My factory employs 18 people and was founded 14 years ago. Of the total employees, 15 of them receive a salary of less than Rs. 25,000, and 3 receive between Rs. 30,000 and Rs. 70,000. We are planning to shut down the services as last fiscal year we incurred a loss, and there has been no business this year.
Please advise on the following:
1. Do I need to pay a bonus for last year to all employees?
2. Provide 15 days of service compensation along with gratuity to all employees.
From India, Noida
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Please advise on the following:
1. Do I need to pay a bonus for last year to all employees?
2. Provide 15 days of service compensation along with gratuity to all employees.
From India, Noida
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Dear Ashu-Ohri,
Since the total number of employees, probably including both workmen and non-workmen categories in your establishment, happens to be less than 50, you can close down your establishment subject to payment of retrenchment compensation under Section 25F of the ID Act, 1947, and all other terminal benefits including gratuity under the PG Act, 1972, cash value of the Annual Leave with Wages at the credit of the workers on the date of closure as per Section 79(3) of the Factories Act, 1948, and statutory bonus up to the date of closure for the accounting year. These payments consequent on the intended closure are mandatory.
From India, Salem
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6185Since the total number of employees, probably including both workmen and non-workmen categories in your establishment, happens to be less than 50, you can close down your establishment subject to payment of retrenchment compensation under Section 25F of the ID Act, 1947, and all other terminal benefits including gratuity under the PG Act, 1972, cash value of the Annual Leave with Wages at the credit of the workers on the date of closure as per Section 79(3) of the Factories Act, 1948, and statutory bonus up to the date of closure for the accounting year. These payments consequent on the intended closure are mandatory.
From India, Salem
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My labor consultant says anyone receiving a salary of Rs. 24,000 per month or above is only eligible for gratuity and notice period pay, and not service compensation, i.e., 15 days per year basic pay+DA additional to gratuity, as that benefit is only payable to workers earning less than Rs. 24,000 per month. Kindly confirm if this is correct.
From India, Noida
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From India, Noida
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Dear Ashu,
I am not sure on what basis your learned consultant has tendered such a legal opinion. The status of a workman is not defined by the quantum of salary or wages drawn except the cadre of a supervisor where the salary is limited to Rs. 10,000/=pm. His opinion will hold good in respect of administrative and managerial cadre employees: even in their case, salary is not the criterion but only the capacity of their job position.
Besides, the Rs. 24K pm ceiling is applicable only for the purposes of the Payment of Wages Act, 1936, which has no relevance in the matters of retrenchment and closure. This ceiling on wages also stands removed in the yet to be enforced Code on Wages. Compensation, if any, and notice pay to such employees in the event of foreclosure of the contract of employment by the employer have to be determined on the basis of the separation clause, if any mentioned therein.
As regards retrenchment compensation u/s 25-F(b), it is 15 days average pay for every year of completed service, not the sum of pay + D.A.
From India, Salem
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I am not sure on what basis your learned consultant has tendered such a legal opinion. The status of a workman is not defined by the quantum of salary or wages drawn except the cadre of a supervisor where the salary is limited to Rs. 10,000/=pm. His opinion will hold good in respect of administrative and managerial cadre employees: even in their case, salary is not the criterion but only the capacity of their job position.
Besides, the Rs. 24K pm ceiling is applicable only for the purposes of the Payment of Wages Act, 1936, which has no relevance in the matters of retrenchment and closure. This ceiling on wages also stands removed in the yet to be enforced Code on Wages. Compensation, if any, and notice pay to such employees in the event of foreclosure of the contract of employment by the employer have to be determined on the basis of the separation clause, if any mentioned therein.
As regards retrenchment compensation u/s 25-F(b), it is 15 days average pay for every year of completed service, not the sum of pay + D.A.
From India, Salem
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Dear all concerned,
In order to close your business, obtaining a No Objection Certificate (NOC) is mandatory from the respective departments such as the Labour Office, EPF, ESI, etc. Firstly, communicate with the respective Labour office from our end and follow all related instructions. Complete all formalities to settle your staff and workers' Full and Final (FNF) accounts.
Best Regards,
Soniya Bhardwaj
AM HR
UDTL
From India, Pune
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In order to close your business, obtaining a No Objection Certificate (NOC) is mandatory from the respective departments such as the Labour Office, EPF, ESI, etc. Firstly, communicate with the respective Labour office from our end and follow all related instructions. Complete all formalities to settle your staff and workers' Full and Final (FNF) accounts.
Best Regards,
Soniya Bhardwaj
AM HR
UDTL
From India, Pune
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Dear Mr. Umakanthan,
Thank you for your valued clarification. I would be grateful if you could further clarify whether the average pay will apply to all workers. For example, if a Karigar/Worker was employed for 6 years and was paid Rs. 5000 per month as the total gross salary in the first year of work, and is now being paid Rs. 150000, his average pay will be Rs. 10,000. Would he need to be paid Rs. 60,000 as service compensation?
