IAS Gyan

Daily News Analysis

New wage code bars bonus for those facing sex abuse charges

1st November, 2020 Economy

Context: As per the extant law, bonus dues are barred only in case of employees dismissed for fraud, violent conduct and theft or sabotage.

New rules:

  • Those indulging in sexual harassment of any form could run the risk of losing out on bonus dues from their employers.
  • The Code on Wages lays down norms for annual bonus dues that accrue to employees, replacing the Payment of Bonus Act, 1965.
  • The new Code, expected to become operational once the government notifies the rules, includes ‘conviction for sexual harassment’ as a ground for denying bonus payouts to employees.
  • As per the extant law, bonus dues are barred only in case of employees dismissed for fraud, violent conduct and theft or sabotage.
  • It is a brilliant nudge to get people to be on their best behaviour in the workplace.
  • The prospect of losing one’s benefits may make employees more careful of their conduct and they should be made aware of this provision.
  • It will serves as an additional deterrent apart from the Prevention of Sexual Harassment (POSH) law of 2013.

Prevention of Sexual Harassment (POSH) law

  • As per the POSH law guidelines, firms are required to form an Internal Complaints Committee (ICC) to inquire into complaints of sexual harassment at the workplace.
  • The Committee is required to make recommendations to employers on the action required pursuant to its inquiry in such complaints.
  • If the ICC upholds a complaint, it could be construed as a conviction.
  • ICC has the powers to decide if someone is guilty and report it further to the police, though not all sexual harassment cases translate into a police case.
  • Under the POSH Act, sexual harassment includes any one or more of the following unwelcome acts or behavior (whether directly or by implication) —
    • physical contact and advances;
    • a demand or request for sexual favours;
    • making sexually coloured remarks;
    • showing pornography;
    • any other unwelcome physical,
    • verbal or non-verbal conduct of sexual nature.

What need to be done?

  • The rules under the Code on Wages should clarify whether the conviction would cover cases of outcomes of the investigation by the Internal Complaints Committee arriving at a conclusion to pay compensation to the victim or not.”
  • “At this point, it is not clear if sexual harassment incidents or related crimes against women outside the workplace could lead to dismissal of employees with loss of bonus payments.

The minimum bonus payable under the Payment of Bonus Act, 1965 is 8.33% of the salary or wage earned by the employee during the accounting year.

The salary and bonus payment limits are yet to be notified under the Code on Wages.