Decided on December 10,1974



- (1.) The question arising for decision in these appeals is the same. The question concerns the liability of the appellant in these appeals to pay contribution to the respondent, the Employees State Insurance Corporation under the provisions of the State Insurance Act in respect of the workmen of the appellant company on the basis of the payment of incentive wages for production above a fixed norm for a group. Whether such payment is to be taken as wages for the purpose of calculating the remuneration payable under the Act was the controversy The two appeals relate to the question raised for two different periods but between the same parties. The Employees Insurance Court examined the position and held that on the terms concerning the payment of incentive wages, it has to be considered as remuneration coming within the meaning of the term as defined in S.22(2) of the Employees State Insurance Act. That is challenged in those appeals.
(2.) The term 'wages' is defined in S.2(22) to read: "Wages means all remuneration paid or payable in cash to an employee, if the terms of the contract of employment, express or implied, were fulfilled and includes any payment to an employee in respect of any period of authorised leave, lock-out, strike which is not illegal or lay off and other additional remuneration, if any, paid at intervals not exceeding two months, but does not include -- (a) any contribution paid by the employer to any pension fund or provident fund or under this Act; (b) any travelling allowance or the value of any travelling concession; (c) any sum paid to the person employed to defray special expenses entailed on him by the nature of his employment, or (d) any gratuity payable on discharge." Everything that is paid in cash to an employee may not be remuneration. There may be cash payments made by the employer which payments the employee may not be entitled to insist upon. Just as, there is an obligation on the employer to pay, there must be a right in the employee to demand as of right. Then only it would become remuneration payable. To put it in other words, it must be payable under the contract of employment. Where the management introduces a scheme to pay some incentive to workmen, if it is as a result of a settlement binding on both parties, necessarily the terms of the settlement become terms of the contract of employment between the parties. If on the other hand, it is introduced under a scheme under which it is open to the employer to withdraw it, alter, vary or modify it without reference to the employees and without their consent or without any binding settlement, it is a payment for which the assent is unilateral and, therefore, cannot be said to be a payment made" in accordance with the terms of the employment. Consequently, it would not be wages within the meaning of S.2(22). It appears to, us that this is the test by which we should determine whether any payment in a given case is wages or not.
(3.) In the case before us, the applicant which is a public limited company having a factory at Edappally disputes the liability for payment of contribution on that part of the wages paid to its workmen which is said to be incentive payments. The amounts so paid are in terms of a settlement dated 9-6-1971 which itself is in renewal of a prior settlement. The settlement Ext. P2 dated 9-6-1971 was in renewal of Ext. P1 dated 26-9-1970. Ext. P1 settlement provided for the introduction of a group incentive scheme under which money is payable for performances by the group above the norm fixed by mutual agreement of the parties. Clause.13 of Ext. P2 which was executed on renewal of the earlier settlement revised the norm fixed earlier. For all practical purposes, the terms may be taken to be the same as in the earlier settlement, Ext. P1. Reading this scheme of settlement, the Presiding Judge of the Insurance Court found that- (1) Ext. P1 as revised by Ext. P2 was not a scheme unilaterally implemented according to the will and pleasure of the management. (2) There is no clause in Ext. P1 or Ext. P2 enabling the management to vary the terms of the scheme unilaterally on their own accord. (3) There is a clause saying that the incentive earnings will not be taken into account for any other purposes such as provident fund, Gratuity and bonus under the Payment of Bonus Act. (4) The payment is to be made on the basis of an agreement and that depends upon the workers exceeding a particular target and if they exceeded it, the management has no right to whatsoever to withdraw it according to their discretion. On these, the court found that the remuneration was payable in the case as a term of contract of employment.;

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