THE MOST DIFFICULT IR SITUATION OF MY CAREER, WHICH MANY OF MY FRIENDS MIGHT HAVE ALSO FACED IN THEIR CAREER:
It was a sugar manufacturing Company with an annual capacity of 3.00 million tones.
Most Union demands in sugar factories are taken care of by the Sugar Wage Board Award except the yearly demand of Bonus as Available/Allocable surplus vary from company to company.
In this particular sugar factory there were four Unions of Workmen duly constituted & recognized under Trade Unions Act, 1926.
They had signed a settlement with the management under section 18(3) (Tripartite) of the Industrial Disputes Act, 1947 agreeing for 8.33 %( One month’s wages) + Rs.300 for that financial year.
However, a section of the workmen were not happy with the settlement & they felt that they were entitled to 20 %( Two & a half month’s wages) bonus.
They formed a new Union (Fifth) affiliated to CITU led by a leader of a nearby factory. This union organized four one day strikes in support of their demand and the management dismissed four office bearers of this Union for the illegal strikes.
In response, the Union organized mass scale violence in the factory township beating senior officials and threatening their families and indulging in serious acts of indiscipline.
At this stage, I was brought on board to resolve the matter and bring about normalcy in the factory.
I invited the CITU union for a dialogue and in the very first meeting the CITU union gave me last ten years of Profit & Loss Accounts of the Company prepared under Companies Act, 1956, which were showing profits and the CITU Union demanded 20% bonus.
I studied the matter under both Payment of Bonus Act, 1965 and the Companies Act, 1956.
I found that bonus is not payable on profits as calculated under Companies Act, 1956 but as per Available/Allocable Surplus calculated under Payment of Bonus Act, 1965.
The major difference between these two acts is the method of calculation of depreciation. Under Company Act, 1956, depreciation is calculated as per Straight Line Method whereas depreciation under Payment of Bonus Act, 1965, is calculated as per Written Down Value (WDV) method.
As per Straight Line Method, the amount of depreciation is small but under Written Down Value method the amount of depreciation is substantial.
In this particular Company, the moment depreciation under Written Down Value method was subtracted from Gross Profit, no Available Surplus was left and hence no Allocable Surplus and hence no bonus was payable except 8.33% for the financial year.
Armed with this perspective, I confronted the union and told them the position as per law and they did not agree and we decided to take the matter for conciliation under Industrial Disputes Act, 1947.
During conciliation proceedings, I informed the Union that depreciation under Companies Act, 1956 is calculated as per Straight Line Method and Under Payment of Bonus Act, 1965, the same is calculated as per Written Down Value method.
The Union could not understand the subject and it took me several meetings to explain to them the difference between depreciation as per Straight Line Method and Written Down Value method.
However, the Union did not agree to my view point despite understanding the subject as they had made tall promises to the workmen.
Ultimately the conciliation talks went to the Labor Commissioner who asked both the Management and the Union to get written opinions of three eminent lawyers of the High Court of the State.
It took me two weeks to collect the same and the Union could not get any opinion from any Lawyer as they were on the wrong side of the law.
Ultimately, the Union’s stand was rejected by the Labor Commissioner and the Management’s stand was upheld.
The matter was referred for adjudication to Industrial Tribunal and the judgment came in favour of the management and the issue was resolved peacefully and amicably.
After that I decided to always resolve Industrial Relations Disputes by taking recourse to laws of the land rather than playing politics of manipulation and so far I have been successful.
I also wanted to know your clear stand had any of our HR Fraternity faced such or similar type situation in their career.
Shared by: Haridas P A, AB Mauri India Pvt Ltd, Manager HR & Admn
It was a sugar manufacturing Company with an annual capacity of 3.00 million tones.
Most Union demands in sugar factories are taken care of by the Sugar Wage Board Award except the yearly demand of Bonus as Available/Allocable surplus vary from company to company.
In this particular sugar factory there were four Unions of Workmen duly constituted & recognized under Trade Unions Act, 1926.
They had signed a settlement with the management under section 18(3) (Tripartite) of the Industrial Disputes Act, 1947 agreeing for 8.33 %( One month’s wages) + Rs.300 for that financial year.
However, a section of the workmen were not happy with the settlement & they felt that they were entitled to 20 %( Two & a half month’s wages) bonus.
They formed a new Union (Fifth) affiliated to CITU led by a leader of a nearby factory. This union organized four one day strikes in support of their demand and the management dismissed four office bearers of this Union for the illegal strikes.
In response, the Union organized mass scale violence in the factory township beating senior officials and threatening their families and indulging in serious acts of indiscipline.
At this stage, I was brought on board to resolve the matter and bring about normalcy in the factory.
I invited the CITU union for a dialogue and in the very first meeting the CITU union gave me last ten years of Profit & Loss Accounts of the Company prepared under Companies Act, 1956, which were showing profits and the CITU Union demanded 20% bonus.
I studied the matter under both Payment of Bonus Act, 1965 and the Companies Act, 1956.
I found that bonus is not payable on profits as calculated under Companies Act, 1956 but as per Available/Allocable Surplus calculated under Payment of Bonus Act, 1965.
The major difference between these two acts is the method of calculation of depreciation. Under Company Act, 1956, depreciation is calculated as per Straight Line Method whereas depreciation under Payment of Bonus Act, 1965, is calculated as per Written Down Value (WDV) method.
As per Straight Line Method, the amount of depreciation is small but under Written Down Value method the amount of depreciation is substantial.
In this particular Company, the moment depreciation under Written Down Value method was subtracted from Gross Profit, no Available Surplus was left and hence no Allocable Surplus and hence no bonus was payable except 8.33% for the financial year.
Armed with this perspective, I confronted the union and told them the position as per law and they did not agree and we decided to take the matter for conciliation under Industrial Disputes Act, 1947.
During conciliation proceedings, I informed the Union that depreciation under Companies Act, 1956 is calculated as per Straight Line Method and Under Payment of Bonus Act, 1965, the same is calculated as per Written Down Value method.
The Union could not understand the subject and it took me several meetings to explain to them the difference between depreciation as per Straight Line Method and Written Down Value method.
However, the Union did not agree to my view point despite understanding the subject as they had made tall promises to the workmen.
Ultimately the conciliation talks went to the Labor Commissioner who asked both the Management and the Union to get written opinions of three eminent lawyers of the High Court of the State.
It took me two weeks to collect the same and the Union could not get any opinion from any Lawyer as they were on the wrong side of the law.
Ultimately, the Union’s stand was rejected by the Labor Commissioner and the Management’s stand was upheld.
The matter was referred for adjudication to Industrial Tribunal and the judgment came in favour of the management and the issue was resolved peacefully and amicably.
After that I decided to always resolve Industrial Relations Disputes by taking recourse to laws of the land rather than playing politics of manipulation and so far I have been successful.
I also wanted to know your clear stand had any of our HR Fraternity faced such or similar type situation in their career.
