This article is written by Shraileen Kaur, a student at ICFAI University, Dehradun. In this exhaustive article, the author discusses in detail the Payment of Wages Act, its historical background, features, objectives, purpose, and relevant case laws related to the Act.
This article has been published by Sneha Mahawar.
It is a well-known fact that India’s economy depends not just on the formal sector but also on the informal sector. The significance of the informal sector in India cannot be ignored. Before independence in 1947, the informal sector, primarily agriculture, contributed to 95 per cent of the Gross Domestic Product (GDP). Even today, 70 per cent of the national income of India consists of income generated through agriculture (Food and Agriculture Organisation of the United Nations).
As per the Employment – Unemployment Survey of 2011-12, presented by the National Sample Survey Office (NSSO), the total workforce of India is 474.23 million. However, out of this total workforce, only 8 per cent belong to the formal sector, and the remaining 92 per cent are working in the informal sector. Additionally, 60 percent of the growth of GDP is due to the contribution of these informal sector workers.
According to the Indian Constitution, the Government of India is required to create employment opportunities and ensure that all workers (formal and informal sectors) have access to a reasonable standard of living that includes all socioeconomic and other welfare opportunities.
Adhering to the Constitution of India, the Indian Government in the year 1948, right after independence, introduced legislation named the Minimum Wages Act of 1948. The legislative intent behind the Act was to make sure that workers in the informal sector receive at least a minimum amount of money as wages to avoid exploitation. However, before this Act, the Payment of Wages Act of 1936 was introduced. The Act made efforts so that informal sector workers could be linked with mainstream development by providing minimum wages, which can be utilised to increase living standards and benefit social development schemes.
The Act has occasionally undergone modifications to ensure that the law is effectively implemented and that workers receive adequate pay in a timely manner to maintain themselves and their families. This article explains numerous significant clauses of the Act and related amendments and case laws.
Payment of Wages Act, 1936
Historical background of the Payment of Wages Act
Since labourers and workers constituted the oppressed class, the concern of arbitrary deductions from wages and payments of wages that were not uniform was not given much attention. However, in 1925, a private Bill known as the Weekly Payment of Wages Bill was presented in the Legislative Assembly that dealt with these issues. However, at that time, the government rejected the Bill by claiming that the problem was already under assessment.
The Indian Government maintained a connection with the regional or state-level administrations in 1926. It encouraged them to look into and gather the necessary data, materials, etc., about the challenges, as mentioned earlier, faced by the oppressed classes, specifically workers and labourers.
The information gathered made it clearly evident that the problems, which included the employers’ arbitrary deduction of large amounts of money from wages and the inconsistent and delayed distribution of payments, which left workers in the most precarious of circumstances, were quite real.
The Royal Commission on Labour was established in 1929 under the chairmanship of John Henry Whitley. The commission was established to investigate and evaluate the current working conditions in factories and other production sites in pre-independent India. The Commission provided the data collected from the provincial governments in British India. It was given the responsibility to do extensive research on the physical and mental well-being, productivity, access to health services, and living standards of the workforce, as well as on the relationships between employers and employees. Also, the Commission had to offer suggestions for the betterment of the workers. The Government of India collected information from the provincial governments.
The report by the Royal Commission on Labour (1929) covered a wide range of problems faced by workers in various manufacturing facilities, including textiles, leather goods, underground mining, steam engines, and silvicultural factories, as well as employees engaged in public service departments. It covered nearly all of the problems that employees experience, from low pay, long working hours, and no leave considering bad health and well-being, no accommodation, lack or absence of trade unions, the establishment of workmen’s compensation fund, industrial disputes, etc.
The report is so thorough that almost all worker welfare legislation and economic laws currently in existence, such as the Trade Union Act of 1926, the Industrial Disputes Act of 1947, the Payment of Wages Act of 1936, and the Minimum Wages Act of 1948, etc., can be linked directly in some capacity to this document.
Findings and suggestions by the Royal Commission on Labour (1929) which have been incorporated under various acts
System of imposing penalties on workers
In many industries, factories and other places where workers were employed, penalising was a pretty common practice. Mining facilities and other industrial sites had far lower rates of fines imposed on workers. On the other hand, plantation facilities hardly ever had a system of imposing penalties on their workers. It was thought to be most common in textile factories. Also, the Presidency of Bombay, before independence, being the hub of such textile mills, had one of the largest arbitrary systems of penalising workers.
While the average fine reduction from a worker’s total pay was about 1%, it was more important to focus on specific cases than the average because they were more relevant.
Arbitrary deductions by the employers
There were also deductions for numerous additional reasons, including required perks or causes like medical care, skills training, interest on pay advances, charitable contributions, employer-selected religious causes, and a variety of other amenities. It was a harsh reality that the amount was deducted from the wages of the workers. However, they never received any benefit, directly or indirectly, from these deductions. The workers were expected to pay for their own medical expenses, education, or other basic necessities. In fact, the interest on the advances given to workers was extremely high compared to the formal sector banking facilities at that time. Moreover, the deduction of two days’ salary for one day of absence is another frequent practice that some mills implement.
In general terms, deductions from pay can be divided into three categories:
- Fines exerted for regulatory purposes (in case of indiscipline by the worker(s)),
- Deductions for damages the company has incurred irrespective of the fact whether the concerned worker was actually responsible for the damage caused or not, and
- Deductions for the use of equipment and other advantages the employer provides.
Furthermore, in each of the three cases, the Royal Commission on Labour found compelling justification for enacting a law.
Increased indebtedness of the workers along with inhumane conditions
Under what circumstances should a deduction be made from the wages of the workers? How much should be deducted from the wages of the workers?
Generally, these deductions are made by the employer. However, there have been instances where employers have delegated their powers to their subordinates. These penalising practices are not just followed in India but across the globe. This is why various nations have come up with different laws, rules, and regulations to prevent arbitrariness in the imposition of penalties.
The Commission further noted that even a modest deduction from the wages of workers is problematic for many employees because their pay often only covers the basic requirements of life, while higher deductions put them further into debt and may even temporarily deplete their resources.
