Provident Fund
Act
| |
Applicability of PF
Act
|
PF Act applies to
factories and other notified establishments employing 20 or more persons. Once
an establishment is covered, its departments and branches, wherever they are,
are covered. Once establishment is covered, it continues to get covered even if
employment goes below 20.
|
Schemes under PF
Act
|
Employees Provident Fund,
Employees’ Pension Scheme and Employees’ Deposit-Linked Insurance Scheme [EDLI] are the three
schemes covered.
|
Partial or full
exemption
|
Exemption can be granted
to certain establishments or employees
|
Contribution to
Provident Fund
|
Contributions to Fund
are made by employers and employees. The fund is administered by Central Board
of Trustees
|
Contribution equal to
125/10% of pay by employer as well as
employee
|
Both employer and
employee contribute @ 12% of ‘pay’ to Provident Fund (in some establishments
like any establishment employing
less than 20 persons, sick units, Jute industry, Beedi industry, Brick industry,
Coir industry other than the spinning sector, Guar gum factories., contribution is 10%).
|
Part of Employer’s
contribution to FPF
|
8.33% contribution of
employer goes to Family Pension Fund. Balance is credited to Employee’s PF
account. Entire contribution of employee is credited to his PF account. Interest
is paid on this amount. Since last 4 years, interest is 8.5%.
|
Employees required to
join the Fund
|
Employee whose pay is
less than Rs 6,500 per month is covered under the Act. ‘Pay’ includes basic
wages, dearness allowance, retaining allowance and cash value of food
concession.
|
Contribution limited to
salary of Rs 6,500 p.m, but higher contribution permissible.
|
If an employee is
member, he continues to be a member even if his ‘pay’ becomes more than Rs
6,500. Employer is liable to pay contribution only on salary of Rs 6,500, though
employer can voluntarily contribute more (as extra employee benefit). Employee
can voluntarily pay contribution on pay above Rs
6,500
|
Employee to become member
immediately on joining
|
An employee becomes member
of PF immediately after joining an establishment to which PF Act applies.
However, he should be ‘employee’. Mere casual engagement is not
‘employment’.
|
Person employed through
contractor covered but not apprentice
|
Persons employed through
contractor are also covered, but apprentices under Apprentices Act are not
covered
|
Administration charges for PF
|
In addition to PF contribution, the employer
also has to pay administration charges at prescribed rates. Presently, it is
1.10% of wages. In case of exempted establishments, the employer has to pay
0.18% of wages / salary as inspection
charges.
|
Contribution to be paid
within 15 days
|
Contribution and
administration charges are to be paid within 15 days from close of month. If
employer delays payment, damages (interest) can be recovered from him.
|
Submission of details of employees joining
and leaving
|
When a new employee joins, Employee’s details
are to be submitted in form No. 5 to PF Commissioner within 15 days from close
of the month in which the employee joins, along with declaration in form 2 given
by employee. If an employee leaves, form No. 10 is to be filed.
|
Monthly return of contribution
|
Employer has to file a monthly contribution
statement (abstract) in form 12A, within 25 days of close of month, along with
copy of receipted challans regarding payment of contribution. Employer has
submit only abstract every month in the prescribed form.
|
Annual Contribution
Statement of PF
|
Employer has to submit
consolidated Annual Contribution
Statement of PF in form 6A for March paid in April to February paid in March of
current year, along with contribution card of each employee for same period in
form 3A by 30th April.
|
Withdrawal of Provident
Fund by Employee
|
A member of provident
fund gets the fund with interest at the time of retirement. Early withdrawal for
housing, marriage, illness etc. is
permissible
|
Pension under EPF
scheme
|
Member is entitled to
get pension after retirement after completion of 58 years of age. The pension
depends on service of number of years and his average salary of last 12 months.
