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It is important to understand the difference between wages and salaries. A wage is based on hours worked.

Employees who receive a wage are often called "non-exempt." A salary is an amount paid for a particular job, regardless of hours worked, and these employees are called "exempt." The difference between the two is carefully defined by the type of position and the kinds of tasks that employees perform. In general, exempt employees include executives, administrative and professional employees, and others . These groups are not covered by minimum wage provisions. Non-exempt employees are covered by minimum wage as well as other provisions. It is important to pay careful attention to these definitions when determining whether an individual is to receive a wage or a salary. Improper classification of a position can not only pose legal problems, but often results in employee dissatisfaction, especially if the employee believes that execution of the responsibilities and duties of the position warrant greater compensation than is currently awarded. When setting the level of an employee's monetary compensation, several factors must be considered. First and foremost, wages must be set high enough to motivate and attract good employees. They must also be equitablethat is, the wage must accurately reflect the value of the labor performed. In order to determine salaries or wages that are both equitable for employees and sustainable for companies, businesses must first make certain that they understand the responsibilities and requirements of the position under review. The next step is to review prevailing rates and classifications for similar jobs. This process requires research of the competitive rate for a particular job within a given geographical area. Wage surveys can be helpful in defining wage and salary structures, but these should be undertaken by a professional (when possible) to achieve the most accurate results. In addition, professional wage surveys can sometimes be found through local employment bureaus or in the pages of trade publications. Job analysis not only helps to set wages and salaries, but ties into several other Human Resource functions

such

as

hiring,

training,

and

performance

appraisal.

As the job is defined, a wage can be determined and the needs for hiring and training can be evaluated. The evaluation criteria for performance appraisal can also be constructed as the specific responsibilities of a position are defined. Compensation is a primary motivator for employees. People look for jobs that not only suit their creativity and talents, but compensate them in terms of salary and other benefits accordingly. Compensation is also one of the fastest changing fields in Human Resources, as companies continue to investigate various ways of rewarding employees for performance. DETERMINING WAGES AND SALARIES (repeated)It is important for small business owners to understand the difference between wages and salaries. A wage is based on hours worked. Employees who receive a wage are often called "non-exempt." A salary is an amount paid for a particular job, regardless of hours worked, and these employees are called "exempt." The difference between the two is carefully defined by the type of position and the kinds of tasks that employees perform. In general, exempt employees include executives, administrative and professional employees, and others as defined by the Fair Labor Standards Act of 1938. These groups are not covered by minimum wage provisions. Nonexempt employees are covered by minimum wage as well as other provisions. Other factors to consider when settling on a salary for a position include: Availability of people capable of fulfilling the obligations and responsibilities of the job Level of demand elsewhere in the community and/or industry for prospective employees Cost of living in the area Attractiveness of the community in which the company operates Compensation company levels already in existence elsewhere in the

COMPENSATION LAWS

There are many federal, state, and local employment and tax laws that impact compensation. These laws define certain aspects of pay, influence how much pay a person may receive, and shape general benefits plans. The Fair Labor Standards Act (FLSA) is probably the most important piece of compensation legislation. Small business owners should be thoroughly familiar with it. This act contains five major compensation laws governing minimum wage, overtime pay, equal pay, recordkeeping requirement, and child labor, and it has been amended on several occasions over the years. Most of the regulations set out in the FLSA impact nonexempt employees, but this is not true across the board. The Equal Pay Act of 1963 is an amendment to FLSA, which prohibits differences in compensation based on sex for men and women in the same workplace whose jobs are similar. It does not prohibit seniority systems, merit systems, or systems that pay for performance, and it does not consider exempt or nonexempt status. TRADITIONAL COMPENSATION For the most part, traditional methods of compensation involve set pay levels (wage or salary) with regular increases. Increases can be given for a variety of reasons, but are typically given for promotions, merit increases, or cost of living increases. The Hay Group points out that there is less distinction today between merit increases and cost of living increases: "Because of the low levels (3 to 4 percent) of salary budget funding, most merit raises are perceived as little more than cost of living increases. Employees have come to expect them." This "base pay" system is one that most people are familiar with. Often, it includes a set salary or wage, a set schedule for merit increases, and a set benefits package. BENEFITS Benefits are an important part of an employee's total compensation package. Benefits packages became popular after World War II, when wage controls made it more difficult to give competitive salaries. Benefits were added to monetary compensation to attract, retain, and motivate employees, and they still perform that function today. They are not cash rewards, but they do have monetary value (for example,

spiraling health care costs make health benefits particularly essential to today's families). Many of these benefits are nontaxable to the employee and deductible by the employer. Many benefits are not required by law, but are nonetheless common in total compensation packages. These include health insurance, accidental death and dismemberment insurance, some form of retirement plan (including profit-sharing, stock option programs, 401(k) and employee stock ownership plans), vacation and holiday pay, and sick leave. Companies may also offer various services, such as day care, to employees, either free or at a reduced cost. It is also common to provide employees with discounted services or products offered by the company itself. In addition, there are also certain benefits that are required by either state or federal law. Federal law, for example, requires the employer to pay into Social Security, and unemployment insurance is mandated under OASDHI. State laws govern worker's compensation. CHANGES IN COMPENSATION SYSTEMS As businesses change their focus, their approach to compensation must change as well. Traditional compensation methods may hold a company back from adequately rewarding its best workers. When compensation is tied to a base salary and a position, there is little flexibility in the reward system. Some new compensation systems, on the other hand, focus on reward for skills and performance, with the work force sharing in company profit or loss. One core belief of new compensation policies is that as employees become employee owners, they are likely to work harder to ensure the success of the company. Indeed, programs that promote employee ownershipnd thus employee responsibility and emotional investmentre becoming increasingly popular. Examples of these types of programs include gain sharing, in which employees earn bonuses by finding ways to save the company money; pay for knowledge, in which compensation is based on job knowledge and skill rather than on position (and in which employees can increase base pay by learning a variety of jobs); and incentive plans such as employee stock options plans (ESOPs). PAY FOR PERFORMANCE Probably the most popular of the newer concepts in compensation is the easiest to understandompensation based on performance. These programs, sometimes referred to as variable pay programs, generally offer compensation incentives based on employee performance or

on the performance of a team. Pay for performance rewards high performance and does not reward mediocre or low performance, and is the definition of the "merit" system. In a true merit based system, there are a few conditions which must be satisfied for it to be meaningful: Employees must have control over their performance. If employees are overly dependent on the actions and output of other employees or processes, they may have little control over their own performance. Differences in performance must mean something business. If there is little difference between performer and a mediocre one, merit pay won't work. to the a high

Performance must be measured regularly and reliably. A clear system of performance appraisal, with defined criteria that are understood by the employee and regularly scheduled meetings must be in place. ADMINISTERING COMPENSATION PROGRAMS Compensation programs and policies must be communicated clearly and thoroughly to employees. Employees naturally want to have a clear understanding of what they can reasonably expect in terms of compensation (both in terms of monetary compensation and benefits) and performance appraisal. To ensure that this takes place, consultants urge business owners to detail all aspects of their compensation programs in writing. Taking this step not only helps reassure employees, but also provides the owner with additional legal protection from unfair labor practices accusations.