The Commission also suggested that children should not be subject to fines because of their incapacity, lack of prior experience, and low pay scale.
The Commission recommended that a maximum of one month following the date the fine was levied be allowed for the payment of a fine in order to avoid spreading it out over an excessively long period of time, which would lead to increased indebtedness.
Protection of workers and optimum utilisation of fines
The smallest amount that could be taken out of a worker’s paycheck as a fine in any given month must not be less than half an anna in rupees (anna was a recognised denomination of the British Indian Rupee during the colonial rule).
The money collected as a fine must be used for an initiative that benefits the entire group of workers and must receive approval from a recognised authority.
The Commission suggested that the notification outlining the actions, conduct, and violations for which penalties may be levied should be posted, and any additional fine should be considered to be unlawful in order to safeguard the workforce from unjustified penalties.
Deductions related to goods or other miscellaneous things
The amount deducted for damaged items must not be greater than the wholesale cost of the product, and the damage to the concerned goods must be directly related to the labourer’s ignorance and recklessness.
Employers should keep records of deductions made for product damage, as doing so will, in any event, give authorities the information they need to decide if additional regulations are needed or not.
It is permissible to deduct money for the purchase of equipment and raw materials as well as for housing accommodations.
Any penalty can be directed at the employer for the imposition of fines and deductions that are not allowed by the law.
The outcome of the findings and suggestions made by the Royal Commission on Labour (1929)
Based on these Commission recommendations, the Government of India re-examined the issue, and in February 1933, the Payment of Wages Bill of 1933 was introduced in the Legislative Assembly and debated for the purpose of gathering opinions, but it was unable to take the form of an Act due to the dissolution of the legislative assembly.
Later on, the Payment of Wages Bill was reintroduced in the Legislative Assembly on February 15, 1935, with standards that were similar to those of the previous Bill from 1933 but completely modified for better protection of labourers and prevention of loopholes. The Select Committee was given the Bill for evaluation. On September 2, 1935, the Select Committee presented its report.
Lastly, the Payment of Wages Bill of 1935, which incorporated the Select Board of Trustees’ suggestions, was once more presented to the Legislative Assembly before being enacted in 1936 and entering into force on March 21, 1937.
Need for the enactment of the Payment of Wages Act
Due to the overabundance of labour that was available in India during the industrial revolution, which gave British merchants significant socioeconomic leverage, the labour force was reduced to a low economic condition with no negotiating market power.
As a result, Indian employees had to work and live in abhorrent circumstances. Regarding their work hours, there were no regulations in place until 1891. Any type of social protection against illness, old age, joblessness, accidents, or unexpected death did not exist.
There was no provident fund programme; instead, a substandard maternity benefits programme was implemented in the 1930s. Between 1889 and 1929, manufacturing workers’ real wages decreased, and the average worker’s standard of living fell below the poverty line.
Among the most oppressed groups in the history of modern capitalism were the Indian Industrial Workers, who were underprivileged and confined like animals without access to the basic necessities of life like food, shelter, and clothing.
Period of Struggle – 1800 to 1900
After 1858, the modern capitalist class in India began to emerge. Additionally, on one hand, with influential and effective government assistance, the modern businesses of France, Germany, and Japan were established. On the other hand, the government’s formal business, customs, transportation, as well as fiscal and monetary policies eventually forced it into rivalry with British capitalists. It gradually became apparent that these policies were limiting the ability of capitalists to thrive.
The Indian capitalist class required effective and prompt government assistance to make up for its preliminary vulnerability in contending with the well-established industries of European countries. This had to be done while striving for self-reliant economic progress that was at odds with the colonial rule on almost every underlying economic concern.
However, capitalists and industrialists in India were not given this assistance. The top administration was ruled by the Crown and antagonistic to Indian industrial initiatives, or rather unsympathetic; after all, their ultimate objective was to squeeze the wealth of the “golden bird”.
Moreover, Indian capitalists feared being dominated and repressed by the much more powerful foreign capitalists, who were given considerable concessions and the free flow of goods around the country. The massive British Industrial Corporation began establishing affiliates and subsidiaries in India after 1918 as a result of the large-scale influx of foreign investment capital into the Indian industry. This was done in order to make the most of the tariff protections offered throughout the 1920s and 1930s, the less expensive Indian labour, and the proximity of the marketplace. At this time, Indian businessmen had proclaimed their dominance over Indian markets.
Indian businessmen consequently came into open conflict with the British economic system, government operations, and policies. They eventually came to the realisation that they required a sovereign nation and a political class that supported local entrepreneurs. As long as British imperialists ruled the nation, India’s economy and trade could not grow properly.
The catastrophic famines that struck India from 1866 to 1901 completely crushed each and every hope of planned growth. By the end of the 19th century, the working and living circumstances of the labour force had deteriorated significantly.
Employees made intermittent efforts to voice their displeasure with their employers and the authorities in the beginning, about 1880, through protests, general strikes, and public gatherings. However, after the Madras Labour Union was established in 1918, real trade unionism in India started.
Period of development of Trade Unionism – 1900 to 1948
As is evident from the discussion above, the conventional Indian industry was destroyed during colonial times as a consequence of the industrial revolution in British India. British capitalist industries stepped in to fill the void, and because they had full control over the methods and means of production, they were empowered to abuse this power.
On the other hand, there weren’t many contemporary industries in India, which meant that the factors of production were concentrated in the hands of a very small number of Indians. Additionally, the Crown was in charge of overseeing and controlling these enterprises through taxes, rules, and regulations. The cottage industry was unsuccessfully revived despite their efforts.
In other words, the authority over the factors of production was concentrated in a small number of people, allowing them to act arbitrarily and according to their preferences.
At the same time, there was an abundance of labour available in India, ready to be employed in dangerous industries with few or no safety precautions, bad living situations, longer working hours, and no nutritious food to add, and meagre or starvation leading wages.
