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
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From India, Bengaluru
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You have asked two questions. The first is related to wages that qualify for overtime allowance. The Factories Act states that it is calculated based on the ordinary rate of wages. The ordinary rate of wages includes basic wages and any allowances to which an employee is entitled. Currently, all allowances are considered part of wages. Historically, when the Act was initially passed, there were primarily two components for salary/wage: basic wage and dearness allowance. With the evolution from Personnel Management to HR Management, salaries began to be divided into various components like basic wages, HRA, Special allowance, Conveyance, Education allowance, etc. This division aims to lessen the burden of employers in terms of statutory contributions.
Referring to section 59(2), the ordinary rate of wages encompasses allowances that employees are entitled to at that time. If HRA, Conveyance, or special allowances are provided, they should be included in wages. It is important to note that if an employee takes a day of Leave without Pay, the deduction will be from the total proportionate wages. The total salary is what should be considered the ordinary rate of wages. Reimbursements fall outside the wages scope. Similarly, compensatory allowances or payments based on specific conditions or achievement of targets are excluded.
Moving on to the second part of the question, can an employee dispute the terms and conditions agreed upon between the employer and the Union? If the settlement arises during conciliation as per section 12(3) of the Industrial Disputes Act, the settlement conditions are binding on all employees. However, in the case of a bipartite settlement or an 18(1) settlement, an employee can disagree and opt out. If the employee lacks support from other workers, there may be limitations on what actions can be taken practically.
From India, Kannur
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4771Referring to section 59(2), the ordinary rate of wages encompasses allowances that employees are entitled to at that time. If HRA, Conveyance, or special allowances are provided, they should be included in wages. It is important to note that if an employee takes a day of Leave without Pay, the deduction will be from the total proportionate wages. The total salary is what should be considered the ordinary rate of wages. Reimbursements fall outside the wages scope. Similarly, compensatory allowances or payments based on specific conditions or achievement of targets are excluded.
Moving on to the second part of the question, can an employee dispute the terms and conditions agreed upon between the employer and the Union? If the settlement arises during conciliation as per section 12(3) of the Industrial Disputes Act, the settlement conditions are binding on all employees. However, in the case of a bipartite settlement or an 18(1) settlement, an employee can disagree and opt out. If the employee lacks support from other workers, there may be limitations on what actions can be taken practically.
From India, Kannur
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