No pension is available for less
than ten years service. Only contribution is returned with slightly reduced
interest.
|
EDLI
|
Employees Deposit Linked Insurance Scheme is
to provide life insurance benefits to employees who are already covered under
PF. Employer is required to pay contribution of 0.5%. Employer is also required
to pay administration charges @ 0.1% of total
wages.
|
PF for international workers
|
There is PF and EPF scheme for international
workers.
|
Payment of Bonus
Act
| |
Reward for hard work and
share of profit
|
Bonus is a reward for
hard work or share of profit of the unit where employee is working [practically,
it is not so]
|
Applicability of
Act
|
The Act applies to
factory employing 10 or more persons where processing is carried out with aid of
power and other establishment established for purpose of profits employing 20 or
more persons
|
Employees eligible for
Bonus
|
Employee whose salary
and wages are upto Rs 10,000 per month and who has worked for at least 30 days
in a year is entitled to get bonus
|
Salary for calculating
bonus
|
Salary above Rs 3,500
per month is not considered for purpose of
bonus.
|
Quantum of
bonus
|
Quantum of bonus is
‘allocable surplus’, which is equal to 60% of ‘available surplus’. ‘Available
surplus’ is equal to gross profit less prior charges allowable as deduction plus
amount equal to income tax on bonus
portion.
|
Minimum and maximum
bonus
|
Minimum bonus is 8.33%
and maximum is 20%. Provisions of set off and set on are made to take care of
shortfalls and excess in ‘allocable
surplus’.
|
Time limit for
payment
|
Bonus should be paid
within eight months from close of accounting
year
|
Bonus based on
productivity
|
Alternate mode of
payment of bonus based on productivity is
permissible
|
Audited accounts for
bonus
|
Audited accounts of
employer cannot be challenged before Arbitrator or Tribunal, but clarifications
can be asked
|
Employees State Insurance Act
(ESI)
| |
Applicability to factories and
shops
|
ESI Act
applies to factories. It can be made applicable to shops also. The Act is
administered by Employees State Insurance Corporation [ESIC].
|
Meaning of ‘factory’ for ESI
Coverage
|
The ‘Factory’ means any premises where
manufacturing process is carried out and persons employed are at least 10 (Till
1-6-2010, if factory was not using power, the limit was 20. Now that distinction
has been abolished). Once a factory or establishment is covered, it continues to
be covered even if number of employees
reduce.
|
Employee covered under ESI
|
Employees drawing
wages upto Rs. 15,000 per month are presently covered under the ESI scheme [The
limit was Rs 10,000 upto 30-4-2010, Rs 7,500 upto 30-9-2006 and Rs 6,500 p.m.
upto 31-3-2003].
Employees include * persons employed
through contractor * Apprentices other than those covered under
‘Apprentices Act’ * Persons employed in administration office, department or
branch for purchase or sale of products. * Casual workers engaged in work
incidental to or connected with work of factory or establishment * Employees
working at head office when factory is located at different place * Canteen
staff, watch and ward staff are employees * Staff in hospital attached to
factory are employees (Apprentices appointed under standing orders will also get
covered w.e.f. 1-6-2010)
|
Employer’s and Employee’s contribution to
ESI
|
The employee’s
contribution is 1.75% of wages, rounded to next higher rupee. Employer’s
contribution is 4.75% of wages payable to each employee, rounded off to next
higher rupee.
The contribution has to be paid within 21
days from close of the month. If the contribution is not paid in time, interest
@ 12% is payable.
|
Wages for purpose of ESI
|
‘Wages’ means all remuneration paid or
payable in cash to employee according to terms of contract of employment and
includes any payment made to an employee in respect of period of authorised
leave, lock-out, lay-off, strike which is not illegal and other additional
remuneration paid at interval not exceeding two months. It does not include *
contribution paid by employer to any pension fund or provident fund * Travelling
allowance * Reimbursement of expenses made by nature of employment of the
employee * gratuity. Thus, wages include basic pay, dearness allowance, city
compensatory allowance, payment of day of rest, overtime wages, house rent
allowance, incentive allowance, attendance bonus, meal allowance and incentive
bonus.
