Employment Business Contracts Sample in India

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Employment Business Contracts Sample in India Powered By Docstoc
					Wage Measurement and
connected issues in India

                Presentation by
                 Biju Varkkey
Indian Institute of Management Ahmedabad
                     India
       PROFILE OF INDIA
Total no: of States and Union    28 States and 7 Union
Territories                      Territories
Total no: of revenue districts   602
Total population                 1028 million (2000)
Annual Per capita income         Rs. 10,254 / US $ 520
                                 (for 2000-01)
GDP                              Rs. 18,95,843 crores (for
                                 2000-01
Total workforce                  315 million
Organized                        29.61 million
Unorganized                      285.39 million
INDIA : HUMAN DEVELOPMENT
           INDEX

   Life expectancy at birth (years) (HDI), 2002 63.7 y


   Adult literacy rate (% ages 15 and above)    61.3
   (HDI), 2002

   GDP per capita (PPP US$) (HDI), 2002         2,670
Employment : Organized Sector.
                            No’s in million

Factories                   10.47
Mines                       0.49
Plantations                 1.09
Shops and Establishments    5.00
Motor Transport             0.71
Services                    3.86
Ports                       0.022
Central/State Governments   7.000
Total                       27.762
Year                        (1999-2000)
    Employment: Unorganized
• It is difficult to correctly arrive at the
  employment numbers, under different
  categories in the unorganized sector.

• However, agriculture & related activities
  continues to be the dominating sector
  accounting for 70% of unorganized sector
  employment. Construction will be the next
  largest sector.
    Differences: organized and
       unorganized sectors.
• The organized sector enjoys better conditions of
  work, protection under labor laws, are better
  unionized and most enjoy collective bargaining
  rights when compared to their unorganized
  sector counter parts.
• On the other hand, the degree of protection &
  trade union rights available for unorganized
  sector is limited :– however, varies depending
  on extend of unionization/political climate of the
  state. (Kerala/West-Bengal). In such cases they
  enjoy near equal protection.
Differences: Government, Public and Private
              sector workers.
• Government workers enjoy high level of job protection,
  trade union representation without collective bargaining
  rights.
• Public Sector workers enjoy trade union and collective
  bargaining rights.
• Private sector workers enjoy trade union and collective
  bargaining rights like public sector. Current trend to non-
  union workplaces.
• Right to strike for government employees – prohibited by
  Supreme Court of India in 2002.
  Officers/executives in any sector – no trade union,
  collective bargaining rights.
Framework for wage calculation
• Organized Sector:-
  – The `day’, `week’ and `month’ are the basic units for
    wages calculation. Used in combination.
  – Normal working week is five days (for government)
    five half days/ six days.
    `Hour’ is generally not a unit for wage calculation. (In
    newer sectors like IT, ITES hour is becoming a
    standard).
  – Wage payment is made monthly.
  Unorganized sector:
  `Day’ is the common unit of calculation. In certain cases
    piece rate wages is in vogue, as well as hourly
    wages.
      CONSTITUTION of India ON
             WAGES
• Directive Principles

• Article 39

  There is equal pay for equal work for both men and women;

  Article 43

  Living wage, etc., for workers.- `The State shall endeavor to
  secure, by suitable legislation or economic organisation or in any
  other way, to all workers, agricultural, industrial or otherwise, work, a
  living wage, conditions of work ensuring a decent standard of life
  and full enjoyment of leisure and social and cultural opportunities
  and, in particular, the State shall endeavour to promote cottage
  industries on an individual or co-operative basis in rural areas.’
   Government and Wages in
           India.
• Government has been intervening from
  time to time, but the process was slow.
• For unorganized sector – legislations and
  for others through various institutions.
• Initial interventions (modern) were by
  British 1860 (though different kings too
  had their own rules)
• Committee on Fair Wages : 1946,
  provided a modern framework.
 National Wage Policy for India.
• As of now, India does not have a formal national
  wage policy, though the issue has been
  discussed several times.
  The government has direct and indirect control
  over wage levels, which has been exercised
  through different institutions.

 (Top salaries of PSU’s and Private Sector are
  strictly regulated, though the degree has been
  diminishing, particularly in Private Sector – This
  has led to phenomenal differentials between
  Private and Public).
Committee on Fair Wages 1946
• Minimum Wage: - bare subsistence of worker,
  enough for health, efficiency and working
  capability.

