The term subsistence allowance refers to the allowance which is paid to a workman1 when he is suspended due to allegations of misconduct, and the investigation or inquiry into the allegations of misconduct is pending. The nexus behind providing this allowance is two-fold, one is to ensure that the suspended workman and his family do not face economic hardship during the pendency of inquiry, and on the other hand it also ensures that the employer completes the inquiry process timely and without any unnecessary delay.
Although the term subsistence allowance has not been defined in the statute, however, Section 10-A of the Industrial Employment (Standing Orders) Act, 1946 lays down the guidelines and circumstances when an employer is required to pay subsistence allowance to the workman and it states the following:
"10-A. Payment of subsistence allowance.--(1) Where any workman is suspended by the employer pending investigation or inquiry into complaints or charges of misconduct against him, the employer shall pay to such workman subsistence allowance-
(a) at the rate of fifty per cent of the wages which workman was entitled to immediately preceding the date of such suspension, for the first ninety days of suspension; and
(b) at the rate of seventy-five per cent of 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.
(2) If any dispute arises regarding the subsistence allowance payable to a workman under subSection (1), the workman or the employer concerned may refer the dispute to the Labor Court, constituted under the Industrial Disputes Act, 1947 (14 of 1947), within the local limits of whose jurisdiction the industrial establishment wherein such workman is employed is situate and the Labor Court to which the dispute is so referred shall, after giving the parties an opportunity of being heard, decide the dispute and such decision shall be final and binding on the parties.
(3) Notwithstanding anything contained in the foregoing provisions of this Section, where provisions relating to payment of subsistence allowance under any other law for the time being in force in any State are more beneficial than the provisions of this Section, the provisions of such other law shall be applicable to the payment of subsistence allowance in that State."
From the aforementioned Section the following salient features of subsistence allowance is derived:
- Subsistence allowance is paid when the workman is suspended pending investigation/inquiry into complaints or charges of misconduct against him.
- The allowance is paid at the following rate:
- @50% of his wages for the first 90 days of suspension.
- @75% of his wages for remaining period of suspension, if delay is not attributable to conduct of workman.
Therefore, mere perusal of the aforementioned Section will reveal that subsistence allowance may be granted only when the workman is suspended and an investigation/inquiry into charges of misconduct is pending before the employer. However, it has also been observed that many a times an employer fails to make payment of subsistence allowance during the period of suspension, and then it is later on claimed by the workman along with interest, if the workman decides to challenge his termination before a Court. Therefore, in order to avoid such a situation, it becomes necessary that an employer ensure that a workman is duly paid the allowance during the term of his suspension pending inquiry.
Scenarios requiring departmental enquiry and payment of subsistence allowance:
1. Retrenchment: Retrenchment, as defined under the Industrial disputes Act, means termination of the service of a workman by the employer for any reason whatsoever, otherwise than as a punishment inflicted by way of disciplinary action, but does not include—
(a) Voluntary retirement of the workman; or
(b) Retirement of the workman on reaching the age of superannuation if the contract of employment between the employer and the workman concerned contains a stipulation in that behalf;
(bb) termination of the service of the workman as a result of the non-renewal of the contract of employment between the employer and the workman concerned on its expiry or of such contract being terminated under a stipulation in that behalf contained therein;
(c) Termination of the service of a workman on the ground of continued ill-health;2
Therefore, the definition itself defines retrenchment as a case where no departmental enquiry is held by the employer and the workman is terminated straight away. So, in cases of retrenchment where no enquiry is conducted by the employer, then the workman does not have any right to claim subsistence allowance.
It is also to be noted that there are various conditions precedent to retrenchment of workmen, which needs to be followed:
1.
1. The workman has been in continuous service for not less than one year under an employer.
2. Workman has been paid, at the time of retrenchment, compensation equivalent to fifteen days' average pay for every completed year of continuous service or any part thereof in excess of six months
3. Notice in the prescribed manner is served on the appropriate Government.
2. Termination: As stated above, where an workman is terminated due to allegations of misconduct (as prescribed under the Company's standing orders), then a departmental enquiry is required to be held, and as per Section 10-A of the Industrial Employment (Standing Orders) Act, 1946, the subsistence allowance is to be paid necessarily pending investigation/inquiry into the allegations of misconduct. However it is to be noted that before the employer prescribes the applicable sanction (proportionate to the misconduct), the misconduct must first be proved through an internal disciplinary enquiry process based on the principles of natural justice. Once the misconduct is established through a formal enquiry, an employer can terminate employment as a sanction, provided that the sanction applied is proportionate to the gravity of the misconduct3.
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