Chapter 22 Labour Organization and Methods of Industrial Peace – Indian Economy


Labour Organization and Methods of Industrial Peace

Labour Organizations in India

Early Efforts: Trade Unions in India are of recent growth. Up to the end of the First World War, Indian labour was practically unorganized. The first instance of collective action by Indian workers was in 1884, when under the leadership of Lokhande, who began life as a factory worker in Bombay met in a conference to draw up a memorandum to the Factory Commission. Lokhande also formed the first labour organization in India when he organized the Bombay Mill-Hands Association in 1890 and started a paper called the ‘Deenabandhu’, the friend of the poor. In 1897, the Amalgamated Society of Railway Servants of India and Burma was formed, but its purpose was more fraternal than militant. Other unions followed such as the Printers’ Union, Calcutta (1906), the Bombay Postal Union (1907), the Union of Warpers, Ahmedabad (1917), and the Clerk’s Union of Bombay (1918). But these were mostly tentative and isolated efforts.

The War and the Birth of the Labour Movement: The credit of organizing the first trade union proper belongs to Madras where B. P. Wadia founded the Madras Labour Union in 1918 for the workers in the three cotton mills of the city. This year may be said to constitute a landmark in the history of the Trade Union Movement in India, for from that year onwards there had been a more or less steady growth of Trade Unionism.

The circumstances that led to this step were the following: The war resulted in a general mass awakening and the difficulties of the times caused discontent and unrest. The factory workers realized their own important share in the economic life of the country, but the high prices of all commodities and the comparatively low wages stood in striking contrast to the huge war profits made by their employers. This feeling of economic discontent was augmented by political agitation and, like his conferee elsewhere, the Indian factory worker began to demand more wages, better housing, more leisure and increased opportunities for bettering himself.

The year 1918–21 witnessed a series of strikes, short and generally successful, and a number of unions were formed in all possible industries and occupations. There were strikes in the Jute Mills of Calcutta, Cotton Mills of Bombay, Tata works in Jamshedpur, in coal fields, in dockyards and in the Postal department. Their success taught them, as nothing else could, the efficacy of organization and to many workers, concerted action in the shape of strikes seemed an unfailing means of securing their ends. But a number of unions formed during this period were mere strike committees brought into existence either before or after a strike, and these disappeared or remained dormant until another strike broke out. In fact, 75 per cent of the unions of this period were unstable and died an early death after 1922 with the disappearance of the post-war boom.

Though individual unions collapsed, the movement itself showed signs of permanence and vitality. Labour organizations had come to stay. The more stable unions were those of Railway workers, Postal employees and Seamen, where the actual members were capable of responsible leadership. Trade union became strong in Bombay, in Ahmadabad where Gandhiji took a hand in the organization and in Madras. Almost all unions, however, were organized and led by non-workers, generally political leaders.

Obstacles to the Movement: The difficulties of organizing permanent trade unions in India were almost insuperable. Factory labour as we noted earlier was mostly migratory in character, so that it had no permanent interest in the labour unions and disliked regular subscriptions and trade union discipline. The ignorance and illiteracy and the general poverty of the worker were other factors to be reckoned with. The different social customs of various castes and creeds that constituted the working class prevented any easy association for common welfare. Perhaps, the most important factor that retarded the growth of the movement in the early period was the definitely hostile attitude of the employers to all combinations of workers.

The Trade Union Act 1926

The passing of the Trade Union Act in 1926 gave a legal status to the labour movement in India. It was through the efforts of labour leaders like N. M. Joshi that the Act was passed legalizing trade union activities, which had been declared illegal by the Madras High Court in 1920 on an appeal filed by Buckingham Mills.

The Act accorded to registered unions certain privileges and immunities. Unions and union officials were given a substantial measure of protection from civil and criminal prosecution. The Act laid down certain conditions regarding registered unions. At least 50 per cent of the office bearers had to be actual workers, for they are the best judges of their own interests and responsibility helps to educate them; the funds of the union could be used only for strictly labour union needs and not for political purposes, for which a separate fund voluntarily subscribed to might be constituted and every union had to submit to the Registrar, every year, an audited statement of receipts and expenditure, a copy of the rules and a list of office bearers.

Though these conditions delayed the registration of unions, the attitude of the employers using non-registration as an excuse for not recognizing a union, soon accelerated the movement for registration.

The Act of 1926 was modified, in some respects, by the Trade Dispute Act, 1929. The Act laid down special penalties for public utility servants going on strike without fourteen days’ notice. A strike or lockout was declared illegal when the object was not the furtherance of a trade dispute, or whose object was to compel the government to state or abstain from a certain course of action. Sympathetic strikes thus became illegal by implication. Both these Acts followed the parent legislation in England on these subjects.

All India Organization

In 1925, the total number of unions in India was reported to be 175. According to the Whitely Commission, there were in 1929, 87 unions with a total membership of 183,000 registered under the Trade Unions Act.

Table 22.1 shows the growth of unions between 1929 and 1943.

Table 22.1 Growth of Registered Trade Unions between 1929 and 1943

Attempts to co-ordinate the trade unions were made from the beginning, but did not meet with much success except amongst the railway and postal workers. But the desirability of sending a  worker’s delegation to the International Labour Conference at Geneva hastened the formation of a national federation of all unions called the All-India Trade Union Congress in 1920. By 1926 some communists and left-wing radical leaders had begun to capture the key positions in trade unions. The Girni Kamgar Union in Bombay was the stronghold of communists and as a result of their militant activity they soon became a powerful factor in the AITUC which was, till then, entirely under the leadership of moderates. The great difference between the communists and the older leaders in ideology and even in the day to day functions of their unions rendered a split inevitable. The actual split in the AITUC took place at its Nagpur Session held in December 1929 under the presidentship of Pandit Jawaharlal Nehru. The points at issue were two: one was the boycott of the Royal Commission on Labour and the other was the AITUC’s affiliation to the Pan-Pacific Trade Union Secretariat. When these two resolutions were passed, the moderate leaders headed by N. M. Joshi seceded from the Congress and formed the All India Trade Union Federation, which, in 1931, was reorganized as the National Trade Union Federation. Meanwhile, another split had led to the formation of the All India Red Trade Congress under the leadership of Deshpande and Ranadive. These splits seriously weakened the trade union movement in India.

Hence, efforts were made to bring about unity in the workers’ movement. The differences were finally composed in 1938 through the efforts of V. V. Giri and it was agreed to combine the AITUC and the NTUF with fifty-fifty representation in the General Council. But soon came another split. That was in 1941 on the issue of India’s attitude towards the war. The Trade Union Congress adopted an attitude of neutrality, although members were granted freedom of action. The Seamen’s Union did not like this lukewarm attitude and seceded from the Congress. Some other members also led by the Radical Democratic Party of M. N. Roy who supported war effort seceded and formed their own organization under the name of Indian Federation of Labour, with Jamnadas Mehta as President. To this new organization, 200 unions with a quarter million members got affiliated. This continues to be a separate body even after the termination of the war. Yet another split had taken place resulting in the formation of the Indian National Trade Union Congress in May 1947 under the presidentship of Dr Suresh Banerjee. This organization consists of 185 members representing 200 trade unions with a membership of over a million workers. The sponsors of this organization demanded that the trade union movement should unequivocally adopt a nationalist outlook. It reposed faith in the Indian National Congress and its leadership and was pledged to achieve its objectives by peaceful democratic means.

The Defects of Indian Unionism as Compared to English Unionism: The labour movement in India is now several decades old, yet the progress so far made cannot be regarded as satisfactory. In point of membership, organization, strength or the place it occupies in the life of the worker and of the nation, it falls much below the standards reached long ago by unions in England and other Western countries.