UNIT STRUCTURE

1. 2. 3. 4. 5. 6. 7. 8. 9.

Learning Objectives Introduction Concept of Wages Theories of Wages Wage Determination Process Wage Payment Procedure Types of Wages Wage Differentials Let Us Sum Up

10.. Answers to check your progress 11. 12. Further readings Possible Questions.

INTRODUCTION

This unit starts with the discussion on the concepts of wages. Then the different theories of wage payments and wage determination process are described elaborately.

Wage payment procedures and types of wage are two important issues which are discussed in detail in this unit. In the last part of this unit, we have discussed on wage differentials.

CONCEPT OF WAGES

Wage and Salary Administration refers to the establishment and implementation of sound policies and practices of employee compensation. The basic purpose of wage and salary administration is to establish and maintain an equitable wage and salary structure. Wages and salaries are often one of the largest components of cost of production and such have serious implications for growth and profitability of the company. On the other hand, they are the only source of workers income. After the independence and particularly after 1948, some new terms relating to wages began to be used. These are: 1. Statutory Minimum Wages 2. Basic Minimum Wages 3. Minimum Wages 4. Fair Wages 5. Living Wages 6. Need Based Wages 1. Statutory Minimum Wages: By it we mean the minimum amount of wages which should essentially be given to the workers as per provisions of the Minimum Wages Act, 1948. 2. Basic Minimum Wages: This minimum wage is fixed through judicial pronouncement, awards, industrial tribunals and labour. The employers are essentially to give this minimum wage to the workers. 3. Minimum Wages: The concept of minimum wages has developed due to different standards in different countries. In Indian context, minimum wage means the minimum amount which an employer thinks necessary for the sustenance of life and preservation of the efficiency of the worker. According to Fair Wage Committee, the minimum wages must also provide for some measures of educationmedical requirements and amenities.

4. Fair Wages: In order to bring about improved relations between labour and management an effort has been made in modern times that the labour gets a fair deal at the hands of owners and managers of industries. Various proposals were undertaken at the Industries Conference in 1947 and a resolution known as the Industrial Truce Resolution was passed. It is provided for the payment of fair wages to labour. The government of India appointed a Fair Wages committee in 1948 to determine the principles on which fair wages should be based and to suggest the lines on which those principles should be applied. According to the report on this Committee, Fair Wages is that wages which the labourer gets for his work just near to minimum wages and living wages. Generally, the current rate of wages being paid in the enterprise are known as fair wages. 5. Living Wages: According to Fair Wage Committee Report, The living wage should enable the male earner to provide for himself and his family not merely the bare essentials of food, clothing and shelter, but also a measure of frugal comfort including education for children, protection against ill health, requirements of essential social needs and a measure of insurance against the more important misfortunes including old age. According to the Committee on Fair Wages, the living wages represent the highest level of the wages and include all amenities which a citizen living in a modern civilized society is to expect when the economy of the country is sufficiently advanced and the employer is able to meet the expanding aspirations of his workers. The Living Wage should be fixed keeping in view the National income and the capacity of the industry to pay. 6. Need Based Wages: The Indian Labour Conference at its 15th session held at New Delhi in July, 1957 suggested that minimum wage fixation should be need based. Following are the important points of the Resolution of the Conference. a) The standard working class family should include three consumption units for the one earner. b) Calculation of minimum food requirements should be made on the basis of the recommendation of Dr. Aykoroyed i.e. 27000 calories for an average Indian adult. c) Calculation of cloth should be made @ 18 yards annually for one member. As such, a family consisting of four members will require 72 yards of cloth.

d) The workers should get minimum rent as per guidelines fixed by the government in the industrial housing policy. e) Expenses for fuel, light and so on should be equal to 20% of the entire minimum wages.

Theories

1.Subsistence Theory: This theory was propounded by David Richardo. Richardo states that The labourers are paid to enable them to subsist and perpetuate the race without increase or diminution. This theory is also known as Iron Law of Wages. According to this theory, if the wages fall below the subsistence level, the number of workers would decrease as many of them would die of hunger, disease, malnutrition etc.. This would make the wage rates go up as labour will become scarce. However, if the workers are paid more than the subsistence wages, they would marry and procreate. This would increase their number and bring down the rate of wages. 2. Wage Fund Theory: This was propounded by Adam Smith. He assumed that wealthy persons have funds of surplus wealth, as a result of their savings wages are paid out of these funds. This fund could be utilised for employing labourers for work. If the fund was large, wages would be high if it was small, wages would be low, just enough for the subsistence. Thus, the size of the fund determined the demand for labour and the wages that could be paid. 3. Residual Claimant Theory: This theory was propounded by Francis A Walker. According to Walker, there are four factors of production namely, land, labour, capital and organisation. Wages represent the amount of value created in the production which remains after payment of the other three factors of production namely land, capital and organisation.

4. Surplus Value Theory of Money: This theory was propounded by Karl Marx. According to Marx, Labour was to be treated as an article of commerce, which could be purchased on payment of subsistence price. The price of any product was determined by the labour time needed for producing it. The labourers were not paid in proportion to the time spent on job, but much less. The surplus, thus created, was utilized for paying other expenses. 5. Marginal Productivity Theory: This theory was propounded by Wicksteed and Clark. According to this theory wages depend upon the demand for and supply of labour. Wages are based upon the entrepreneurs estimate of the value that will probably be produced by the last or marginal worker. Workers are paid only what they are economically worth. As long as additional worker contributes more to the total value than the cost in wages, it pays the employer to continue hiring. The result is that the employer has a larger share in profits as he doesnt have to pay to non-marginal workers. 6. Bargaining Theory of Wages: This theory was propounded by John Davidson. According to him, wages are determined by the relative bargaining power of workers or trade unions and of employers. When a trade union is involved, monetary benefits, incentives, job differentials etc. tend to be determined by the relative strength of the organisation and the trade union. WAGE DETERMINATION PROCESS

