Case: Ti Cycles Of India,Amattur Vs. M.K. Gurumani

In other words the incentive for increased production is generally known as `production bonus. Broadly the basis of remuneration for work in industry is based on two fundamental arrangements, viz. (i) payment by time, and (ii) payment by output. In the former case, a worker is paid a predetermined amount for a specified unit of time which may be an hour, a day, a week, or a month. Under this arrangement, there is no direct control on the amount of work down by the workers except perhaps to a certain extent through supervision so long as he is engaged on tasks specified by the employer. In the latter arrangement, the worker is remunerated according to his output or the output of the group to which he belongs. It may assume complex forms such as "differential piece work" wherein rates of remuneration per unit of output may be either progressive or regressive. There are also other types of remuneration that are not directly dependent on production, like bonuses for regular attendance, length of service, quality of production and elimination of waste, all constituting an area of wage incentives." 12. The First and the Second Five Year Plans also recommended the introduction of incentive to promote more efficient work in the industries with due safeguards to protect the interests of the workers through the guarantee of minimum or fall-back wages and protection against fatigue and undue speed up. In the Second Five Year Plan, it was further made clear that earnings beyond the minimum wage should be necessarily related to results and workers should be consulted before a system of payment by results was introduced in such an establishment. The Third Five Year Plan emphasised the need for higher productivity and reduction in the unit cost of production and put the responsibility on the management to provide the most efficient equipment, correct conditions and methods of work, and adequate training and suitably psychological and material incentives for the workers. One thing is clear from the report and the recommendations made in the various Five Years Plans that there is a base of standard above which extra payment is made for extra production in addition to basic wage. Sometimes, the piece rate work is termed as bonus and such a question was considered by this Court in Daily Partap v. Regional Provident Fund Commissioner, 1998(8) SCC 90 : 1999(1) SCT 216 (SC). The test adopted in that case is that in order to be excluded from `basic wages the payment under such a scheme must have a direct nexus and linkage with the amount of extra output. On an examination of the scheme in that case, it was found that less than normal number of the workmen doing normal work of a shift, production bonus was given according to the deficiency in the numerical strength of workmen and extra output given by any workman in any shift, output of different types of workmen being measured according to the prescribed norms but production bonus not directly linked with the amount of the extra output furnished by the workman concerned but paid at a uniform rate of his normal wages was held to be not bonus at all and the scheme was not a genuine one. It was not the same as incentive bonus scheme. 13. In the present case, the scheme sets out the terms under the settlements. Clause 1.1 sets out the objectives as follows :"The objective of the scheme is to ensure optimum production of high quality, promote safety and cost consciousness and maintain a high level of productivity." 14. Incentive payment is based on two components : group performance index and individual/sectional performance index. It was made clear that no incentive will be payable to workmen on leave, absent, away from duty or no holidays. The minimum performance level is indicated in each sectional incentive table and below which no incentive will be paid for any reason whatsoever. If a person works for more than one group during the month, he will be awarded incentive as per the performance of each group in the respective periods. Clause 9.1 also sets out incentive payment payable under the scheme will not be regarded as wages and, therefore, the payment shall not be taken into account for the purpose of leave wages, overtime wages, in lieu of notice, provident fund contributions, bonus, gratuity or any other allowance. However, this clause is subject to review in case of statutory amendments if any.15. The Authorities were carried away by considering that the bonus is payable on the basis of output equivalent to certain pieces per man-day. But it is made clear in the scheme that each payment will be made not on the basis of pieces of per man-day nor is it a piece rate work for which wages are paid but it is an additional incentive for payment of bonus in respect of extra work done. The measure of extra work done is indicated by pieces and not wages as such that are paid on that basis. It is not that in respect of each piece any wages and paid but altogether if certain number of pieces are produced, additional incentive will be payable at a particular rate. Therefore, the authorities have completely missed scope of the scheme and have incorrectly interpreted the same. Inasmuch as both the High Court and the authorities have incorrectly understood the position in law and have wrongly held that the concept of `wages under the Act would include bonus and that even on facts the scheme would attract Section 4(2) of the Act. Proviso to Section 4(2) of the Act is to the effect that in case of a piece-rated employee, daily wages shall be computed in a particular manner but that is not the rate at which the wages are paid in the present case at all. Therefore, Section 4(2) of the Act is not attracted in the case of the present scheme with which we are concerned.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]14. Incentive payment is based on two components : group performance index and individual/sectional performance index. It was made clear that no incentive will be payable to workmen on leave, absent, away from duty or no holidays. The minimum performance level is indicated in each sectional incentive table and below which no incentive will be paid for any reason whatsoever. If a person works for more than one group during the month, he will be awarded incentive as per the performance of each group in the respective periods. Clause 9.1 also sets out incentive payment payable under the scheme will not be regarded as wages and, therefore, the payment shall not be taken into account for the purpose of leave wages, overtime wages, in lieu of notice, provident fund contributions, bonus, gratuity or any other allowance. However, this clause is subject to review in case of statutory amendments if any.15. The Authorities were carried away by considering that the bonus is payable on the basis of output equivalent to certain pieces per man-day. But it is made clear in the scheme that each payment will be made not on the basis of pieces of per man-day nor is it a piece rate work for which wages are paid but it is an additional incentive for payment of bonus in respect of extra work done. The measure of extra work done is indicated by pieces and not wages as such that are paid on that basis. It is not that in respect of each piece any wages and paid but altogether if certain number of pieces are produced, additional incentive will be payable at a particular rate. Therefore, the authorities have completely missed scope of the scheme and have incorrectly interpreted the same. Inasmuch as both the High Court and the authorities have incorrectly understood the position in law and have wrongly held that the concept of `wages under the Act would include bonus and that even on facts the scheme would attract Section 4(2) of the Act. Proviso to Section 4(2) of the Act is to the effect that in case of a piece-rated employee, daily wages shall be computed in a particular manner but that is not the rate at which the wages are paid in the present case at all. Therefore, Section 4(2) of the Act is not attracted in the case of the present scheme with which we are concerned.