Indian trade unionism has hardly touched the fringe of the vast number of wage earners in the country. Unlike in England, where all workers, whether industrial, agricultural or general, are brought within the organization, the membership in India is mostly confined to industrial workers. Efforts had been made to organize agricultural workers in Kisan Associations. Still, the total number organized is small. Before 1939, it was said that only 5 per cent of the industrial workers had joined the unions.

More serious than the limited membership, however, is the quality or stability of the unions. Loyalty to the union is weak and discipline is wanting. Unlike his counterpart in England, the Indian worker little realizes the need to provide for the future by strengthening his union. He expects a pretty quick return for his subscription to the union, failing which he discontinues payment. Many unions in the past became defunct just on this account and the funds of many unions even today are very meagre. Perhaps this attitude is inevitable so long as the unions work merely as instruments of getting an increase in wages. The poverty and the migratory character of labour were also said to account for these defects.

But conditions have been changing. The phenomenal fall in agricultural prices from 1929 and the increased pressure upon land have tended to stabilize factory labour and create a real proletariat bound to industries. The prosperity during the war, the dearness allowances and bonuses have certainly bettered the condition of the industrial wage earner, especially as compared to the rural worker. The war and its effects, the agitation for and attainment of freedom have all combined to make for a general awakening of the worker. With better education and a growing sense of responsibility, the Indian worker might be expected to realize better the need for loyalty and discipline. Right leadership is, therefore, the key to the situation.

Unhappily, Indian labour has not been served well in this respect. The workers, ignorant, illiterate and in constant fear of victimization, were unable to take up the leadership. From the beginning of unionism, therefore, outsiders, lawyers or politicians, have been the leaders. In England also, there were outsiders interested in unions but their part was more to encourage and protect rather than guide the union in their day to day affairs. Able leadership, which understood the needs of labour, rose from within the ranks of actual workers. The result was, after the initial failure of political unionism, the steady growth of unions and betterment of working class conditions. In India, on the other hand, politicians or mere agitators have striven to exploit the ignorance of the workers for their own power and profit, not caring, in the least, to train the workers help themselves.

Besides, no mutual benefit funds were established as in England to provide for sickness, death, unemployment and dispute benefits. Welfare works such as schools, adult education, medical relief, facilities for technical training, co-operative credit and improvements in housing were not undertaken. The only bait held before union members was increased wages. This very short-sighted and selfish aim could not take labour far on the road to progress.

The factory owners in India, unlike those in England, failed to realize that well organized unions meant better work and more responsible negotiations tending to promote industrial peace. The  stubborn opposition of employers to all unions even after the legislation of Trade Union Act and Trade Disputes Act and their indifference to the development of well-organized unions increased the dependence of workers on their leaders as the only safeguard against exploitation by employers.

Under these circumstances, leadership has fallen more and more into the hands of extremists and communists. This has increased so much during and since the war that whereas before 1939, the policy of trade union was limited to gain as much as possible for the workers, now the communist principle of the destruction of capitalist society has come to the forefront. The English trade unionism also was tainted by such an extremist policy, but sobered by the failure of the General Strike and the Great Depression, it has turned to evolutionary socialism. The change in Indian trade union ideology is the result of extremist leadership and the workers are exploited by outsiders for their own political purposes.

This has also tended to weaken the national organization of labour. Such a tendency is certainly a danger signal and an attempt to check in the formation of Indian National Trade Union Congress with a pronounced fidelity to Congress policy.

These points of weakness need not be taken as inherent to India. Given right leadership, the Indian labourer is capable of giving a good account of himself. The Textile Labour Association of Ahmedabad, organized by Gandhiji and conducted according to his principles, has a distinguished record to show of its service both to the workers, to the industry and to the country. The reason for this difference in organization and achievement is really sound leadership. We may conclude that, in the absence of a literate and efficient working class led by capable leaders as in England, trade unionism in India might turn out to be more a national liability than an asset.

Methods of Industrial Peace

For industrial progress and prosperity the maintenance of peaceful relations between labour and capital is of primary importance. Strikes and lockouts mean a loss both to the employers and employees and are harmful to the community in general.

Although modern industry began to grow in India from the middle of the 20th century, no industrial dispute of importance took place for a long time. But the years immediately following the First Great War witnessed a number of strikes. There were two general strikes owing to economic distress and high prices in Bombay in 1918–19 and 1920 involving about 150,000 workers and two in Ahmedabad in 1920 and 1921 involving 30,000 and 33,000 workers respectively. During 1920 and ’21, there were strikes among cotton mill workers in Sholapur and among postal workers, tramway and railway workers lasting from a fortnight to five months. With the restoration of normal conditions and the fall in the cost of living, the strike fever subsided. The trade depression which followed, however, led to a movement on the part of employers to stop paying war bonuses or to decrease wages, causing a fresh outburst of strikes at industrial centres like Bombay and Ahmadabad. The years 1926 and 1927 were comparatively quiet. The year 1928, however, saw a recrudescence of industrial unrest and strikes, particularly in Bombay following an attempt to introduce rationalization and new methods of work. Most of the strikes were the result of disputes regarding pay or bonus, or reinstatement or dismissal of one or more individuals. The growing influence of the communists was said to be the cause of the increase in the number of bitterness of the disputes.

Early Attempts: Prevention and settlement of industrial disputes is of major importance in the industrial progress of any country and among the early efforts towards peaceful settlement may be mentioned the Work Committees or Shop Committees on the lines of the Whitely Committees in England. These Committees composed of workers and employers sought to settle frictions in factories. They brought the workers and employers together, established personal contact and made the parties more responsible. Important firms like the Tatas and the Buckingham and Carnatic Mills set up such committees but, except in Ahmadabad, their results were disappointing, for the employers viewed them as substitutes for trade unions, while the unions regarded them as rival institutions deserving of no encouragement.

The Government of Madras was the first to set up courts of inquiry to deal with individual disputes as they arose. The Committees appointed by the Bombay and Bengal governments did valuable work and made recommendations regarding the machinery to be set up for preventing and setting disputes. But legislation on the subject could not be taken up until the Trade Union Act was passed.

The Trade Disputes Act 1929

The 1929 Trade Disputes Act closely followed the English legislation on the subject and did not provide for compulsory arbitration. The Act provided for the setting up of ad hoc Courts of Inquiry and Conciliation Boards by the Governor-General-in-Council in the case of railways or concerns under the control of the Government of India, and by the provincial governments in the case of all other concerns. The duties of the Court of Inquiry were confined to the investigation of the matters referred to them and to reporting to the authority which appointed them. On the other hand, the Boards of Conciliation composed of independent persons and included equal number of persons representing the parties to the dispute, and were charged with the duty of trying to effect a ‘fair and amicable settlement ‘failing which they were simply to make a report of their findings and recommendation to the appointing authority, which published it for public information. In the case of public utility services, the Act imposed an obligation on the workers and employers to give fourteen days’ notice before declaring a strike or lockout. In the absence of such notices, strikes were to be treated as illegal and hence punishable under the Act.

The above Act, was, however, very limited in its scope. It placed no obligation on the government to refer to disputes to a Court of Inquiry or a Board of Conciliation on its own initiative. The government was to appoint Courts of Inquiry or Boards of Conciliation only when both the parties to a dispute referred it to the government and the government was satisfied that the persons applying represented the majority of each party. Nor did it confer any authority on the government to enforce the recommendations of such bodies. With the publication of the report, the statutory obligations of the public authorities ended, reliance being placed on the public opinion to induce the parties to accept the recommendation contained in the report. In England, less reliance was placed on ad hoc public enquires of this kind than on the efforts of the conciliation officers and others to bring the parties privately to an agreement. It was only in 1938, that the defect was removed by an amendment to the Act which provided for the appointment of Conciliation Officers charged with the duty of mediating in, or promoting the settlement of trade disputes.

