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Showing posts with label Labour Laws. Show all posts
Showing posts with label Labour Laws. Show all posts

Wednesday, 22 May 2013

12 Facts about Leaves and Holidays in India!!



Q 1 : How many leaves should be applicable in a company?


Numbers of leaves entitlement in a company depends upon state you are in. Every state has different leave entitlement and leave policies which should be seen before you define leave policy of your company. Leave policy of your company can not be less than mentioned  in your State’s shop and establishment act.
You can refer below link to download some relevant attachments which describe leave entitlement in various states.

http://hrsuccesstalk.com/forum/Thread-Leave-entitlements-in-different-states-as-per-Act


Q 2: Whether an employer is bound to grant sick leave to an employee if employee submits medical certificate?


Technically speaking an employer is not bound to accept any sick leave even if it is accompanied with medical certificate in case employer is not satisfied with the certificate submitted. There is no act on this issue.
But normally when an employee submits medical certificate from a competent medical practitioner then employer should accept it otherwise it will be considered as illogical.

Q 3: Leave is right of an employee?


Leave is not right of an employee. An employee is given casual, sick and privilege leave for some purpose.

Casual leave is provided to an employee to take care of urgent and unseen matters like Parents teacher meeting called by kid’s school in short notice.

Sick leave is provided in case employee gets sick.

Privilege leaves are provided for planned long leaves for the purpose of travel, vacation etc.

Employee need to apply for each leave and take approval except in cases where approval could not be taken in advance. Employer can refuse the leave application, if not satisfied with the reason of leave. There is no set rule for which leave to be approved and not approved. It depends from reason to reason. Eg. If an employee ask for leave to watch cricket match, it can be refused.

Q 4: Mass casual leave applied by group of employees. What do an employer should do?


If the reason of mass casual leave by many employees is to hamper work intentionally, demonstrating against the employer etc then employer has all the rights to refuse such leaves and further if required taking disciplinary action.

Q 5: Do an employer can ask medical certificate for one day sick leave?


No, an employer should not ask for medical certificate for one day sick leave. In one of the case Supreme
Court has mentioned that an employee will not necessary go to see a doctor for treatment if illness is only for one day.

That is the reason most of the companies ask for medical certificate, if employee is on sick leave for 3 or more days.

Q 6: Holidays and weekly off to be included or excluded while calculating number of leaves when holidays falls in between leaves?


It is one of the questions which confuse many HR professional. Technically speaking, all leaves with pay are excluding weekly off and holidays which means even if an employee is on leave for whole month (30 days) which includes 4 weekly off and 1 holiday then employee should be considered on leave for 25 days only.
Similarly, if an employee take leave from Saturday to Monday where Sunday is weekly off then Sunday should not be counted as leave. Hence only 2 leaves should b counted.

Q 7: What is the concept for giving compensatory off on national holiday, holiday and weekly off?


Compensatory Off in case of National Holiday or Holiday : Compensatory off should be given within 90 days of national holiday or holiday for which employee has worked along with one day average daily wage

OR

Employee can choose for double rate of average daily wage.

This is as per Punjab Industrial Establishments (National and Festival Holidays and Casual and Sick Leave) Act 1965 which is extended to Delhi also.

Compensatory off in case of weekly off: Employee should be given weekly off 3 days before or after weekly off on which he worked so that worker should not work for more than 10 days consecutively without a weekly off.

Q 8: Please explain concept of Encashment of leave?


Under Factory Act there is no mention of leave encashment while in service even with consent of Management. An employee can take leave encashment while quitting services, superannuation, discharge, dismissal or death. Leave encashment should be as per average daily wage of employee. There are some companies which pay leave encashment on basic and DA, which is not correct.

Q 9:  Can employee take leave during notice period?


Yes, employee has right to take leave during notice period. In one of the case, Ghanshyam Vs Delhi Metro Rail Corporate, 2007, Delhi High court has confirmed the same.

Q 10: Can Leaves be clubbed together?


As per Delhi Industrial Establishments (National and Festival Holidays and Casual and Sick Leave) Rule 1973, Casual leave cannot be clubbed with any other leave.
That is the reason most of the companies do not club Casual leave with any other leave but Sick Leave and Privilege leave can be clubbed together.

Q 11: What should be leave policy of company?


Below is the draft which should be part of company leave policy. You can make changes are per your requirement.

