INSTITUTE OF MANAGEMENT

STUDIES
(DAVV)

SUBJECT – Compensation & Reward

Management
CLASS- MBA (HR) 4th semester
SECTION – “B”
Topic – Payment of Wages Act, 1936

Submitted by- Submitted to-

Anukrati Bagherwal Dr. Vishakha Baheti
Balendra Kol
Lavina Pahuja
Palak Agrawal

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 INTRODUCTION
rd
The Payment of Wages Act 1936 was come in to the force on 23 April 1936.This
Act was passed to regulate the payment of wages for certain classes of persons
employed in industry. It ensures payment of wages in a particular form and at
regular intervals without unauthorized deductions. The Act extends to whole of India
sec. 1(2). It was extended to Jammu and Kashmir by the Central Labour Law
(Extension to Jammu and Kashmir) Act 1970.
rd
The Payment of Wages Act 1936 was come in to the force on 23 April 1936.This
Act was passed to regulate the payment of wages for certain classes of persons
employed in industry. It ensures payment of wages in a particular form and at
regular intervals without unauthorized deductions. The Act extends to whole of India
sec. 1(2). It was extended to Jammu and Kashmir by the Central Labour Law
(Extension to Jammu and Kashmir) Act 1970.

OBJECTIVE OF THIS ACT

1. To Regulate the payment of wages to certain class of employed person.

2. Regulation completed by the Act is to fold: -

i. The date of payment of wages.

ii. The deduction from wages whether fine or otherwise.

3. To ensure payment of wages to persons who covered by the Act certain

provisions have been made in this Act.

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 APPLICABILITY OF THIS ACT
According to Sec. 1(4) of the Act, it applies to in the first instance to the payment of
wages to:
1. Person employed in Factory.
2. Person employed upon any railway by a Railway Administration or either
directly or through sub- contractor.
3. Person employed in industrial and other establishment specified in sub –
clauses (a) to (g) of clause (ii) of sec 2
4. The State Govt. may after giving 3 months’ notice by notification in the
Official Gazette, extends the provision of this Act or any of them to payment of
wages to any class of persons employed.

Short title, extent, commencement and application: —

(1) This Act may be called the Payment of Wages Act, 1936.

(2) It extends to the whole of India.

(3) It shall come into force on such date as the Central Government may, by
notification in the Official Gazette, appoint.

(4) It applies in the first instance to the payment of wages to persons employed in
any [factory, to persons] employed (otherwise than in a factory) upon any
railway by a railway administration or, either directly or through a sub-
contractor, by a person fulfilling a contract with a railway administration [and to
persons employed in an industrial or other establishment specified in sub-clauses
(a) to (g) of clause (ii) of section 2].

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 DEFINITION
In this act, unless there is anything repugnant in the subject or context: —

(i) “appropriate Government” means,

in relation to railways, air transport services, mines and oilfields, the Central
Government and, in relation to all other cases, the State Government;

(ii) “employed person” includes the legal representative of a deceased employed

person;
(iii) “employer” includes the legal representative of a deceased employer;

(iv) “factory” means any premises including the premises thereof-

(i) whereon ten or more workers are working, or were working on any day
of the preceding twelve months, and in any part of which a manufacturing
process is being carried on with the aid of power, or is ordinarily so
carried on, or

whereon twenty or more workers are working, or were working on any day of
the preceding twelve months, and in any part of which a manufacturing process
is being carried on without the aid of power, or is ordinarily so carried on,- but
does not include a mine subject to the operation of the Mines Act, 1952 (XXXV
of 1952) or a mobile unit belonging to the armed forces of the Union, a railway
running shed or a hotel, restaurant or eating place

(v) “Industrial or other establishment” means, any—

 tramway service, or motor transport service engaged in carrying passengers
or goods or both by road for hire or reward;
 air transport service other than such service belonging to, or exclusively
employed in the military, naval or air forces of the Union or the Civil
Aviation Department of the Government of India;]
 dock, wharf or jetty;
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  Inland vessel, mechanically propelled;
 mine,
 quarry or oil-field;
 plantation;
 workshop or other establishment in which articles are produced, adapted or
manufactured, with a view to their use, transport or sale;
 establishment in which any work relating to the construction, development or
maintenance of buildings, roads, bridges or canals, or relating to operations
connected with navigation, irrigation or the supply of water or relating to the
generation, transmission and distribution of electricity or any other form of
power is being carried on;
 any other establishment or class of establishments which[ the appropriate
Government] may, having regard to the nature thereof, the need for
protection of persons employed therein and other relevant circumstances,
specify, by notification in the Official Gazette