Trade unionism was present in India, but when compared to other nations, it was unable to lead the labour movement to its final victory, where it would have gained sufficient collective bargaining power to exercise authority in negotiations about topics like salaries and benefits, conditions of employment, safety precautions, social welfare, etc. In other words, the conditions for workers were terrible, and they had no leverage in negotiations.
The ultimate crisis for labourers – 1850 to 1936
The period of crisis for labourers started in the mid-period of struggle and lasted till the early years of the development of trade unionism. During this period, the conditions of workers were degraded in the worst possible manner. The majority of the labour was in a debt trap, leading to high rates of defaults and suicides. The condition of the labourers was further deteriorated by arbitrary deductions from their wages, making them incapable of fulfilling even the basic needs of their families, like food and clothing. The grounds for the wage deduction were not certain. Hence, the employers abused them at their own discretion. A deduction in wages was imposed irrespective of the fact of whether the worker in question was actually liable or not. Further, the amount of such a deduction was leading to an unbalanced deduction of wages.
There were numerous wage periods, which added to the anguish of labourers. Additionally, despite having certain wage periods, wages to be paid to the workers were often months late. The working class, who rarely understood the notion of savings and investment, depended on prompt payments to provide for their family members by giving them food, clothing, and a roof over their heads. These essentials are required for any person’s survival, and denying them to workers, even if indirectly, would result in a huge labour crisis.
In this way, the cumulative effects of various variables like a colonial rule, lack of proper trade unionism, the politicisation of the concern of labourers, and the Industrial Revolution in Britain led to the ultimate crisis of the labourers.
All these factors made the general public realise that in order to protect the rights of labourers, a joint effort is required. Hence, the concern of the labourers was connected with the need for “Swaraj.” This resulted in increased pressure on the governmental authorities, which finally led to the introduction of the Payment of Wages Act of 1936.
Objective and purpose of the Payment of Wages Act, 1936
Considering the efforts of the public at large, the Payment of Wages Act of 1936 was passed by the British Government on April 23, 1936. As previously stated, this Act was enacted to regulate the payment of wages for a specific group of workers. In accordance with the Payment of Wages Act, “wages” refers to any compensation given to employees, with some exceptions listed in the specific exclusions mentioned under the Act. These exclusions include any monetary value for housing accommodations or incentives, as well as gratuities, travel expenses, and the amount offered for the delivery of electricity or water.
The Payment of Wages Act 1936 is a useful piece of legislation that governs how specific kinds of people employed in industries get paid.
The primary goals of the Act are-
- To guarantee consistent and fast wage payments,
- To prevent wage employees from being exploited by eliminating arbitrary penalties and wage deductions, and
- It outlines the obligations of businesses to pay wages; fix wage periods; compensation schedules and methods; allowable deductions; and other related issues.
Application of the Payment of Wages Act, 1936
The Payment of Wages Act, 1936 applies to the entirety of India and is implemented by the competent government in each jurisdiction on a state and national level. The Central Government is the competent authority in cases involving railroads, air transportation, mining, and oil and gas fields. In all other situations, the State Government is the competent authority to take decisions.
Approach taken by the Payment of Wages Act, 1936
This legislation follows a specific approach to governing the payment of wages to workers by their employers. It is a 2-step approach. It involves –
- The first one is to specify a date on which the wages are paid, and
- The second one is to see if the pay deduction that was stated by the employer is reasonable or not.
According to Section 1(4) of the Payment of Wages Act, 1936, all individuals who have worked in factories, for the Railway Administration or a subcontractor, or in other manufacturing or commercial facilities must be paid their wages accordingly.
According to the Payment of Wages Act, 1936, the state government has the authority to apply the requirements of the Act to any category of employed individuals after publishing a three-month notice in the Official Gazette of India. All employers are now compelled by Section 3 of the Payment of Wages Act, 1936, to undertake the obligation to pay the entitled wages as specified by the Act to all of the employees who come under the ambit of Section 1(4) of the Act.
Meanwhile, if any employers violate Sections 5 or 7 of the Act, which deal with the prompt payment of wages in existing authorised “coins and currency”, then in such a scenario, the employer could be fined, which should not be less than INR 1,000. However, such a fine can go as high as INR 5,000.
Difference between the Payment of Wages Act, 1936 and Minimum Wages Act, 1948
In general, people think that the Minimum Wages Act of 1948 is simply an extension of the Payment of Wages Act, 1936. However, this is not true at all. Both the Acts are entirely different. As per the Payment of Wages Act of 1936, workers must be able to get their wages on time, and it also specifies the minimum wages that must be paid to them.
|Basis||Payment of Wages Act of 1936||Minimum Wages Act of 1948|
|Objective of the Act||The objective behind the introduction of this Act was to prevent delays in the payment of wages that led to a debt trap for the informal sector workers.||The objective behind the introduction of this Act was to ensure that every worker receives at least a minimum amount of money as wages and to avoid the exploitation of the informal sector workers.|
|Application and scope of the Act||Payment of Wages Act of 1936 applies uniformly to the whole territory of India, including the State of Jammu and Kashmir.||Minimum Wages Act of 1948 is applicable to the whole of India. However, its scope varies depending on states and regions.|
|Definition of Wages||Payment of Wages Act of 1936 defines “wages” under Section 2 (VI) of the Act.||Minimum Wages Act of 1948 defines “wages” under Section 2 (h) of the Act.|
|Purpose of the Act||The Act aims to control how certain types of people who work in the industry are paid their wages. Its goal is to guarantee the regular payment of wages free from any unlawful deductions.||The Act is designed to set up the minimum wage determining mechanism in industries where there is no plan in place for the absolute management of wages. This mechanism is built by collective bargaining agreements or other means. It prevents the exploitation of workers.|
|Inclusion of housing allowance||The housing allowance is not a part of wages under the Payment of Wages Act of 1936.||Wages include a housing rent allowance under the Minimum Wages Act of 1948.|
|Additional remuneration||Regardless of whether it is referred to as a monetary incentive or by another name, any additional compensation due under the conditions of employment is not considered as “wages.”||The additional payments due under the conditions of employment to the employee are not considered wages.|
|Scope of wages||“Wages” encompasses compensation for extra hours, holidays, and leave time.||Compensation for extra hours, holidays, and leave time is excluded.|
|Compensation by the court||Any compensation that is due under a court’s orders, judgments, or settlements is considered wages.||It excludes any compensation due in accordance with a court’s decision, settlement, or decree.|
|Other monetary amounts payable regarding employment||Wages also comprise any amount that is payable by the employer to the employee related to his or her termination of work under any law, etc.||Wages under the Minimum Wages Act of 1948 does not comprise any amount that is payable by the employer to the employee related to his or her termination of work under any law, etc.|
|Scheme-related monetary benefit||Any amount that the employee is eligible to receive under a scheme created in accordance with law is included in wages.||Any amount that the employee is eligible to receive under a scheme created in accordance with a law is not included in the wages.|
‘Wages’ as defined by the Payment of Wages Act, 1936
The financial reimbursement or remuneration that a company gives to workers in return for work completed is known as a wage. It is also referred to as ‘personnel expenses’. The calculation of wages can be done either as a fixed sum for each project executed or as an hourly, daily, or weekly price based on a quantifiable number of tasks performed.