Leave Policies

Commencement of Leave Period: 1st January to 31st December of every year. Grant of leave shall depend upon the exigencies of the work and shall be at the discretion of the manager/management.

All regular employees are entitled to 27 days leave in a year. There are three types of leave: Casual, Sick and Earned. The details are as follows:

Casual Leave

Maximum Limit: 6 Days

Leave Application: A formal leave application needs to be submitted at least one day (or earlier) before commencement of leave. Non-compliance will result in it been treated as “Absenteeism". No Casual leaves will be entertained without prior permission.

Rules:
1. CL can be taken for minimum 0.5 to maximum 3 days. In case of more than 3 days leave, it should be taken as EL.
2. There are no casual leave carry-forwards. At the closing day of financial year any available leave under this head will lapse automatically.
3. Can not be appended with EL/SL.
4. Need to apply atleast a week before for 3 days leaves.
5. Pro rata entitlement for new joinee & resigned emloyees
6. All employees who worked for total of 10 days in a month would be eligible for prorate leave for that month.

Sick Leave

Maximum Limit: 6 Days.

Leave Application: Submission of leave application or intimation to office is expected.

Rules:

1. SL can be taken for minimum 0.5 to maximum 7 days (paid) .
2. There are no sick leave carry-forwards. At the closing day of financial year any available leave under this head will lapse automatically.
3. For all absences exceeding 3 days, medical certificate needs to be enclosed. For all absences exceeding 7 days, every additional day beyond the 7th day will be adjusted against Earned Leave in credit of the employee, subject to production of aforesaid medical papers.
4. SL can be appended with EL.
5. Pro rata entitlements for new joinee & resigned employees
6. All employees who worked for total of 10 days in a month would be eligible for prorate leave for that month.

Earned Leave/ Privilege Leave

Maximum Limit: 15 Days

Leave Application: Leave application needs to be submitted and approved by immediate manager, at least 15 days before commencement of leave.
Rules:

1. EL can be taken for minimum 3 to maximum 15 days . PL cannot be taken for less than 3 days.
2. EL are carried forward subject to maximum limit of 60 days. Any accumulation beyond 60 days, will lapse automatically at the end of the financial year
3. Pro rata basis for new joinee cannot be normally granted. It can be granted only if there are exceptional situations as given below with due approval from Reporting Manager:--
a. Death in Immediate Family (Spouse/Child/Parents)
b. Child Birth
c. Self marriage
d. Accidental Hospitalization.

4. Earned Leave will be credited in the beginning of Calender Year to every employee’s account, but the entitlement will be proportional to the number of months worked. E.g. For every month completed in the pay roll of the company 1.25 days will be credited to the employee’s entitlement.
5. For resigned employees their leaves entitlement would be calculated pro rata i.e. till their last day of work. Any excess leave taken would be adjusted in F& F.

Q  12: Share abstract from Factory act and Delhi Shop and Establishment Act which describe about leaves?


