How Should We Handle Wage Deductions for Contract Workers' Absences?

In my industry, we hire workmen on an outsourcing basis, paying minimum wages and providing statutory benefits through a contractor. We pay full wages by calculating based on 26 days, allowing for 4 week offs. If a workman is absent, the days missed are deducted from the 26 days for wage payment calculation. There have been representations from workmen requesting that absent days be deducted from the total working days.

Clarification on Wage Calculation for Outsourced Workers

Your question is not clear. Is it that you pay the contractor (outsourced payroll provider) wages per day/per worker deployed, and the rate is so fixed that the daily average is calculated by dividing the monthly minimum rate of wages by 26? If this is the calculation, the weekly offs are actually included in the daily rate payable, and in such a scenario, there is no need to pay for the weekly offs.

Suppose that the monthly wages as per minimum wages are Rs 13,000. Then the average daily wages would be Rs 500 (13000/26). Suppose a worker is absent on any day, you can pay for 25 days in a month. The amount of wages payable for that month would be Rs 12,500, i.e., Rs 500 x 25.

Absent? How about statutory leave entitled as per the CLRA?

If Earned Leave (EL) or Paid Leave (PL) is allowed, there may not be absenteeism or it may be reduced. That aside, I have no other choice if you would arrive at the average wage by dividing by 25 or 26 days (denominator). Generally, the denominator used is the number of calendar days of the respective month(s) for the purpose of calculating average daily wages. This operates like Leave Without Pay (LOP). However, subject to your leave policy, the matter should be dealt with accordingly. The 26-day norm is applicable for the calculation of gratuity.

I differ with Prof. Kumar. The concept of 26 days applies not only to the calculation of gratuity but also to overtime calculation, the calculation of the daily rate of wages, and many other matters.

If a monthly wage is fixed, the daily rate is arrived at by dividing it by 26 only. However, concerning individuals whose service is fixed for the month and whose salary is fixed per month, the daily average may be found by dividing the monthly gross by 30 or 31 as well. In such a scenario, however, the weekly off days should be paid.

In the case of daily-rated workers, when the minimum wage is calculated, it is the monthly wage divided by 26 as explained in the notification itself. At the same time, if you consider the actual working days in the month, the wages per day would increase with a decrease in the number of days worked. It should not be like that.

Yes, Madhuji, the average daily wages are as stipulated in the respective notifications issued from time to time. At the same time, it's the minimum wages. We have been using calendar day average daily wages whenever the question of part of the month payment arose, and that worked well as there was no underpayment or overpayment, taking into consideration the paid weekly holidays.

Instances of Loss of Pay (LOP)

We have encountered instances where Loss of Pay (LOP) was involved. When we applied the norms of 26 or 25 days, the deduction amount turned out to be higher, leading to issues with the workers. To prevent any unpleasantness, we adopted the practice of using calendar day average wages consistently for all months. This approach seems reasonable as everyone is entitled to a full month's salary regardless of whether there are 28, 29, 30, or 31 days in the month.

Contract Labor and Wage Averaging

We did not hire contract laborers on daily wages but on minimum wages. However, in instances of part-month payments, this type of averaging was applied without any difficulties. At one point, we had over 14,000 regular/permanent employees and 3,000 contract/casual employees (managed through the Forest Department) who were paid in cash until 1995.