The administration of the Act by the government was equally defective, for the government seldom utilized the machinery provided in the Act. Between 1929 and 1933, more than 500 disputes occurred in the country but only two Courts of Enquiry and two Boards of Conciliation were appointed by the government. Generally, the government delayed action until a dispute had attained a serious magnitude and became a threat to public peace. A considerable change, however, took place after 1937. With the formation of Congress Ministries in several provinces, they appointed, within a year of their assumption of office, Committees of Inquiry or Boards of Conciliation in the case of, at least, fifteen disputes.

Defence of India Act (Rule 81-A): After the outbreak of the Second World War, prices of food-stuffs and other necessities went up and this meant a fall in real wages. Workers clamoured for dearness allowances and they were granted in all industrial centres. But a further rise in the cost of living and a desire for a share in the abnormal war profits led to a general strike in the cotton mills of Bombay in 1940 and to a dispute in 1941 in Ahmadabad. A large number of disputes occurred all over India on the question of war bonus. This was readily conceded. Lest such disputes should affect the war effort, some machinery to avoid strikes and lockouts was found necessary. The Act of 1929 was, however, utterly inadequate. It was, therefore, supplemented in 1942 by Rule 81-A framed under the Defence of India Act which authorized the Central government to prohibit strikes and lockouts and issue orders requiring employers and labourers to observe specified terms and conditions of employment. The government could also refer any trade dispute for conciliation or adjudication and enforce the decision. A fourteen days’ previous notice for a strike or a lockout was made compulsory not only in public utilities as in the 1929 Act, but in the case of every industry. Strikes were made illegal during the period covered by conciliation proceedings and also during the period when the award was made binding. These powers were also extended to Provincial governments subject to certain qualifications. The powers granted by these provisions were freely exercised by the Central and Provincial governments for the duration of the war.

The Tripartite Conference 1942: One of the most important recommendations made by the Royal Commission on Labour (1931) related to the setting up of an industrial council for India on the lines of the tripartite representation of governments, employers and employees. This was taken up by the Third Conference of Labour Ministers and a Plenary Conference of all these interests held in 1942, decided to establish a Tripartite Conference consisting of representatives of the State, employers and workers for promoting better mutual understanding among the parties concerned. It’s periodical meetings enabled government to know precisely the view-points of employers and workers in regard to labour problems.

Industrial Relations Machinery 1945: In 1937 the Government of India appointed a Conciliation Officer for Railways to mediate in threatened disputes and to promote the settlement of actual disputes. In 1942 the government appointed a Labour Welfare Adviser, one Deputy Labour Welfare Adviser and eight Assistant Labour Welfare advisers. The above two organizations— Conciliation Officer and Labour Welfare Advisor—were amalgamated in 1945 into the Industrial Relations Machinery to deal with disputes and promote better industrial relations in industries and undertakings managed by the Central government. Its main functions in connection with conciliation and labour welfare included assistance in the formation of voluntary machinery in industrial establishments, prevention and settlement of industrial disputes, maintenance of continuous touch with this state of relations between labour and management, examination of welfare schemes, etc.

The Industrial Disputes Act 1947

The different steps taken, kept within control, the labour situation during the war-period. But soon after the termination of the war, serious labour troubles broke out rudely dislocating the economic life of the country. The strike-fever became more wide-spread during the post-war period. The  existing machinery for the prevention and settlement of industrial disputes could not cope with the new situation. Realizing the urgency of devising some effective and speedy machinery for settling disputes which were holding up productive activity, the Interim government passed a comprehensive Industrial Disputes Act in February 1947, modifying the existing legislation on the subject.

The Act provided for the establishment of a workers’ committee in every industrial establishment employing 100 or more workers. It was to consist of representatives of employers and workers in equal numbers. The provision that the workers’ representatives should be chosen in consultation with their trade union, removed the difficulty experienced in the working of such committees in the past. The chief function of the committee was to promote measures for securing and preserving amity and good relations between the employer and workmen. Certainly, a dispute has better chances of successful settlement when a works’ committee within the factory tackles it quite at the beginning than when it has become a complicated issue requiring the intervention of a third party.

An elaborate conciliation machinery also was provided by the Act. The provincial governments had been authorized to appoint Conciliation Officers. If an industrial dispute took place or was apprehended, the Conciliation Officer had to inquire into it and play the part of a mediator. To expedite his work, a time limit of 14 days had been fixed within which he would have to submit his report to the government concerned. If the matter was not resolved, it would be referred to a Conciliation Board, consisting of an independent chairman and two or four other members. The Board must ordinarily complete its work within two months. In order to collect all the facts relevant to an industrial dispute, provision had also been made for the appointment of a Court of Enquiry. It would work as a fact-finding body and should ordinarily submit its report within six months.

Based on the experience of war time regulations, provincial governments had been empowered to refer a dispute to a Tribunal for adjudication. Reference to a Board or a Tribunal was compulsory in the case of public utility services. The settlement reached through the Conciliation Board and the award given by the Tribunal could be made binding on the parties.

Furthermore, in order to secure a congenial atmosphere for the settlement of industrial disputes, the Act prohibited strikes and lockouts during the pendency of conciliation and adjudication proceedings. Strikes and lockouts without 14 days’ notice in public utility services had been made illegal.

The Industrial Disputes (Appellate) Tribunal Act 1950 has been set up a Labour Appellate Tribunal with all India-jurisdiction so as to do away with the awkward situations which were being created by the divergent, if not conflicting, decisions given in the various Industrial Awards.

The Bombay Industrial Disputes Act 1938 had made conciliation compulsory, and strikes and lockouts before the completion of conciliation proceedings had been declared illegal, although the acceptance of the award was not obligatory. In practice, this meant the suspension of the strike weapon for a period of four months during which the conciliation machinery was to operate. This temporary denial of the strike weapon was opposed by labour unions. During the war period, the principle of compulsory adjudication was enforced under the Defence of India Rules, as a war measure. But when the principle of compulsory arbitration was embodied in the Act of 1947, it was vehemently opposed by labour representatives. Such a provision, it was argued, constituted a denial of the fundamental right of the trade union, the right to take concerted action. They objected especially to clause 23, which prescribed penalties for illegal strikes.

It is, no doubt, true that the right to strike is an important weapon for labour to bargain effectively with their employers. Normally this right should be respected. All the same, an industrial dispute is not only a domestic issue between the employers and employees, but one that adversely affected all sections of the society.

Labour Legislation and Labour Welfare

Labour Legislation

The agitation for the regulation of factories came from Lancashire in Great Britain which wanted to check the growth of the cotton industry in India. In 1878, the Bombay provincial government appointed a committee to investigate the conditions in the cotton factories of Bombay. The report brought to light the excessive hours of work, low wages, exploitation of child and woman labour, common occurrence of preventable accidents, the lack of sanitation in factories and the wretched housing conditions of labour. But public opinion in India, and particularly amongst the manufacturers, was opposed to any legislation. Therefore, nothing was done immediately and the first Factory Act was passed only in 1881.

The Factory Act 1881: The provisions of this Act were very elementary. The employment of children below 7 years of age was forbidden and those between 7 and 12 were to work only 9 hours a day. Fencing of machinery, midday meal interval and 4 holidays in the month were also provided for.