ABSTRACT FROM FACTORY ACT REGARDING LEAVE

79. ANNUAL LEAVE WITH WAGES. - (1) Every worker who has worked for a period of 240 days or more in a factory during a calendar year shall be allowed during the subsequent calendar year, leave with wages for a number of days calculated at the rate of - (i) if an adult, one day for every twenty days of work performed by him during the previous calendar year; 
(ii) if a child, one day for every fifteen days of work formed by him during the previous calendar year. 
Explanation 1 : For the purpose of this sub-section - (a) any days of lay off, by agreement or contract or as permissible under the standing orders; 
(b) in the case of a female worker, maternity leave for any number of days not exceeding twelve weeks; and 
(c) the leave earned in the year prior to that in which the leave is enjoyed; shall be deemed to be days on which the worker has worked in a factory for the purpose of computation of the period of 240 days or more, but he shall not earn leave for these days. 
Explanation 2: The leave admissible under this sub-section shall be exclusive of all holidays whether occurring during or at either end of the period of leave.
(2) A worker whose service commences otherwise than on the first day of January shall be entitled to leave with wages at the rate laid down in clause (i) or, as the case may be, clause (ii) of sub-section (1) if he has worked for two-thirds of the total number of days in the remainder of the calender year. 
(3) If a worker is discharged or dismissed from service or quits his employment or is superannuated or dies while in service, during the course of the calendar year, he or his heir or nominee, as the case may be, shall be entitled to wages in lieu of the quantum of leave to which he was entitled immediately before his discharge, dismissal, quitting of employment, superannuation or death calculated at the rates specified in sub-section (1), even if he had not worked for the entire period specified in sub-section (1) or sub-section (2) making him eligible to avail of such leave, and such payment shall be made - (i) where the worker is discharged or dismissed or quits employment, before the expiry of the second working day from the date of such discharge, dismissal or quitting, and 
(ii) where the worker is superannuated or dies while in service, before the expiry of two months from the date of such superannuation or death. 
(4) In calculating leave under this section, fraction of leave of half a day or more shall be treated as one full day's leave, and fraction of less than half a day shall be omitted. 
(5) If a worker does not in any one calendar year take the whole of the leave allowed to him under sub-section (1) or sub-section (2), as the case may be, any leave not taken by him shall be added to the leave to be allowed to him in the succeeding calendar year: 
Provided that the total number of days of leave that may be carried forward to a succeeding year shall not exceed thirty in the case of an adult or forty in the case of a child : 
Provided further that a worker, who has applied for leave with wages but has not been given such leave in accordance with any scheme laid down in sub-sections (8) and (9) or in contravention of sub-section (10) shall be entitled to carry forward the leave refused without any limit. 
(6) A worker may at any time apply in writing to the manager of a factory not less than fifteen days before the date on which he wishes his leave to begin, to take all the leave or any portion thereof allowable to him during the calendar year: 
Provided that the application shall be made not less than thirty days before the date on which the worker wishes his leave to begin, if he is employed in a public utility service as defined in clause (n) of section 2 of the Industrial Disputes Act, 1947 (14 of 1947) : 
Provided further that the number of times in which leave may be taken during any year shall not exceed three. 
(7) If a worker wants to avail himself of the leave with wages due to him to cover a period of illness, he shall be granted such leave even if the application for leave is not made within the time specified in sub-section (6); and in such a case wages as admissible under section 81 shall be paid not later than fifteen days, or in the case of a public utility service not later than thirty days from the date of the application for leave. 
(8) For the purpose of ensuring the continuity of work, the occupier or manager of the factory, in agreement with the Works Committee of the factory constituted under section 3 of the Industrial Disputes Act, 1947 (14 of 1947), or a similar Committee constituted under any other Act or if there is no such Works Committee or a similar Committee in the factory, in agreement with the representatives of the workers therein chosen in the prescribed manner, may lodge with the Chief Inspector a scheme in writing whereby the grant of leave allowable under this section may be regulated. 
(9) A scheme lodged under sub-section (8) shall be displayed at some conspicuous and convenient places in the factory and shall be in force for a period of twelve months from the date on which it comes into force, and may thereafter be renewed with or without modification for a further period of twelve months at a time, by the manager in agreement with the Works Committee or a similar Committee, or as the case may be, in agreement with the representatives of the workers as specified in sub-section (8), and a notice of renewal shall be sent to the Chief Inspector before it is renewed. 
(10) An application for leave which does not contravene the provisions of sub-section (6) shall not be refused, unless refusal is in accordance with the scheme for the time being in operation under sub-sections (8) and (9). 
(11) If the employment of a worker who is entitled to leave under sub-section (1) or sub-section (2), as the case may be, is terminated by the occupier before he has taken the entire leave to which he is entitled, or if having applied for and having not been granted such leave, the worker quits his employment before he has taken the leave, the occupier of the factory shall pay him the amount payable under section 80 in respect of the leave not taken, and such payment shall be made, where the employment of the worker is terminated by the occupier, before the expiry of the second working day after such termination, and where a worker who quits his employment, on or before the next pay day. 
(12) The unavailed leave of a worker shall not be taken into consideration in computing the period of any notice required to be given before discharge or dismissal. 
80. WAGES DURING LEAVE PERIOD. - (1) For the leave allowed to him under section 78 or section 79, as the case may be a worker shall be entitled to wages at a rate equal to the daily average of his total full time earnings for the days on which he actually worked during the month immediately preceding his leave, exclusive of any overtime and bonus but inclusive of dearness allowance and the cash equivalent of the advantage accruing through the concessional sale to the worker of foodgrains and other articles : 
Provided that in the case of a worker who has not worked on any day during the calendar month immediately preceding his leave, he shall be paid at a rate equal to the daily average of his total full time earnings for the days on which he actually worked during the last calendar month preceding his leave, in which he actually worked, exclusive of any overtime and bonus but inclusive of dearness allowance and the cash equivalent of the advantage accruing through the concessional sale to the workers of foodgrains and other articles. 
(2) The cash equivalent of the advantage accruing through the concessional sale to the worker of foodgrains and other articles shall be computed as often as may be prescribed, on the basis of the maximum quantity of foodgrains and other articles admissible to a standard family. 
Explanation 1: "Standard family" means a family consisting of a worker, his or her spouse and two children below the age of fourteen years requiring in all three adult consumption units. 
Explanation 2: Adult consumption unit means the consumption unit of a male above the age of fourteen years; and the consumption unit of a female above the age of fourteen years and that of a child below the age of fourteen years shall be calculated at the rates of 0.8 and 0.6 respectively of one adult consumption unit. 
(3) The State Government may make rules prescribing - (a) the manner in which the cash equivalent of the advantage accruing through the concessional sale to a worker of foodgrains and other articles shall be computed; and
(b) the registers that shall be maintained in a factory for the purpose of securing compliance with the provisions of this section. 


