Hello, Can somebody please elaborate on section 59(2) of the Factories Act, which states that the “ordinary rate of wages” means the basic wages plus such allowances. My hypothetical question is if there exists a settlement agreement between the employer and employees as a union, but if some employees decide that the agreement is not really beneficial to them and challenge it, are there any legal precedents I can use on behalf of employees to support my argument?
From India, Bengaluru
From India, Bengaluru
You have asked two questions. First is relating to wages which will qualify for overtime allowance. The Factories Act says that it is calculated on ordinary rate of wages. Ordinary rate of wages means the basic wages and such allowances which an employee is entitled to get. In the present scenario, all allowances will form part of wages. In the past (or when the Act was passed) there existed mainly tow components for salary/ wage, and they were basic wage and dearness allowance. It was with the advent of HR Management replacing the Personnel Management that the salary was started getting bifurcated in to different components like basic wages, HRA, Special allowance, Conveyance, Education allowance etc etc. The purpose of this bifurcation is very clear, and it is nothing but to reduce the burden of the employers towards various statutory contributions.
When to come back to section 59(2) we will see that ordinary rate of wages shall include allowances to which employee is entitled to for the time being. If HRA, Conveyance or special allowance are available to employees, that should be part of wages. It is also noted that if that employee takes a day Leave without Pay, it would be the total wages proportionate of which the deduction will be made. Then it is the total salary which is to be considered as ordinary rate of wages. Yes, if any reimbursement is there that will be outside the scope of wages. Similarly, any amount paid as compensatory allowance or based on certain conditions or achievement of target shall be excluded.
Now coming to the next portion of question, ie, can an employee raise any dispute over the terms and conditions agreed between the employer and the Union. If the settlement is a settlement arrived at during the course of a conciliation as per section 12(3) of the Industrial Disputes Act, the conditions of settlement is binding on all employees. At the same time if it is a bi partie settlement or 18(1) settlement an employee can disagree to the settlement and come out of it. But what can he do when he is not supported by other workmen? He cannot do anything in practical.
From India, Kannur
4246When to come back to section 59(2) we will see that ordinary rate of wages shall include allowances to which employee is entitled to for the time being. If HRA, Conveyance or special allowance are available to employees, that should be part of wages. It is also noted that if that employee takes a day Leave without Pay, it would be the total wages proportionate of which the deduction will be made. Then it is the total salary which is to be considered as ordinary rate of wages. Yes, if any reimbursement is there that will be outside the scope of wages. Similarly, any amount paid as compensatory allowance or based on certain conditions or achievement of target shall be excluded.
Now coming to the next portion of question, ie, can an employee raise any dispute over the terms and conditions agreed between the employer and the Union. If the settlement is a settlement arrived at during the course of a conciliation as per section 12(3) of the Industrial Disputes Act, the conditions of settlement is binding on all employees. At the same time if it is a bi partie settlement or 18(1) settlement an employee can disagree to the settlement and come out of it. But what can he do when he is not supported by other workmen? He cannot do anything in practical.
From India, Kannur
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