Mentoassociates.com – Legal Articles

Employees working in factory, mine, oilfield, plantation, port, railway company, shops and establishments where 10 or more persons are employed are eligible for gratuity. Normally gratuity is to be paid to an employee after termination of his service, if he has rendered continuous service of not less than 5 years. If termination is due to death or disablement, then 5 years service is not required.

The amount of gratuity is calculated at the rate of 15 days wages for every completed year of service. However the maximum gratuity amount shall not exceed Rs 3,50,000/-.

Keeping in view inflation and spiraling prices, the Union Government decided to amend the relevant provisions, namely Sec 4 of the Act. While it was found that an amount computed at the rate of 15 days wages was a small amount, the said amendment seeks to enhance the same to 30 days wages. The Bill was introduced in the Rajya Sabha in November 2012 and is yet to be passed in the Rajya Sabha. Following the President’s Assent, the Bill will become an Act and come into force on a date decided by the Government and notified in the official gazette.

Employers of establishments where gratuity is applicable are supposed to obtain insurance for their liability for payment towards gratuity. They also need to register the establishment with the Controlling authority. The employer is also duty bound to display an abstract of the act and rules in English and language understood by the majority of the employees in a place near the main entrance.

Each employee who has completed one year of service shall make a nomination, within 30 days of the completion of one year service.  If he or she has a family, then the nomination shall be made to a family member and not to a third party. The employee needs to apply for gratuity within 30 days of it becoming payable.

An employer who   makes a false statement or false representation with respect to any gratuity matter is liable for punishment with imprisonment up to 6 months or fine up to 1000 rupees or both.

The Payment of Gratuity (Amendment) Act, 2010, has increased the gratuity limit from 3.5 lakhs to 10 lakhs and the same is tax free. The same is applicable for both private and public sector employees. The enhancement is with effect from 24-05-10, and the same is calculated based on the date of retirement/resignation and not on the date of receipt of the amount. Section 10(10) 0f the income tax contains the provisions relevant to tax implications of gratuity.

Once the Act becomes applicable, it continues even if the number of employees falls below ten.
The formula for the calculation of gratuity = (Last drawn basic salary +DA) x 15/26 x number of years of service.
As per the decision in of Madras High Court in   Mettur Beardsell Limited, Madras Vs. Regional Labour Commissioner (Central), Madras & others reported in 1998 LLR 1072 (Mad. HC), an employee who has completed at least 240 days of service in the fifth year will be eligible for gratuity.

THE MINIMUM WAGES ACT, 1948

Definition of employee:Employee   means any person who is employed for hire or reward to do any work, skilled or unskilled, manual or clerical, in a scheduled employment, in respect of which minimum rates of wages have been fixed.

Fixing of Minimum rates of wages and applicability of the Act:The employees working in the employments specified in Part I or Part II of the Schedule to the act are entitled for the minimum rates of wages. The appropriate Government shall, fix the minimum rates of wages payable to employees employed in an employment specified in Part I or Part II of the Schedule. Minimum wages payable under this Act shall be paid in cash.

Authorities:
a.   Committees/sub committees for fixing or revising Minimum wages.

b.    Advisory Board : For the purpose of coordinating work of committees and sub committees and advising the appropriate Government generally in the matter of fixing and revising minimum rates of wages.

c.   Inspectors.

Overtime:Where an employee, whose minimum rate of wages is fixed under this Act, works on any day in excess of the number of hours constituting a normal working day, the employer shall pay him for every hour or for part of an hour so worked in excess, at the overtime rate fixed under this Act or under any law of the appropriate Government for the time being in force, whichever is higher.

Settlement of Disputes:The appropriate Government may, appoint any Commissioner for Workmen’s Compensation or a Labour Commissioner for any region, or any officer of the State Government not below the rank of Labour Commissioner or any other officer with experience as a judge of a Civil Court or as a Judicial Magistrate to be the Authority to hear and decide for any specified area all claims arising out of payment of less than the minimum rates of wages.

Where an employee has any claim, the employee himself, or any legal practitioner or any official of a registered trade union authorized in writing to act on his behalf, or any Inspector, may apply to the authority above mentioned to address his grievances. Every such application shall be presented within six months from the date on which the minimum wages or other amount became payable.

Punishment to Employers:

Any employer who—

(a) pays to any employee less than the minimum rates of wages fixed for that employee’s class of work, or less than the amount due to him under the provisions of this Act, or

(b) Contravenes any rule or order made under Section 13;shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to five hundred rupees, or with both.

Any employer who contravenes any provision of this Act or of any rule or order made there under shall, if no other penalty is provided for such contravention by this Act, be punishable with fine which may extend to five hundred rupees.

Effect of contracts:Any contract or agreement, whether made before or after the commencement of this Act, whereby an employee either relinquishes or reduces his right to a minimum rate of wages or any privilege or concession accruing to him under this Act shall be null and void in so far as it purports to reduce the minimum rate of wages fixed under this Act.