ABSTRACT FROM DELHI SHOP AND ESTABLISHMENT ACT FOR LEAVE

Sub-section (16)—”Leave”
The expressions ‘leave means leave of absence, that is to say, the permission obtained by an employee from his employer relieving him from the duty of attending the work with or without pay. The dictionary meaning of the word ‘leave’ being permission, unless such permission is given or leave sought is granted, it cannot be said that the person seeking leave can absent himself from duty in an unauthorised manner; Industrial Tribunal v. Rabindra Nath Sen, 1963 I LLJ 582.

22. Leave.—(1) Every person employed in an establishment shall be entitled—
(a) after every twelve months’ continuous employment, to privilege leave for a total period of not less than fifteen days;
(b) in every year, to sickness or casual leave for a total period of not less than twelve days:
Provided that:
(i) an employee who has completed a period of four months in continuous employment, shall be entitled to not less than five days’ privilege leave for every such completed period; and
(ii) an employee who has completed a period of one month in continuous employment, shall be entitled to not less than one day’s casual leave for every month:
Provided further that a watchman or caretaker who has completed a period of twelve months in continuous employment and to whom the provisions of sections 8, 10, 11, 13 and 17 do not apply by virtue of an exemption granted under section 4, shall be entitled to not less than thirty days’ privilege leave.
(1A) (i) Privilege leave to which an employee is entitled under clause (a) of sub-section (1) or under any such law, contract, custom or usage, award, settlement or agreement as is referred to in section 3, or any part of such leave, if not availed of by such employee, shall be added to the privilege leave in respect of any succeeding period to which he is so entitled to, however, the total period of such privilege leave which may be accumulated by such employee shall not at any one time exceed three times the period of privilege leave to which he is entitled after every twelve months’ employment under that clause or under such law, contract, custom or usage, award, settlement or agreement.
(ii) Leave admissible under clause (b) of sub-section (1) shall not be accumulated.
(2) If an employee entitled to leave under clause (a) of sub-section (1) of this section is discharged by his employer before he had been allowed the leave, or if, having applied for and having been refused the leave, he quits his employment before he has been allowed the leave, the employer shall pay him full wage for the period of leave due to him.
23. Wages during Leave.—Every employee shall be paid for the period of his leave at a rate equivalent to the daily average of his wages for the days on which he actually worked during the preceding three months, exclusive of any earnings in respect of overtime but inclusive of dearness allowance.


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Wednesday, 8 May 2013

10 Facts you should know about Employee / Workmen Compensation Act in India


Q 1 : Whether contractual employee is eligible for claim under Employee Compensation Act?


Employee Compensation Act do not distinguish between types of employees- contractual, permanent, casual, daily wages and even employee working abroad- all types of employees comes under purview of this Act.

In case of contractual employee both contractor and principal employer are liable to pay compensation to employee in case of mishap defined in the act.




Q 2 : Can an employee or his dependent take claim under both ESI and Employee Compensation Act?


No, employee or his dependent can take claim under only one Act either ESI or Employee Compensation Act.

Q 3 : Can company take insurance policy to insure its liability under Employee Compensation Act?


Yes, there are insurance policies available to cover such liabilities and called WC-Workmen Compensation Policy. In case of any claim insurance company need to pay the same to claimant.

Also commissioner can direct insurance company to pay claim as per act even if claimant has claimed lesser amount.

Q 4 : Compensation calculation considering wage which is less than minimum wages of the state. Possible?