The Act was applicable only to factories using mechanical power and employing not less than 100 hands, and working for more than 4 months in the year. Small workshops and the tea and coffee plantations were left out. There was little provision for sanitation. The Act had little effect in the absence of an effective inspectorate.

Pressure from Lancashire and Dundee led to further enquires in 1882 and 1884, and, in 1890 the Indian Factory Commission was appointed. Based on their Report, the next Act was passed in 1891.

The Factory Act 1891: This Act extended the protection granted to workers. It raised the lower and upper age limits to 9 and 14 respectively and the working hours for children were reduced to 7 and for women to 11 hours with 1 ½ hours interval. Night work was forbidden and the working day was fixed between 5 a.m. and 8 p.m. Men were granted ½ hr interval. All were to have weekly holiday. All factories employing over 50 hands were brought under the Act, though the mines and seasonal factories were excluded. An inspecting machinery was also created.

The introduction of electric lights and the shift system and the insufficient number of inspectors, however, made the employers openly disregard the Acts. The next Act was passed in 1911 after another enquiry.

The Factory Act 1911: The age limits were the same as under the 1891 Act. The new features of this Act, were: the certification of age, the inclusion of seasonal industries and better provisions for health, fencing of machinery and inspection. For the first time, the hours of work for men were fixed at 12 per day.

Still, the Act did not provide against the employment of children in two factories and the distinction between textile and non-textile industries were kept up. During the war, some of these provisions were suspended to meet the war emergency.

The Factory Act 1922: The Act was based on the recommendation of the Washington Labour Conference. The distinction between textile and non-textile factories was abolished and any workshop employing more than 20 persons was brought under the factory laws. The minimum age of children was raised from 9 to 12 and the maximum from 14 to 15. The hours of work were reduced to 6 and for adults a 60 hour week with one hour instead of half-an-hour recess was enacted.

The Act was amended in 1923, 1926 and 1931 so as to include electrical stations, water works, etc., to prevent the employment of children in these factories by making the parents responsible, to forbid the cleaning of machinery in motion, etc.

The Factory Act of 1934: This was based on the recommendations of the Royal Commission of Indian Labour (Whitley Commission) 1929. It was very comprehensive modifying the previous legislations. Its main provisions were the following:

  1. A distinction was drawn between seasonal and perennial factories.
  2. Factory operatives were divided into four classes: (a) adult males; (b) adult females; (c)  children i.e., persons over 12 but under 15 years of age; and (d) adolescents, i.e., persons between 15 and 17. This last category was special to this Act.
  3. In the case of seasonal factories, the maximum limits of 11 hrs per day and 60 hrs per week laid down by the 1922 Act for both adult males and females were permitted. In the case of perennial factories, the maximum hours were reduced to 9 per day and 54 per week. Maximum hours of work for both adolescents and children were limited to 5 per day in seasonal and perennial factories. In certain cases exemptions were permitted.
  4. The principle of ‘spread over’, i.e., limitation of the period of consecutive hours in a working day was introduced in this Act for the first time. It was limited to 13 hrs in the case of adults and 7 ½ hrs in the case of children.
  5. The provisions of 1922 with regard to artificial humidification were expanded.
  6. Provision was made for workers’ welfare in the following respects: the maintenance of a suitable and sufficient supply of water for washing for the use of persons employed in the process, involving contact with obnoxious or poisonous substances; adequate shelter for rest in factories employing more than 150 hands; the reservation of suitable rooms for the use of children of women working in factories employing more than 50 women and the maintenance of adequate first aid appliances.
  7. The intervals and holidays were to be the same as provided in the Act 1922.
  8. A limitation of hours of work and amount of overtime that may be worked was laid down, and wages for overtime was fixed at 1½ times the normal.
  9. In addition to certificate of age, evidence of fitness was to be produced.
  10. Power was given to inspectors to call upon managers to carry out such tests as may be necessary to determine the strength and quality of the structure of factories.
  11. The powers of local governments to grant exemptions from factory laws were limited.

The Act of 1934 left many vital matters to the rule-making powers of provincial governments and the discretion of Inspectors. These defects were sought to be remedied by other Acts. In 1946 an amendment to the Act of 1934 was passed reducing the hours of work in perennial factories from 54 to 48 and in seasonal factories from 60 to 54. Overtime pay was fixed at double the ordinary wages.

The Factory Act of 1948: This first factory law passed by the Indian national government eliminated the distinction between perennial and seasonal factories. The old 54 hour week was replaced by a 48 hour week. The minimum age was raised from 12 to 13 and the working hours of young persons reduced from 5 to 4 ½ hours.

The Act further provided that factories should be relicensed before their construction and new factories should provide for a minimum of 5000 cubic feet of space per worker and other health amenities such as the supply of water, etc. This Act ensured the safety, health and welfare of 35 million workers but it should not be forgotten that agricultural labour which far outnumbered industrial labour had not been touched by legislation.

Mining, Plantation, etc., Legislation

The Mines Act, 1923: The first Mines Act of 1901 contained provisions relating to safety and inspection only but the 1923 Act was wider in scope. Employment underground of children below 13 years was forbidden and the hours of work were fixed at 60 above ground and 54 underground. A weekly holiday also was provided. The 1928 Act fixed the hours of work at 12 a day. The Indian Mines Act, 1935, based on the recommendations of the Royal Commission on Labour and the Draft Convention of the International Labour Conference of 1931 limited the hours of work above ground to 54 per week and 10 per day and the hours of work underground to 9 per day. The minimum age was raised to 15. It also provided for the election of two workers to the Mining Board.

The Amending Act of 1937 and 1940 made the supervising staff responsible to the owners of mines instead of the raising contractors for the payment of wages and salaries.

In 1939, the employment of women underground in mines was prohibited though in order to prevent undue hardship, a principle of gradualness in the number of women to be reduced every year was laid down. In view, however, of the acute shortage of labour in coal mining areas during the II world war, the government exempted the mines from the provisions on condition that the wages for women working underground were the same as for the men employed on similar work. Milk also was to be supplied to women working underground. The Coal Mines Act of 1940 provided for the use of the Coal Mines Stowing Fund set up under the Act, for protective measures such as extinguishing fires.

The Mines Act of 1952: This Act sought to improve the provisions regarding welfare and safety of workers employed in mines. Important features of the Act were: the grant of leave with wages, reduction in the working hours of both surface and underground workers from 54 to 48 per week, regulation of the daily hours of work, and fixation of overtime rates of wages at twice and 1½ times the rates for underground and surface workers respectively.

Shop Acts: Bombay was the first to pass a Shop Act (1940) and the Punjab, Bengal and Sind governments followed suit. These Acts secure a weekly holiday for employees, fixed the maximum daily hours and the hours of opening and closing, and provided for overtime remuneration, holidays with pay, etc. The Government of India passed in 1942 the Weekly Holiday Act so that the provinces that had passed no Shop Acts so far might be encouraged to do so.

Plantation Labour Laws: The first law was passed in 1863 and others followed in 1865, 1870 and 1882. The Assam Labour and Emigration Act 1901 regulated the recruitment and employment of indentured labour in Assam and subjected the workers to penal contracts. In 1915 the principle of indentured labour was withdrawn and the penalties for breach of contract were abolished in 1927. On the recommendations of the Royal Commission on Labour, the Tea Districts Emigration Labour Act was passed in 1932 appointing a controller to supervise recruitment. Recruits were to be forwarded through prescribed routes where arrangements for feeding, rest and medical aid had to be made. The emigrants enjoyed the right to be repatriated at the employer’s expense after the first three years of service or even within one year if the work was not suited to their personal capacity or for any other sufficient reason. Persons under sixteen unaccompanied by their parents or guardians, and a married woman without her husband’s consent could not be recruited.