Wage determination is a complex process. However, wage determination process consists of the following steps: 1. Job Analysis: Job analysis describes the duties, responsibilities, working conditions and inter-relationships between the job as it is and the other jobs with which it is associated. It attempts to record and analyse details concerning the training, skills, required efforts, qualifications, abilities, experience, and responsibilities expected of an employee. After determining the job specifications, the actual process of grading, rating or evaluating the job occurs. A job is rated in order to determine its value relative to all the other jobs in the

organization which are subject to evaluation. The next step is that of providing the job with a price. This involves converting the relative job values into specific monetary values or translating the job classes into rate ranges. 2. Wage Survey: In determining the wages for a specific job it is very necessary to work as to what wages are being given for the same job in other enterprises. If, on the basis of utility, the wages for a specific job are determined below the wages for the same job on other enterprises, following will be its disadvantages: 1. Good persons and persons of merit will not be available. 2. If such people are at all obtained for employment, they will shift to another enterprise after some time. It is, therefore, necessary to keep in mind the following in wage-survey: i) Term of survey, (weekly or monthly) ii) The whole wage-payment-knowledge of daily working hours or monthly payment. iii) Definition of jobs. iv) Appropriate questionnaire for collecting information. v) Scientific technique of collecting the data. 3. Group Similar Jobs into Pay Grades: After the results of job analysis and salary surveys have been received, the committee can turn to the task of assigning pay rates to each job, but it will usually want to first group jobs into pay grades. A pay grade is comprises the jobs of approximately equal difficulty or importance as determined by job evaluation. Pay grading is essential for pay purposes because instead of having to deal with hundreds of pay rates, the committee might only have to focus on a few. 4. Price Each Pay Grade: The next step is to assign pay rates to pay grades. Assigning pay rates to each pay grade is usually accomplished with a wage curve. The wage curve depicts graphically the pay rates currently being paid for jobs in each pay grade, relative to the points or ranking assigned to each job or grade by the job evaluation. The purpose of wage curve is to show the relationship between (i) the value of the job as determined by one of the job evaluation methods and (ii) the current average pay rates for the grades.

5. Fine-Tune Pay Rates: Fine tuning involves correcting out of line rates and developing rate ranges. (i) Correcting out of Line Rates: The average current pay for a job may be too high or too low, relative to other jobs in the firm. If a rate falls well below the line, a pay rise for that job may be required. If the rate falls well above the wage line, pay cuts or a pay freeze may be required. (ii) Developing Rate Ranges: Most employers do not pay just one rate for all jobs in a particular pay grade. Instead, they develop rate ranges for each grade so that there might be different levels and corresponding pay rates within each pay grade. The rate is usually built around the wage line or curve. One alternative is to arbitrarily decide on a maximum and minimum rate for each grade. As an alternative, some employers allow the rate for each grade to become wider for the higher pay ranges reflecting the greater demands and performance variability inherent in these more complex jobs. 6. Wage Administration Rules: The development of rules of wage administration has to be done in the next step. It is considered advisable in the interests of the concern and the employees that the information about average salaries and ranges in the salaries of group should be made known to the employees concerned; for secrecy in this matter may create dissatisfaction and it may also vitiate the potential motivating effects of disclosure. Finally, the employee is appraised and the wage is fixed for the grade he is found fit.

WAGE PAYMENT PROCEDURE

TYPES OF WAGES Determination of reasonable wages is a difficult task for the management and so they should give adequate attention to this area. However, different types of wage payment can be divided into three parts: 1. Time wage 2. Piece wage

3.

Wage

incentive

plan

1. Time wage: In this type the worker is given remuneration according to time. This type of remuneration may be per hour, per day or per month or per year. There exists no relationship between the quantum of work and the wage. This type is in operation in all industries in India. This plan is very simple to understand. The worker works after due thinking and with convenience. However it encourages the tendency of prolonging or delaying the work unnecessarily. Moreover, it is very difficult to measure the productivity of the workers under this type of plan. 2. Piece Rate System: In this type of plan, a worker gets remuneration according to his output irrespective of the time he takes in finishing his job. Here, the payment of remuneration is related to work and not to time. Under this type, the workers are encouraged to earn more and more. The more the output is, the more the remuneration is. The workers are also at liberty for their job with interest and they need not be supervised. However, this type of wage payment is not suitable for commodities of artistic taste. Moreover, the quality of goods goes down. 3. Wage incentive Plan: This type of wage payment is the combination of two types the above referred. Efforts have been made here to obtain the advantages of both these types while avoiding their disadvantages. This includes: a) Halsey Premium Scheme: Under this scheme if a worker gives an output more than the fixed standard job, he is given about 33% to 50% of the remuneration for that job as bonus. Here a standard of output is fixed and a standard of time is also fixed for the completion of that job before hand. If the job of fixed standard is completed with the standard time fixed for the purpose, the worker gets his fixed wages. But, if he completes the job before the fixed standard time and, thereby, saves some time, he gets a fixed percentage of his wages for the time so saved as bonus. b) Rowan Premium Scheme: This plan is an improvement upon Halsey Plan. Under this plan, premium is that proportion of the wages for the time taken which the time saved bears to the standard time. The credit of this incentive premium method

goes to Rowan of Scotland. The worker is paid wages at normal rates for the duration he has worked and is paid extra money in the form of premium on the basis of the time he has saved. Under this scheme, the standard work and the standard time both are fixed. The wages for the time saved will increase in the same percentage that is equal to the proportion the time saved bears to standard time. The premium for the time saved cannot be more than the total standard wages. Thus, a worker cannot get cleverly wages more than needed. c) Taylors Plan: Taylor plan is based on wages per unit. In other words, a worker is paid wages in accordance with his output. Higher price rate is fixed for the workers who give production over and above the standard workload fixed. The lower rate is fixed for the workers who give production below the standard workload fixed. d) Merrick Plan: This plan is somewhat a modified form of Taylors plan. This plan offers three grade piece rates than the two offered in the Taylors plan. I. First limit is for new workers and is very low. II. Second limit is for workers with average efficiency. III. Third limit is for very efficient workers. e) Gantt Plan: This is also a modified form of Taylor plan. In it, wages are fixed on the basis of time. On the other hand, the efficient workers are given wages per unit. Thus, the workers who give more output get their wages at enhanced rates. f) Emerson Plan: This plan is a combination of Taylor, Merrick and Gantt plans. However, a slight modification in these plans has been made and different rates of bonus have been fixed under this plan. The amount of bonus increases with the increase in efficiency. These percentages are as under: 1% bonus on 67.5 efficiency. 10% bonus on 90% efficiency. 20% bonus on 100% efficiency. 20% + 30% extra on bonus on efficiency more than 100%. g) Profit-Sharing Scheme: Under this scheme, workers are given a certain percentage of profits as bonus. But it suffers from one defect. Suppose, there is no profit in a particular year. Workers will also not be given the bonus for that very year. The workers think that they have been deceived by the employers and therefore, clash with them on this very issue.

This assumes the form of worker-management unrest and has its bad effect on the production. This scheme is undoubtedly a new and better scheme. But, the trade unions misuse the scheme. h) Scalan Plan: Under this scheme, the workers are paid bonus equal to the percentage of profits earned more than the profits earned last year by the organisation. 15% of the bonus is deducted and this deduction is deposited in the fund which is distributed among the workers in the year to come.