In one of the case, Karnataka High court has mentioned that in case workman wage is less than minimum wage of the state then minimum wage should be considered for calculation of Compensation.

Q 5: What type of events should be considered as Accident under the act?


As mentioned in my earlier post- What is Employee Compensation Act (Earlier known as Workmen Compensation Act), that Supreme court in one of its verdict mentioned that there must be a casual connection between the injury and the accident AND the accident and the work done in the course of employment for entitlement of compensation under the act.

Below are considered as accident and compensation is applicable:


  • Employee fall in well while going to attend a call of the nature while on duty and died
  • Driver killed by co driver while taking company truck from one place to another
  • Employee got chest pain and died while on duty
  • Employee got died or permanent total disability while operating some one else machine.
  • Accident of driver while vehicle was not moving


Below are some examples which can not be considered as Accident under the act:


  • Employee suicide in the premises.
  • Employee found dead far from company premises during working hours.
  • Killing of an employee by her husband at work place.


Q 6: Is there any time limit to claim Compensation?


As per act claim should be made within 2 years from the date of accident but Commissioner can entertain if he is satisfied with reason of delay.

Q 7: What is the time limit of compensation payment by employer?


It should be within one month else 12% interest on amount should be paid by employer apart from 50% penalty.

Q 8 : From which date compensation should be calculated?

Compensation should be calculated from the date of accident incurred.

Q 9 : Who has the onus to prove an accident?


Employee

Q 10 : Educational institute fall under Employee /  Workmen Compensation Act?


Yes

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Tuesday, 7 May 2013

What is Employee Compensation Act (Earlier known as Workmen Compensation Act)?

Introduction


Employee Compensation Act which was earlier known as Workmen Compensation Act which supports employee and its dependents in case of mis-happening with employee during course of employment.  As per this act Employer is liable to compensate in case of death or major/ minor injuries to an employee and his dependents.

Downloads : 

Bare Act : Workmen Compensation Act
Notification by government to cover all employees under this act

How to calculate compensation in case of mis happening?


IN CASE OF DEATH

50% of the monthly wages  X  Relevant Factor OR Rs 120,000/- whichever is more.  Also Rs 2500 for funeral expenses.

IN CASE OF TOTAL PERMANENT DISABILITY 

60% of the monthly wages  X  Relevant Factor or Rs 1,40,000/- whichever is more.

IN CASE OF PARTIAL PERMANENT DISABILITY

Such percentage of the compensation payable in case of TOTAL PERMANENT DISABILITY above as is the percentage of the loss in earning capacity (Refer Schedule I)

IN CASE OF TEMPORARY DISABILITY

A half monthly installment equal to 25% of the monthly wages, for the period of disablement or 5 years whichever is shorter


Note:


  • Relevant Factor for the calculation of the amount of compensation has been mentioned in Schedule IV of the act.
  • In case where wage of an employee less than minimum wage of the state, minimum wage should be considered for the purpose of calculation of compensation.
  • Maximum of Rs 8000/- can be considered as wages for the purpose of calculation of compensation wherever wages of employee is more than Rs 8000/-. Download notification in this regards.
  • Monthly wages is the average of last 12 months wages.


Examples 1 : An employee whose age is 25 years and monthly wage is Rs 3,000/- died in an accident during work.

Calculation:

As the age of the employee is 25 years hence the relevant factor as per Schedule IV is 216.91
In case of death we take 50% of monthly wages i.e. Rs 1,500/- in this case
Hence total compensation under the act will be Rs 3,25,365/- which will be paid as lump- sum amount
Also employee family will be paid Rs 2,500/- for funeral expense

Examples 2 : An employee whose age is 25 years and monthly wage is Rs 3,000/- incurred and get total permanent disability.


Calculation:


As the age of the employee is 25 years hence the relevant factor as per Schedule IV is 216.91
In case of death we take 60% of monthly wages i.e. Rs 1,800/- in this case
Hence total compensation under the act will be Rs 3,90,438/- which will be paid as lump- sum amount

What does Accident means?


Any accident with employee while working will definitely fall under the definition of Accident under the act but there are some occasions which are doubtful hence below are some cases and verdicts by authority, sharing with you, which will help you to understand what does accident means under the act.
Supreme court in one of its verdict mentioned that there must be a casual connection between the injury and the accident AND the accident and the work done in the course of employment for entitlement of compensation under the act.