Additionally, individuals such as accountants and supervisors are not required to be paid service compensation. This is because, by the definition/description of their job roles, they will not be categorized as labor.
I appreciate the clarifications you have provided. Two labor court lawyers practicing in the Delhi High Court, whom I consulted, informed me that I am not obligated to pay any service compensation. This is in accordance with the Ministry of Labour notification published in the "Gazette of India" S.O. 2806(E). This notification specifies Rs. 24000 per month as the wages under the said sub-section(6) of the Payment of Wages Act, 1936(4 of 1936).
Thanks & Best Regards,
Ashu Ohri
From India, Noida
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Thank you for your valued clarification. I would be grateful if you could further clarify whether the average pay will apply to all workers. For example, if a Karigar/Worker was employed for 6 years and was paid Rs. 5000 per month as the total gross salary in the first year of work, and is now being paid Rs. 150000, his average pay will be Rs. 10,000. Would he need to be paid Rs. 60,000 as service compensation?
Additionally, individuals such as accountants and supervisors are not required to be paid service compensation. This is because, by the definition/description of their job roles, they will not be categorized as labor.
I appreciate the clarifications you have provided. Two labor court lawyers practicing in the Delhi High Court, whom I consulted, informed me that I am not obligated to pay any service compensation. This is in accordance with the Ministry of Labour notification published in the "Gazette of India" S.O. 2806(E). This notification specifies Rs. 24000 per month as the wages under the said sub-section(6) of the Payment of Wages Act, 1936(4 of 1936).
Thanks & Best Regards,
Ashu Ohri
From India, Noida
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Dear Ashu, Can you pl get a copy of such notification and upload it?
From India, Salem
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From India, Salem
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Dear Ashu Ori,
The S.O. 2806 (E) dated 28-08-2017 is the notification issued by the Central Government enhancing the coverage limit of wages under Section 1(6) of the Payment of Wages Act, 1936 from the existing Rs. 18,000 to Rs. 24,000 per month for the purpose of application of the Act. Therefore, you may have misquoted the learned advocates.
Terminal benefits, as the name suggests, are the benefits payable to an exiting employee by the employer upon the termination of their employment. Therefore, the salary/wages the employee last drew at the time of termination of employment form the monetary basis, and the total number of years of continuous service rendered by the employee is the chronological unit for computing the benefit, not any average as you mentioned.
Regarding your query about the employment status of an accountant and a supervisor, I suggest revisiting the definition clause under Section 2(s) of the Industrial Disputes Act, 1947. Once you do so, you will agree that regardless of the salary drawn, an accountant is considered a "workman," and a supervisor can also be classified as such when their monthly salary does not exceed Rs. 10,000.
Thank you.
From India, Salem
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The S.O. 2806 (E) dated 28-08-2017 is the notification issued by the Central Government enhancing the coverage limit of wages under Section 1(6) of the Payment of Wages Act, 1936 from the existing Rs. 18,000 to Rs. 24,000 per month for the purpose of application of the Act. Therefore, you may have misquoted the learned advocates.
Terminal benefits, as the name suggests, are the benefits payable to an exiting employee by the employer upon the termination of their employment. Therefore, the salary/wages the employee last drew at the time of termination of employment form the monetary basis, and the total number of years of continuous service rendered by the employee is the chronological unit for computing the benefit, not any average as you mentioned.
Regarding your query about the employment status of an accountant and a supervisor, I suggest revisiting the definition clause under Section 2(s) of the Industrial Disputes Act, 1947. Once you do so, you will agree that regardless of the salary drawn, an accountant is considered a "workman," and a supervisor can also be classified as such when their monthly salary does not exceed Rs. 10,000.
Thank you.
From India, Salem
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Dear Mr. Umakanthan,
I have rechecked with the lawyer, Mr. Jitesh Pandey, and he says that an Accountant and Supervisor who draw a salary of Rs. 70,000 each can never be categorized as workmen by any court of law. Adv. Pandey, who has a 30-year-old law firm, says that if needed, he can provide me with this legal opinion in writing.
Best Regards & Thanks,
Ashu Ohri
From India, Noida
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I have rechecked with the lawyer, Mr. Jitesh Pandey, and he says that an Accountant and Supervisor who draw a salary of Rs. 70,000 each can never be categorized as workmen by any court of law. Adv. Pandey, who has a 30-year-old law firm, says that if needed, he can provide me with this legal opinion in writing.
Best Regards & Thanks,
Ashu Ohri
From India, Noida
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In India, pilots are also considered workmen, so accountants are also workmen. I don't see any connection between the closure of a factory and 50 employees. A Rs 24,000 salary per month has nothing to do with compensation or gratuity. You need to pay a bonus only to those employees whose salary is not more than Rs 21,000 per month.
From India, Thiruvananthapuram
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From India, Thiruvananthapuram
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