Wage differentials mean differences or disparities in wages. Wages differ in different employments or occupations, industries and localities and also between persons in the same employment or grade. One, therefore comes across such terms as occupational wage differentials, inter-industry, inter-firm, inter-area or geographical differentials and personal differentials. In other words, wage differentials may be as follows: i) Occupational Differentials: The reasons for occupational wage differentials can be varying requirements of skill, knowledge, demand supply situation, degree of responsibilities etc. In countries adopting a course of planned economic development, skill differentials play an important role in manpower and employment programmes, for they considerably help in bringing about an adequate supply of labour with skills corresponding to the requirements of product plans. ii) Inter-firm Differentials: Inter-firm differentials reflect the relative wage levels of workers in different plants in the same area and occupation. Differences in technological advancement, managerial efficiency, financial capability, age and size of them, relative advantages and disadvantages of supply of raw materials, power and availability of transport facilitiesthose are also accounted for considerable disparities in inter-firm wage rates. Lack of co-ordination among adjudication authorities, too, are responsible for such anomalies. iii) Inter-area or Regional Differentials: Such differentials arise when workers in the same industry and the same occupational group, but living in different geographical

areas, are paid different wages. Regional wage differentials may be conceived in two senses. In the first sense, they are merely a part of inter-industry differentials in a particular region. In the second sense, they may represent real geographical differentials, resulting in the payment of different rates for the same type of work. In both cases, regional differentials affect the supply of manpower for various plants in different regions. iv) Inter-industry Differentials: These differentials arise when workers in the same occupation and the same area but in different industries are paid different wages. Inter-industry differentials reflect skill differentials. The industries paying higher wages have mostly been industries with a large number of skilled workers, while those paying less have been industries with a large proportion of unskilled and semiskilled workers. Other factors influencing inter-industry differentials are the extent of unionisation, the structure of product markets, the ability to pay, labour-capital ratio, and the stage of development of an industry. v) Inter-personal Wage Differentials: These differentials are between workers in the same plant and the same occupation. These may be due to differentials in sex, skills, age, knowledge or experience.

1. It may be noted that in India, the term wage is applied in relation to blue collar (factory workers) and salary in relation to white collar employees. 2. The main objective of wage and salary administration is to establish and maintain an equitable wage and salary system to obtain, retain, and motivate people of required skill in an organisation. 3. Theories of wages include wage fund theory, subsistence theory, surplus value theory, residual claimant theory, marginal productivity theory etc.

4. Wage determination process includes job analysis, conduct of salary survey, group similar jobs into pay grades, price each pay grade, fine-tune pay rates and wage administration rules. 5. Types of wage payment include time wage, piece wage and wage incentive plan. 6. Wage differentials are the result of occupational differences, inter-firm differentials, regional differentials, inter-industrial differentials and personal differentials. 7. In order to protect the interest of workers, the legislations enacted by the Government of India are Payment of Wages Act, 1936; Minimum Wages Act, 1948; Payment of Bonus Act, 1965. The difference between wage and salary defines more than how much you end up making per year. We use the terms to often describe differences in types of work, as well as what is actually counted in the final total. Wages are generally paid per hour. This means that you have to be present and working in order to get paid. Most of the time, wage jobs are not as inclusive when it comes to things like paid vacations, or paid sick days. Wage earners often have to give up pay for leaving early, coming in late, missing a day, or taking a vacation. Salary refers to how much you get paid every year. Salary earners rarely have to punch a time clock, or keep an accurate account of their hours, because they get paid for performance rather than by the hour. Salaried workers are much more likely to have paid sick days and paid vacations, and are not docked pay for being late or leaving early from time to time. Salary can also be counted in terms other than money. Some companies consider reimbursement for things like medical insurance as part of your salary. You can even find some companies blending education and retirement contributions as part of your salary package. Historically, we often refer to manual labor jobs as wage jobs, and professional jobs as salaried positions. Wage earners are more likely to be found in positions with high

turnover, while salaries are often assigned for positions with low turnover. We express wages as an hourly payment. We express salary as packages. You might find that you receive a base salary, stock options, retirement, benefits, and bonuses as a salary package. Wages are more likely to be added up into additional payments. If you work 50 hours in one week, you may receive your first 40 hours at the regular pay rate, and the additional 10 hours at 1 times your normal pay rate. Salary earners are not often given the opportunity to get paid extra for additional hours. Summary: 1. Wage earners are paid by the hour. 2. Salary earners are paid by the year. 3. Salary earners usually receive paid time when they are not working. 4. Wage earners often have to give up pay for time off. 5. Salaries are often calculated as packages. 6. Wage earners get paid more for working more than 40 hours per week. 7. Salary workers are rarely offered overtime pay. 8. Salaries can contain all kinds of benefits and perks.

Q.1. Define wages. How they differ from salary?

Ans Wages are compensation of wage earners The numerous employees who use the tools and equipments for their employers to produce goods and services that are sold by their employers. Wages for Salary : Wage is a compensation to the employees for services rendered to the organisation In case the quantum of services rendered is difficult tomeasure, then the payment

is called salary. Normally the wage period is shorter than the salary period. SHORT ANSWER TYPE QUESTIONS

Q.1. Write short notes on minimum wage, fair wage and living wage.

Ans. 1.Fair Wage :- One of the most important and persistent demand of labour in the present day is to guarantee of a fair wage which is reflected in the slogan equal pay for equal work. It is the wage equal to that received by employees performing equal work demanding equal skills, equal difficulty and equal unpleasantness. 2 Minimum Wage: It is the wage to convince bare necessaries of life i e food, shelter and clothing It may provide a little for workers efficiency e g for his health and education 3. Living Wage : It is wage which can offer an employee, incentive to work and produce enough in quantity, without sacrificing quality, so that the payment of such a age is justifiable by the industry A literate and intelligent worker will use living wage for steady size in his standard of living i.e. healthy living, with a few comforts and provision for contingencies. LONG ANSWER TYPE QUESTIONS

Q.1. Discuss different issues in Indian Wage Policy ? What are the strengths and weaknesses of this policy?