All financial compensation, ‘including’ the following, is considered to be waged.
- The sum payable under the conditions of employment;
- Amount due in accordance with any judgement, settlement, or award;
- Amount paid as overtime compensation or for time off during the holidays, and
- Amount payable due to employment termination.
Wages have been defined under Section 2(iv) of the Payment of Wages Act, 1936. “Wages” refers to all remuneration (whether paid in the category of wage entitlements or otherwise) represented in cash or qualified to be presented in finances that would be due for payment to a worker in respect of his occupation or work performed in such employment. Also, wages include payments if the express or implied terms of employment are satisfied, and include:
- Any earnings resulting from a judgement, award, or agreement reached between the parties;
- Any extra payment required by the terms of employment, regardless of whether it is referred to as a bonus or by another name;
- Any compensation to which the employee is entitled in relation to overtime pay, holidays, or any other leave period;
- Any amount due as a result of the worker’s termination of employment under any law, agreement, or other documents that permits payment of the amount, regardless of any deductions from the wages, but does not establish a deadline for payment;
- Any remuneration to which the employee has a right under any system established by any law in effect at the time, with the following exceptions:
- Any benefit (whether through a profit-sharing agreement or elsewhere) that is not paid under a prize, settlement, or court ruling and is not part of the payment due under the conditions of employment;
- Any housing accommodations, access to electricity and water, basic healthcare, or other perks, as well as any services not included in the calculation of wages under a general or specific decree of the State Government;
- Any employer contributions to pensions or provident funds, as well as any interest that has accrued;
- Any travel reimbursement or travel concessions value;
- Whatever amount is paid to the employee to cover specific costs that his work requires of him; or
- Any gratuity due upon dismissal from work under conditions other than those mentioned in subclause (d).
Significant provisions of the Payment of Wages Act, 1936
Wage payment and deduction from wages
The obligation of the employer to pay wages
In Section 3 of the Payment of Wages Act, it is stated who is accountable for paying wages to the workers. Each and every worker that an employer engages or employs for labour purposes is entitled to receive payment of all wages due to them.
In other circumstances, if the employer identifies a person or, on the rare chance, realises that there is a person qualified for the job or is authorised for the same task, at that point, such a person is responsible for the payment of wages.
These points must be noted concerning the obligation of the employer to pay wages –
- Regardless of what is said in sub-section (1), the company is competent to pay any wages that are required under the Act.
- Also, if the contractual employee or any person to whom the employer designates to make the payment in favour of the workers forgets to do so, then the employer is the one to be held responsible.
- Each employer shall be held responsible for paying all necessary wages and benefits to the individuals they employ.
- The manager of that production facility will be responsible for paying the wages of the employees he employs as a result of the industrial setting.
- The obligation to supervise will be conditioned on the payment of remuneration to any staff they use or employ due to mechanical or other grounds.
- Concerning the payment of wages to the workers in the railway line department, an individual is appointed by the department for a specific region, and such a person is under the obligation to pay wages to the workers.
- A person appointed by a contractual worker who is directly under his supervision will be held responsible for the payment of the representatives’ wages on account of the contractual worker.
- In the event that he fails to pay wages to the representatives, the people who hired the workers could be held liable for the payment of their wages.
Fixing a specific period for the payment of wages
Each person responsible for the payment of wages under Section 3 will establish the time frames for which those earnings are due. No pay term shall be longer than one month. The Payment of Wages Act, 1936 clearly indicates that wages can be paid to workers in the following way –
- Payment on a day-to-day basis.
- Payment on a week-by-week basis.
- Payment to be paid fortnightly.
- Payment on a monthly basis.
Also, the Act clearly mentions that under no circumstances shall the payment of wages to the representatives by the manager go beyond the intervals of 1 month, i.e., 30 days.
Moreover, considering the then-prevalent situation where the workers were paid wages –
- Bi-annually, or
The Act mentioned that wages could not be paid following this system as it leads to increased indebtedness of the workers.
Day on which wages shall be paid
According to Section 5(1) –
“(1) Every person employed upon or in:
- Any railway, factory or industrial or other establishments upon or in which the total number of employed persons is less than one thousand, must receive his wages before the expiry of the seventh day from the last day of the wage period for which the wages are payable.
- Any other railway, factory or industrial or other establishments, must receive his wages before the expiry of the tenth day from the last day of the wage period for which the wages are payable.”
These points must be noted with regard to the payment of wages. The points are as follows –
- When a worker’s engagement with an employer is terminated, the employer is then responsible for ensuring that the terminated worker receives their pay by the end of the second working day following the date of termination.
- The company or the individual accountable for the payment of wages must ensure that the wages are paid on a working day.
- The competent authorities may ask the person responsible for making wage payments to recruit or appoint persons, but only to a certain extent and according to the restrictions set out in the order.
