes of work, localities, and workers

1.5 Payment and Enforcement

• Employer must pay not less than minimum wages
• Wages payable in cash; bank payment with written authorization permitted
• Wage periods must not exceed one month
• Time limits for payment: establishments with less than 1,000 persons - 7th day; others - 10th day
• Deductions permitted only as per Payment of Wages Act, 1936

1.6 Penalties

2. Payment of Wages Act, 1936

2.1 Key Definitions

2.2 Applicability

• Applies to persons employed in factories, railways, industrial establishments
• Covers employees drawing wages up to Rs. 24,000 per month (amended from Rs. 18,000)
• Extends to whole of India
• State Governments may extend to other establishments by notification

2.3 Responsibility for Payment

2.4 Time of Payment

• Wage period must not exceed one month
• Wages paid before expiry of 7th day after last day of wage period (establishments employing less than 1,000 persons)
• Wages paid before expiry of 10th day after last day of wage period (establishments employing 1,000 or more persons)
• On termination: wages paid before expiry of 2nd working day
• Payment on working day only; if closed on pay day, payment on preceding working day

2.5 Deductions from Wages

2.5.1 Authorized Deductions

2.5.2 Limits on Deductions

• Total deductions must not exceed 50% of wages in any wage period (75% in specific cases)
• Fines and deductions for damage not to exceed 50% together
• No deductions for acts/omissions causing damage after 60 days
• Fines realized to be credited to common fund for workers' welfare

2.6 Mode of Payment

• Wages paid only in current coins or currency notes
• Payment by cheque or bank credit with written authorization permitted
• Electronic mode (bank account transfer) allowed with employee consent
• No payment in kind or through promissory notes

2.7 Claims and Remedies

• Application to prescribed authority for delayed payment or unauthorized deductions within 12 months
• Authority may direct payment with compensation up to 10 times the amount
• Appeals to prescribed authority within 30 days
• Recovery as arrears of land revenue if employer fails to pay

2.8 Penalties

3. Payment of Bonus Act, 1965

3.1 Key Definitions

3.2 Applicability

• Applies to every factory and establishment employing 20 or more persons on any day during accounting year
• Once applicable, continues even if strength falls below 20
• Covers employees drawing salary/wage up to Rs. 21,000 per month (amended from Rs. 10,000)
• Excludes certain institutions: hospitals, educational institutions, financial institutions, LIC

3.3 Calculation of Bonus

3.3.1 Minimum and Maximum Bonus

3.3.2 Bonus Formula

• Bonus = (Available Surplus / Direct Wages) × Salary/Wage payable to each employee
• Ceiling on salary/wage for bonus computation: Rs. 7,000 per month (or Rs. 3,500 for minimum bonus)
• Available Surplus = 67% of Gross Profits in excess of amounts specified
• Set-off and Set-on provisions: losses/surplus carried forward for 4 years

3.4 Eligibility Conditions

• Employee must have worked for at least 30 working days in accounting year
• Working days include: days of lay-off, leave with wages, holidays, maternity leave
• Disqualifications: dismissal for fraud, riotous/violent behavior, theft/misappropriation/sabotage

3.5 Set-off and Set-on

3.6 Time Limit for Payment

• Bonus paid within 8 months from close of accounting year
• Dispute pending: paid within one month of settlement/award/order
• Delay attracts interest at 10% per annum on due amount

3.7 Proportionate Reduction

• Employer may apply for exemption or proportionate reduction if allocable surplus insufficient
• Application within prescribed time to appropriate government
• Government decides after inquiry

3.8 Penalties

3.9 Special Provisions

• New establishments: exemption from bonus payment for first 5 accounting years if set-off available
• Establishments in loss: minimum bonus payable even if no allocable surplus
• Recovery as arrears of land revenue if employer fails to pay

4. Payment of Gratuity Act, 1972

4.1 Key Definitions

4.2 Applicability

• Applies to every factory, mine, oilfield, plantation, port, railway company employing 10 or more persons
• Applies to every shop or establishment employing 10 or more persons on any day in preceding 12 months
• Once applicable, continues even if employment falls below 10
• Covers all employees irrespective of wage ceiling (no monetary limit)

4.3 Eligibility

• Completion of 5 years continuous service (except death or disablement)
• Service of 240 days in year constitutes one year of continuous service
• Service of 190 days for seasonal establishments
• Termination after completion of 5 years makes employee eligible

4.4 Calculation of Gratuity

4.4.1 Formula for Non-Seasonal Establishments

• Gratuity = (Last drawn salary × 15 days × Number of completed years of service) / 26
• Salary = Basic + Dearness Allowance (if forms part of retirement benefits)
• 15/26 represents 15 days wages for every completed year (26 working days per month)

4.4.2 Formula for Seasonal Establishments

• Gratuity = (Last drawn salary × 7 days × Number of completed years of service) / 26
• 7 days wages for every season

4.4.3 Maximum Amount

• Maximum gratuity payable: Rs. 20,00,000 (amended from Rs. 10,00,000 in 2010)
• Government may revise ceiling by notification

