• Payment of Wages

• Prof. Sushma Mhaske

Payment of Wages Act, 1936.
History – beginning of 20th century –
• an attempt has been made to protect the wages earned by workers.
• The GOI in 1926 asked the local govts to take into account the problems of inordinate
delays in payment of wages to the workers
• In addition to this the Royal Commission on Labour was appointed in 1926 to examined
the problem relating to wages & made valuable recommendations
• As a result of these recommendations in Feb 1933 the Payment of Wages Bill, 1933 was
introduced in Legislative Assembly but dissolution of Assembly – 1935 revised Bill was
introduced in Feb – the Payment of Wages Act was passed in 1936 & came into force on
28th March, 1937
Object –
• To regulate the payment of wages to worker
• Worker employed in certain specified industries
• To ensure a speedy and effective remedy to them
• Against illegal deductions &/or unjustified delay caused in paying wages
Applicability – whole of India
Applies to – factory, railway, industrial establishment, other establishment
notified by the govt. – govt. can bring other establishment within its
purview by giving prior 3 months notification in official gazette.
Employees – S/1 (6) – the employees who are getting wages not exceeding
18000 rs per month (2007 - 6000, 2010 – 10000, 2012 - 18000)
Appropriate govt
Employed person – it includes the legal representative of deceased
employee also.
Employer – includes the legal representatives of deceased employer
• Industrial or other establishment -
a) Tramway service, or motor transport service engaged, in carrying passengers or goods or both by
road for hire or reward;
aa) Air transport service other than military, naval or air forces of Union or Civil Aviation Dept of Govt;
b) Dock, wharf or jetty
c) Mine, quarry or oil-field;
d) Inland vessel, mechanically propelled;
e) Plantation;
f) Workshop or other establishment in which articles are produced, adapted or manufactured with a
view to their use, transport or sale;
g) Establishment in which any work relating to the construction, development or maintenance of
building, roads, bridges or canals, or relating to operation connected with navigation, irrigation, or
to supply of water or relating to generation, transmission and distribution of electricity or any
other form of pawer is being carried on.
h) Any other establishment if the appropriate govt thinks fit by notification in the official gazette.
• Section 2 – def. Wages – all remuneration
Includes Does not includes
Remuneration under any award or Any bonus not in terms of employment
settlement b/w the parties
Overtime payment or paid leave Value of any house accommodation
Additional payment Any contribution by employer for PF
Sum on termination – u/any law Sum paid to defray special expenses
Sum for which employee is entitled Any gratuity other than mandatory
under law*

*Gratuity under the payment of Gratuity Act is considered as wages but

other than that if the employer is giving voluntarily.
• Section 3 – Responsibility of payment of wages – every employer
shall be responsible for payment of wages which is required to be
paid under this Act

• Factory Manager Industrial Establishment Railways Contractor

(person who is person person
responsible Nominated Designated
for supervision
& control)
• Section 4 – Fixation of wage Period by Employer
• - no wage period shall exceed 1 month
• Section 5 – Time of Payment of Wages (on working day)

• Any Railway /factory Other cases

(less than 1000 employees)
a) Before the expiry of 7th day a) Before expiry of the 10th day
after the wage period after the last day of the wage
period.
• Dock/wharf/jetty employees - before the 7th day from the day of
completion of work
• In case of termination of work – before the expiry of the 2nd working day
from the day of termination.
• Section 6 – wages to be paid in –

