Understanding Wages for Sales Promotion Employees: Can You File a Case Under the Payment of Wages Act?

What is the actual meaning of wages in the Payment of Wages Act?

Definition of wages for a Sales Promotion Employee in the Payment of Wages Act

I seek clarification on the definition of wages. For example, can a Sales Promotion Employee who is receiving a Gross Salary of Rs. 32,000 per month, distributed as follows: (A) Basic - Rs. 13,000, (B) House Rent Allowance - Rs. 3,900, (C) Special Allowance (Medical Reimbursement, L.T.A., Lunch Allowance, Liaison Allowance, Conveyance Allowance, Personal Allowance, Bonus) - Rs. 14,900, file a legal case under the Payment of Wages Act against the employer for withholding the salary? If yes, kindly define the components that are considered in the assessment of wages for filing a case under the Payment of Wages Act 1936.

The employer has deducted Provident Fund Contribution, and the calculation of Gratuity is based on the Basic salary.

If there is any case law, please provide the details.

Dear Friend, it would be better if you answer the following queries:

1) What is the exact breakup of the Special Allowance of Rs. 14,900.00?

2) Is the medical reimbursement a fixed sum payable every month without bills?

3) Same query in respect of L.T.A.

4) Is the lunch allowance paid only to SPEs during tours or always and to all employees in the company?

5) What is meant by liaison allowance?

6) Is the personal allowance common to all or only for SPEs?

7) Is the monthly bonus paid under the PB Act, 1965, or is it part of the remuneration payable as per the contract of employment?

8) Are the SPEs paid the actual travel expenses like bus/train fare, taxi fare, and daily allowance for boarding and lodging separately for the business tours undertaken by them in addition to the monthly conveyance allowance?

9) In case of authorized leave, is the entire salary paid, or are proportionate deductions made in respect of all the special allowances?

Thank you.

Thank you for addressing my post. You have requested certain clarifications which are as follows:

Breakup of Special Allowance:

1. Till 1998, all SPE were receiving a yearly bonus. Later, it was converted into a Personal Allowance of Rs. 1250 per month, which was eventually merged into Special Allowance.
2. Before 2002, Lunch Allowance was Rs. 400 per month.
3. Liason Allowance - Rs. 2450 per month.
4. Bonus - Rs. 1250 per month.
5. In 2015, Medical Allowance was Rs. 6600 per year.
6. Good Conduct Allowance - Rs. 6000 per year.
7. L.T.A - Rs. 4200 per year.

Medical and L.T.A. Claims:

Before 2015, submission of medical bills was mandatory to claim Medical Allowance. For the L.T.A. claim, travel tickets were mandatory.

Allowance Details:

Lunch Allowance was fixed for all SPE of the company. Liason Allowance was also fixed for all SPE to enhance the sales of the company by obliging the customers. After 2002, Lunch Allowance and Liason Allowance were merged with Special Allowance. Conveyance Allowance was a separate head, later merged with Special Allowance.

Other Allowances and Leave Encashment:

Daily Allowance, Ex-Station, Out-Station allowances, and travel expenses are paid separately through expense statements on a monthly basis, which are not connected to the monthly salary. Calculation of Privilege Leave encashment was based on the basic salary only.

Thank you.

Dear Alokst, after carefully analyzing the inputs relating to the wage/salary structure furnished in the thread, I think that the queries posted by you initially are:

Meaning of "wages" under the Payment of Wages Act, 1936

(1) What is the meaning of the term "wages" as defined under the Payment of Wages Act, 1936?

Filing a claim under the Payment of Wages Act, 1936

(2) Whether an employee, particularly a Sales Promotion Employee as defined under the Sales Promotion Employees (Conditions of Service) Act, 1976, can file a claim against the employer under the P.W. Act, 1936 for withholding of his salary, even though his monthly salary exceeds the ceiling prescribed due to the inclusion of certain allowances in the salary/wage structure?

However, I am sorry to state that your subsequent clarifications seem to increase my confusion only. If the monthly gross salary of Rs. 32,000.00 comprises a Basic of Rs. 13,000.00, HRA of Rs. 3,900.00, and Special Allowances of Rs. 14,900.00, I just asked you for the break-up of the special allowances under various heads, if any.

Of course, though the various heads of allowances are mentioned, your description about their apportionments and merger makes me doubtful whether the particulars are C.T.C based and thus renders my understanding all the more difficult. For instance, you have mentioned that the yearly bonus, monthly allowances of liaison, lunch, and conveyance allowances were subsequently converted as monthly payable and merged with the monthly Special Allowance, while the other allowances of medical, good conduct, and leave travel are still yearly payable. Therefore, for all purposes, the monthly gross salary/wages of an SPE employed in your company comprise only three components: Basic, H.R.A, and Special Allowance, which amount to Rs. 32,000.00 as mentioned at the outset.

Is my presumption correct?

Sir, your presumption is correct but one thing I want to add is that in 2015, the company had converted employees' yearly allowances (medical, good conduct, and L.T.A.) into monthly payments and merged them into a special allowance. Currently, my gross salary is Rs. 32,000 per month, including all allowances.

Understanding Allowances as Part of Wages

I would say that all fixed allowances as per the terms of the contract of employment or settlement should form part of wages/salary for all purposes, including deciding the contribution towards PF and calculation of gratuity, etc. There are views expressed by courts that a special allowance paid to all employees will be part of the salary. At the same time, if a particular employee or a category of employees are paid allowances considering the nature of their work, such as the risk involved or the skill required, then that can be excluded from the salary. This was the view expressed by the Apex Court in Bridges & Roofs (India) Ltd.'s case. Therefore, in my opinion, all allowances paid monthly when the employee is on employment or leave with wages should be considered as part of wages/salary.

Clarification on Monthly Bonus Payments

With regard to bonus paid monthly, there is again a misinterpretation of the law from the employer's side. Therefore, if paid monthly, it cannot be treated as a bonus. According to the Payment of Bonus Act, an employee whose salary exceeds Rs 21,000 is not eligible for a bonus, and as such, you may not be eligible to receive any bonus. However, if others who are otherwise eligible for a bonus are paid a bonus calculated on the basic wages as per your structure, the same should be questioned. If the gross salary is the basis for excluding employees from bonus coverage, then the same principle should be applied for the calculation of the bonus amount. This should also be the basis for other statutory payments like the payment of gratuity.

Addressing Non-Payment of Salary

When the issue pertains to non-payment of salary, I believe you have other options available under the Sales Promotion Employees (Conditions of Service) Act itself. Since you did not have managerial powers, you can raise it as an industrial dispute.

Regards, Madhu T K