Paper 2 Business Laws, Ethics and Communication, Chapter 3

Shri R.D. Maheshwari

Court in Jalan Trading Co. (Pvt.) Ltd. V Mill Mazdor Sabha observed

Object is to maintain peace and harmony between Labour and Capital

By allowing employees to share establishment’s prosperity.

Maximum and minimum bonus provided.

Scheme of set off and set on provided.

To ensures a reasonable degree of uniformity

Applicability of the act.

Definitions

Eligibility for the payment of bonus

Minimum , Maximum bonus and scheme of set on and set off

Sources from which bonus is payable’

Time within which bonus is payable

Resolution of dispute

Advance payment of dispute

Deductions from payment of bonus.

Payment of bonus in case of new establishment.

Other incidental matters

Factory

Establishment where twenty persons employed

Government can apply act to Establishments

Employees employed in LIC

Employees in Dock workers Regulation A

Employees of:

Indian Red Cross Society.

Universities and other educational institutions;

Hospitals

Chambers of Commerce, Social Welfare Organizations.

Reserve Bank

Industrial Finance Corporation

Employees of

Government may exempt other establishment

Deposit Insurance Corporation;

National Bank for Agriculture & Rural Development (NABARD)

Unit Trust of India

IDBI

Small Industrial Development Bank

National Housing Bank. Financial Institution in Public Sector

Accounting Year

Employer

Employee

Salary or Wages

Establishments in Public Sector

Available Surplus

Allocable Surplus

Requiring Clarity

For Corporation • The year ending when books closed

For a Company • A period for Profit & Loss Account is made

For Other Cases • Year commences 1st April, or • In case the accounts closed other than the 31st March

• The Owner or Occupier of the Factory For factory:

• Person having ultimate control over establishment

For other establishment:

Remuneration in money

Includes • Dearness Allowance • Free Food Allowance

Does not include: • Overtime • Value of House Accommodation • Traveling Concession • Bonus (Incentive, Production ) • Contribution by employer to Pension, Provident Fund • Retrenchment Compensation, Commission

Employed on salary not exceeding Rs.10,000 skilled unskilled, manual, supervisory, managerial, hire or reward .

Eligibility for Bonus ◦ Entitled to bonus

Section 8 ◦ An employee worked at least 30 working days .

ONGC Vs Sham Kumar Sahegal ◦ Employee was prevented & re-instated bonus not lost

Following Employees Entitled to bonus Employee of seasonal factory

Temporary Employee

Retrenched employee,

Probationer employee

Dismissed employee re-instated.

Part time employee

Piece rated worker

Employee disqualified from receiving bonus if Dismissed for

1 • Fraud;

2 • Riotous or Violent Behavior

3 • Theft, Misappropriation or Sabotage

Apprentice

Employee dismissed for misconduct

What Constitutes Salary

Prakash Chandra is working as Salesman

The following payments made to him • Overtime allowance • Dearness allowance • Commission on sales • Employer’s contribution towards pension fund • Value of food

Which Items constitute Salary?

Following items to be taken as Salary • Dearness allowance • Value of Free Good

Following items to be Excluded as they do not form part of Salary • Payment for Overtime, • Commission on Sales & • Employer’s Contribution to Pension Fund

An Intro.

Employee deemed to have worked even if

Laid Off

Leave with Salary

Absent due to Temporary Disablement

Employee on Maternity Leave

Allocable Surplus Available Surplus Section 2(4) • Allocable Surplus

means 67% of the available surplus of a company which has not made arrangements , for dividends

• Other case, 60% of available surplus

Section 5, the available surplus is gross profit after deducting depreciation, development rebate or investment allowance or development allowance, Income Tax payable

Sums in Third Schedule

Section 10 provides that employer bound to pay minimum bonus • 8.33% of Wages or • Rs. 100 whichever is higher

Employee not completed 15

• 8.33% of wages or Rs. 60/- whichever is higher

Minimum Bonus Payable

• Whether or not Allocable Surplus is available

Employee not worked full accounting year • Worked 3 months.

What is the Minimum Bonus Payable

Minimum Bonus Payable is • 8.33 per cent of wages or • Rs.25/- whichever is higher

Minimum Bonus Maximum Bonus • Minimum bonus 8.33% of

wage or Rs. 100 • Whichever is higher. • Whether or not there is

allocable Surplus

• Section 11 provides no matter how much is Allocable Surplus

• Maximum bonus not to exceed 20% of wage.

• For allocable surplus, set on or set off under section 15 with Schedule IV be considered.

Allocable surplus exceeds maximum bonus , excess subject to 20% be set on for being carried for four years

Allocable surplus falls short of minimum bonus, be set off for four years,

For Banking Company ◦ (a)Dividends on preference shares capital 7.5 per cent of paid up equity capitall 5 per cent of reserves Sum transferred to Reserve Fund ◦ (b) For a company other than banking .company

Rules of set on & set off of allocable surplus : ◦ Allocable surplus exceeds maximum bonus Excess subject to 20% of total wage be carried forward

as set on ◦ There is no available surplus Minimum amount of bonus

carried forward for set off

Adjustment of Puja or Customary Bonus paid

Time limit within which bonus be paid?

Deductions from Bonus

Adjustment of customary or interim bonus

Time limit for Payment of Bonus in case dispute for bonus

Deduction from Bonus

As per Section 17 Puja bonus, Customary bonus advance paid then to deduct from bonus payable

Bound to pay bonus in one month when award becomes enforceable In other cases, bonus made in 8 months from close of accounting year.

As per section 18 Employee guilty of misconduct causing loss then to deduct loss from bonus payable

‘Establishment in public sector’ means owned, controlled or managed by: ◦ Government company or ◦ A corporation where 40 per cent held by Government; or Reserve Bank or ◦ Establishment in the Public Sector sells Goods and Income

from sale is not less than 20% of the Gross Income The provisions of the Act shall apply as they apply to

Establishment in private sector

Sec 31 A permits

Employees agree with employer to receive bonus based on production, employees to receive bonus as per agreement

Employees relinquish right to receive minimum bonus, agreement is void

From the year of Sale of Goods or services in the first five year dividend payable from :

Profits As per provisions No set on & Set off For 6th year set on & Set off to apply for 5th & 6th year. For 7th year set on & set off for 5th & 6th & 7th year. For 8th year, usual becomes case.

Bonus due under agreement, settlement Application can be made to Government Government to Issue Certificate to Collector who

will recover.

Audited A/cs presumed to be correct.

Appointment Functions Public Servants

Upto 6 months or Upto 1000 Fine or Both

Government may grant exemption Having Regard Financial Position Other Relevant Factors and In Public Interest

Establishment having undertaking ,branch and department ,can it be taken as same establishment