Section 30: Establishments to include departments, undertakings and branches

Overview

This section of the Code on Wages, 2019, specifically deals with the Payment of Bonus. It clarifies how the term 'establishment' should be understood when determining bonus eligibility. Essentially, it ensures that all parts of a larger organization are considered together for bonus calculations, rather than being treated as separate entities.

Scope and Coverage

• Employees Covered: This section applies to all eligible employees who are entitled to a bonus under the Payment of Bonus chapter of the Code on Wages, 2019.
• Establishments Covered: It covers all ‘establishments’ as defined under the Code. Crucially, this section states that all departments, undertakings, and branches of an establishment are considered as one single establishment for the purpose of bonus calculations.
• Thresholds/Exclusions: There are no specific thresholds or exclusions within Section 30 itself. Eligibility for bonus is determined by other sections within the Payment of Bonus chapter (e.g., minimum number of employees, salary ceilings).

Key Obligations and Rights

• Employer Duty: Employers must consider all departments, undertakings, and branches as a single unit when calculating bonus payments. They cannot artificially separate these to avoid bonus obligations.
• Employee Right: Employees have the right to have bonus calculated considering the overall profitability and performance of the entire establishment, including all its departments, undertakings, and branches. This prevents employers from manipulating the calculation by isolating less profitable parts of the business.

Compliance and Penalties

Violating this provision (i.e., treating departments as separate establishments to avoid bonus payments) would be considered a violation of the Code on Wages, 2019. This can lead to inspections by Labour Inspectors, and potential penalties including fines and, in some cases, imprisonment for non-compliance. The exact penalty will depend on the severity and nature of the violation.

Practical Examples

• Example 1: Manufacturing Company A large manufacturing company has a factory, a research and development department, and a sales office. All three are considered part of the same ‘establishment’ for bonus purposes. The bonus pool will be calculated based on the overall profits of the entire company, not just the factory.
• Example 2: Bank with Branches A nationalized bank has multiple branches across a city. Even though each branch operates somewhat independently, they are all considered part of the same ‘establishment’. The bonus will be calculated based on the bank’s overall performance, not just the performance of individual branches.