Below are considered as accident and compensation is applicable:


  • Employee falling in well while going to attend a call of the nature while on duty and died
  • Driver killed by co driver while taking company truck from one place to another
  • Employee got chest pain and died while on duty
  • Employee got died or permanent total disability while operating some one else machine.
  • Accident of driver while vehicle was not moving
Also see:

10 Facts you should know about Employee /  Workmen Compensation Act in India


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Sunday, 28 April 2013

Frequently asked questions on Payment of Bonus Act, 1965, in India



Payment of Bonus Act, 1965


As per this act, employer, employing 20 or more employees at any day of financial year is bound to pay bonus provided wages of employee should be below or equal to Rs 21,000/- per month. Every employee should get minimum of 8.33% of wages, capped at Rs 7,000/-, even if there is loss and maximum of 20% of wages, capped at Rs 7,000/-, in an accounting year. Download Payment of Bonus Act 1965.

Q  : Who is eligible for Bonus?


Every employee whether on probation, part time, contractual, permanent, supervisor or manager whose wage is less than or equal to Rs 21,000/- and has completed 30 days in an accounting year is eligible for bonus. Apprentice under Apprentice act are not eligible.


Q: On which salary components Bonus is calculated?


Bonus is calculated on Basic and DA.

Q :  Do a start up organization need to pay bonus?


In the first five accounting year following the accounting year in which the employer sells the goods produced or manufactured by him or renders services, as the case may be, from such establishment, bonus shall be payable only in respect of the accounting year in which the employer derives profit from such establishment and such bonus shall be calculated in accordance with the provisions of this act in relation to that year but the concept of set off and set on will not apply.

Q : When should a new unit be considered as separate unit for the purpose of taking Bonus exemption for new establishment.


As per Supreme Court judgement, any unit where Profit and Loss account and Balance sheet are maintained separately should be considered as separate establishment.

Q : What is the concept of set on and set off.


(1) Where for any accounting year, the allocable surplus exceeds the amount of maximum bonus payable to the employees in the establishment, then, the excess shall, subject to a limit of 20% of the total salary or wage of the employees employed in the establishment in that accounting year, be carried forward for being set on in the succeeding accounting year and so on up to and inclusive of the fourth accounting year to be utilized for the purpose of payment of bonus.

(2) Where for any accounting year, there is no available surplus or the allocable surplus in respect of that year falls short of the amount of minimum bonus payable to the employees in the establishment, and there is no amount of sufficient amount carried forward and set on which could be utilized for the purpose of payment of the minimum bonus, then, such minimum amount or the deficiency, as the case may be, shall be carried forward for being set off in the succeeding accounting year and so on up to and inclusive of the fourth accounting year.

Where in any accounting year any amount has been carried forward and set on or set off under this section, then, in calculating bonus for the succeeding accounting year, the amount of set on or set off carried forward from the earliest accounting year shall first be taken into account.


Example:

In the Example, the total amount of bonus equal to 8.33 per cent of the annual salary or wage payable to all the employees is assumed to be Rs. 1,04,167. Accordingly, the maximum bonus to which all the employees are entitled to the paid (twenty per cent of the annual salary or wage of all the employees) would be Rs. 2,50,000.


Year
Amount equal to sixty per cent, or sixty seven per cent, as the case may be, or available surplus allocable as bonus
Amount payable as bonus
Set on or set off of the year carried forward
Total set on or set off Carried forward
(1)
(2)
(3)
(4)
(5)

Rs.
Rs.
Rs.
Rs.  of       (year )
1.
1,04,167
1.04,167**
Nil
NIl
2.
6.35,000
2,50,000*
Set on 2,50,000*
Set  on           
2,50,000*       (2)
3.
2,20,000
2,50,000*
(inclusive of 30,000 from year –2)
Nil
Set  on           (2)
2,20,000
4.
3,75,000
2,50,000*
Set on 1,25,000*
Set  on          
2,20,000         (2)
1,25,000         (4)
5.
1,40,000
2,50,000*
(inclusive of 1,10,000 from year-2)
Nil
Set  on            (2)
1,10,000
1,25,000         (4)
6.
3,10,000
2,50,000*
Set on 60,000
Set on
Nil+                 (2)
1,25,00           (4)
  60,000          (6)
7.
1,00,000
2,50,000*
(inclusive of 1,25,000 from year–4 and 25,000 from year-6)
Nil
Set on
35,000            (6)
8.
Nil (due to loss)
1,04,167**
(inclusive of 35,000 from year -6)
Set off 69,167
Set off
69,167            (8)
9.
10,000
1,04,167**
Set off 94,167
Set off
69,167            (8)
94,167            (9)
10.
2,15,000
1,04,167**
(after setting of 69,167 from year-8 and 41,666 from year-9)
Nil
Set off
52,501            (9)
Notes-
* Maximum.
+ The balance of Rs. 1,10,000 set on from year-2 lapses.
** Minimum


Q : What is the time limit to pay bonus?