THE MINIMUM WAGES (CENTRAL) RULES, 1950

Applicability:These rules are applicable to employments carried on by or under the authority of the central Government, or a railway administration or in relation to a mine, oil field or major port, or any corporation established by a Central Act or the central Government.

Duties of Employers:
a. Every employer shall send annually a return in Form III so as to reach the Inspector, not later than the 1st February following the end of the year to which it relates.

b.  Notices in Form IX-A containing the minimum rates of wages fixed together with abstracts of the Act, the rules made there under and the name and address of the Inspector shall be displayed in English and in a language understood by the majority of the workers in the employment at the main entrances to the establishment and at its office and shall be maintained in a clean and legible condition.

c. A register of overtime shall be maintained by every employer in Form IV in which entries under the columns specified therein shall be made as and when overtime is worked in any establishment.

d. A register of wages shall be maintained by every employer at the work spot in Form X.

e. A wage slip in Form XI shall be issued by every employer to every person employed by him at least a day prior to the disbursement of wages.

f. A muster roll shall be maintained by every employer at the work spot in Form V and the attendance of each person employed in the establishment shall be recorded daily in that Form within 3 hours of the commencement of the work shift or relay for the day as the case may be.

g. All registers and the muster roll shall be preserved for a period of three years after the date of last entry made therein.

Weekly day of rest:An employee in a scheduled employment in respect of which minimum rates of wages have been fixed under the Act, shall be allowed a day of rest every week, which shall ordinarily be Sunday.

Number of hours of work:The number of hours which shall constitute a normal working day, shall be-(a) in the case of an adult -9 hours;(b) in the case of a child-41/2 hours.

Overtime rate of wages:When a worker works in an employment for more than nine hours on any day or for more than forty-eight hours in any week, he shall, in respect of overtime work, be entitled to wages,-(a) in the case of employment in agriculture, at one and a half time the ordinary rate of wages;(b) In the case of any other scheduled employment, at double the ordinary rate of wages.

THE KARNATAKA MINIMUM WAGES RULES, 1958

Applicability:These rules are applicable to employments where the Minimum Wages (Central) Rules, 1950 are not applicable.

Duties of Employers:

a) The employer shall display in a conspicuous place at or near the main entrance of the establishment , a notice in English or in the language of the majority of the persons employed therein, specifying the dates on which wages will ordinarily be paid.

b) All fines imposed and deductions made shall be recorded in the case of factories and other Industrial Establishments in Form 1 of the Karnataka Payment of Wages Rules, 1963 and in all other cases in the Registers maintained in Forms I and II respectively. These Registers shall be kept at the work spot and maintained up-to-date.

c) A Return in Form III shall be submitted annually by the employer to the Inspector of the area within a period of one month after the expiry of the year to which the Return relates. Provided that no annual returns shall be submitted by an employer who submits a common annual return in Form 20 of the Karnataka Factories Rules, 1969.

d) Notices containing the minimum rates of wages fixed together with abstracts from the Act, the rules made there under in Form No. X and the name and address of the Inspector shall be displayed in English and in a language understood by the majority of workers in the employment at a conspicuous place.

e) A register of overtime shall be maintained by every employer, in the case of a factory or an industrial establishment in Form 9 of the Karnataka Factories Rules, 1969, and in all other cases in Form IV in which entries under the columns specified therein shall be made as and when overtime is worked in any establishment.

f) A register of wages shall be maintained by every employer and kept in Form V, provided that the Register need not be maintained and kept in the prescribed form by any employer who maintains a like register under the payment of Wages Act, 1936, and the Factories Act, 1948.

g) Wage slips in Form VI shall be issued by every employer to every person employed by him at least a day prior to the disbursement of wages.

h) Every employer shall get the signature or the thumb impression of every person employed on the register of wages and wage slip. Entries in the register of wages and wage slips shall be authenticated by the employer or any person authorized by him in this behalf.

i) A muster –roll shall be maintained by every employer and kept in Form VII. Provided that the muster-roll may not be maintained by an employer who maintains a like roll under the Factories Act, 1948 or the Shops and Commercial Establishment Act.

j) All registers required to be maintained shall be preserved for a period of three years after the date of last entry.

k) Every employer shall maintain a bound inspection book and shall produce it when so required by the Inspector.

l) There shall be exhibited or displayed in a factory, workshop or, place where the work is allocated, and in the case of out workers, at the place where duties are assigned to such outworkers notices in Form XIII giving the following particulars, namely:1.   Weekly holidays.2.   Working hours of employees.3.    Time for payment of wages.

Weekly day of rest:An employee in a scheduled employment in respect of which minimum rates of wages have been fixed under the Act, shall be allowed a day of rest every week which shall ordinarily be Sunday, but the employer may fix any other day of the week as the rest day for any employee or class of employees in a scheduled employment.

Number of hours of work:The number of hours which shall constitute a normal working day shall be:-(a)   in the case of an adult, nine hours;(b)   in the case of a child, four and a half hours.

Overtime rate of wages:When a worker works in an employment for more than nine hours on any day or more than forty-eight hours in any week, he shall in respect of overtime work be entitled to wages at double the ordinary rate of wages.