• Current coins Currency notes Cheque Bank Transfer

• 2017 amendment – cheque (if appropriate govt thinks fit they can
mandate the payment of wages can be done through only cheque or
bank transfer)
• e. g. PSU employee
Section 7 – Deduction made from wages (fines, Absence from Duty,
Insurance Premium, loan given by employer recovery, trade union
subscription, on behalf of employee employer has paid some taxes
that can be deducted)
• Limitation – total deduction to co-operative societies shall not exceed
75% of wages & other cases 50%
• French Motor Car Co. Ltd Workers Union v. French Motor Car Co. 1990
– Absence from duty by an employee must be on his own volition & it
cannot cover his absence when he is forced by circumstances created
by employer.
• Kothari Ltd. V. Second Addl District Judges-cum-Appellate Authority
1990 – AP HC held – if the absence from duty is due to coercion and
the workman is not a consenting party, then the management has no
power to deduct wages.
Section 8 – Fines – (max 3% of the wages)
• To impose fines approval of appropriate govt is mandatory
• Notice to employees- mentioning all acts & omissions on which fines can
be imposed
• Before imposition of fines – opportunity of being heard shall be given to
employee
• Without this procedure if fine is imposed by employer in that situation fine
will be considered as void.
• The employee who is below the age of 15 years fine cannot be imposed.
• 90 days time period should be given to employee to pay the fine.
• The date for imposition of fine will be considered on which the act or
omission is done.
• All the record with respect to imposition of fine shall be recorded by
employer in a Register.
Section 9 – Deductions for Absence from Duty
• Deductions may be made only on account of the absence of an
employee from the place where, by the terms of his employment, he
is required to work, such absence being for the whole or any part of
the period during which he is so required to work.
• In case of common leave – the employer can deduct max 8 days
wages
• Kothari Ltd. v. Second A.J.-cum-Appellate Tribunal 1991 – where the
employee is prevented from reaching the work place due to ‘Bund’,
employer is not entitled to deduct his wages.
Section 10 – deductions for damage or loss
• Employer is entitled to deductions for damage to or loss of
goods expressly to the employed person for custody, or for
loss of money for which he is required to account, where
such damage or loss of directly attributable to his neglect or
default.
• Opportunity of being heard
• All such deductions and all realizations thereof shall be
recorded in a register to be kept by the person responsible
for the payment of wages
Section 11 – Deductions from services rendered –
• The employee has to accept the services then only deduction is possible.
e.g. house accommodation
Section 12 – Recovery of Advances – e.g. remaining amount of TA with
interests
Section 12A – Deduction for Recovery of loans
Section 13 – Deduction for payment to cooperative Society & Insurance
Scheme, social security fund, PF, membership subscription etc.
Section 13A – Maintenance of Register and Record
Section 14 – Inspectors (site visit, inspection of record, he can talk to
employee in case of any suspension. Duties – visit during working hours
only, )
Section 14A – Facilities to be afforded to Inspector – every employer shall
afford an Inspector all reasonable facilities for making any entry,
inspection, supervision, examination or inquiry under this Act.
Section 15 – Claims arising out of Deductions, Delay in payment of Wages
• Appropriate govt can appoint Officer of the Central govt/ regional govt. Labour
Commissioner or Assistant Labour Commissioner or Labour court presiding officer or
Civil Court Judge – to hear & to decide the claims regarding the Payment of Wages &
deductions
• More than one authority can be appointed by appropriate govt
• In case of wrong deductions – from that date within 12 months application has to be
submitted to appropriate authority – in case of delay the authority has discretion to
admit after hearing the cause for delay.
• Application with malicious intent – fine (Rs. 375/-) can be imposed on employee
• Decision of the authority is final
• Application can be moved – the person aggrieved/legal practitioner/any official or
registered trade union/Inspector/any other person with the permission if the
authority under the Act.
• Abdul Waheed v. Authority, Payment of Wages Act, 1995 – the authority has no
jurisdiction to entertain & decide claims involving questions of law & facts.
Continuance if such proceeding will amount to be an abuse of the process of law
• Payment of Wages Inspector, Ujjain v. Suraj Mal Mehta 1969 – the authority has the
jurisdiction to try the matters which are incidental to the claim in question.
Section 16 – Single Application for Different Claims –
Section 17 – Appeal – the appeal can be preferred within 30 days of the
date on which the order or direction was made, in Presidency town before
the Small Causes Court and else where the District court
• Cl (1A) – no appeal shall lie unless the memorandum of appeal is
accompanied by a certificate by the authority to the effect that the
appellant has deposited the amount payable under the direction appealed
against.
• Murudhar Kshethriya Gramin Bank v. Bhagwan Ram 1995 –held – the
appeal and deposit & information of deposit to court have to be within