|
Contribution period and benefit
period
|
Contribution period is (a) 1st
October to 31st March - corresponding benefit period is following 1st July to
31st December (b) 1st April to 30th September - corresponding benefit
period is following 1st January to 30th June. Thus, ‘benefit period’ starts
three months after the ‘contribution period’ is over. The relevance of this
definition is that sickness benefit and maternity benefit is available only
during ‘benefit period’. However, other benefits e.g. medical benefit,
disablement benefit, dependant’s benefit and funeral expenses are available
during contribution period also.
|
Unemployment benefit under ESI
|
Unemployment Benefit scheme known as
‘Rajiv Gandhi Shramik Kalyan Yojana’ is introduced. Under the scheme, an
insured person going out of insured employment involuntarily on account of
closure of a factory or establishment, retrenchment or permanent invalidity
arising out of non-employment is entitled to get unemployment allowance for a
maximum period of 12 months in his entire period of service. Spell of
unemployment shall not be less than one month. Employees who have completed
three years of insurable employment are eligible under the scheme.
|
Report to ESIC by employer when employee
joins
|
When an employee
joins, his declaration in Form I has to be obtained. The declaration should be
submitted within 10 days to ESIC office. Temporary Identification certificate is
also to be issued. Employer has to maintain register of all employees in form
6.
Employee and his family members should
obtain ‘Smart card’ identity from ESIC which will enable them to get ESI benefit
anywhere in India.
|
Return of contribution to ESIC
|
Return of Contribution of employees
(employed through Principal as well as Immediate Employer) shall be submitted in
form 5. The return is to be certified by Chartered Accountant if the number of
employees are 40 or more. If number of employees are less than 40, self
declaration is to be made by employer regarding maintenance of records and
registers, submission of declaration forms, distribution of TIC/PIC
received/distributed to employees engaged directly or through immediate employer
and wages paid. Due dates are 12th May and 11th
November.
|
Annual declaration to ESIC
|
Every employer has to submit annual
declaration by 31st January in form
01(A)
|
Payment of Gratuity
Act
| |
Applicability of Gratuity Act
|
The Payment of Gratuity Act applies to
every factory, mine, oilfield, plantation, port. The Act also applies to every
‘shop and establishment’ where 10 or more persons are employed or were employed
on any day in preceding 12 months. Once the Act becomes applicable to any shop
or establishment, the Act will continue to be applicable even if later number of
employees falls below ten [section 1(3A) of Payment of Gratuity Act]
|
Employees covered under Gratuity
Act
|
Payment of Gratuity Act is applicable to
all employees - workers as well as persons employed in administrative and
managerial capacity. The Act is applicable to all employees, irrespective of
the salary.
|
When gratuity is payable
|
Gratuity is payable
to a person on (a) resignation (b) termination on account of death
or disablement due to accident or disease (c) retirement (d) death.
Normally, gratuity is payable only after an
employee leaves after completing five years of continuous service. In case of
death and disablement, the condition of minimum 5 years’ service is not
applicable.
|
Insurance of gratuity liability not
mandatory
|
Insurance of gratuity liability by employer
is optional. It is not compulsory.
|
Quantum of gratuity
|
Gratuity is payable @ 15 days wages for
every year of completed service in case of regular employees. In the last year
of service, if the employee has completed more than 6 months, it will be treated
as full year for purpose of gratuity, i.e. 15 days gratuity will be payable. In
case of seasonal establishment, gratuity is payable @ 7 days wages for each
season.
|
Wages for calculating gratuity
|
Wages for gratuity means all emoluments
which are earned by an employee while on duty or on leave in accordance with
terms and conditions of his employment and which are payable to the employee in
cash. It includes dearness allowance. However, allowances like bonus,
commission, House Rent allowance (HRA), overtime and other allowances are not to
be considered as ‘wages’ for purpose of Payment of Gratuity Act.
|
Employees getting pay on monthly
basis
|
In case of employees paid on monthly wages
basis, fifteen days wages will be calculated by dividing monthly salary by 26
days and multiplying by 15 days. For example, if last drawn salary of a person
(basic plus DA) is Rs. 2,600 per month, his salary per day will be Rs. 100
(2,600 divided by 100). Thus, the employee is entitled to get Rs. 1,500 [15 days
multiplied by Rs. 100 daily salary] for every year of completed service.
|
Ceiling of gratuity
|
Maximum gratuity payable under the Act is Rs
10 lakhs w.e.f. 24-5-2010 [section 4(3) of Payment of Gratuity Act. The limit
was Rs 3.50 lakhs upto 24-5-2010].