(iii) “wages” means

all remuneration (whether by way of salary, allowances, or otherwise) expressed in
terms of money or capable of being so expressed which would, if the terms of
employment, express or implied, were fulfilled, be payable to a person employed in
respect of his employment or of work done in such employment, and includes—
(a) any remuneration payable under any award or settlement between the parties
or order of a Court;
(b) any remuneration to which the person employed is entitled in respect of
overtime work or holidays or any leave period;
(c) any additional remuneration payable under the terms of employment
(whether called a bonus or by any other name);
(d) any sum which by reason of the termination of employment of the person
employed is payable under any law, contract or instrument which provides for
the payment of such sum, whether with or without deductions, but does not
provide for the time within which the payment is to be made;
(e) any sum to which the person employed is entitled under any scheme framed
under any law for the time being in force, but does not include—
(i) any bonus (whether under a scheme of profit sharing or otherwise) which

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 does not form part of the remuneration payable under the terms of
employment or which is not payable under any award or settlement
between the parties or order of a Court;
(ii) the value of any house-accommodation or of the supply of light water
medical attendance or other amenity or of any service excluded from the
computation of wages by a general or special order of Appropriate
Government.
(iii) any contribution paid by the employer to any pension or provident fund
and the interest which may have accrued thereon;
(iv) any travelling allowance or the value of any travelling concession;
(v) any sum paid to the employed person to defray special expenses entailed on
him by the nature of his employment; or

(vi) any gratuity payable on the termination of employment in cases other than
those specified in subclause (d). {Section 2(vi)}

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 Responsibility for payment of wages
Section 3 provides that every employer shall be responsible for the payment to
persons employed by him of all wages required to be paid under the Act. However,
in the case of persons employed in factories if a person has been named as the
manager of the factory; in the case of persons employed in industrial or other
establishments if there is a person responsible to the employer for the supervision
and control of the industrial or other establishments; in the case of persons employed
upon railways if the employer is the railway administration and the railway
administration has nominated a person in this behalf for the local area concerned; in
the case of persons employed in the work of contractor, a person designated by such
contractor who is directly under his charge; and in any other case, a person
designated by the employer as a person responsible for complying with the
provisions of the Act, the person so named, the person responsible to the employer,
the person so nominated or the person so designated, as the case may be, shall be
responsible for such payment.
It may be noted that as per section 2(ia) “employer” includes the legal representative
of a deceased employer.

Fixation of wage period

As per section 4 of the Act every person responsible for the payment of wages shall
fix wage- periods in respect of which such wages shall be payable. No wage-period
shall exceed one month

Time of payment of wages

Section 5 specifies the time payment of wages. The wages of every person employed
upon or in any railway factory or industrial or other establishment upon or in which
less than one thousand persons are employed, shall be paid before the expiry of the
seventh day.
The wages of every person employed upon or in any other railway factory or
industrial or other establishment shall be paid before the expiry of the tenth day,
after the last day of the wage- period in respect of which the wages are payable.
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However, in the case of persons employed on a dock wharf or jetty or in a mine the
balance of wages

found due on completion of the final tonnage account of the ship or wagons loaded
or unloaded as the case may be shall be paid before the expiry of the seventh day
from the day of such completion.
Where the employment of any person is terminated by or on behalf of the employer
the wages earned by him shall be paid before the expiry of the second working day
from the day on which his employment is terminated. However, the employment of
any person in an establishment is terminated due to the closure of the establishment
for any reason other than a weekly or other recognized holiday the wages earned by
him shall be paid before the expiry of the second day from the day on which his
employment is so terminated.
The Appropriate Government may by general or special order exempt to such extent
and subject to such conditions as may be specified in the order the person
responsible for the payment of wages to persons employed upon any railway or to
persons employed as daily-rated workers in the Public Works Department of the
Appropriate Government from the operation of this section in respect of wages of
any such persons or class of such persons.
All payments of wages shall be made on a working day.
Wages to be paid in current coin or currency notes or by cheque or crediting in
bank account
As per section 6 of the Act, all wages shall be paid in current coin or currency notes
or by cheque or by crediting the wages in the bank account of the employee:
Provided that the appropriate Government may, by notification in the Official
Gazette, specify the industrial or other establishment, the employer of which shall
pay to every person employed in such industrial or other establishment, the wages
only by cheque or by crediting the wages in his bank account.

