Dear Kanaka
You both are right. There is three types of employments namely
Daily Rated
Monthly Rated
and Contract Rated
It is clear that in case of daliy rated employees , wages are to be paid on the basis of days on which they performed or attended the work.
In case of contract the amount is to be paid as per terms of contract i.e on monthly , fortnightly or on completion of work.
In case of monthly rated salary is for full month i.e for 30 or 31 days.
Now in case of LWP under Payment of wages act or Minimum Wages Act, to work out daily rate of salary , gross salary is to de divided by number of days of the month. It is not very clear under any law that it has to be taken only for total number of working days in the month.
If we assume the working days as basis and also if a holiday falls during the month( as declared under national & festival holidays), then in that we can not change the base by further reducing the number of working days.
Under the payment of wages act , the objective was to create a rational base. One rest day after every six working days is guide line under the law and payment for this is to be adjusted in the monthly rated base. There is rational behind doing the same.
As far as in the factory if they are not taking allowance into consideration for deduction of salary / wages for LWP , then they might have introduced a policy to that effect. Number of organisations are adopting this policy and they are also paying leave encashments on the basis of 26 working days. Under any if you are violation is if you are deducting higher than the prescribed and if you are deducting on basis which works out to be less than that of normal. Then it does not fall under the violation clause.
Hence both the methods are correct and these are not violating any legal provisions. This question of correct basis has been taken to courts a number of time. Judges are also of the view that this should be of rational basis of 30 or 31 days of one month in the case of monthly rated employees. In case of bifurcated salary we can assume further basis for deductions but in case of consolidated , the amount has be taken as single component. Again, it is for the management to decide and adopt the basis as per their convenience..
I hope this clarifies your doubts.
Regards
Anil Anand