However, Employer
can offer better terms to their employees than those specified under the Act as
per any award, agreement or contract.
Income tax exemption is available upto Rs
10 lakhs w.e.f. 24-5-2010.
|
Payment of gratuity within 30
days
|
Employer is under obligation to pay the
gratuity within 30 days from the date it becomes payable. Otherwise, interest @
15% is payable.
|
Industrial Disputes
Act
| |
Object of
IDA
|
The object of the Industrial Disputes Act
is to make provisions for investigation and settlement of industrial disputes.
However, it makes other provisions in respect of lay off, retrenchment, closure
etc. The purpose is to bring the conflicts between employer and employees to an
amicable settlement. [The Act is achieving exactly opposite]. The Act
provides machinery for settlement of disputes, if dispute cannot be solved
through collective bargaining.
|
Wide
definition of ‘industry’
|
In Bangalore Water Supply &
Sewerage Board v. Rajappa (1978) 2 SCC 213 = 36 FLR 266 = 1978(1) LLN
657 = 1978(2) SCR 213 = 1978(1) LLJ 349 = AIR 1978 SC 548 (SC 7 member bench 5 v
2 judgment), a very wide interpretation to the term 'industry' was given. It was
held that profit motive or a desire to generate income is not necessary. Any
systematic activity organized by cooperation between employer and employees for
the production and/or distribution of goods and services calculated to satisfy
human wants and wishes is ‘industry’.
|
Who is
‘workman’
|
‘Workman’ means any person (including
apprentice) employed in any industry to do any manual, clerical or supervisory
work for hire or reward. It includes dismissed, discharged or retrenched person
also. However, it does not include (i) Armed Forces i.e. those subject to Air
Force Act, Army Act or Navy Act (ii) Police or employees of prison (iii)
Employed in mainly managerial or administrative capacity or (iv) person in
supervisory capacity drawing wages exceeding Rs 1,600 per month or functions are
is mainly of managerial nature.
|
21 days notice for change in condition of
service
|
Section 9A provides that an employer cannot
effect any change in the conditions of service applicable to any workman without
giving 21 days notice.
|
Adjudication of Industrial Disputes
|
The Industrial Disputes Act provides for
‘Works Committee’ in factories employing 100 or more workers. The committee will
consist of equal number of representatives of employer and employees.
Representatives of employees will be selected in consultation with Registered
Trade Union. The Works Committee will first try to settle disputes. If dispute
is not solved, it will be referred to ‘Conciliation Officer’. He is appointed by
Government. The matter may also be referred to ‘Board of Conciliation’. He will
try to arrive at fair and amicable settlement acceptable to both parties. If he
is unable to do so, he will send report to appropriate Government. The
Government may then refer the industrial dispute to Board of conciliation,
Labour Court or Industrial Tribunal.
|
Compensation for layoff
|
A factory employing 50 or more but less
than 100 employees on an average per working day can lay off the workmen, who
have completed one year of service, by paying compensation equal to 50% of
salary (basic plus DA)
|
Retrenchment
|
‘Retrenchment’ means discharge of surplus
labour or staff by employer. It is not by way of punishment. The retrenchment
should be on basis of ‘last in first out’ basis in respect of each category,
i.e. junior-most employee in the category (where there is excess) should be
retrenched first. If employer wants to re-employ persons, first preference
should be given to retrenched workmen.
|
Protection to employee completing 240
days
|
Once an employee completes 240 days, he is
deemed to be permanent employee under Industrial Disputes Act. He cannot be
termed as ‘contingent workman’
|
Restrictions on large industry in layoff,
retrenchment or closure
|
Large industries employing 100 or more
workmen on an average for preceding 12 months cannot lay-off, retrench or close
down the undertaking without permission from Government (sections 25M to 25-O of
Industrial Disputes Act).