The Plantations Labour Act 1951 provided for the welfare of labour in plantations. The central government prepared model rules under various section of the Act to ensure uniformity, although the rule making power was vested in the state governments. Under the Act the provision of housing and medical facilities for workers had been made a direct responsibility of employers. Planters were already taking action to provide these facilities in advance of the enforcement of the Act.

Transport Workers: The employment in the railway for shops was regulated by the Indian Factory Act 1922. But the railways constituted a big employer of so many other classes of workers for which there was no provision. In 1930 the Indian Railways (Amendment) Act was passed giving effect to the International Labour Conventions with respect to railway workers. The Act had provided for a 60 hrs a week, weekly rest of full 24 hrs and overtime pay.

Maritime Workers had been covered by the Indian Merchant Shipping Amendment Act of 1931. A minimum age had been fixed for employment as trimmers and stokers and medical examination of young persons employed at sea had been made compulsory. An indemnity had to be paid if the ship founded or is lost. In the case of accidents in loading and unloading, the dockers were protected by the Indian Dock Labourers Act 1934.

Other Ameliorative Measures

Relief to Indebted Worker 1936: The Royal Commission on Labour had made a few recommendations concerning imprisonment for debt and in 1936, the Indian government amended the Civil Procedure Code exempting from attachment of salary below Rs 100 and subject to certain conditions, forbidding the imprisonment of such debtors. The Bengal Workmen’s Protection Act 1935 and the Protection of Debtors Act 1937, (C.P.) made it a criminal offence for a factory for collecting a debt in order to prevent the harassment of debtors by their creditors.

Payment of Wages Act 1936: Delay in the payment of wages was a factor in increasing the indebtedness of the workers. While daily wages were paid on the day on which they were earned, weekly wages were paid one to five days later and monthly wages from 10 to 15 days later. Such a postponement involved hardship for the workers. So a Weekly Payment Bill was proposed in 1924 but it had to be withdrawn. Under the Payment of Wages Act 1936, wages must be paid before the expiry of seven days in undertakings employing less than 1000 workers and before the expiry of the tenth day in other cases.

Permissible deduction from pay included fines for damage or loss of goods expressly entrusted to the employee, payment for house rent, provident fund, co-operative dues, etc. Fines are not to be imposed on children under 15. Fines could only be imposed for offences previously notified and approved by the provincial government and the person fined must get an opportunity to show cause why he should not be fined. The total amount of the fine in the wage period was not to exceed half an anna in the rupee and could not be recovered in instalments or after the expiry of 60 days after imposition. A record of fines had to be kept and the amount realized must be spent on purposes beneficial to the workers. Fine for absence must bear the same proportion to the total wage as the period of absence bears to the total wage period.

The C.P. Unregulated Factories Act 1937: Since the enquiry by the Royal Commission on Labour (1930), numerous laws had been passed to secure the interests of the labouring classes. But they covered only about 7 or 8 million workers. The rest who constituted the greater majority of the industrial workers were those engaged in small or what were known as unregulated industries. In Central Province, an Act passed in 1936 that sought to regulate the labour of women and children and promoted labour welfare in factories not covered by the existing Factory Acts.

Later on several attempts at legislation were being made with a view to promoting social security and industrial peace, of which the following were of great significance.

Minimum Wages Act 1948: The Act provided for the fixing of minimum wages in certain industries with low wage levels, such as woollen carpet making, shawl weaving, tobacco processing including bidi making, rice, flour, (dhal and oil mills, cinchona, rubber, tea and coffee estates road laying, building trade, lack and mica works, tanneries and leather works. It also provided for the fixing of minimum wages in agriculture. Fixation of wages and enforcement are, no doubt, a difficult piece of legislation but necessary for social welfare. The government also made a survey of 1000 villages all over the country for gathering agricultural statistics for the purposes of this Act.

The UP government had been the first to enact Minimum wages Act in Dec. 1948. To begin with, the wages in two of the well-developed industries viz. cotton and woollen, have been fixed at a basic minimum of Rs 30 in urban and Rs 28 in rural centres, in addition to dearness and food allowances based on the cost of living index numbers. Wage fixing in the sugar and electrical industries followed soon.

Profit-Sharing: In 1948, the Central government appointed an Experts Committee to make recommendations for the scheme of profit sharing in industries. The Committee proposed an experiment for a specified period, in a few industries selected for this purpose, such as cotton, jute and iron and steel industries. This was examined by the Central Advisory Council but decision was postponed on account of a sharp difference of opinion. Emphasis was laid, however, of the importance of such a measure as a sure means of promoting industrial peace.

Social Insurance

The need to protect the workers against hardships arising from sickness, accidents, unemployment and old age had long been recognized in Western countries like Germany and England and suitable measures passed. Such measures were conspicuous by their absence in India, though of late a good start has been made.

Workmen’s Compensation Act 1923: Until 1923, no compensation was due to workers except in case of death. The Workmens’ Compensation Act of 1923 recognized the right to compensation in all cases of ‘personal injury by accident arising out of and in the course of employment’ and specified industrial diseases. It covered ten classes of workmen, including all persons employed in factories, mines, docks and certain types of building works, telegraph and telephone lines men, underground sewage workers, members of fire brigades and most railway workers. Government was given power to add to the list of scheduled industries. Amending Acts were passed in 1929, and 1931 expanding the scope of the Act and the scale of compensation.

The amount of compensation in case of death depended upon the average monthly wages of the deceased and in case of injury on the monthly wages and the extent of the injury. For those getting less than Rs 10, the compensation in case of death was Rs 500; for permanent disablement it was Rs 700 and for temporary disablement half the monthly wages. When the monthly wage was between Rs 50 and Rs 60, the corresponding figures were Rs 1800, Rs 2500 and Rs 15 per month, respectively. The maximum for persons earning over Rs 200 were Rs 4000, Rs 5600 and Rs 30 per month, respectively. In the case of minors, the compensation for death was Rs 200, for permanent disability Rs 1200, and half the wages for temporary disablement.

The enforcement of the Act was entrusted to the provincial governments and administered by full time special commissioners in important centres. Reports on the working of the Act showed that full advantage had not been taken by labourers through a lack of adequate knowledge regarding their rights in claiming compensation. To safeguard the interests of dependents, the Act provided that all fatal accidents were to be brought to the notice of the Commissioner of labour and the amount of compensation promptly deposited with him when the employer admitted the liability, and in case he did not, the dependents to the information necessary to enable them to judge if they had made a claim or not. From July 1924 to the end of 1938, there were 2,80,000 accidents and the compensation paid amounted to over a crore and a half of rupees.

Facilities for accident insurance were provided by a number of leading insurance companies and the Mill Owner. Mutual Insurance Association Ltd., Bombay, had been organized to provide mutual insurance against the employers’ liability under the compulsory Compensation Acts.

Maternity Benefits Legislation: The first bill on this subject, in accordance with the Washington Conference, was introduced in the Indian Legislature in 1924, but it was rejected. However, the Bombay government passed in 1929 the Bombay Maternity Benefits Act. This was substantially amended in 1935. A similar Act was passed in C.P. in 1931. Since then, such Acts have been passed in almost all the provinces and they applied not only to factories but also to plantations and mines. These Acts provided for compulsory rest and a cash benefit for a certain period before and after child birth subject to the condition that the employee had served for a period varying from six months to a year. During the period of this cash benefit the employee was free to take up service elsewhere. The amount of benefit was generally 8 annas per day.