Ans Wage Policy in India Recent wage practices in India in the organised sector are such that dearness allowances are paid to neutralize at least partially, price increases, bonus paid as per the bonus act and fringes benefits given under the employees state insurance act and the employees provident fund act. Wage boards have attempted to settle wage disputes taking

into account the principle of fair wages first set forth by the report of committee on fair wages. (a) Productivity of labour. (b) Prevailing rates of wages in the same occupations in the same neighbouring localities. and similar

(c) Level of the national income and its distribution. (d) Place of the industry connected in the economy of the country The committees recommendations are similar to the requirement laid down above The Minimum Wages Act:- 1948 The act empowers the central and state governments to fix minimum rates of wages and to revise such wages from time to time in respect of schedule employments The state governments are required to appoint advisory board for fixing minimum wages and there is to be a central advisory board to advise on the wage fixation matters in general and for the coordination of the work of the state advisory boards Fringe Benefits In almost all industrial organisations the employees receives several employee benefits, commonly known as fringe benefits. In India fringe benefits for the labour personnel in common use may he categorised as Dearness Allowance, City Compensatory Allowance and Special Housing Assistance Allowance To these may be added cleaning charges for uniforms travelling allowance, canteen subsidy, food subsidy, special financial assistance to workers educational schemes leave with wages for attending basic education school etc Mechanics of Wage Fixation in India : Collective bargaining can be used for negotiating wages and hours of work Unfortunately the trade unions lack solidarity The multiplicity of unions often makes workers bargaining power rather weak The state therefore, has provided conciliation and adjudication machinery The industrial tribunals usually attempt to five a reasonable rate to wage Very often however a tribunals award was not found satisfactory either by the employer or the workers

Wage Boards A wage board is a tripartite body with representatives of management and workman presided over by an independent person nominated by the government The board is required to fix wages in accordance with a principles of wage fixation and discussed earlier The wage board help to resolve the disputes in a democratic manner by bringing the parties together, without compulsion on either side It may however be pointed out that a wage board can only make recommendations as there is no legal sanction behind it But for all practical purposes, a boards recommendations are regarded as awards, and if unanimous, are made binding on the parties

Q.1. What do you mean by incentives?

Ans. Incentives refer to the variable records granted to the individuals in terms of changes in specific results in organisational setting incentives incite the people towards action According to George R Terry, incentives means that which incites or has tendency to incite action They are devised to play a causal role in conjuction with rewarding the effect In simple words, incentives means that psychological excitement which makes the employees efficient Normally the employees need the incentives to achieve the objectives Security in job, recognition, promotion, respect, praise, minimum wages promise are the examples of incentives

Q.2. What are the advantages of Incentives?

Ans. 1 Incentives balance the input and output equilibrium individuals working better receive greater rewards, incentives are also desired from the stand point of equity theory 2 As the incentives provided one relatively objectives because they can be determined by objective criteria such as number of pieces or rupees This objectivity in incentive schemes are more acceptable people than the subjective ratings by their superiors.3.Incentives increase expectancy that performance

will be followed by reward. If money has relevance to an individual, more expectancy will increase motivation.

Q.1. Discuss financial and non-financial Incentives.

Ans. Financial or Monetary Incentives : Financial Incentives play a very-important role in improving the performance of the employee Money is an important financial incentive which cannot be avoided. As cash plays a very important role in fulfilling the physical and most basic needs of the individuals. Cash is more capable of fulfilling the physical needs of labour class and the financial incentives are more fruitful than non-financial incentives. Non-Financial Incentives : According to neo-classical approach Of management nonfinancial incentive play a very important role in motivating the employees towards the. work. Non-monetary incentives are those social and psychological attractions which encourages people to do the work efficiently and effectively. The non-financial incentives can take only of the following steps. 1. Delegation of Responsibility 2. Lack of Fear 3. Participation 4. Pride in work 5. Constructive attitude 6. Promotional opportunities 7. Title or degree 8. Good Leadership 9.Recognition 10. Personnel or individual status 11. Justice 12. Security of Service

Q.2. Discuss Incentive Plans and their characteristics.

Ans. Incentives are essential in inducing people to work effectively and efficiently. Today, the managers have the conviction that unless people are provided with incentives the productivity and output cannot be increased. Both time and piece wage plans have their own strong points and drawbacks. As has already been observed the time wage plan assigns the gains or losses arising from variations in workers productivity to the employers the piece wage system on the other hand, offers no guarantee of a consistently reasonable wage and possess on the gains or losses owing to changes in workers productivity to them. Nature and Features 1. The incentive plan should be proprlv communicated to the employees so that they can increase their performance to claim incentives. 2. It consists of both monetary and non-monetary elements.

Q.3. Discuss Taylors differential piece rate system.

Ans. The system was introduced by F.W. Taylor the father, of scientific management. The underlying principle of this system is to penalize a slow worker by paying him a low piece rate for low production and to reward an efficient worker by giving him higher piece rate for low production and to reward an efficient worker by giving him higher piece rate for a higher production. Taylor was of the view that an inefficient worker had no place in the organisation and he should be compelled to leave the organisation by paying him a low piece rate for low production. Taylor proceeded on the assumption that through time and motion study it is possible to fit a standard time I or doing a particular task.

Q.4. Discuss Halsey Premium Plan.

Ans It is an American plan originated by F A Halsey to encourage efficiency amongst workers as well as to guarantee them wages according to time basis. The standard time required for a job is determined before hand on the basis of time and motion studies and I or from past records. Workers who perform the job in less than the standard time and thus save time are rewarded with a bonus, but the worker who takes longer than the standard time is not punished, and is paid wages according to time wage system. Advantages 1. By dividing the profit of saved time between men and management, it makes for performance of the bonus rate as both parties benefit by it. 2 The workers can very easy follow the method of calculating the bonus and so there is no room / or any misunderstanding. Q.5. Discuss Emerson efficiency premium plan.

Ans. Like the Gantt plan, the Emerson plan also provides for the standard task and a guaranteed day wage for all workers. But unlike the Gantt plan under which bonus at afixed rate is paid only to those workers who attain or exceed the 100 percent efficiency This plan provides for the payment of bonus at an increasing percentage to all workers above a minimum level of efficiency (say 60 percent). The percentage of bonus, howevei, does not increase at efficiency levels beyond 100 percent. Advantages 1. It provides an encouraging reward to the beginners, besides giving incentive to the skilled and efficient labour . 2. The plan can be applied to individual workers or to groijps of workers. 3. It is easy to understand.

Q.6. Discuss Co-partnership and Profit Sharing Schemes.

Ans These schemes are becoming very popular now a days Under these schemes, workers get a share of the yearly profits of the company This is done with a view of setting the cooperation of workers by giving them the feeling that they are to share the prosperity of the business, Workers can. be given their share of profits in the form of cash or shares in the company. A permanent interest of workers in the future of the business is created if the share of profits is given in the form of shares in the company.

Home Chapter 11 : Maintenance Q.1. Define Fringe Benefits. Ans.- Fringe: benefits are those benefits which are provided by an employer to Or for the benefit of an employee and which are not in the form of wages, salaries and time related payments.