|
Public Utility
|
.In case of public utility, employees have
to give at least 14 days notice for strike. The notice is valid only if strike
commences within 6 weeks. Otherwise, fresh notice is required. - - Similarly, an
employer cannot declare lock out without giving 14 days notice.
|
Disciplinary action against
employee
|
The workman is issued with a ‘Show Cause
Notice’ giving details of charges of misconduct against him. He has to give his
reply. Then, enquiry into charges is conducted by an ‘Enquiry Officer’ appointed
by Management. Such ‘Enquiry Officer’ can be an employee of the company or an
outsider. The workman can defend himself before the Enquiry Officer or he can be
defended by his co-worker or a Union Representative. The workman is not allowed
to engage a lawyer to defend his case. After enquiry, the ‘Enquiry Officer’ has
to give his findings and state whether he finds the workman ‘guilty’ or ‘not
guilty’. He should give reasons for his views. However, the ‘Enquiry Officer’
should not give his opinion about the punishment that should be imposed on the
workman. Copy of the report of Enquiry Officer has to be given to the workman.
The workman has right to state his case on the basis of ‘Enquiry Report’ After
the reply of workman, the authorised Manager will go through enquiry papers,
report of Enquiry Officer and observations/reply of workman on the report of
Enquiry Officer. The Authorised Manager will then issue suitable order.
|
Employees’ Compensation
Act
| |
Compensation if injury/death occurs out of
and during the course of employment or for occupational disease
|
Under Employees’ Compensation Act, 1923
(earlier known as Workmen’s Compensation Act upto 18-1-2010), an employee who dies or suffers
disablement (partial or total) due to accident is entitled to get compensation
from employer, if it is employment injury, i.e. arising out of and during
the course of employment.
Notional
Extension of employment - A workman is
entitled to get compensation even beyond working hours or beyond his work place,
if there is nexus between the time and place of the accident and the employment
of workman.
Occupational
disease – Employer is
liable if a employee contracts any specified occupational disease, while he is
in service of employer for at least 6 months. [section 3(2)].
|
No compensation if employee covered under
ESI
|
Since an employee is entitled to get
compensation from ESIC, an employee covered under ESI Act is not entitled to get
compensation under Employee’s Compensation Act, as per section 53 of
ESIC.
|
Applicability of Act
|
Act is applicable to
factories, mines, plantations, transport establishments, construction work etc.
(who are not covered under ESI Act). In most cases, Act applies even if number
of employees are much less than 20.
|
Coverage of employees
|
Every employee,
including those employed through contractor, but excluding casual employees who
is engaged for purpose of employer’s business is eligible.
Persons employed
outside are also covered. Persons employed in clerical capacity are also
included w.e.f. 18-1-2010.
|
Employment through contractor
|
Person employed through contractor is also
eligible for compensation. Principal employer is liable though he can recover
the amount from contractor.
|
No fault
liability
|
Employer is liable even if the employee was
negligent or careless or was at fault.
|
Computation of liability
|
Mode of computation
of compensation is given in section 4 of the Act. Compensation is payable to
employee for total or partial disablement.. No compensation is payable if
disablement is upto only three days. Compensation is payable to dependents of
employee in case of death.
All actual medical
expenses for treatment of injury will be reimbursed to employee. If employee
dies, funeral expenses upto Rs 5,000 are payable by employer.
Interest
is payable in case of default.
|
Compensation only through Commissioner in
case of death or total disablement
|
The compensation
must be paid only through the ‘Commissioner of Employee’s Compensation’ in case
of death or total disablement. Any lump sum payment to employee under the Act
must be made only through Commissioner.
|
Technology
IT Social Networking blogs...
Wednesday, July 4, 2012
Finance & Accounts Job Knowledge
Tuesday, June 12, 2012
Social Network
Join New Social Network Website – Zurker, Get Free Invitation...
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