Labour Legislation—Post Independence Developments

The process of labour legislation continued to proceed with changing times. After independence certain drastic changes were made in labour legislation, which was influenced by some factors, both exterior and interior. External factors that influenced it were the transformation in global attitudes towards labour, considering it as an important constituent of the production process. Worldwide organizations such as the UNO and ILO had also exercised their own influence in these attitudinal changes. Internally, the adoption of the socialist pattern of society by the Government of India implied an important role for labour whose interests needed to be protected. Establishment of industries by Indian capitalists and the enactment of the Industrial Disputes Act introduced their own dynamics into the situation. We discuss below these factors and the legislations that were passed in their contexts are enumerated in detail in the following pages:

The Workmens’ State Insurance, Act, 1948: By far the most important piece of legislation in the ‘Nineteen forties was the Workmens’ State Insurance Act. In 1943, the Tripartite Labour Conference recommended a policy of social security for labour and the Government of India responded by passing the Workmens’ State Insurance Act 1948.

The Act provided for insurance against sickness and accidents and maternity benefits for persons employed in or in connection with work in perennial factories. Workers and employers made a joint contribution towards the insurance funds and the government the cost of administration. The number of workers eligible for benefit had been raised under this Act from 25 to 35 lakhs.

For the purpose of this Act workers were divided into eight groups and the lowest group receiving wages below one rupee made no contribution to the fund. A qualified and insured worker was entitled to medical treatment and care plus a cash payment for a maximum period of eight weeks when he was unemployed owing to illness. Maternity benefit at 12 annas per day was granted for twelve weeks. The Act also provided disablement and dependants’ pension.

The Act was brought into force in Delhi and Kanpur on 24 February 1952. The gradual implementation of the scheme in other areas was taken up by the government with experience gained in the working of this Act, while modification and extension of the scope came in due course.

The Employees’ Provident Funds Act 1952 replaced the ordinance of 1951 and provided for compulsory provident fund for employees in certain industrial establishments. It applied to all factories employing 50 or more persons. It did not, however, apply to factories which were owned by government or local authorities.

Employers had to contribute 6 per cent of the basic wages and dearness allowance of the employees and the employers contributed an equal amount. Safeguards against attachment of the provident fund amount of a member and against the reduction of wages by an employer by reason of his liability in contributions had been made. For the effective working of the Act, Central Provident Fund Commissioner, Regional Provident Fund Commissioners and Inspectors had been appointed.

Uncoordinated labour legislation in different provinces and States imposed unequal financial burden on industry and led to the migration of industries to areas less suited for the purpose simply to avoid rigorous labour laws. With a view to ensuring uniformity, an annual conference of the Provincial Ministers of Labour together with the representatives from the States had been convened from 1940. The employers too held a representative meeting in 1941. As a result, a Tripartite Conference consisting of the representatives of State (Government of India, Provincial Governments and State Governments) employers and employees was held in 1942. A Standing Committee consisting of these three interests had been set up to advise the Government of India on matters concerning labour and a greater uniformity in labour legislation was anticipated.

Labour Welfare

The system of large scale production had many harmful effects on workers. Long hours of work, low wages, unhealthy conditions of work, overcrowded slums, little leisure and less recreation are some of the commonest evils of industrialism. Governments have attempted to remove them by a series of Factory Acts and other measures to secure the better life and welfare of the worker. The legislation in India of this type had been already noticed. Compensation for accidents, maternity benefits and sickness and accidents insurance which go a step forward to secure positively the welfare of workers have also been undertaken. Still legislation alone, however important and beneficial, cannot promote the welfare of the workers. Other agencies also have a large part to play in counteracting the baneful effects of industrialism.

Labour welfare, in a restricted sense, is associated with measures conducive to the health, happiness and efficiency of the workers. It deals with the provision of opportunities for the worker and his family for a good life as understood in its most comprehensive sense.

In the past, a few enlightened employers, missionary societies such as the Y.M.C.A. and social organizations like the Bombay Social Service League, Seva Sadan Society, etc., interested themselves in promoting labour welfare. It is now recognized that this type of work is to be carried on not merely on humanitarian grounds, but also for economic reasons inasmuch as it has a direct bearing on labour efficiency. Besides, it gives labour an added sense of dignity and responsibility and thus helps secure harmony between labour and capital.

Since the advent of Provincial autonomy, governments in provinces became actively interested in this type of work. Largely through the efforts of Gulzari Lal Nanda, Secretary of the Textile Labour Association, Ahmedabad, a sum of Rs 1,20,000 was set apart in the budget of 1938–’39 for industrial welfare. The example of Bombay was followed by the U.P., Bengal, Sind, the C.P. and Bihar and welfare centres had been established in important industrial towns such as Bombay, Calcutta, Madras, Karachi, Cawnpore, Nagpur, etc. The Central government had also appointed an Advisor on welfare work.

Welfare work undertaken by the Bombay government covered out-door and in-door recreation, the provision of libraries, reading rooms, canteens, magic lantern lectures, nursery, schools, advice on maternity and health and radio programmes. Similar activities had been started in important industrial centres in other provinces also.

It is well known that several large employers like the Railways, the Tata Iron and Steel Co., the Buckingham and Carnatic Mills, Madras, the Sassoon Group in Bombay and the Empress Mills in Nagpur were conducting labour welfare work planned and supervised by experienced welfare officers. But many of the Indian employers were reluctant to pursue welfare work among labourers because of the cost and work involved.

Housing: Among the various kinds of welfare work carried out by employers, housing is of major importance. The conditions in Bombay in 1931 were stated to be a disgrace to any civilized community. Limitations of space and high land value were responsible for much of the congestion in large cities. Lack of control over selection of sites for industries and the large number of immigrant workers seeking accommodation would explain the deplorable conditions. In 1932, the mills housed 20 per cent of their workers in Bombay, 15 per cent in Ahmadabad and 12 per cent in Sholapur. Many jute mills in Calcutta also provided good sanitary quarters of approved designs. The housing arrangements at Jamshedpur by the Tatas and at Nagpur by the Empress Mills were simply magnificent. Up to 1945 the former has built a garden city of 8428 houses costing Rs 143 lakhs and added 5000 more during the next five years and the latter had laid out a model village with all the necessary amenities. In both cases, the employees were encouraged, by loans given on liberal terms and repayable in easy instalments, to build houses for themselves. In the Madras Province, 226 factories had provided housing accommodation for their workers by 1936. The Railways provided quarters for a large number of railway servants, quarters-being allotted according to grade and pay. The Ahmadabad Labour Union had built 64 dwellings on the Sabarmati and were acquired by the occupiers on hire purchase system.

Further, slum clearance has been undertaken by the municipalities of Calcutta, Bombay, Madras and Cawnpore and by the Improvement and Port Trusts and some Provincial governments. The  Bombay government had completed nearly one third of its gigantic programme of building 625 chawls with 50,000 tenements. But this was a big problem and neither an easy nor a complete solution to the problem of housing for workers.

Health: Bad and insanitary housing, congestion, ignorance and above all, poverty were the chief among the causes of the prevalence of deadly diseases among the labour population. Epidemics were very common. The Punjab suffered most from tuberculosis, Bengal from malaria and Kala zar, Bihar and Orissa from Beri-Beri, etc. The Factory Act of 1934, contained special provisions for safeguarding the health of the workers. Since that date, large industrial establishments maintain well-equipped dispensaries and hospitals attended by duly qualified doctors and nursing staff. Provincial governments and local bodies are also doing something to improve sanitation and medical facilities but owing to financial difficulties, such efforts were very inadequate. So far labour unions have done very little welfare work. The Textile Labour Association of Ahmadabad, however, was an exception. In 1936, it treated in its well-equipped hospitals, 703 in-patients and 49,176 out-patients. It ran 22 schools and spent about Rs 41,000 on education.