Payment of wages in current cash, either coins or notes
The employer or person in charge of paying wages must pay the wages to the workers in the currently prevalent currency, either coins, cash notes, or a combination of both. Furthermore, the employer is also not allowed to make a kind payment. Moreover, after receiving written authorisation from the employee, the employer may pay the employee’s earnings via cheque or bank transfer into his bank. The employer of each employee working in such commercial or other facilities shall pay the employee’s wages only by issuing a cheque or by depositing the money to his bank account, as specified by the competent government by notification in the Official Gazette.
Payroll deductions that are permitted under the Act
Manufacturing or production firms should deduct money in accordance with this Act as simply as possible at the time that employees are paid their wages. The employer would no longer be permitted to deduct what he deems fit. Deductions relating to all payments made by an employee to his employer must be stated beforehand.
The following are not included in the definition of a deduction:
- Restriction of the employee’s raise
- Cancellation of the employee’s promotion
- Stopping the incentive for poor productivity by using the worker
- Demotion of the employee by the employer
- Termination of the employee
The aforementioned actions taken by the organisation must have a good and appropriate justification before initiation.
Amounts that can be deducted under this Act
Employers should impose a fine on employees only with prior approval from the state government or other authorised institutions. Before imposing a fine on the employee, the employer must go by the rules listed below.
- In the workplace, a notice listing all fines imposed on employees should be posted. This notice should also list any actions that the representative should not take.
- The worker shouldn’t be forced to pay a fine before explaining his actions and providing justification for them.
- The total amount of the fines shouldn’t be more than 3% of his salary.
- Any person under the age of fifteen should not be required to pay a fine.
- In order to punish the worker for his acts or omissions, a fine should be imposed only once on his wages.
- The mechanism for shareholdings or reimbursements from the representatives should not be used to collect penalties.
- Within 60 days of the date the penalty was imposed, it must be deducted or recovered.
- On the day that the worker or employee commits the act of exclusion, a fine should be imposed.
- All fines collected from workers should be added to the general reserve and used to assist the workers.
- A record of all penalties and payments made must be kept by the individual in charge of the payment of wages to the workers under Section 3 of the Payment of Wages Act of 1936.
- All funds received in relation to penalties imposed must be used strictly for the goals determined by the competent authorities. Such goals should be in the long-term interests of the workforce at the production line or mines.
- After 90 days have passed since the day the fines were imposed, no fines imposed on an employee or worker may be recovered from them.
Deductions due to exclusion from duties
The worker’s absence from work for either a single day or for any other duration of time may result in deductions from wages by the employer.
The worker’s absence from work for either a single day or for any other duration of time may result in deductions from wages by the employer.
The amount deducted for the absence during working hours must not be greater than a total that has a comparable connection to the pay. This pay is due in reference to the payment period as this absence does to that wage period.
For instance, if a worker’s monthly salary is INR 15,000 and he misses one month of work due to another obligation, the penalty for failure to fulfil an obligation should not exceed INR 15,000.
Employees who show up for work and refuse to participate in the business operation without a valid excuse will be seen as being absent from their duties.
The employer may withdraw eight days’ worth of wages from the pay of the workers if at least ten persons collectively fail to report for duty without being given a cause and without prior notice.
Amount deducted for losses or damages
A register is to be maintained by the person responsible for the payment of the wages in such a framework as might be recommended. Also, it will contain all such observations and all confirmations thereof.
According to Section 10(2) of the Payment of Wages Act, 1936, the employer should give the worker an opportunity to provide justification and reason for the damage that took place. The deductions made by the employer from the wages of the worker should not exceed the value or measure of the damage done by the worker.
Amount deducted for services provided
If a worker does not consider or admit the house-convenience service or administrative structure provided by the employer, in this case, only the employer is authorised to deduct the cost from the employee or worker’s pay.
The amount of the deduction should not be greater than the estimated value of the house-convenience services or administrative structure.
Recovering advances from deductions
If an advance was given to employees by the employer prior to the start of business, the company should be able to recover or recuperate that advance from the worker’s primary payment of wages or salary. On the other hand, the employer shouldn’t be allowed to recoup or recover the loans made for the employee’s travel expenses.
Deductions in relation to the recovery of the advances
Resolutions for the recovery of loans granted for home construction or other objectives will be based on any rules established by the State Government that control the amount of flexibility with which such loans may be permitted and the rate of interest payable afterwards.
Payments to cooperative organisations and insurance systems – subject to deductions.
The conditions that the State Government may impose will determine the justification for pension contributions to cooperative organisations, deductions for payments to insurance coverage maintained by the Indian Postal Service, or for worker recognition deductions made for compensation of any premium on their additional security strategic plan to the Life Insurance Corporation.
Keeping registrations and records updated (Section 13A)
Every employer is required to maintain the registers and information necessary to provide information on the individuals they employ, the work they do for them, the pay they get, the deduction taken from that pay, the receipts they provide, and other details in the format that may be advised.
Every registration and record must be maintained and protected for a duration of three years following the date of the last addition made to them. It means that both the employer and the employee need to have a three-year history of transactions.
Authorities under the Payment of Wages Act of 1936
Authority for the purposes of this Act may be chosen by the state government. Any authority will be regarded as a public servant for the purposes of Section 14 of the Indian Penal Code, which was passed in 1860.
A monitor may be chosen by the state government to oversee the implementation of this legislation. Each inspector will be treated as a member of the general public or a public worker for the purposes of Section 14 of the Indian Penal Code, 1860.
Rights of the Inspector
The Inspector under this law has the following authority:
Inspectors have the authority to conduct investigations and evaluate whether employers are appropriately adhering to the rules mentioned in this Act or not.
For the purposes of carrying out the purposes of this Act, the Inspector may, with the assistance, if any, he deems necessary, may enter, investigate, and examine any property of any railway, production system, industrial, or other establishments.
An inspector is capable of overseeing the payment of wages. It includes the payments to those working on any foundation, whether it be a factory, machinery, other establishments, or a railway. It includes taking possession of or making copies of any registers, records, or sections thereof that he deems important in relation to a violation of the Act.