Q.2. What are the objectives of Fringe Benefits? Ans. 1. To promote employees welfare by providing welfare measures like recreation facilities: 2 To meet requirements of various legislations relating to fringe benefits 3. To boost up employee morale. 4. To provide security to the risks like old age benefits and maternity benefits. 5.To create and improve sound industrial relation. 6.To provide quantitative work environment and work life. 7.To motivate the employees by identifying and satisfying their unsatisfied needs. SHORT ANSWER TYPE QUESTION employees against social

Q.1. Discuss Fringe benefits in Indian Industries. Ans In India, the National Association of Manufactures has indicated the following fringe benefits which are essential in motivating the workers towards higher output and for attracting and in the efficient workers in the enterprise. These include : 1. Payment for health and security benefits (include in this category are the retirement plans, social security payments, saving plans, profit sharing plans, group life insurance. 2. Premium payments for the period of time a worker has marked. 3. Payment for time not worked, 4. Miscellaneous Expenditure. 5. Payment for pei(orming special duties. 6. Payment for employee services. Q.2. Write a short note on The (Regulation and Abolition) Act, 1970 Contract Labour

Ans. The contract Labour (Regulation and Abolition) Act, 1970 was passed in 19709 and came into objects. force from February, 1971. of It has two major in

(i) To regulate the employment certain establishments.

contract

labour

(ii) To provide for the abolition of contract labour in certain circumstances. Application of the Act; The act extends to the whole of India. It applies:(a) to every establishment in which twenty or more workmen are employed or which employed on day of the preceeding twelve months as contract labour. (b) to every contractor who employs or who employed on any day of the preceding twelve months twenty or more workmen.

Registration of Establishments Employing Contract Labour:The Act contains provisions for registration of establishments emplo3?ing contract labour. The relevant provisions are contained in section 6 to 10 of the Act. Appointment of Registering Officers The appropriate Government may, by an order notified in the official Gazette: (a) appoint such persons, being Gazetted officers of Goyernment, as it thinks fit to be registering officers ; and (b) define the limits, within which a registering officer shall exercise the powers conferred on him by or under this act. Registration of Certain Establishments:Every principle employer of an establishment to which this Act applies shall, within such period as the appropriate government may, by notification in the official Gazette, fix in this behalf with respect to establishments generally or with respect to any class of them, make an application to the registering officer in the prescribed manner for registration of the establishment. Effect of Non-Registration No principal employer of an establishment, to which the Act applies, shall (a) in the case of an establishment required to be registered under section 7, but which has not been registered within the time fixed for the purpose under this section: (b) m the case of an establishment the registration respect of which has been revoked in

under section 8 employ contract labour in the establishment after the expiry of the period or after the revocation of registration as the case may be (sec 9). Prohibition of Employment of Contract Labour Section 10 empowers the appropriate government to prohibit employment of contract labour in any process, operation or other work in any establishment by issuing a notification

in the official Gazette The appropriate Government shall take the following steps before issuing such a notification. 1 It shall consult the Central Board or, as the case may be the State Board 2 It shall have regard to the conditions benefits provided for the contract of work and

labour in that establishment and other relevant factors. Licensing of Contractors Appointment of government may, Gazette, Licensing Officers by an order notified The appropriate in the official

(a) appoint such persons, being Gazetted officers of Government, as it thinks fit to be licensing officers ; and (b) define the limits, within which a licensing officer shall exercise the powers conferred on licensing officers by or under this Act (Sec 11) Licensing of Contractors No contractor to whom this Act applies, shall undertake or execute any work through contract labour except under and in accordance with a license issued in that behalf by the licensing officer. It shall be issued on payment of such fees and on the deposit of such sum, if any, as security for the due performance of the conditions as may be prescribed (Sec 12) The license is non-transferable. Revocation, Suspension and Amendment of Licenses If the licensing officer is satisfied, either on reference made to him in this behalf or otherwise, that a

(a) a license granted under Section 112 has been obtained by misrepresentation or suppression of any material fact, or (b) the holder of a license has, without reasonable cause, failed to comply with the conditions subject to which the license has been granted or has contravened any of the provisior1 of this Act or the rules made there under, then,

without prejudice to any other penalty to which the holder of the license may be liable under this Act, the licensing officer may, after giving the holder of the license an opportunity of showing cause revoke or suspend the license or forfeit the sum, if any, or any, or any portion thereof deposited as security for the due performance of the conditions subject to which the license has been granted. Welfare and Health of Contract Labour The contractors are required to take certain specific measures for the welfare and health of contract labour The relevant provisions are as under 1. Canteens : The appropriate Government may make rules requiring that in every establishment to Which this Act applies, and where in contract labour numbering one hundred or more is ordinarily employed by a contractor and the employment of the contract labour is likely to continue for such period as may be prescribed, one or more canteens shall be provided and maintained by the contractor for the use of such contract labour. The rules may provide for (a) the date by which the canteens shall be provided; (b) the number of canteens that shall be provided; (c) the standards in respect of construction, accommodation furniture and other equipment of the canteens , and (d) the food stuffs which may be served therein and the charges which may be made there for. 2 Rest Rooms In every place wherein contract labour is required to work at night, in connection with the work of an establishment to which this Act applies, and in which work requiring employment of contract labour is likely to continue for such period as may be prescribed, there shall be provided and maintained by the contractor for the use of the contract labour such number of rest rooms or such other suitable alternative accommodation with in such time as may be prescribed. 3 Other Facilities It shall be the duty of every contractor employing contract labour in connection with the work of an establishment to which this Act applies, to provide and maintain (a) a sufficient supply of wholesome drinking water for the contract labour at convenient places;

(b) a sufficient number of latrines and urinals of the. prescribed types so situated as to be convenient and accessible to the contract labour in the establishment and (c) washing facilities 4 First-aid Facilities (Section 19) There shall be provided and maintained by the contractor so as to be readily accessible during all working hours a first aid box equipped with the prescribed contents at every place where contract labour is employed by him Liability of Principal Employer in Certain Cases (Section 20) If any amenity required to be provided, under Sections 16, 17, 18 or 19 for the benefit of the contract labour employed in an establishment is not provided by the contractor within the prescribed time, such amenity shall be provided by the principal employee within such time as may be prescribed:Responsibility for Payment of Wages It has been observed that the contractors do not pay proper wages to the contract labour or that payment of wages is not made in time or that unauthorised deductions are made from wages Section 21 has been incorporated to protect the contract labour against such malpractices It provides as follows. 1.A contractor shall be responsible for payment of wages to each worker employed by him as contract labour and such wages shall be paid before the expiry of such period as may be prescribed. 2. Every principal employer shall nominate a representative duly authorised by him to be present at the time of disbursement of wages by the contractor and it shall be the duty of such representatives to certify the amounts paid as wages in such manner as may be prescribed. 3. It shall be the duty of the contractor to ensure the disbursement of wages in the presence of the authorised representatives of the principal employer. Other Offences (Section 24) If any person contravances any of the provisions of this Act or of any rules made there under for which no other