limitation of 30 days from the date of receipt of the certified copy of the
impugned order.
• Nagar Palika v. Prescribed Authority 1992 – Allahabad HC – the
requirement of making deposit at the time of filing of appeal does not
destroy the remedy of the appeal.
Section 18 – Powers of Authorities Appointed under Section 15
• Every Authority appointed U/S/15 shall have all the powers of a Civil
Court for the purpose of ---
• Taking evidence
• Enforcing the attendance of witnesses
• Compelling the production of documents
Section 20 - Penalty for Offences under the Act
(1) For violation of Secs 5,7,8,9,10,11,12,13 – fine Rs.1500/- which may
extend to Rs. 7000/-
(2) For violation of Secs 4,5(4),6,8(8),10(2),25 – fine which may extend to Rs.
3750/-
(2A) whosoever is responsible to nominate or designate a person U/S/3 –
fine Rs. 3000/-
(3) Failure to maintain record & register – fine Rs.1500/- to Rs. 7500/-
(4) Willfully obstruct the Inspector in discharging his duties etc. – fine Rs.
1000/- to Rs.7500/-
(5) Subsequent conviction – guilty of violation of same provision –
imprisonment for a term which shall not be less than 1 month which may
extend to 6 months & fine which any extend to Rs. 22500/- or both.
(6) Willful neglect to pay wages – additional fine Rs.750/- for each day for
which such failure or neglect continues.
Section 21 – no Court shall take cognizance of a complaint against any person for an offence
U/ss (1) of S/20 unless – An application has been presented U/S/15
• U/Ss (2) – opportunity of being heard if his default was due to – a bona fide error or bona fide
dispute as to the payable to he employed person or
• Occurrence of the emergency or exceptional circumstances, the person responsible was unable
to pay wages
• The failure of employee to apply for or accept payment.
• U/Ss (3) – no court shall take cognizance of the following offense unless the complaint is made
by the Inspector or by any other person with his sanction –
i. Non-fixation of wage period
ii. Non-payment of wages in current coin or currency notes as required U/S/6.
iii. Non-compliance with any rule and the Act
iv. Contravention of S/20 (3) & S/20 (4)
v. U/Ss (3A) – no court shall take cognizance of any offence punishable U/Ss/(3) or Ss (4) of
S/20 except on a complaint made by or with the sanction of the Inspector.
• U/Ss (4) – in imposing of fine U/S/20 the Court shall take into consideration the amount of any
compensation already awarded against the accused in any proceedings taken U/S/15
• UOI v. Competent Authority 1998 LLR 189 – the executing Court
cannot go beyond the order as passed. The High Court would not
interfere in such a matter where the petitioner is not complying with
mandatory directions issued by Competent Authority.
Section 22 – Bar of Suits
• S/22 excludes the jurisdiction of the Court to entertain a suit in
respect of the matter entrusted to the jurisdiction of the authority
constituted U/S/15 of the Act.
• But, a suit for recovery of arrears of Pay, PF, Gratuity, Bonus etc.
pending a claim application U/S/15vis not barred.
Section 22A – no suit, prosecution or other legal proceeding shall lie
against the Govt. or any other officer of the govt for anything which is
in good faith doen or intended to be done under this Act
• Section 23 – Contracting out
• Any contract or agreement, whether made before oe after the
commencement of this Act, whereby an employee relinquishes any
right conferred by this Act shall be null & void.
• However, the protection U/S/23 is available with respect to –
a. Right to receive wages
b. Right to receive them at the proper time stipulated in the Act
c. Right to receive the wages without unauthorized deductions.
• Karnataka Bank Employee Association v. Commissioner of Labour &
others 1980 – Kar HC held – S/23 does not prevent the employee
from entering into an agreement advantageous or beneficial to him.
Section 24 – Delegation of Powers – the appropriate govt, ny
notification in the Official Gazette, direct that power exercisable by it
under this Act shall be,
• When appropriate Govt is central govt – such Officer or Authority
subordinate to the Central Govt or by the State govt or by the such
officer or authority subordinate to the state Govt as may be specified
in the notification.
• When appropriate Govt is State Govt – by such officer or authority
subordinate to the State govt as may be specified in the notification.
Section 25 – Display by Notice of Abstracts of the Act
• S/25 requires for the display on the notice board the abstracts of this
Act and the rules made under it.
• The person responsible for the payment of wages to employees
• In English and in the language of the majority of the employees in the
factory or industrial establishment.
Section 25A – Payment of Undisbursed wages in cases of death of
employed person – all amounts payable to an employee as wages,
shall, if such amounts could not or cannot be paid on account of his
death before payment or on account of his whereabouts not being
known –
a) To his nominee
b) Where no nomination or for any other reasons such amounts
cannot be paid to the person nominated, be deposited with the
authority who shall deal with the amounts so deposited in such a
manner as may be prescribed.
c) Section 26 – Rule Making Power – the appropriate Govt may make
Rules to regulate the procedure to be followed by the authority and
Courts.
 Code on Wages

