COMPANIES have devised many ways to motivate their workers to deliver their best and to achieve improvement in productivity. Various incentives are guaranteed to workers under the law. Far-thinking employers add to these either through collective labour agreement (CLA) or in pursuance of company policy.

The law allows workers one profit bonus, casual, sick and earned leave, gratuity or provident fund upon leaving, a share in the company’s profit, old-age pension and medical benefits through social security schemes. In fact, all existing labour laws are welfare-oriented and safeguard workers’ interest in case of accidents that cause injury or death.

Progressive companies grant additional bonuses, leave over and above the statutory limits, encashment of leave not availed, good attendance premium, attractive conveyance allowance, safety awards and medical facilities to workers and their families. Some companies also make a one-time incentive payment to every worker, for reaching the CLA within a stipulated period.

In 1983, I had worked for a few months at a ceramic insulator manufacturing factory located in Punjab. The factory management had devised a unique but successful method of paying monthly wages to its workers. Each worker’s wage had two components comprising a fixed and a variable part. The fixed part was around 50 per cent of the total wages and the remaining could go up to 70pc if a worker exceeded his monthly output target.

Progressive companies grant additional bonuses and leave.

This incentive would keep workers struggling to achieve a higher output. Overall, it was a win-win situation both for the employer and the workers. This system looks exciting to employers but is difficult to sell to labour unions.

The payment of bonuses is perhaps the most notable part of incentives. Besides the payment of one statutory bonus, profit-making companies pay their workers annual bonuses ranging from one to 19 basic salaries according to a survey conducted by the writer.

A well-known fertiliser company refers to the bonus it gives to its workers as ‘travelling allowance on maintenance of industrial peace’ (Tamip). The amount of Tamip has always remained at 60pc of the workers’ annual basic salary earnings. Due to an increase in basic salaries every year, the bonus amount continues to increase.

In this company, the maximum basic salary in the highest pay group of non-management employees is more than Rs200,000, so the Tamip amount they receive is fabulous. However, in most other companies, workers are paid bonuses equivalent to five or six months’ worth of their basic salary.

The provision of one statutory bonus was introduced in 1972 through Standing Order 10-C of the Industrial and Commercial Employment (Standing Orders) Ordinance, 1968, by the first PPP government. Industrial workers and their trade unions felt elated with this addition in their benefits and would refer to it as the ‘10-C bonus’. The law provided that “every employer making profit in any year shall pay for that year within three months of the closing of that year to the workmen who have been in his employment in that year for a continuous period of not less than 90 days a bonus in addition to the wages payable to such workmen”.

The amount of the bonus was to be determined as follows; “if the amount of the profit is not less than the aggregate of one month’s wages of the workmen employed, be not less than the amount of such aggregate, subject to the maximum of 30pc of such profit”. Bonus payable by virtue of this law has to be based upon the gross wages inclusive of the basic wage and all allowances, as defined in the Payment of Wages Act.

The Sindh government has devolved the Standing Orders law and named it the Sindh Terms of Employment (Standing Orders) Act, 2015. However instead of SO 10-C, the bonus provision is now contained in SO 13. According to the act ‘wages’ and ‘remuneration’ mean the wage as defined in the Sindh Payment of Wages Act, 2015; that is the gross salary.

The majority of employers pay a profit bonus based on a worker’s basic salary and the cost of living allowance, which constitutes a violation of the law. In fact, they should pay it on the gross salary.

Similarly, the law on payment for overtime work is also flouted by most employers. The law provides that a worker engaged on work beyond the statutory limit of working hours, shall be paid at double the rate of his wages for those extra hours. This payment for overtime work should also be based upon the gross salary, without the deduction of any allowance which is part of a worker’s monthly wages.

The writer is an industrial relations professional.

Published in Dawn, June 1st, 2017