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Subsistence Allowance Act – An Overview

Posted by: The ADP Team on 4 June 2019 in Compliance, HR, Trend Views

(Volume – 41 of Coffee Break Compliance Guide from Anandan Subramaniam)

Do you observe misconduct by any employee? Planning for a suspension? Follow the process.

The Hon’ble Supreme Court of India, (in O.P. Gupta v. Union of India, AIR 1987 SC 2257: (1988) 1 SCR 27: (1987) 4 SCC 328. Case), observed that Subsistence allowance, the dictionary meaning of the word ‘Subsist’ as given in Shorter Oxford English Dictionary, Vol. II at p. 2171 is ‘to remain alive as on food; to continue to exist’. ‘Subsistence’ means – means of supporting life, especially a minimum livelihood.

A workmen in India is entitled for payment of subsistence allowance under Section 10A of Industrial Employment (Standing Orders) Act, 1946, where he/she is suspended by the employer.  It reads,

Section 10A. Payment of subsistence allowance: Where any workmen is suspended by the employer pending investigation or inquiry into complaints or charge of misconduct against him, the employer shall pay to such workman subsistence allowance-

  1. at the rate of fifty per cent of the wages which the workman was entitled to immediately preceding the date of such suspension, for the first ninety days of suspension; and
  2. at the rate of seventy-five per cent of the such wages for the remaining period of suspension if the delay in the completion of disciplinary proceedings against such workman is not directly attributable to the conduct of such workman.

A suspension is defined as, “an interim decision of an employer as a result of which an employee is debarred temporarily from attending his office and performing his functions in the establishment where he is employed, such restriction being imposed on the employee on the ground either that a disciplinary proceeding has already been, or is shortly to be, instituted against him or that a criminal proceeding in respect of an offence alleged to have been committed by him is under investigation or trial”.

Where the Central Act provides for such relief, few States in India has enacted specific Act/Rules for governance and compliance of payment of subsistence allowance.  The States are – Tamilnadu, Karnataka, Kerala and West Bengal.  Where few other States includes this in the Shop and Establishment Act, others follow the Central Act.

The Industrial Employment (Standing Order) Act, prescribes certain modes of behavior as misconduct. If workmen commits any misconduct, various punishments can be awarded, if it is proved.  But the workmen needs to be issued Charge Sheet and given an opportunity to prove himself to offer satisfactory explanation to the charges of misconduct.  If such explanation is not satisfactory, a domestic enquiry shall be initiated to substantiate the fact to prove the misconduct.

There is also a provision to suspend such employee, pending and during the course of enquiry.  This is not seen as a punishment but only to ensure that workman does not tamper with the evidences or witnesses. This process is part of natural justice.   But this needs to be cautiously used and only for genuine and justifiable reason.  There should be material to justify suspension.

In K.Srendran vs. Govt. of Kerala and others, the Hon’ble Kerala High Court observed that “the power to suspend an employee should be exercised with caution and care as an order of suspension pending enquiry may put the employee into sham and humiliation.  Of course, if the continuance of the employee in the same place affects the disciplinary proceedings, the employer can suspend the employee.  Whether an employee should be suspended pending enquiry will depend upon various circumstances.  Suspension pending enquiry though cannot be considered as a punishment, it cannot be disputed that it causes real hardship to an employee.  The Stigma attached cannot be ignored.”

Besides, the Hon’ble Supreme Court, in UCO Bank & Ors. ….Appellants vs. Rajendra Shankar Shukla observed that “An employee is entitled to subsistence allowance during an inquiry pending against him or her but if that employee is starved of finances by zero payment, it would be unreasonable to expect the employee to meaningfully participate in a departmental inquiry”.

Hence, it is mandatory for an employer to pay subsistence allowance, of an amount equal to 50% of wages upto 90 days and 75% between 90 to 180 days. Provided further that where the period of suspension exceeds one hundred and eighty days, the employee shall be entitled to receive, after the said period of one hundred and eighty days a subsistence allowance equal to ninety per cent of the wages which the employee was drawing immediately before his suspension (in few States it is 100% of wages). The provision of paying wages of 90% or 100% as subsistence allowance for a workman, who was charge-sheeted, after 180 days, was aimed in reducing the time of domestic enquiry.   

Such employee would not be entitled to subsistence allowance if he/she accepts employment during the period of suspension in any establishment other than the establishment where he had been working immediately before his suspension.

The employee is entitled for full wages for the suspended period if he/she is exonerated of the charge which caused his/her suspension, the subsistence allowance paid to him for any period shall be adjusted against the full wages admissible to him for the same period. If the enquiry was concluded with a punishment, the employee shall not, in any event be liable to refund or forfeit any part of the subsistence allowance admissible to him/her.

A brief procedure for taking disciplinary action

  1. Written complaint from the complainant
  2. Show cause notice is issued to the accused
  3. If the explanation is satisfactory the show cause is closed or a warning letter is issued.
  4. Else, Charge sheet is issued to the accused
  5. An Enquiry officer and Management representative are appointed
  6. Domestic enquiry continues and Enquiry officer will present his report.
  7. On the basis of report from Enquiry Officer, either the charge is dropped or another show cause notice is sent, stating the charges are proved and why further action cannot be taken
  8. Upon receipt of reply to the notice, Management takes decision.

During the period Subsistence Allowance is paid and it will attract only ESI, if applicable.

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TAGS: Employer Responsibilities Labour Management

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