Payment of Wages

Chapter 3
• S/2 (y) – Wages – all remuneration whether by of - salary/allowance/otherwise – which
can be express in terms of money or which will be payable to employee in respect of
employment or work done by him.
• Wages Includes – (a) basic pay, (b) dearness allowance, (c) retaining allowance
• Wages does not include – (a) any bonus payable which does not form part of
employment,
• (b) value of house accommodation, supply of electricity/water/medical
attendance/other amenities excluded by Appropriate Govt. by G.O.
• (c) Contribution paid by employer – to pension / PF
• (d) Conveyance allowance
• (e) Special expenses – defray
• (f) House rent allowance
• (g) Remuneration payable under Award/Settlement
• (h) Overtime allowance
• (i) Commission
• (j) Any Gratuity
• (k) Retrenchment compensation
Section 15 to 25
Section 15 – Mode of payment of wages -
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
• By the electronic mode
• Provided that – the appropriate govt may, by notification, 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
• By crediting the wages in his Bank account
Section 16 – Fixation of Wage Period
• The employer shall fix the Wage period for employees either as –
• Daily or
• Weekly or
• Fortnightly
• Monthly
• Subject to the condition that no wage period in respect of any employee
shall be more than a month.
• Provided that – different wage period may be fixed for different
establishments.
Section 17 – Time Limit for Payment of Wages
• (1) The employer shall pay or cause to be paid wages to the employees,
engaged on
Daily basis At the end of the shift
Weekly basis on the last working day of the week, that is to say, before the
weekly holiday

Fortnightly basis Before the end of the second day after the end of the fortnight;
Monthly basis Before the expiry of the 7th day of the succeeding month

