My factory employs 18 people and was founded 14 years ago. Of the total employees 15 of them get a salary of less than 25,000 and 3 get between Rs. 30,000 and 70,000. We are planning to shut down the services as last fiscal year we made a loss and no business this year.
Please advise:
1. Do I need to pay bonus for last year to all employees.
2. 15 days of service compensation as well gratuity to all employee.

From India, Noida
Dear Ashu-Ohri,
Since the total no of employees probably including both workman and non-workman categories in your establishment happens to be less than 50, you can close down your establishment subject to payment of retrenchment compensation under section 25F of the ID Act,1947 and all other terminal benefits including gratuity under the PG Act,1972, cash value of the Annual Leave with Wages at the credit of the workers on the date of closure as per section 79(3) of the Factories Act,1948 and statutory bonus up to the date of closure for the accounting year. These payments consequent on the intended closure are mandatory.

From India, Salem
My labour consultant says anyone getting a salary of Rs. 24,000 per month or above is only eligible for gratuity and notice period pay and not service compensation i.e 15 day per year basic pay+DA additional to gratuity as that benefit is only payable to workers getting less than Rs. 24,000 per month. Kindly confirm this is correct.
From India, Noida
Dear Ashu,
I am not sure on what basis your learned consultant has tendered such a legal opinion. The status of workman is not defined by the quantum of salary or wages drawn except the cadre of supervisor where the salary is limited to Rs. 10,000/=pm. His opinion will hold good in respect of administrative and managerial cadre employees: even in their case salary is not the criterion but only the capacity of their job position.
Besides, the Rs.24K pm ceiling is applicable only for the purposes of the Payment of Wages Act, 1936 which has no relevance in the matters of retrenchment and closure. This ceiling on wages also stands removed in the yet to be enforced Code on Wages. Compensation, if any and notice pay to such employees in the event of foreclosure of the contract of employment by the employer have to be determined on the basis of the separation clause, if any mentioned therein.
As regards retrenchment compensation u/s 25-F(b), it is 15 days average pay per every year of completed service, not the sum of pay+D.A.

From India, Salem
Dear all concerned
In order to closure of ur business obtaining NOC is mandatory from respective departments like. Labour Office, EPF, ESI etc.
First make communication from us respective Labour office follow all related instructions . Complete all formalities according settle ur staff n workers FNF account.
Best Regards
Soniya Bhardwaj

From India, undefined
Dear Mr. Umakanthan,
Thank you for your valued clarification and would be grateful if you can further clarify that average pay will apply to all workers?. Say if a Karigar/Worker was employed for 6 years and was paid Rs 5000 per month total gross salary in the first year of work and now being paid Rs. 150000 his average pay will be Rs. 10,000 and needs to be paid Rs. 60,000 as service compensation?
And people such as accountant and supervisor are not required to be paid service compensation? as by definition/description of their job they will not be categorised as labour.
I thank you once again for the clarifications provided. Two labour court lawyers practicing in Delhi High Court I consulted told me that I need not pay any service compensation as Per Ministry of Labour notification published in "Gazette of India" S.O. 2806(E)-In exercise of the powers conferred by sub-section(6) of section 1 of the Payment of Wages Act, 1936(4 of 1936), the central government, on the basis of figures of the Consumer Expenditure Survey published by the National Sample Survey Organization, hereby specifies Rs. 24000 per month as the wages under said sub-section(6)
Thanks & Best Regards
Ashu Ohri

From India, Noida
Dear Ashu, Can you pl get a copy of such notification and upload it?
From India, Salem
Dear Ashu Ori,

The S.O 2806 (E) dt 28-08-2017 is the notification issued by the Central Govt enhancing the coverage limit of wages u/s 1(6) of the Payment of Wages Act,1936 from the existing Rs.18000/= to Rs 24000/= per month for the purpose of application of the Act. Sorry, therefore, you should have most probably misquoted the learned advocates.

Terminal benefit, as the very name would clearly suggest, is the benefit payable to an exiting employee by the employer on the occasion of termination of his employment under him. Logically, therefore, what the salary/wages the employee has drawn lastly at the time of termination of his employment is the monetary basis and the total no of years of continuous service rendered by him is the chronological unit for computing the benefit and not any average as you have mentioned.

Regarding your query about the employment status of accountant and supervisor, I request you to go through the definition clause u/s 2(s) of the ID Act,1947 once again. Then you will agree that irrespective of the salary drawn, an accountant is a 'WORKMAN" and a supervisor can also be so when his monthly salary does not exceed Rs.10000/=.

From India, Salem
Dear Mr Umakanthan,
I have rechecked with the lawyer Mr. Jitesh Pandey and he says Accountant and Supervisor who draw a salary of Rs. 70,000 each can never be categorised as workman by any court of law. Adv Pandey who has a 30 year old Law firm says if I need he can give me this legal opinion in writing.
Best Regards & Thanks.
Ashu Ohri

From India, Noida
In India pilots are also workmen.So accountants are also workmen.
I dont see any connection between closure of factory and 50 employees.
Rs 24000 salary pm has nothing to do with compensation or gratuity.
You need to pay bonus only to those employees whose salary is not more than Rs21000/pm.

From India, Thiruvananthapuram

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