Bonus should be paid within 8 months from end of financial year.

Q : Can Bonus be paid on monthly basis?


Many company follow the practise of paying bonus on monthly basis, some pay minimum 8.33% of Rs 7.000 i.e Rs 583/- or some 20% of Rs 7,000/- i.e Rs 1,400/- per month.

They do it for achieving following purpose:

  • In hand salary of employee will increase as we are paying statutory bonus up front on monthly basis.
  • Company liability of bonus payment is taken care of.
Now the question is whether this is a right practise or not? If you go out to find out answer of this question you will get two opinions as follows:

  1. Yes, we can do this as there is no mention in the act that we can not pay it on monthly basis.
  2. No, we can not do this. How can company calculate percentage of bonus to be paid in the starting of financial year? Also when you pay any money on monthly basis it becomes part of your salary which means statutory bonus is yet to be paid. ESI will also be deducted on such payments.
If you ask me, I would not recommend to pay bonus on monthly basis as it can create problem in future and employer pay need to pay statutory bonus again.

Q : What are the circumstances when an employee is not eligible for bonus?


An employee shall be disqualified from receiving bonus under this Act, if he is dismissed from service for -- 
(a) fraud; or
(b) riotous or violent behaviour while on the premises of the establishment; or
(c) theft, misappropriation or sabotage of any property of the establishment.


Q : Which institutions are exempted from payment of bonus?


Hospitals, Social welfare institutions, Chambers of the Commerce , Indian Red Cross society or other institutions of a like nature, universities and educational institutions. 

Q: How working days of an employee calculated for computing bonus?


Computation of number of working days.—An employee shall be deemed to have worked in an establishment in any accounting year also on the days on which-- 

(a) he has been laid off under an agreement;
(b) he has been on leave with salary or wage;
(c) he has been absent due to temporary disablement caused by accident arising out of and in the course of his employment; and 
(d) the employee has been on maternity leave with salary or wage, during the accounting year.

Q : Can interim bonus paid to employee be adjusted against statutory bonus payout?


When:

(a)    an employer has paid any puja bonus or other customary bonus to an employee; or
(b) an employer has paid a part of the bonus payable under this Act to an employee before the date on which such bonus becomes payable.

then, the employer shall  be entitled to deduct the amount of bonus so paid from the amount of bonus payable by him to the employee under this Act in respect of that accounting year and the employee shall be entitled to receive only the balance.

Q: Can an organization pay different percentage of bonus to different set of employees?


No, bonus percentage should be same for every employee who is eligible under the act. No discrimination.

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Saturday, 20 April 2013

Insights of EDLI-Employee's Deposit Linked Insurance Scheme


















What is EDLI?


EDLI means “Employees’ Deposit Linked Insurance” which is a part of Provident Fund scheme and provides a lump sum payment to the insured person’s nominated beneficiary in the event of death due to natural cause, accident or illness.

Every employer pays certain amount to PF for insurance of its employees which is as follows:

EDLI Account              :  A/c No. 21 :  0.5% of Basic capped at Rs 6500/-
EDLI Admin Account   : A/c No. 22  :  0.01% of Basic capped at Rs 6500/- 

For more information read post PF Fundamentals everyone should know.

Above contribution is other than 12% of Basic contributed by employer and there is no contribution which is made by employee in this scheme. Every employee who is member of PF gets covered under this scheme and his nominated beneficiary get lump sum amount in case of employee’s death. EDLI cover applies across globe and 24 hours which means employee’s family will get claim even if death is not during working hours.