• Fair wage: Above minimum wage

• Living wage: male worker not to provide for
  himself, but for family – not just bare necessities
  but frugal comfort, education for children, social
  security etc.
• Need based minimum wage.
   Institutions involved in wage
           determination.
• Wages Legislation. (covers organized/unorganized)
• Wage Boards (covering select private and public
  sectors).
  Pay Commission (for government/Public Sector).
  Collective Bargaining (for covered workers).
  Government Directives/Special commissions

• Salary Surveys/Compensation Consultants – for
  private sector, non officer cadre.
          Wages Legislation
•   Minimum Wages Act 1948
•   Payment of Wages Act 1936.
•   Equal Remuneration Act 1976
•   Companies Act 1952.

• Other (s):
• Payment of Bonus Act
                 Definion of Wages
• Minimum wages Act:

   Wages" means all remuneration, capable of being expressed in
   terms of money, which would, if the terms of the contract of
   employment, express or implied, were fulfilled, be payable to a
   person employed in respect of his employment or of work done in
   such employment [and includes house rent allowance],

   but does not include-

  (i) the value of- (a) any house, accommodation, supply of light, water,
     medical attendance, or (b) any other amenity or any service
     excluded by general or special order of the appropriate government;
(ii) any contribution paid by the employer to any pension fund or
     provident fund or under any scheme of social insurance;
(iii) any travelling allowance or the value of any travelling concession;
(iv) any sum paid to the person employed to defray special expenses
     entailed on him by the nature of his employment; or
     Who is eligible for Minimum
               wages?
• "employee" means any person who is employed for hire or reward to
  do any work, skilled or unskilled, manual or clerical, in a scheduled
  employment in respect of which minimum rates of wages have been
  fixed; and includes an out-worker to whom any articles or materials
  are given out by another person to be made up, cleaned, washed,
  altered, ornamented, finished, repaired, adapted or otherwise
  processed for sale for the purposes of the trade or business of that
  other person where the process is to be carried out either in the
  home of the out-worker or in some other premises not being
  premises under the control and management of that other person;
  and also includes an employee declared to be an employee by the
  appropriate government; but does not include any member of the
  Armed Forces of the,8[Union].
Calculation of Minimum Wages:
• 15th Indian Labor Conference:
  – Standard working family of 1 man(earning)+ 1 women
    (wife) + 2 children.
  – 2700 calories for adult 80% for wife and 60% for child
    (daily)
  – 72 yards of cloth per annum.
  – Government rental cost for housing
  – 20% of above for fuel, lighting, miscellaneous.

  – This formed the basis for calculation.
    Minimum Wages: present
           situation.
• Idea of National Minimum wages not
  accepted.
• Hence minimum wages determined by
  center/state government for different
  occupations. Now total 200 occupations
  covered.
• For same occupation , minimum wages
  vary from state to state.
• Declared on per day basis for 8 hour work.
           Wage Indexation.
• The system of DA (Dearness Allowance) to take
  care of effects of inflation. (cost of living).
• Indexation can be fixed or variable (indexation
  value decreases as income rises).
• Consumer Price Index used as the basis.
• Clearly followed in organized sector.
• On some states minimum wages revised
  periodically, so no requirement for indexisation.
  – (Freeze in DA)
   Payment of Wages Act 1936

• Introduced to ensure that wages are not
  withheld, no wrongful deductions made and
  payment is made in such manner that wage
  earner will benefit. (objective was to reduce
  effects of payment in kind for work done).

• Act has limitations – agriculture not covered.
           Current Situation.
• Payment in kind reducing. (only kind may be
  very rare) combination of cash and kind.
• Organized sector moving into Commercial Bank
  linked transactions. (ATM’s/Cheque).
• Non-payment of wages still a cause for industrial
  dispute in organized sector.

• Non-payment of wages dealt as police complaint
  (criminal offence) in unorganized sector.
 Equal Remuneration Act 1976
• Payment of equal wages for men and
  women workers for same work or work of
  same nature.