• (2) where an employee has been –

• Removed or dismissed from service; or
• Retrenched or has resigned from service, or became unemployed due to
closure of the establishment,
• The Wage payable to him shall be paid within 2 working days of his removal,
dismissal, retrenchment or as the case may be, his resignation.
• Section 18 – Deductions which may be made from Wages
• (1) Notwithstanding anything contained in any other law for the time being in
force, there shall be no deductions from the wages of employee, except those as
are authorized under this code
• Explanation –
• (a) Any payment made by an employee to the employer or his agent shall be
deemed to be a deduction from his wages
• (b) any loss of wages to an employee, for a good & sufficient cause, resulting from
i. The withholding of increment or promotion, including the stoppage of an
increment;
ii. The reduction to a lower post or time-scale ; or
iii. The suspension,
Shall not be deemed to be a deduction from wages in a case where the provisions
made by the employer for such purposes are satisfying the requirements specified
in the notification issued by the appropriate govt. in this behalf.
• S./18 (2) – deductions from the wages of an employee shall be made in
accordance with the provisions of this code, & may be made only for the
following purposes, -
a. fines imposed on him;
b. Deductions for his absence from duty;
c. Deductions for damage to or loss of good expressly entrusted to the
employee for custody, or for loss of money for which he is required to
account, where such damage or loss is directly attributable to his neglect
or default;
d. Deductions for house-accommodation supplied by the employer or by
appropriate Govt. or any housing board set up under any law for the
time being in force, whether the Govt. or such board is the employer or
not, or any other authority engaged in the business of subsiding house-
accommodation which may be specified in this behalf by the appropriate
govt. by notification;
e. Deductions for such amenities & services supplied by the employer as the
appropriate Govt. or any officer specified by it in this behalf may, by general or
special order, authorize & such deduction shall not exceed an amount equivalent to the
value of such amenities & services.
Explanation – for the purposes of this clause, the expression “services” does not include
the supply of tools & raw materials required for the purposes of employment.
f. Deductions for recovery of –
i. Advances of whatever nature (including advances for TA or Conveyance allowance), &
the interest due in respect thereof, or for adjustment of overpayment of wages;
ii. Loans made from any fund constituted for the welfare of labour, as may be prescribed
by the appropriate govt., & the interest due in respect thereof;
g. Deductions for recovery of loans granted for house-building or other purposes approved
by the appropriate govt and the interest due in respect thereof
h. Deductions of income-tax or any other statutory levy levied by the Central
Govt. or state Govt & payable by the employee or deductions required to
be made by order of a court or other authority competent to make such
order;
i. Deductions for subscription to, and for repayment of advances from any
social security fund or scheme constituted by law including provident fund
or pension fund or health insurance scheme or fund known by any other
name;
j. Deductions for payment of co-operative society subject to such conditions
as the appropriate govt may impose;
k. Deductions made, with the written authorization of the employee,for
payment of the fees & contribution payable by him for the
membership of any Trade Union registered under the Trade Unions Act,
1926;
i. deductions for recovery of losses sustained by the railway
administration on account of acceptance by the employee of
counterfeit or base coins or mutilated or forged currency
notes;
m. deductions for recovery of losses sustained by the railway
administration on account of the failure of the employee to
invoice, to bill, to collect or to account for the appropriate
charges due to the railway administration whether in respect
of fares, freight, demurrage, wharf age and cranage or in
respect of sale of food in catering establishments or in
respect of commodities in grain shops or otherwise.
n. Deductions for recovery of losses sustained by the railway
administration on account of any rebates or refunds incorrectly
granted by the employee where such loss is directly attributable to his
neglect or default.
o. deductions, made with the written authorization of the employee, for
contribution to the Prime Minister’s National Relief Fund or to such other
fund as the Central Govt may, by notification, specify
• S/18 (3) - deductions shall not exceed 50% of wages
• S/18 (4) - if deducted can be recovered from employer
• S/18 (5) – deductions made by employer for PF or trust, or Govt Fund, such
employees shall not be held responsible for such default of the employer.
Section 19 – Fines - No fine shall be imposed on employee – save in
respect of those acts & omissions on his part as the employer, with the
previous approval of the appropriate Govt. or of such authority as may be
prescribed, may have specified by notice under sub-section (2)
• (2) – notice on the premises – acts or omissions punishable
• (3) – opportunity of being heard
• (4) – total amount of fine should not exceed 3% of the wages
• (5) – no fine on the employee below the age of 15 yrs
• (6) – no fine shall be recovered from him by installment or after expiry of
90 days
• (7) – 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 thereof shall be recorded in a register and it
can be used for benefits of employees only.
Section 20 – Deductions for absence from duty –
• (1) Deductions may be made only on account of the absence of an
employee from the place where, by the terms of his employment, he
is required to work, such absence being for the whole or any part of
the period during which he is so required to work.
• (2) proportionate deductions
• Provided that – 10 or more employee acting in concert absent
themselves without due notice & without reasonable cause, such
deduction from any such person may include such amount not
exceeding his wages for 8 days with opportunity of being heard.
• (3) all such deductions and all realizations thereof shall be recorded in
a register to be kept such form as may be prescribed.
Section 21 – Deductions for damage or loss
• (1) a deduction for cl. (c) & (n) S/18 for damage or loss shall not
exceed the amount of the damage or loss caused to the employer by
negligence or default of the employee.
• (2) opportunity of being heard
• (3) deductions and realization a shall be recorded in a register.
Section 22 – a deduction under S/18 seb. Sec 2 of cl. (d) or (e) shall
not be made from the wages of an employee, unless
• The house accommodation amenity or service has been accepted by
him as term of employment or otherwise &
• Such deduction shall not exceed an amount equivalent to the value of
the house accommodations amenity or service supplied &
• Shall be subject to such conditions as the appropriate Govt may
impose.
Section 23 – Deductions for Recovery of Advances
• Recovery of advance of money given to an employee before the
employment began shall be made from the first payment of wages to
him in respect of a complete wage period but no recovery shall be
made of such advances given for travelling expenses;
• Recovery of advance of money given to an employee after the
employment began shall be subject to conditions as ay be prescribed;
• Recovery of advances of wages to an employee not already earned
shall be subject to such conditions as may be prescribed.
Section 24 – Deductions for Recovery of Loans –
• Deductions under cl (g) of sub-sec (2) of sec. 18 for recovery of loans
granted to an employee, regulating the extent to which such loans
may be granted & the rate of interest payable thereon, shall be such
as may be prescribed.
Section 25 – chapter not to apply to Government establishments-
unless the appropriate govt , by notification, applies such provisions
to the Govt establishments specified in the notification.