Calculation behind deciding amount of claim to deceased family


OLD METHOD


Before 08th January 2011, following method was used to decide claim amount. Let’s call it “Old Method”

“An amount, equal to the average balance in the account of deceased during preceding 12 months or during the period of his employment whichever is less, except where the average balance exceeds Rs 50,000/-, the amount payable shall be Rs 50,000/- plus 40% of the amount in excess of Rs 50,000/-subject to maximum of Rs 1,00,000/-“

Example : An employee, ABC, joined an organization on 01st August 2010 and died on 20th February 2012. His basic salary at the time of joining was Rs 6000/- and has been increased to Rs 7000/- wef 01st April 2011. His average PF balance in last 12 preceding months is Rs 1,20,000/-

As the average of PF balance in last 12 preceding months is more than Rs 50,000/-.

Rs 50,000 + 40% of Rs 50000/- (As max limit is 1,00,000) = Rs 50,000 + Rs 20,000/- = Rs 70,000

Amount paid to nominee will be Rs 70,000


NEW METHOD


On 08th January 2011, Central Government has amended the method of calculation of benefit under EDLI scheme where a new method was introduced to calculate benefit. Final benefit to nominee will be whichever is maximum i.e. benefit as per old or new calculation method.  Idea was to give maximum benefit to deceased nominee. 

Also limit of maximum benefit payout has been increase to Rs 1,30,000/-. Click here to download the notification.

Calculation process as per NEW METHOD is as below:

“The average monthly wages drawn (subject to maximum of Rs 6500/-) during the 12 months preceding death of employee should be multiplied by 20 times”

Example : :Lets take the same example above and find out benefit to employee under new calculation method.  An employee, ABC, joined an organization on 01st August 2010 and died on 20th February 2012. His basic salary at the time of joining was Rs 6000/- and has been increased to Rs 7000/- wef 01st April 2011. His average PF balance in last 12 preceding months is Rs 1,20,000/-

Average salary of last 12 months : (6000 x 2 + 6500 x 10) /12 = 6416

Explanation : In Feb and Mar 11 his basic was 6000 and wef April 11 is basic was 8000 (we will cap it at 6500)

Multiply average with 20 times : 6416 x 20 = 1,28,320/-

As per new method benefit is  :  Rs 1,28,320/-
As per old method benefit is :  Rs 70,000/-


Higher in both methods is Rs 1,28,320/- hence this will be paid as lump sum benefit to nominee of deceased. 
 

EDLI benefit through insurance company


There is no restriction to employer to contribute in EDLI through RPFC provided employer has taken other insurance policy to give benefit to nominee of employee in case of employee’s death. Benefit through insurance policy should be better than benefits provided by RPFC in EDLI. Sum insured of insurance policy can not be less than maximum capping provided by EDLI i.e. 1,30,000/- as on date. In case EDLI make changes in maximum benefit capping and increase it then employer also need to increase sum insured in insurance policy (if existing sum insured become less due to the changes in EDLI ruling). 

There are many insurance companies which provide such type of insurance policy to corporate for its employees eg LIC, Max insurance etc.

There are some benefits associated with taking insurance policy in place of EDLI. Some of them are listed below.


  • Premium paid to insurance company is lower as compared to contribution paid to RPFC for EDLI. Hence it is direct cost saving for the company.
  • Nominee of employee gets fixed sum insured irrespective of number of working days and contribution in PF or EDLI.
  • Processing of claim is faster as compared to EDLI. Formalities are also less.
  • Claim processing is hassle free.
  • Premium paid by employer is treated as normal business expense for the purpose of income tax.
  • Also, employer has flexibility to choose other benefits for employees in same insurance policy like double sum insured in case of accidental death etc, with little increase in premium.


Process of taking EDLI from Insurance company

Following is flow of activities which you need to do while opting for EDLI exemption:
  • Find an insurance company which gives policy on basis of which you can file application in RPFC for EDLI exemption.
  • Many insurance companies, especially private player, will allocate you a relationship manager, who will guide and help you to file your application to RPFC. 
  • Employer need to intimate employees about shift from EDLI to private insurance company along with benefits of doing so.
  • Apply to RPFC along with required documentation for exemption from EDLI. You need to attach copy of insurance policy you have taken.
  • You can stop giving EDLI contribution i.e 0.5% of Basic caped at 6500/-, to RPFC from the month you file the application to RPFC but you still need to contribute EDLI admin charges i.e. 0.01% of Basic, capped at 6500/-.
  • You need to fill and submit Form 7IF on monthly basis and submit to RPFC.  Click here to download the format.

Please add any other information related to EDLI. Also you can visit HR SUCCESS Forum to post your queries and get answers.


If you are really serious about learning HR and want to grow then visit our web page LEARN HR THROUGH PRACTICAL IMPLEMENTATION