Factory Amenities: The idea of industrial canteens was gaining quick currency in the country, and it had been recognized that provision of cheap and wholesome food at cost price on the factory premises would go a long way towards promoting industrial health and efficiency. Some employers provided this even before the war but during the war, the number increased. In 1943, the government recommended more canteens and, in 1947, an Act was passed making it compulsory in specified factories employing more than 200 workers canteens in industrial establishments. Progressive employers like the Tatas provided other amenities as well, such as, free milk and biscuits to children in creches, and soda to workers, rest house for women, etc. The amendments to the Factory Act of 1934 contained several provisions regarding the installation of drinking water, lavatories, crèches, etc.

Recreation: Provision of recreation–facilities by employers is not yet common. The welfare centres opened by various provincial governments helped labourers with all forms of out-door and in-door recreational activities such as periodic cinemas, dramatic performances and bhajana parties, libraries and reading rooms, debating societies, lectures and radios. Playgrounds also have been provided in certain centres.

Gratuities and Provident Funds: Gratuities are paid to railway servants and employees of local bodies and larger public companies subject to a specified period of approved service. Retirement Benefit Schemes have been introduced by large industrial establishments like the Tatas and the Lever Brothers. The Tatas pay, on retirement, a gratuity equal to half a month’s salary for each completed year of unbroken service, subject to a maximum of twelve months’ pay. Every permanent employee who has put in twenty years’ service and whose salary does not exceed Rs 500 per month was entitled to it.

Provident Fund Schemes exist mostly in undertakings directly or indirectly managed by governments or municipalities. The railways and some large public utility services such as the Bombay Electric Supply and Tramway (BEST) Co., the Tata Electric Plants and the Tata Iron and Steel Co. (TISCO), have established contributory Provident Funds. Usually, the employee contributes 1/12 and 1/24 of his pay and the company contributes an equal amount. Model Rules for Provident Funds for Industrial Workers were drawn up by the Fourth Tripartite Conference in 1944.

Co-operative Societies: Almost all large industrial concerns have credit societies established for the benefit of their workers. In Jamshedpur, there were at the end of 1938, 26 co-operative societies including stores. Cheap grain and cloth stores were very common during the First World War, but most of them disappeared later. Some are back in most industrial establishments. Articles are sold at net cost and some, like the Tatas, subsidize the grain shops.

War Allowances, Bonuses, etc.: The increased cost of living due to the high prices of foodstuff and other necessities was met by dearness allowances. The favourable position in industries led, after some strikes, to the granting of war bonuses-a share to the workers in the increased profits. Many employers carried out several welfare programmes. This expenditure on labour welfare such as, medical relief, recreations, sports and canteens, was a better investment than the payment of the Excess Profits Tax to the government.

Efficiency: But the most significant development during the war was the provision of opportunities for increasing the efficiency of labour. The trade unions, busy formulating and getting grievances redressed and possessing meagre funds, seldom worked for better standards of efficiency. In 1937, an Industrial Training Workshop was organized in Ahmadabad by the Government of Bombay and the war needs expanded these opportunities as never before. The Government of India started a scheme of intensive technical training for illiterate persons between the age of 17 and 40 to secure suitably trained persons for Defence Services and ordnance factories. At the end of 1942, there were 313 training centres with 20,000 trainees. Another scheme was the Bevin Scheme for training Indian workers in engineering trades in English factories and workshops owned by the British industrialists. By the end of May 1945, 788 candidates had been selected for the course and 643 trainees had returned to India to take up work as supervisors, inspectors, etc.

Employment Exchanges have been organized to assist the resettlement of demobilized military and industrial personnel and centres providing suitable training in various trades and occupations have been opened in different parts of the country. These function as agencies for the recruitment of skilled labour.

Although labour welfare work in India is of recent origin much has been done. Better planning and organization, however, are desirable and the co-operation of the employers and the employees is necessary for any real progress in this direction.

Labour Reforms

The Indian labour policy has evolved over the past six and a half decades in response to specific needs of the situation to suit the country’s specific requirements of planned economic development and social justice. The labour policy has two-fold objectives, namely, (i) maintaining industrial peace, and (ii) promoting the overall welfare of labour.

By labour reforms we mean the measures initiated by the government to increase production, productivity and employment opportunities in the economy even while protecting the overall interest of labour. Basically the policy includes* ‘Skill development, retraining redeployment, updating knowledge base of worker, promotion of leadership qualities, etc.’ ‘Further it also includes labour law reforms. Changes in the labour laws are done interlaid for protecting the interest of workers.’ The following are the important labour laws initiated by the Government of India since the dawn of independence.

The Minimum Wages Act 1948

Minimum Wages Act 1948: The Act provides for the fixing of minimum wages in certain industries with low wage levels, such as woollen carpet making, shawl weaving, tobacco processing including beedi making, rice, flour, (dhal and oil mills, cinchona, rubber, tea and coffee estates, road laying, building trade, lac and mica works, tanneries and leather works. It also provided for the fixing of minimum wages in agriculture. Fixation of wages and enforcement are, no doubt, a difficult piece of legislation but necessary for social welfare. The government also made a survey of 1000 villages all over the country for gathering agricultural statistics for the purposes of this Act.

The U.P. government had been the first provincial government to introduce Minimum wages in Dec. 1948. To begin with, the wages in two of the well-developed industries, viz. cotton and woollen, have been fixed at a basic minimum of Rs 30 in urban and Rs 28 in rural centres, in addition to dearness and food allowances based on the cost of living index numbers. Wage fixing in the sugar and electrical industries followed soon.

The Payment of Bonus Act 1965

The Payment of Bonus Act, 1965 provided for payment of bonus to employees of factories and other establishments employing 20 or more workers. A minimum bonus of 8.33 per cent was payable by every industry and establishment under section 10 of the Act.

The maximum bonus including productivity linked bonus that can be paid in any accounting year shall not exceed 20 per cent of the salary/wages of an employee under the section and 31A of the Act.

The Payment of Bonus Act was amended subsequently in 1995 to enhance the eligibility limit and calculation ceiling and bring employees employed through contractors on building operations within the ambit of the Act.

According to the Act an ‘employee’ means any person (other than an apprentice) employed on a salary or wage not exceeding Rs 3500 per month in any industry to do any skilled, manual, supervisory, managerial, administrative, technical or electrical work for hire or reward. However, Section 12 of the Act stipulated that in the event, if the employees’ salary/wage exceeds Rs 2500 per month, bonus has to be calculated as if his remuneration was only Rs 2500 per month.

The payment of Bonus Act was challenged by a number of establishments in various High Courts. The government contested at such cases and the position of the Government of India that the Act would have retrospective effect from 1 April 1993 was upheld by the courts.

Problems Relating to Bonus in India

The concept of bonus is being interpreted and understood in four different ways in India. These are.

  1. Bonus is an incentive for being regular at work, an encouragement for good work done, or remuneration for some special or additional service rendered by labour. This type of incentive bonus is not disputed between the employer and his workers.
  2. Bonus is an ex gratia payment, depending entirely on the goodwill of the employer, which cannot be claimed at a later date as a matter of right: However, workers and their unions may dispute this claim.
  3. Bonus is the employees’ share in the profits of the firm, which they can claim as a right. Though this type of bonus is accepted by capitalists, disputes may cause with regard to the quantum and the methods of calculation.
  4. Bonus is a deferred wage payable to workers. Workers claim bonus under this category whether the firm is running on profit or loss.