The resources that the Inspector will make available
For each registration, inspection, observation, evaluation, or request made in accordance with this Act, each employer shall fund the reasonable costs of an inspector.
Requirement of a hearing for the claim
There shall be an authority mentioned below appointed by the competent authority to hear and decide on all matters arising from observations regarding the payments or postponement in payment of the salaries and benefits of people who are employed and compensated, along with all concerns incidental to such claims.
- Any Commissioner of Workmen’s Compensation; or
- Someone working for the Central Government in the following capacities:
- Labour Commissioner for the region; or
- with at least two years of experience as an Assistant Labour Commissioner; or
- Any state government representative who, for the past two years, has not occupied the position of the Assistant Labour Commissioner;
- A supervisory official of any Labour Court or Industrial Tribunal established under the Industrial Disputes Act, 1947 (14 of 1947), or under any equivalent law governing the investigation and resolution of industrial conflicts in existence in the State; or
- Any other representative or official with expertise as a Judge of a Civil Court or a Judicial Magistrate, with authority to hear and decide for any predetermined jurisdiction all cases arising out of findings on the salaries and benefits or postponement in the instalment of the wages of people employed or paid there, along with all concerns inadvertent to such cases.
- If the appropriate Government deems it necessary to do so, it may choose more than one specialist for any area that has been identified, and it may grant special or general proposals to facilitate the conveyance of those experts or the part of the work that is required of them under the Payment of Wages Act.
Only one application for claims from the unpaid group
The portion of this Act makes reference to the aforementioned title. If many employees have not had their wages paid, there is no requirement for multiple applications. According to this Act, all such employees may submit a single application to the specialist for the payment of their wages.
Section 17 of this Act mentions the right to appeal. The parties who are dissatisfied may file an appeal with the district court under the following circumstances:
- In the unlikely event that the above organisations reject the applicant’s request.
- The authorities compel the employer to pay more than or equal to INR 300.
- In the unlikely event that the total exceeds INR 25, the employer will retain it for the single unpaid employee. If several unpaid workers are present, they will each receive INR 50.
Power of the authorities designated by Section 15
In accordance with Section 15 of the Payment of Wages Act of 1936, the authorities have the following powers –
- Taking evidence, putting it into practice, requiring witnesses to appear, and mandating the production of reports.
- Provisional attachment of the employer’s or another party’s assets that are involved in the wage-payment process
“Where whenever after an application has been made under sub-section (2) of Section 15 the authority or where whenever after an intrigue or appeal has been filed under Section 17 by an employed individual or any legitimate professional or any authority of an enlisted worker’s organisation approved recorded as a hard copy to follow up for his sake or any Inspector under this Act or some other individual allowed by the power to make an application under sub-section (2) of Section 15.”
The court, at times, has referred to this Section and is satisfied that the company or another person responsible for paying wages under Section 3 is likely going to avoid paying any sum that may be arranged to be compensated under Section 15 or Section 17 by the officials or the court, as the case may be, with the sole exception of circumstances where the institution or court has made the decision that the components of the contractual arrangements be destroyed by the temporary suspension.
After giving the employer or any other party an opportunity to be heard, it is feasible to make arrangements for the connection of a significant amount of the employer’s or another party’s liability for the payment of wages as determined by the authority or court to be sufficient to cover the potential payment under the heading. Any application for connection under subsection (1) will be subject to the provisions of the Code of Civil Procedure (1908) (5 of 1908) dealing with connection before judgement under that Code.
Penalties for violations of the Payment of Wages Act
Reasons for imposing punishment
- Wages not being paid on time,
- Unjustified deductions,
- Excessive justification for the incompletion of the obligations,
- Excessive justification for injury or business collapse,
- Reasoning in excess for the settling of a house out of generosity or administrative power.
Penalties include a fine that won’t be less than INR 1,000 but could reach INR 7,500
- In the unlikely event that the wage period is longer than one month;
- The failure to pay salaries on a business day;
- No current currency, money notes, or both are used to pay wages;
- Inability to maintain a record of employee penalties collected;
- Inappropriate use of the fine that was collected from the employees;
- If the employee doesn’t display the edited compositions of the notification of this Act and the rules made
Punishable with a fine of up to INR 3,000
- Anyone who prevents an Inspector from fulfilling his duty under this Act;
- Anyone who strongly refuses to disclose any registers or other records at the request of an inspector
- Whoever refuses or willfully neglects to pay the reasonable expenses of an Inspector for conducting any entries, reviews, evaluations, supervisions, or requests permitted by or according to this Act.
Punishable with a fine that will not be less than INR 3,750 but might reach INR 20,500
- Whoever does the same offence more than once.
- Detention for a period that will not be less than one month but might extend to six months, as well as a fine that will not be less than INR 3,750 but could increase to INR 20,500.
- The process employed in the trial of the offences under the Payment of Wages Act of 1936.
- No court will consider a claim against a person for an offence under subsection (1) of Section 20. However, if the claim regarding the circumstances constructing the offence has been made under section 15 of the Act and has been fully or partially accepted, and the authority involved pursuant to the last Section of the investigatory court has conceded that such a claim has been made, thereby authorising the formation of the perceived injustice, in that case, the following circumstances may be considered –
- a genuine mistake or meaningful disagreement regarding the amount owed to the employee; the occurrence of an emergency, the appearance of exceptional circumstances such that the person responsible for making short-term payments was unable to do as such, even with the use of reasonable perseverance and diligence, or the inability of the employee to request or accept payment.
- No court lobby, with the exception of an objection raised by or with the approval of an Inspector under this Act, takes notice of the rejection of Sections 4 or 6 or of any requirement made under Section 26, accordingly.
- The amount of any payments already made against the person charged in any proceedings conducted in accordance with Section 15 will be taken into consideration by the Court when imposing any penalties for an offence under subsection (1) of Section 20.
