Demand for Increase in Minimum Bonus | Labour Economics

In this article we will discuss about the views of employees, employers and bonus review committee on the demand for increase in minimum bonus.

Views of the Employees on Increase in Minimum Bonus:

The employees have urged for an increase in the minimum bonus on the following ground:

(i) On account of the rise in prices, the employee’s real wages have fallen, despite that they are getting the basic wages plus dearness allowance which is linked to the Consumer Price Index, and also the 4% minimum bonus related to the total basic wage and D.A. Therefore, to bridge the gap, even if partially, between the actual total earnings and the need based wage or the living wage, the quantum of minimum bonus should be increased.

(ii) As minimum bonus 4% has got to be paid under the Act whether there is profit or not, it has acquired a connotation of “deferred wage” and, therefore, minimum bonus should not be linked to either existence or non-existence of profits or to set-off in subsequent years of any loss resulting from payment of minimum bonus.

The representatives of the All India Trade Union Congress (AITUC) urged that wages as a proportion of cost of production have gone down, which means that the workers share in the total value produced or added by manufacture has come down while that of the employers has gone up. This position could not be rectified except by increase in wages or minimum bonus, which is not dependent on profits or losses but in fact in the nature of deferred wage.

(iii) The unions have, furthermore, urged that the increased minimum bonus should also by paid to the employees of small establishment employing less than 20 persons who are at present not covered by the Payment of Bonus Act; the coverage should extend to every employed person.

(iv) It was represented that under the present Bonus Act, the employees of the following institutions/authorities have been excluded from the benefit of the minimum bonus e.g. the employees of;

(i) Central and State Governments;

(ii) Local Authorities;

(iii) Education and Charitable Institutions;

(iv) Hospitals;

(v) Solicitors and Chartered Accountants firms;

(vi) Central and State Government Printing Presses;

(vii) Milk Schemes;

(viii) Indian Red Cross Society;

(ix) Contractors on building operations;

(x) Dock Labour Board;

(xi) Domestic servants, tailors, dhobis, beedi workers.

Employers View on Increase in Minimum Bonus:

The following statement of the Maharashtra Chamber of Commerce indicates the employers view point on the question of linking bonus to production/productivity.

“There is considerable confusion in the matter of relating bonus payment to production/productivity. Bonus is essentially a scheme for sharing of profits with the employees. We consider that in this sense it should in no way be related to production/productivity. This does not mean that we do not wish to encourage improvement in production/productivity. Bonus Act provides a generalised scheme applicable to all industrial establishments. Measurements of productivity present complex problems from industry to industry and even units within the same industry cannot be assessed by a single uniform measure of performance. Norms of performance will have necessarily to be set for different processes and different operations in the establishment. It cannot be said that in respect of condition of tooling and equipment and regular availability of materials of uniform quality, we have reached a stage where measurement of productivity could be recognised and accepted without much dispute.”

Moreover, improvement in productivity may not always lead to improvement in profits. Technical efficiency may not always reflect itself in the commercial profit result.Emergence of commercial profit depends on several other factors such as price level, capacity of utilisation, indirect taxes and other imports. In view of the above, we are not in favour of linking profits sharing with production/productivity.

It has also been argued that there are already many engineering firms which have introduced incentive/production bonus schemes through which the workmen have been earning additional remuneration from 30% to 200% of their wages. It would be difficult for such firms to introduce an additional scheme related to production or productivity, nor would that be desirable.

The representation on behalf of and the representatives appearing for the tea industry before the Bonus Review Committee have pointed out that even the 40% minimum bonus is a heavy burden on these industries. The tea interests stressed the agricultural base, export- orientation and low profitability of the industry generally as factors supporting its claim for exemption from any increase in minimum bonus.

Similarly, the Bombay Mill-owners Association, the Ahmedabad Mill-owners Association and the South Indian Mill-owners Association have based their opposition to an increase in the minimum bonus especially on the fluctuating fortunes of the industry, its export- oriented character and its uniformly low profitability as evidenced by the negative retained profits for a succession of years and the available indices of gross profits in relation to sales and capital employed, or profits after tax as percentage of net worth and dividend rates, all of which are lower than in the case of cotton textiles and engineering.