• However discrimination exists in terms of
  definition as: difficult work (men) and easy
  work (work) in same workplace.
• Also depending on type of employment
  contracts
Types of employment contracts.
• Organized Sector       • Un-organized Sector


• Permanent worker.      • Inherited worker.
• Contract Worker.
                         •   Contract worker.
• Badali Worker
  (substitute)           •   Casual worker.
                         •   Beck and call worker.
• Casual Worker (daily
  wages).                •   Free labour/Help.
                         •   Bonded/Child (illegal)
• Apprentice/Trainee.
           Bonus Payment
• Payment of Bonus Act.
  – 8.33% minimum bonus and 20% maximum,
    even for loss making organizations.
  – Workers earning up to Rs 3500 (?) per month
    alone eligible.
  – Government employees (earning limit applied)
    also given bonus, declared yearly.

  In un-organized sector, one month equivalent
    (during festivals) is like a norm –
                    Working Hours
• Formal sector :- Factories Act
• No adult workers shall be required or allowed to work in a factory for
  more than forty-eight hours in any week. (51)

• Subject to the provisions of section 51, no adult worker shall be
  required or allowed to work in a factory for more than nine hours in
  any day.

• The periods of work of an adult worker in a factory shall be so
  arranged that inclusive of his intervals for rest under section 55, they
  shall not spread over more than ten and a half hours in any day :
  Provided that the Chief Inspector may, for reasons to be specified in
  in writing, increase the spread over up to twelve hours.
        Working hours –contd .
• Shops and commercial establishments
  Act-
• No employee in any establishment shall be
  required to work for more eight hours in any day
  and 48 hours in any week. (Section X of THE KERALA SHOPS
  AND COMMERCIAL ESTABLISHMENTS ACT, 1960 )

• Informal Sector:
• Based on conventions – `sunrise to sunset’
  unless the sector/location is unionized.

• Government – 45 hours.
         Overtime payment.
• Workers under factories Act are eligible for
  overtime payment, for excess of 30
  minutes - at twice the rates.
• Working on off days, holidays also eligible
  for overtime.
• Overtime specified under Minimum
  Wages Act.
• Government has abolished overtime in
  gov/Public Sector (now compensatory off).
              Wage Boards.
• Tripartite Wage Boards consists of equal
  representatives of employers and workers and
  an independent Chairman.
• Determined the wages and other remuneration
  to be given to the workers in industries, where
  wage boards are formed .
• Wage bargaining mostly took place at the
  industry level, and through Government
  controlled wage boards.
• First Wage Board (Divatia Wage Board) was
  constituted in May, 1956
 Pay Commission:- (government
        employees)
GOI appoints pay commissions to determine the
wages (monthly) and conditions of work of
government employees, including armed forces.

Till now 5 commissions have been appointed

State Governments also appoint commissions
for state government employees.

Central and State pay commission reports
considered a bench mark for organized sector.
 Wage determination: Bargainable
  Category in Public and Private
             Sectors.
• PSUs collective bargaining (national/industry
  level) exists – but not very free. Government
  sets limits. (LCF).

• Some private sector also join the PSUs (banks)
  for wage negotiations, if the union is common.

• In private sector - enterprise level bargaining is
  accepted. But they too try to keep wages under
  check.
     Wage Determination: Non
   barganiable category in Public
              Sector.
• Set by the government.
    Wage Determination: Non
  Bargainable Category – Private
             Sector.
• Difference between Sunrise and
  Traditional Sectors.
• This is where freedom exists.
• Executive salaries have been shooting
  through the roof in India, particularly in
  sunrise sectors like IT, Bio – Tech.
• In fact, NRI;s from North America are
  coming back since they find that earning
  potential is high.
            Taxation Issues
• Only in organized sector, three stage tax
  rate on wages. Only very few people
  covered (or actually pay taxes).

• 15%, 20%, 30% depending on annual
  income.

• No tax below Rs 1 lakh.
• Reforms are progressing
 Agencies Involved in Collection of
           Wages Data
• Government:
  – Central Statistical Organisation.
  – National Sample Survey Organisation
  – Labour Bureau under Ministry of Labour, GOI.
  – Ministry of Agriculture – Agricultural Survey.
  Private:
    Consulting companies keep track of executive
    remuneration.
  Comprehensive Source of wages Absent.

				
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