penalty is elsewhere provided, he shall be punishable with imprisonment a term which may extent to three months or with fine which may. extend to one thousand rupees or with both. Inspectors (Section 28) The appropriate Government may, by notification in the Official Gazatte, appoint such persons as it thinks fit to be inspectors for the purposes of this Act and define the local limits within which they shall exercise their powers tinder this Act (Sec. 28 (1)). Q 3 Write a short note on The Payment of Wages Act, 1936 Ans The payment of wages act was passed in 1936 and it came into force from 28 March, 1937 Thereafter, the Act was amended in 1937, 1940, 1951, 1957, 1964, 1970, 1971, 1976, 1977 and 1982 The payment of wages Act, 1982 extended the application of the Act to cover person whose average wages are below Rs 1600/- (one thousand and six hundred rupees) . Objects of the Act The preamble of the Act lays down its object as an Act to regulate the payment of wages to certain classes of persons employed in industry. The regulation contempted by the Act is related RUIES FOR PAYMENT OF WAGES to (1) the date of payment of wages and (ii) the deductions from wages whether as fine or otherwise. In Arbind Mill Ltd. Vs K.R. Gadgill (1941), it was observed by the Bombay High court that the general purpose of the Act is to provide that the employed persons shall be paid their wages in a particular from and at regular intervals without any unauthorised deductions. The words certain classes of persons in the preamble are also important. The applicability of the Act is discussed below. Application of the Act The payment of wages Act, 1936 is applicable to whole of India. It applies in the first instance to the payment of

wages to (I) persons employed in any factory ; and (ii) to persons employed in any Railway by Railway Administration either directly or through a sub conductors or by persons fulfilling a contract with the Railway Administration. Responsibility for Payment of Wages : According to Section 3 of the Act, every employer is responsible for the payment, to persons employed by him, of all wages required to be paid under the Act. In case of persons employed (a) in factories, if a person has been named manager of the factory under clause (6) of subsection (1) of section 7 of Factories Act, 1948 (b) in industrial establishments, where a person is responsible to the employer for the supervision and control of the establishment ; and (c) upon the Railways, the person nominated by the railway Administration in this behalf for the local area concerned (d) the person so named, the person so responsible to the employer, or the person so nominated, as the case may be, shall also be responsible for such payment. Wage Period (Section 4). Every person responsible for the payment of wages under section 3 shall fix the wage periods in respect of which the wages shall be payable. No wage period shall exceed one month. Time and Mode of Payment 1.In a railway, factory or industrial establishment in which less than 1000 persons are employed, wages must be paid before the expiry of the seventh day after the last day of the wage period in respect of which the wages are payable. In all other factories or industrial establishments, wages must be paid before the expiry of the tenth day from the last day of the wage period as aforesaid. 2.Where the employment of any person is terminated by or on behalf of the employer, the wages earned by him shall be paid before the expiry of the second working day from the day on which his employment is terminated. 3.The State Government may exempt the persons employed in a railway from the operation of this section, partially or wholly. 4. all the payment of wages shall be made on a working day. Penalty for contravention is

tine up to five hundred rupees. All wages shall, be paid in current coins or currency notes or in both. The employer may, after obtaining the written consent of the employed person pay him the wages either by cheque or by crediting the wages in his bank account. Deduction from Wages. The wages of employed persons shall be paid to them without deduction of any kind except those authorised by or under the Payment of Wages Act. What is deduction ? Every payment made by the employed person to the employer or his agent shall, for the purposes of this Act, be deemed to be a deduction from wages. What is not a deduction ? Any class of wages resulting from the imposition of any of the following penalties, namely: (i) the withholding of increment or promotion; (ii) the reduction to a lower post or time scale to a lower stage in a time scale ; or (iii) Suspension; shall not be deemed to be deduction from wages in any case where the rules framed by the employer for the imposition of any such penalty are in conformity with the requirements, if any, which may be specified in this behalf by the State Government by notification in the official Gazette. Authorised Deductions Deduction from the wages of an employed person shall be made only in accordance with the provisions of this Act and may be of the following kinds only: (a) Fines (b) Deductions for absence from duty (c) Deduction for loss of goods

(d) House Accommodation (e) Amenities and Services (J) Recovery of Advances (g) Recovery of Loans (h) Recovery of Loans for House-building (i) Income Tax (j) Orders of Court (k) Provident Fund (1) Co-operative Societies (m) Prime Ministers National Relief Fund (n) Life Insurance Policy (o) Acceptance of Counterfeit Coins (p) Insurance Premium on Fidelity Guarantee Bonds (q) Failure to invoice or to collect (r) Incorrects Rebates or Refunds Rule Making Power The State Government may, by notification in the Official Gazette, make rules for the purpose of carrying into effect the provisions of this Act. It may also make rules to regulate the procedure to be followed by the Authorities and Courts referred to in Sections 15 and 17. In particular, the rules may relate to (1) maintenance of records, registers, notices etc. (ii) display of notices on premises (iii) inspection (iv) the manner of giving notice of the days on which wages will be paid (v) procedure for imposition of fines under Section 8 and for the making of deductions under Sections 9, 10 and 12 (vi) powers of Inspectors (vii) amount of. court fees payable in respect of any proceedings under the Act (viii) abstracts to be contained in the notices required by section 25 (ix) for any other matter which is to be or may be prescribed. Q.4. Write a short note on the Minimum Wages Act, 1948. Ans. The minimum Wages Act was passed in 1948 to secure the welfare of unorganised workers .in certain industries by fixing the minimum rates of wages. The Act empowers the

appropriate Government for fixation of minimum wages in employments enumerated in the schedule to the Act. The fixation of minimum wages relates to the industries where sweated labour is most prevalent or where there is inevitable chance of exploitation. In prescribing the minimum wage rates the capacity of the employers need not be considered as the state assumes that every employer must pay the minimum wages if he employs labour. Broad Features of the Act: The Minimum Wages Act are as under: 1. The minimum fixation of: Wages Act lays broad down features of the for

the

principles

(i) a minimum time rate of wages, (ii) a minimum piece rate (iii) a guaranteed time rate, and (iv) an overtime rate for different occupations, localities or classes of work and for adults, adolescents, children and apprentices. 2. The maintain rate of wages may consist of: (1) a basic rate of wages and a cost of living allowance ; or (ii) a basic rate of wages with or without the cost of living allowance and the cash value of the concessions in respect of essential commodities supplied at concessional rates. 3. The Act lays down that wages shall be paid in cash although, it empowers the appropriate Government to authorise the payment of minimum wages either wholly or partly in kind in particular cases. 4. The Act provides that the cost of living allowance and cash value of the concessions in respect of supplies of essential commodities at concessional rate shall be computed by the competent authority at certain intervals. In case of undertakings controlled by the union territories and Central Government the Director of Labour Bureau is the competent authority. 5. The Act empowers the appropriate Government to fix the number of hours of work per day, to provide for a weekly holiday and the payment of over-time wages of which minimum rates of wages have been fixed under the Act. Competent Authority It means the authority appointed by