Bar of suits
No court will hear any cases involving the recovery of salaries or other deductions from benefits if the complete amount of the promised benefits has not been received. It involves –
- Structures that are the focus of intrigue under Section 17 or a request under Section 15 that has been presented by the aggrieved party and is currently before the power chosen under that Section; or
- has influenced the offended party’s understanding of a Section 15 course’s subject; or
- has been declared not to be payable to the offending party in any proceeding under Section 15; or
- could have been recouped by filing a claim under Section 15.
Waiving the privilege
- Any arrangement or settlement, whether established before or after the passing of this Act, whereby a person employed waives a privilege granted by this Act will be void and unenforceable to the extent that it suggests depriving him of that right.
- Posting of the Act’s summary via notification.
- The person responsible for paying wages to workers in a manufacturing facility shall require a notification to be displayed in such a manufacturing facility.
- The notification shall contain such summaries of this Act and of the guidelines promulgated thereunder in English as well as in the language of the majority of the workers in the manufacturing unit, as may be suggested.
Decentralisation of the specific powers under the Act
Any authority that the appropriate government may exercise under this Act will, in relation to such matters and pursuant to such requirements, presuming any, as may be mentioned in the course, be further enforceable, the appropriate government may direct by notice in the Official Gazette. Such matters related to the decentralisation of power are mentioned below –
- If the Central Government is the appropriate government, by any official or authority subject to the Central Government, by the State Government, or by any authority or body inferior to the State Government, as may be specified in the notification.
- If the appropriate government is a state government, by the official or authority subject to the state government, that may be specified in the notification.
Payment of unpaid wages in the event of death of the worker employed
- Payment made by the employer to the person the employee appointed prior to his death at the time of entering into a contractual obligation.
- The business will be freed from its obligation to pay any salaries that the employer has with the designated authority.
- If no such nomination has been provided or if payments cannot be sent to the person so chosen for whatever reason, the funds should be retained with the position that has been authorised to retain them. This position will maintain the funds in the manner that may be advised.
Power to make rules
Rules issued under subsection (2) of Section 15 of the Payment of Wages Act of 1936 may, expressly and without favour to the minimisation of the preceding power:
- Mandate the maintenance of the records, registrations, returns, and notifications necessary for the Act’s validity and suggest their organisational design;
- Mandate the posting of a notice indicating the rates of compensation payable to employees employed on such premises in a prominent location on the property where work is conducted;
- Make room for routine checks of the scales, measurements, and weighing equipment used by employers to determine the pay of those in their employment;
- Suggest a method for changing the dates on which compensation will be provided;
- Make recommendations on the position that can be favoured under subsection (1) of Section 8 and deductions with respect to which fines may be required;
- Provide a technique for the establishment of the deduction under Section 10 and the imposition of penalties under Section 8;
- Suggest the terms under which the proviso to Section 9‘s sub-section (2) for deductions may be used;
- Suggest the authority with the necessary resources to back up the justifications for using fine returns;
- Impose limits on the number of advances that may be made and the percentages by which they may be recovered with regard to Section 12‘s clause (b);
- Determine the range of expenditures that could be allowed in operations under this Act;
- Determine the sum of court fees payable for any actions brought under this Act; and
- Specify the amended works that must be included in the Section 25 notification.
When establishing any regulation under this Section, the State Government may stipulate that violating the rule shall result in a fine of up to INR 200.
All recommendations made pursuant to this Section shall be based on the State of the preceding publication, and the date to be ascertained pursuant to clause (3) of Section 23 of the General Clauses Act, 1897, shall not be less than one-fourth of a year after the date on which the document of the suggested fundamentals was made available.
Case laws on the Payment of Wages Act
Align Components Private Limited and another v. Union of India and others. (2020)
On April 30, 2020, the Aurangabad bench of the Bombay High Court issued a landmark decision in the case of Align Components Pvt. Ltd. and another v. Union of India and others – (2020), which was filed alongside a number of other petitions. The decision stated that workers’ wages do not have to be paid if they choose not to report to work in regions where the lockdown has been removed.
Parties to the Case
|Petitioner||Align Components Private Limited and another|
|Respondent||The Union of India and others|
|Representatives of Petitioner||Mr. T. K. Prabhakaran|
|Representative for Respondent||Mr. S.B. Deshpande (Assistant Solicitor General) and Mr. D.R. Kale (Government Pleader)|
|Judges||2-Judge Bench consisting of Justices S. V. Gangapurwala and R. G. Avachat.|
Facts of the case
In this case, the petitioner has called into question the MHA Order, a notification/order that the Government of India, Ministry of Home Affairs, issued on March 29, 2020. The order instructed employers to compensate full wages to the employees during the lockdown. This notification was made in accordance with Section 10(2)(l) of the Disaster Management Act of 2005.
The businesses were compelled to scale back or cease their manufacturing operations as a result of the lockdown restrictions issued by the Ministry of Home Affairs in India.
Arguments put forth by the petitioners and respondents
The petitioners said that the employees would be ready to take on any work that was offered to them and that they would be fairly prepared to do it. Although the petitioners requested a complete exemption from paying wages, they also said that they would be willing to pay 50% of the gross earnings or the minimum rates of wages set by the Minimum Wages Act, whichever is greater. The legal representatives for the respondents – the Union of India and other parties – asked for more time to get information.
Judgement as given by the Bombay High Court
Considering the facts and circumstances of the case, the High Court of Bombay held that –
“I am of the opinion that since the Hon’ble Apex Court is dealing with a related cause of action, I would not be inclined to interfere with the impugned order and would expect the petitioners to pay the gross monthly wages to the employees, save and except for conveyance allowance and food allowance, if being paid on a month-to-month basis in the cases of those workers who are not required to report for duties.”
“It is made clear that workers will be expected to report for duty according to shift schedules, subject to the employer providing adequate protection against coronavirus infections since the State of Maharashtra recently partially lifted the lockdown in some industrial areas in the State of Maharashtra. If these employees choose to stay away from work, the management is free to deduct their salary as a result, as long as it follows the legal process for doing so. Even in places where there may not have been a lockdown, this would still be applicable.”