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 Deductions from the wages of an employee
Section 7 of the Act allows deductions from the wages of an employee on the
account of the following: -
(i) fines;
(ii) absence from duty;
(iii) damage to or loss of goods expressly entrusted to the employee;
(iv) housing accommodation and amenities provided by the employer;
(v) recovery of advances or adjustment of over-payments of wages;
(vi) recovery of loans made from any fund constituted for the welfare of labour in
accordance with the rules approved by the State Government, and the interest
due in respect thereof;
(vii) subscriptions to and for repayment of advances from any provident fund;
(viii) income-tax;
(ix) payments to cooperative societies approved by the State Government or to a
scheme of insurance maintained by the Indian Post Office;
(x) deductions made with the written authorization of the employee for payment
of any premium on his life insurance policy or purchase of securities.

Fines Section 8 deals with fines. It provides that: -

(1) No fine shall be imposed on any employed person save in respect of such acts
and omissions on his part as the employer with the previous approval of the State
Government or of the prescribed authority may have specified by notice under
sub-section (2).
(2) A notice specifying such acts and omissions shall be exhibited in the
prescribed manner on the premises in which the employment carried on or in the
case of persons employed upon a railway (otherwise than in a factory) at the
prescribed place or places.

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(3) No fine shall be imposed on any employed person until he has been given an
opportunity of showing cause against the fine or otherwise than in accordance
with such procedure as may be prescribed for the imposition of fines.
(4) The total amount of fine which may be imposed in any one wage-period on
any employed person shall not exceed an amount equal to three per cent of the
wages payable to him in respect of that wageperiod.
(5) No fine shall be imposed on any employed person who is under the age of
fifteen years.
(6) No fine imposed on any employed person shall be recovered from him by
installments or after the expiry of ninety days from the day on which it was
imposed.
(7) Every fine shall be deemed to have been imposed on the day of the act or
omission in respect of which it was imposed.
(8) All fines and all realization’s thereof shall be recorded in a register to be kept
by the person responsible for the payment of wages under section 3 in such form
as may be prescribed; and all such realization’s shall be applied only to such
purposes beneficial to the persons employed in the factory or establishment as
are approved by the prescribed authority.
It may be noted that when the persons employed upon or in any railway, factory or
industrial or other establishment are part only of a staff employed under the same
management all such realization’s may be credited to a common fund maintained for
the staff as a whole provided that the fund shall be applied only to such purposes as
are approved by the prescribed authority.

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 CASE STUDY
Surajmal Mehta vs Authority Under Payment Of Wages ... on 25 March, 1964
The matter arises thus, The Badnagar Electric Supply and Industrial Co., Ltd.,
Badnagar, having secured a license from the Government of the quondam Gwalior
State, was doing business in the distribution of electric energy in that place. The
Company's license was revoked by the Madhya Pradesh Government and the
undertaking was taken over by the M. P. Electricity Board on 1st October 1962. The
petitioner was the Managing Director of the Company.
When notice was given by the petitioner to the employees of the Company that their
services were not required by the Company from 1st October 1962, some twenty
employees of the Company made an application on 20th September 1962 to the
Government Labour Officer, Ujjain, to take necessary steps for securing to them the
payment of "notice pay and retrenchment compensation". The Labour Officer asked the
petitioner to make 'She payment demanded by the twenty employees, but the petitioner
denied the liability of the Company to pay any compensation to the employees.
Thereupon the Payment of Wages Inspector, Ujjain, filed an application on 7th
February 1963, under Section 15 of the Act, before the Authority praying that a
direction be issued under Section 15 (3) of the Act for payment to the aforesaid twenty
employees "notice pay and retrenchment compensation" amounting to Rs. 12,853.60
nP. or such sum as may be determined by the Authority.
LINK: - https://indiankanoon.org/doc/1689629/

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