the appropriate Government by notification in the official Gazette to as certain from time to time the cost of liviig index number applicable to the employees in the scheduled employments specified in such notification. Cost of Living Index Number It means the index number ascertained and declared by the component authority by notification in the official Gazette to be the cost of living index number applicable to employees in any scheduled employment in respect of which minimum rates of wages have been fixed The term cost of living index number has been replaced by most of the State Government by the term consumer price index number Employer The term employer means any person who employees either directly or through another person one or more employees in the scheduled employment in respect of which minimum rates f wages have been fixed. When employed through a contractor the contractor is within the meaning of the Act But the owner where scheduled employment is carried on is not if he is not concerned with such employment. Scheduled Employment It means an employment specified in the schedule or any process or branch of work forming part of such employment. The schedule as given in the Act has been reproduced later. Wages It means all remuneration capable of being expressed in terms of money, which would, if the terms of contract of employment were fulfilled, be payable to a person employed in respect of his employment or of work done in such employment. Employee The term 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 workers are an employer of a place an employer

minimum rates of wages have been fixed. Fixation of Minimum rate of wages The Act provides for the fixation of minimum rates of wages payable to employees for the specified class of employment, for the whole state or for a part of the state and to review minimum rates of wages so fixed and revise, if necessary, at such intervals as it may think fit, but not exceeding 5 years. Payment of Minimum Rate Wages Where in respect of any scheduled employment, the appropriate Government has fixed and notified minimum rates of wages, the employer is bound to pay every employee engaged in that employment under him the wages at rates not less than what is notified. Timings of Payment of Wages The wages of a worker in any scheduled employment shall be paid on a working day. In the case of establishments in which less than one thousand persons are employed, the wages shall be paid before the expiry of the seventh day after the last day of the wage period in respect of which the wages are payable. In all other factories, wages must be paid before the expiry of the tenth day from the wake period aforesaid. PAYMENT OF MINIMUM WAGES Wages in Kind Minimum wages under this Act must be paid in cash But this section authorises the payment of minimum wages in kind, where the appropriate Government is of the opinion, that it has been the custom to pay wages wholly or partly in kind. Wages for Overtime When a worker works in any scheduled employment for more than nine hours on any day or forty eight hours in any week, he shall be entitled to wages at one and a half time the ordinary rates of wages in the case of employment in agriculture and at double the ordinary rate of wages in any other scheduled employment. Penalties An employer who pays to any employee less than the prescribed minimum rate of wages or infringes any order or rule, may be punished with imprisonment upto six months and / or with fine up to five hundred rupees or with both. . 5.Write a short note on the Payment of Gratuity act,

1972. Ans. Gratuity is a retrial benefit which Js paid by an employer to an employee in consideration of his past services at the time of his retirement or after his death. In the case of employment coming to an end due to retirement or super annuation, it enables the affected employee to meet the newsituation which quite often means a reduction in earnings or even total stoppage of earnings. In case of death of an empl6yee, it provides much needed financial assistance to the surviving members of the family. Gratuity therefore, serves as an instrument of social security. Object of the Act The object of the Act is to provide for a scheme for the payment of gratuity to employees engaged in factories, mines, oil fields, plantations, ports, railway companies, shops and other establishments. Applicability of the Act According to Section 1 (3), the Act applies to (a) every factory, railway company; mine, oilfield, plantation, port and

(b) every shop or establishment within the meaning of any law for the time being in force in relation to shops and establishments in a state, in which ten or more persons are employed, or were employed, on any day of the preceding twelve months (c) Such other establishments or class of establishments in which ten or more employees are employed, or were employed, on any day of the proceeding twelve months as the Central Government may by notification specify in this behalf. Broad Features of the Act The payment of Gratuity Act, 1972 is a progressive social security and welfare measure providing for compulsory payment of gratuity The sailent features of the Act are 1 The Act is fairly sweeping in coverage as it applies to all factories mines oil fields, plantations, ports and railways irrespective of the number of persons employed by them. It also covers shops and establishments employing ten or more persons. 2. The Act is a self-contained and an exhaustive piece of

labour welfare and social security law. The provisions of this Act and the rules made under it have an over - riding effect on all other Acts or contracts so far as they are inconsistent with this Act. 3. The Act gives a statutory right of gratuity to all the employees who have rendered five years continuous service and whose services stand terminated after coming into force of the Act on account of super-annuation or retirement or resignation, or death or disablement. 4. The Act provides both executive as well as quasijudicial machinery for matters relating to nomination, determination and recovery of gratuity 5. There is a provision in the Act relating to maintenance of records regarding opening, change or closure of establishments, display of notices, and maintenance of record by the controlling authority. PAYMENT OF GRATUITY When is Gratuity Payable? According to Section 4 (1) of the Payment of Gratuity Act, 1972, gratuity shall be payable to an employee. On the termination of his employment after he has rendered continuous service for not less than five years. (a) on his superannuation, or (b)on his retirement or registration, or (c)on his death or disablement due to accident or disease. The completion of continuous service of five years is not necessary where the termination of employment is due to death or disablement. In case of death of the employee, gratuity is to be paid to his nominee or in the absence of nomination to his heirs. Protection of Better Terms of Gratuity The right of an employee to receive better terms of gratuity under any award, or argument, or contract with the employer is protected. Where a particular provision in an existing gratuity scheme is more favourable whereas some other provisions are less favourable, the employees must make a choice of one of the two schemes in its entirely as more favourable.

Compulsory Insurance The payment of Gratuity Act, 1987 has prescribed provisions for compulsory insurance for employers liability for payment towards the gratuity under the Act from the Life Insurance Corporation of India established under the Life Insurance Corporation of India Act, 1956 or any other prescribed insurer. However, employer of an establishment belonging to or under the control of the Central Government or the state Government is exempted from the operation of these provisions. The Appropriate Government may also exempt: (i) employer who has already established an approved gratuity fund in respect of his employers and who desires to continue such arrangement ; and (ii) employee employing 500 or more persons, who has established an approved gratuity fund in the manner prescribed. Recovery of Gratuity Section 8 provides that if the gratuity under the Act is not paid by the employer within the prescribed time, the controlling Authority shall, on application made to it in this behalf by the aggrieved person, issue a certificate for that amount to the collector, who shall recover the same together with the compound interest thereon at such rate as the Central Government may by notification, specify, from the date of expiry of the prescribed time, as arrears of land revenue and pay the same to the person entitled there to. Gravity is not Attachable Gravity has been exempted from attachment in execution of any decree or order of any Civil, Revenue or Criminal Court. Penalties (a) Avoidance of any payment, payable under this Act, making any false, statement or representation shall be punishable with imprisonment to the extent of six months or with fine to the extent of one thousand rupees or with both.

(b) An employer violating the provisions of this Act shall be punishable with imprisonment to the extent of one year or with fine to the extent of one thousand rupees or with both.

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