laxman k.

private job
I intend to start a new company where maximum workers would be on contractual system. I want to pay wages above minimum rate and apart from wages, introduce motivational shemes like attendance bonus, incentives and monthly work performance valuation.

Ex. A worker drawing monthly salary of Rs. 5000/ (GROSS) Would be entitled to attendance bonus of Rs. 1000/- pm for 100% attendance aprt from his weekly off days.If the person is absent for 1 day she/he looses Rs. 250/ for two days absenteeism he/she looses Rs. 500/- For three days absenteeism she/he looses Rs. 750 Absenteeism above 3 days he/she is not entitled to any bonus.

Similarly the incentives would be paid on achievement fo the set monthly target.If the monthly target is met he/she is entiled to Rs. 500/- as incentives but incase the percentage of put during the month of a particular workmen is more than the monthly target she/he shall be entiled to an additional incentives based on percentage. The person below the monthly target is not entitled to any incentives.

The monthly work performance will be evaluated by the supervisor approved by plant incharge and final approval by General Manager
The over attitude of the worker, approach towards work and overall perfornance will be taken into account.

This payment will be made every month.The shemes would framed into independant clauses of the appoiontment letter and shall not be the part of salary.

Can someone please guide me whether i am inviting any sort of risk or liability or is it illegal if so what is the safe way to have this sort motivating shemes ?


From India, Chicalim
Rajat Joshi

HR Consulting ,Trainer -Creative Thinking & Past Life Therapist

Hello Laxman,

Please accept our best wishes on your new venture.

Your intentions and ideas are very good and noble however we would like you to address the following issues :

Taking maximum number of workers on a contractual system may pose a problem and please check on the same with your local labour law consultant. Contractual workers may be allowed if the nature of the work is seasonal and not on the core area of the business like production.

Even if you take the contractual workers – You being the Principal Employer are responsible for all the statutory dues like PF, ESI , insurance etc. You have to ensure the contractors satisfy all the obligations otherwise the onus/liability is on your company.

Also, check the local laws if the contractual employees exceed 180 working days then they are deemed to be employees.

Co-relate the proposed gross salary with local minimum wage per day pertaining to the specific industry with respect to skilled/semi-skilled/unskilled category as applicable. This would assist you to arrive at an appropriate gross salary.

Attendance Bonus payout as per the actual 100 % physical attendance – Rs. 1,000/- is good. However 25%/50%/75 % cuts with respect to absence to 1/2/3 days is a bit harsh as there is no incentive for the workers to be present on all working days if they miss two days on account of illness or personal work. This cut can be rationalized to 10%/15%/20 % respectively. Also, you can have this scheme – if they adhere to 100% attendance for consecutive three months – they would get additional Rs. 3000/- bonus. Have a different slab of bonus who are absent for 1/2/3 days in a month for a quarter as well.

Incentive on monthly target would work only if their individual contribution is quantifiable on a shift basis and documented. Also, provide the group incentive to foster team work.

Hope this helps.

Best Regards,

Rajat Joshi

From India, Pune
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