Besides, it has been argued that wages in most industries are regulated by the Wage Boards. Even in industries for which Wage Boards have not been constituted so far, it should not be difficult to set up such boards for determining fair and equitable wages. The Bonus Act should not be used as an instrument for regulating wages.

Views of Bonus Review Committee:

Linkage of Bonus with Productivity:

On the question of linking the minimum bonus with increase in production/productivity, the evidence of both employees and employers has been against the possibility of forging such a link. The employees have opposed the suggestion on the grounds that minimum bonus should be unconditional and that it is impracticable to separate out the contribution of labour to the increase in production/productivity.

The employers have recognised that scheme of bonus related to production/productivity have an important contribution to make towards improvement of productivity in industry, but they have said these can be applied only, and are being applied on a unit-wise basis.

The problem of measurement of production/productivity in terms of a common denominator applicable to the entire-field of industry and trade within the purview of the payment of Bonus Act, are indeed large and complex.

We, have, therefore, come to the tentative conclusion that no general system of bonus linked to increase in production/productivity could be worked out so as to provide substitute for or alternative to, the general scheme of annual profit bonus in industrial and commercial establishment.

The Committee, however, admitted that there is apparently room for appreciable expansion of bonus system (so-called) related to production/productivity, a spectrum of which is vague in Indian Industry.

Recommendations of the Bonus Review Committee (Interim Report):

The committee carefully considered all the memoranda submitted by the parties and the oral evidence tendered by them not only on the question of minimum bonus but also on the possible linking of any part or whole of the minimum bonus with production/productivity.

The committee said that it may be recalled that the fall in labours share of value added by manufacture, however, not a new feature originating from is 1965-66. The National Commission on Labour had also observed that this has been a persisting trend right from 1947.

Ample evidence has also been brought forward to show that both in private and in public sector, in a number of cases 8.33% or more has been paid as bonus where only 4% bonus was the entitlement.

Linking Bonus with Production/Productivity:

All organisations of employers and workers have pointed out the impracticability of linking and part of bonus to productivity or production. In these circumstances, the committee agrees with the views of both the parties and recommended that no part of the bonus shall be linked to production/productivity.

Besides, the committee said that, our recommendations should, be implemented immediately so that wide-spread industrial unrest and stoppage of production on the issue of “Minimum Bonus” may be avoided. Thus, the committee further said that, Government should take immediate and effective steps to make the recommendations forceable without loss of time.

Mode of Payment:

The Committee also suggested that the 8.33% minimum bonus shall be paid in cash except where the workers agree that it may be paid otherwise.

Irregularities:

During the year 1991, inspections were carried out in 729 establishments (607 in public sector, 119 in private sector and 3 in contractor’s establishments). The total number of irregularities detected was 1553, 693 in public sector, 851 in private sector and 9 in Contractor’s establishments).

Of these, 3 related to wrong calculation of profits, 392 to short payment of bonus, 41 to payment of bonus less than proportionate bonus, 139 to non-payment of bonus, 7 to non-payment of bonus within statutory time limit, 37 to delayed payment of bonus, 2 to wrong calculation of set-on/set-off, 501 to improper maintenance of registers, 204 to non-production of registers, records, etc., 222 to miscellaneous irregularities and 5 for irregular computation of working days. As many as 2,174 irregularities were pending at the end of the previous year and 1,553 irregularities were detected during 1991 with the result that the total number of irregularities to be rectified during the year was 3,727.

Punishments, Prosecution and Penalties:

If any person contravenes any of the provisions of the Act or the rules made thereunder or fails to comply with the direction of requisition made under the Act, he shall be punishable with imprisonment extending to six months or with fine extending to Rs. 1,000 or with both.

For various infringements committed by the employers, 66 of them were served with show-cause notices and no claim was filed against any establishment. As many as 322 cases of prosecutions were pending at the beginning of the year and 30 were filed during the year.

Out of a total number of 352 cases, 12 cases were disposed of during the year, 11 resulting in conviction, 1 resulting in acquittal and nil cases were withdrawn or otherwise settled. At the end of the year 340 prosecutions remained pending in courts. In respect of 11 cases resulting in conviction, a total amount of Rs. 7,050 was imposed as fines of which an amount of Rs. 4,000 was awarded to the Department towards cost.