4.5 Payment of Gratuity

4.5.1 Circumstances for Payment

4.5.2 Time Limit

• Gratuity paid within 30 days from date it becomes payable
• Delay beyond 30 days attracts interest at simple rate notified by Central Government (currently 10% per annum)
• If nominee/legal heir not identified, paid within 30 days of identification

4.6 Forfeiture of Gratuity

• Gratuity not forfeitable on grounds other than those specified
• Death or disablement: no forfeiture applicable

4.7 Nomination

• Employee may nominate one or more persons for receiving gratuity in event of death
• Nomination in prescribed form submitted to employer
• Nomination may be modified at any time
• If no nomination or nominee predeceases, gratuity paid to legal heirs
• If employee is minor, guardian may receive and hold gratuity for minor

4.8 Claims and Disputes

• Disputes referred to Controlling Authority appointed by appropriate government
• Application within prescribed time (limitation as per rules)
• Authority conducts inquiry and determines claim
• Appeals lie to prescribed appellate authority within 60 days
• Recovery as arrears of land revenue if employer fails to pay determined amount

4.9 Penalties

4.10 Compulsory Insurance

• Employer may obtain insurance for liability under the Act
• Premium paid by employer; cannot be recovered from employee
• Insurance not compulsory but recommended for financial security

5. Equal Remuneration Act, 1976

5.1 Objective and Scope

• Provides for payment of equal remuneration to men and women workers for same or similar work
• Prevents discrimination on ground of sex in matters of recruitment and service conditions
• Extends to whole of India
• Applies to all establishments including government, factories, mines, plantations

5.2 Key Definitions

5.3 Equal Remuneration for Equal Work

• Employer must pay equal remuneration to men and women workers for same or similar work
• No discrimination on ground of sex in recruitment (except where employment prohibited/restricted by law)
• No adverse variation in service conditions for women
• No discrimination on ground of sex in promotion, training, transfer

5.4 Advisory Committees

• Central and State Advisory Committees constituted to promote employment opportunities for women
• Committees advise governments on matters arising under the Act
• Composition includes representatives of employers, employees, women workers, government

5.5 Penalties

5.6 Claims and Enforcement

• Complaints filed with appropriate authority within prescribed time
• Authority investigates and determines claim
• Recovery of differential remuneration as arrears of land revenue
• Officers appointed to inspect establishments and investigate complaints

6. Wage Code, 2019

6.1 Overview

• Consolidates and amends laws relating to wages and bonus
• Subsumes Payment of Wages Act 1936, Minimum Wages Act 1948, Payment of Bonus Act 1965, Equal Remuneration Act 1976
• Universalizes provisions of minimum wages and timely payment of wages to all employees
• Enhances coverage and simplifies compliance

6.2 Key Definitions

6.3 Floor Wage and Minimum Wages

• Central Government fixes floor wage considering living standards of workers
• State Governments fix minimum wages not less than floor wage
• Minimum wages reviewed and revised at intervals not exceeding 5 years
• Different minimum wages for different geographical areas, skills, arduousness of work
• Universal application: covers all employees in scheduled and non-scheduled employments

6.4 Payment of Wages

6.4.1 Time of Payment

6.4.2 Mode of Payment

• Wages paid in coins, currency notes, or by cheque/bank transfer
• Electronic mode requires written authorization from employee
• Wage period not to exceed one month

6.4.3 Deductions

• Permitted deductions: fines, absence, damage/loss, house accommodation, amenities, advances, provident fund, cooperative societies, income tax, insurance, court orders
• Total deductions not to exceed 50% of wages
• Fines: rules displayed showing acts/omissions; amount credited to welfare fund

6.5 Bonus Provisions

• Minimum bonus: 8.33% of wages or Rs. 100, whichever is higher
• Maximum bonus: 20% of wages
• Applicable to establishments employing 20 or more persons
• Ceiling on wages for bonus computation: Rs. 21,000 per month
• Eligibility: 30 working days in accounting year
• Payment within 8 months from close of accounting year

6.6 Equal Remuneration

• No discrimination between male and female employees in matters of wages for same or similar work
• No discrimination in recruitment except where employment prohibited by law
• No adverse variation in service conditions for women

6.7 Claims and Adjudication

• Claims for unpaid wages/deductions filed with Inspector-cum-Facilitator within 3 years
• Inspector may conduct inquiry and determine claim
• Appeals to prescribed authority within 30 days
• Recovery as arrears of land revenue

6.8 Penalties

6.9 Inspector-cum-Facilitator

• Dual role: facilitation of compliance and inspection
• Powers to inspect premises, examine registers, records
• Facilitation: advise employers on compliance, prevent violations
• Inspection based on web-based inspection scheme with transparent criteria

6.10 Exemptions and Compliance

• Central/State Governments may exempt establishments from provisions in public interest
• Single registration for establishments under the Code
• Single consolidated annual return for all locations
• Maintenance of registers and records in electronic form permitted

7. Important Case Laws

7.1 Minimum Wages

7.2 Payment of Wages

7.3 Bonus

7.4 Gratuity

7.5 Equal Remuneration

8. Comparative Summary

8.1 Coverage Comparison

8.2 Monetary Benefits Summary

8.3 Payment Timelines