Since the time of independence, the question of bonus and its quantum has been agitating the minds of workers and their union leaders and remained a leading industrial dispute between employees and their employers. The disputes and their spill-over effects affect the minds of the government, who appointed the Bonus Commission under the chairmanship of M. R. Maher. The commission recommended to the government that bonus be considered as a share in the firm’s expenditure and that the stand of the workers be accepted. The government accepted the commission’s recommendation with certain modifications. The government accordingly enacted the Payment of Bonus Act 1965 with the following basic provisions:

  1. The Payment of Bonus Act is applicable to every factory and establishment that employs 20 or more persons as well as those public sector undertakings which are not run departmentally and which complete with private sector firms.
  2. The Act is not applicable to the Reserve Bank of India, the LIC, Unit Trust of India, Universities and educational institutions, hospitals, social welfare institutions, departmental enterprises of the central and state governments or a local authority.
  3. As per the Act, an employee is a person who draws a salary or wage up to Rs 1600 per month. However, the bonus payable to the employees drawing above Rs 750 per month should be calculated as if their salary/wage was only Rs 750 per month.
  4. The minimum bonus is 4 per cent of the salary/wage during an accounting year or Rs 40 whichever is higher irrespective of the availability of profits. The maximum amount of bonus in any year out of the surplus available for allocation has been fixed at 20 per cent of the basic wage and dearness allowance.
  5. Only those who work for all working days will be entitled to bonus and a proportionate reduction will be made for those who work for a lesser period of time, but one should at least have worked for a period of 30 days in a year to be entitled for bonus.
  6. The available surplus in respect of any accounting year will be computed for calculating bonus to the employees by deducting certain charges incurred by the firm from its gross profits. These prior charges include remuneration for proprietors or partners, depreciation or development rebate admissible under the Income Tax Act, all direct taxes, actual dividends payable on preference shares, capital and a return of 8.5 per cent on equity capital and 6 per cent on reserves.
  7. As per the Act, 60 per cent of the allocable surplus, as determined above, shall be allotted to the payment of bonus to employees in every accounting year. If the firm is foreign, 67 per cent of the allocable surplus should be set aside for payment of bonus.

The workers and their representatives were not satisfied with the Bonus Commission’s recommendations, nor with those of the Payment of the Bonus Act 1965. They always took the stand that bonus is a deferred wage that should be paid to the workers irrespective of the results of the firm’s performance. They argued that the minimum fixed at 4 per cent was too low and insisted that they be paid at least 8.33 per cent. Taking cognizance of their objections to the provisions of the Payment of Bonus Act 1956, the Government of India appointed the Bonus Review Committee under the chairmanship of Dr B. K. Madan in early 1972.

Recommendations of the Madan Bonus Review Committee 1972

The Madan Committee upheld the demands of workers and recommended a statutory minimum of 8.33 per cent for all business units irrespective of their performance. Accordingly, the President of India promulgated an Ordinance in September 1972 amending the Payment of Bonus Act of 1956, raising the minimum bonus to 8.33 per cent for all business units. Departing from the original Act which stipulated that only competitive public sector units needed to pay bonus, the amended Act stated that employees of all public sector undertakings whether competitive or non-competitive should pay the ex-gratia payment of 8.33 per cent.

The Madan Committee submitted its final report in September 1974. The committee recommended to the government that they fix the minimum bonus at 8.33 per cent and the maximum at 20 per cent. Also they recommended that the benefit be extended to those drawing a salary/wages up to Rs 2500 instead of being fixed at Rs 1600. However, the bonus with regard to employees drawing a remuneration between Rs 1600 and Rs 2500 would be calculated as if they were drawing only Rs 1600. The Madan Committee rejected the demand to widen the scope of the Bonus Act to include government departmental employees and others covered by the Act.

In 1995, the government raised the eligibility limit for bonus for employees working in factories to Rs 3500 per month and in open establishments to Rs 2500 per month, respectively, from 1 April 1993.

The recommendations of the Bonus Review Commission and their implementation by the government had been roundly criticized by both workers’ and employers’ organizations. While the workers had grievances over the commission’s refusal to consider minimum bonus of 10 per cent for 1973 and 12.5 per cent for 1974, the employers felt aggrieved over the raising of minimum bonus to Rs 3500 and compulsory payment of bonus by even loss-making concerns.

Bonus Issues During Emergency

The declaration of emergency in June 1975 by the then Prime Minister Indira Gandhi that was used to gag public opinion and protests over government activities came in handy to authorities to reverse the earlier amendment to the Payment of Bonus Act under which the minimum bonus of 8.33 per cent. Government also refused to concede the views of workers and their unions that bonus was deferred wage and insisted that henceforth bonus would be linked to productivity and profitability. Government also stressed that the insistence by workers to pay bonus even by loss-making units led to industrial sickness that in turn resulted in loss of employment opportunities. Under the new amendment, the units incurring losses were exempted from the obligation of paying bonus to their employees. Though the workers were extremely unhappy over the state of affairs and the new amendment, they could not agitate due to the totalitarian nature of emergency.

Once the emergency was lifted in March 1977, the issue of bonus became an important industrial dispute. Trade unions took cudgels on behalf of workers over the issue of bonus and every industrial unit faced the threat of strike and lock out. The Janata Party government at the centre raised the minimum bonus to 8.33 per cent and set up the Boothalingam Study Group to examine the bonus question as part of wages and income policy.

Boothalingam Study Group and Bonus

The Boothalingam Study Group examined the issue of bonus and concluded that bonus related to profit as prevalent in India for long time is ‘Suitable only in industries producing for the market in reasonable competitive conditions.’ It is not suitable in the case of organized industrial or other activities, where profit motive does not exist, as in Indian public sector industries. According to the Study Group ‘Bonus is, therefore, unsuitable to government services and similar activities including railways, posts and telegraphs and public utilities, financial and other institutions. The Study Group considered the productivity-linked bonus more logical and satisfactory but it was difficult, if not impossible, to identify measures of productivity which could be uniformly applied to all sectors of the economy. The Study Group further opined that even in the industrial sector, both private and public, bonus related to profits of industrial units tends to perpetuate and accepted profits in the earnings of workers who did the same work or put in the same effort, often creates tensions between workers, themselves, between government and workers between management and workers, and even between managements.

To the Study Group, bonus should be paid in the long run by a system wherein workers get a fair share of the benefits of productivity. However, since bonus has become a part of country’s industrial life, it may not practicable to give it up. Therefore, under the existing circumstances, the Study Group recommended the continuance of the payment of bonus.

In October 1979, the government conceded the demand of railwaymen for bonus and subsequently of departmental undertakings such as postal services and even ordinary factories.

Discussion Questions

22.1. Trace the evolution of trade unions in India.

22.2. What are the salient features of Trade Union Act of 1926? What were the obstacles to the growth of trade unions in India?

22.3. What were the drawbacks of Indian Trade Unionism vis-à-vis that of England?

22.4. Discuss the different methods available to secure industrial peace in the country.

22.5. What were the important legislations enacted after Independence to secure peace and tranquillity in industrial establishments in India? Did they bring about the desired impact?

22.6. Labour welfare as an objective is commendable. But what are the obstacles that stand in the way of achieving it?

Suggested Readings

22.1. Economic surveys, Ministry of Finance, Public Review committee division, Government of India, New Delhi.

22.2. Madan committee Report.

22.3. Payment of Bonus Acts.

22.4. Report of the committee on labour welfare (1969), Ministry of Labour, Employment and Rehabilitation, Government of India, New Delhi.

22.5. National Commission on Labour Report (1969), Ministry of Labour, Government of India.


* India 2012—A Reference Annual, Publications Division, Government of India, New Delhi.