Company is not making profit in consecutive years - how would they pay increment and bonus to their employees?

If a company is not making a profit for several years, they accept orders without any margin to repay liabilities. How should they pay increments and bonuses to their employees, and how should they overcome the situation?

Karthigeyan.S, Bangalore.

Dear Karthikeyan,

Knowingly or unknowingly, you have used the phrase "To run for repaying the liabilities". Liability does not imply financial liabilities only. The employees employed in the Company for carrying out its operations in the manner instructed to them by the Management also are one among the stakeholders to whom the company owes its moral responsibility to ensure better working conditions on par with other Companies in the industry. Keeping the operations of the Company viable and making profits are the responsibilities of the Management. Any lapse in this regard can only be termed as a managerial failure for which the employees cannot be penalized. Unfortunately, labor is the only factor of production that remains always negotiable. But it does not mean that they should be denied their statutory benefits on account of the Company being in the red continuously. It is for the Management to embark upon suitable revival measures in the long run.

But if the company is paying more than minimum wages and better than other companies in the industry, is there a liability for the company to increase wages year-on-year? In such a situation, the company shall close one day and employees shall lose jobs.

Your comments, please, sir...

Dear Catapro,

I need not emphasize the importance of the upward journey of the wages of the working class from minimum wages to fair wages and finally to that of living wages as spelled out in our Constitution. Paying more than the statutory minimum wages or that of the industry wages cannot be a valid point or a reasonable justification against the subsequent increase of the existing wages of the employees. In fact, the issue is related to so many factors like the value and volume of the products manufactured or the services rendered by the establishment, the labor cost ratio, the types and the extent of the existing fringe benefits, etc.

Of course, the management can convince the employees and their unions about the need for reducing the rates and periodicity of wage revision in order to maintain the competitiveness of the company in the market. We also should bear in our minds that the subject matter of periodical wage revision cannot be isolated from the persistent inflationary trend in the economy which results in substantial reduction in the real wages of the working class.

You mentioned "as spelt out in our Constitution." May I have a reference for it?

For your information, the standard for the fine chemical industry regarding expenditure on manpower is 3 to 5% of sales turnover, while ours is over 12%. We explained this to the union and the labor commissioner along with supporting industry data; however, the union is not concerned... they are sticking to their stance and continuing the strike for an annual increase in wages.

In such a background, we have recruited new employees to run the plant. Now these new employees have become permanent by virtue of their service period.

Now my questions are:

1. Can we recruit new employees to run the plant if existing employees are on strike?
2. If the union doesn't agree with the industry standard of 5% wages of sales, what options do we have?
3. If the newly recruited employees have now become permanent, whom do we dismiss after the strike is withdrawn following negotiations?
4. Could you please provide a reference to the constitution for a fair increase in wages to improve the living standards of workers?

Your responses to the above specific questions, one by one, would be highly appreciated.

Thanks