Moreover, the High Court of Bombay observed the following –
- The Bombay High Court noted the order of the Supreme Court issued on April 27, 2020, in a series of cases involving Ficus Pax Private Ltd. v. Union of India and others (2020), where the Supreme Court ordered the petitions to be stated in two weeks, and no interim relief was granted to the businesses or employers who had likewise asked for a stay of the MHA Order requiring them to pay proper wages.
- The Court further observed that the Kerala High Court had decided to stay a decision by Kerala’s Finance Department that allowed for the payment of 50% of salaries right away and deferred payment of the remaining 50%.
- The Hon’ble Judge observed that petitioners would be required to pay full wages because the Supreme Court is dealing with a related cause of action. Therefore, the Bombay High Court was unwilling to interfere with the MHA order case in the Apex Court.
- A leave of absence was provided to add a workers’ representative or union or to inform the employees’ representative to submit an intervention request.
- The case was expected to be heard on May 18, 2020, or the next day the Honourable Court performs court proceedings, whichever comes first. However, the decision is still pending.
Although the Court did make two important exceptions to the general norm, they are as follows:
- If paid on a month-to-month basis, the meal allowance and transportation allowance for employees who are not expected to report for duty do not need to be paid; and
- Employees are expected to report for work according to their work routines in the locations where the lockdown has been removed, provided they are adequately protected from coronavirus infections. If these employees choose to voluntarily miss work, the management is free to withhold their pay.
Additionally, the Court, elaborating on the exception, stated that –
“It is made clear that workers will be obliged to appear for duty according to shift schedules under the condition that the employer provides proper protection against coronavirus infections. Recently, the State of Maharashtra partially lifted the lockdown in some industrial districts. If these employees choose to stay away from work, the management is free to deduct their salary as a result, as long as it follows the legal process for doing so. Even in places where there may not have been a lockdown, this would still be applicable.”
Ludhiana Hands Tools Association v. Union of India (2020)
The issue, in this case, revolves around clause (iii) of the Ministry of Home Affairs order in 2020 concerning worker migration and the COVID-19 lockdown.
Parties to the case
|Petitioner||Ludhiana Hands Tools Association|
|Respondent||Union of India|
|Representatives of Petitioner||Mr. Jamshed P. Cama (Senior Advocate), Mr. Jawahar Raja (Advocate), Mr. Krishan Kumar, (Advocate on record).|
|Representative for Respondent||Mr. Tushar Mehta (Solicitor General), Mr. Pukhrambam Ramesh Kumar (Advocate on record).|
|Judges||3-Judge Bench consisting of Hon’ble Mr. Justice L. Nageswara Rao, Hon’ble Mr. Justice Sanjay Kishan Kaul, and Hon’ble Mr. Justice B.R. Gavai.|
Facts of the case
In the case of Ludhiana Hands Tools Association v. Union of India (2020), a Public Interest Litigation (PIL) was filed before the Apex Court under Article 32 of the Indian Constitution, asserting that the order is outside the purview of the government under the Disaster Management Act as this Act facilitates the Commission to combat natural and man-made disasters and is not formed for the objective of addressing the employers’ failure to pay wages during the lockdown. Due to this, the statute under which it was passed does not apply to this order. Aside from being arbitrary and in violation of Articles 14, Article 19(1)(g) as well as Section 300A of the Indian Constitution, Section 10(2)(i) of the Disaster Management Act of 2005, which has been read in the manner described above, must be scrapped.
Judgment as given by the Bench
Although it has ordered that no deterrent measures be taken against the petitioners, the Supreme Court has indeed given the temporary remedy in this case.
The same arguments were put out in the other case, Twin City Industrial Employers Association v. Union of India (2020); however, the Supreme Court refrained from interfering with the Ministry’s ruling preventing small-size businesses from having to pay their workers any wages.
In both cases, the Apex Court issued inconsistent rulings; nonetheless, in the first, the Payment of Wages Act’s provisions are being violated because the workers’ payments are not being paid on time.
Moreover, in this case, the Apex Court also made reference to a landmark judgement of Anant Ram v. District Magistrate of Jodhpur (1956). In this case, it was held that in order to be eligible for a payment deduction on the ground of absence from work, such absence should be voluntary. Therefore, no deduction must be made under Section 7(2) when an employee is absent from work during the time between being fired and being reinstated because such an absence cannot be characterised as voluntary.
Analysis of the Payment of Wages Act, 1936 with regard to the prevalent situation
If one is to comprehend the Payment of Wages’ applicability in the modern day, it is crucial to understand the numerous revisions that have been periodically added to this Act in order to modify it to meet the needs of the modern workforce. This law was created many years ago, so it might not be applicable in its fullest meaning to the current generation. However, this is not true. Through the creation of the Payment of Wages (Amendment) Bill, 2017, major revisions to the Payment of Wages Act of 1936 were made. The Minister of Labour and Employment – Mr. Bandaru Dattatreya, presented this Bill in the Lok Sabha on February 3, 2017.
Section 6 of the Payment of Wages Act of 1936 enables the employer to pay compensation solely in coins or currency. However, the proviso said that if the employer so chooses, they may pay the salaries via check or by depositing the amount in the employees’ bank accounts—but only after getting the necessary consent from them.
Compared to the era when the 1936 legislation took effect, technology has advanced and evolved in the present era. Nowadays, a lot of workers have their own bank accounts.
Hence, the new Act makes several substantial improvements, but the most important one is that companies no longer need to obtain written consent before paying employees’ salaries by check or bank account.
Regardless of their financial situation, the government has pushed every individual to get a bank account. Most employees and labourers, about 80%, have a bank account. As a result, the ability to transfer wages through a cheque or bank account is now convenient for both companies and employees. In doing so, employers will encounter fewer complaints from workers about inadequate and tardy wage payments.
The government has made it clear that only checks or electronic transfers may be used to pay compensation to the manufacturing and other entities listed under the legislation. Thus, the goal of the digital economy will be furthered. A lot of state governments, including those in Punjab, Andhra Pradesh, Haryana, Kerala, etc., have already enacted the aforementioned revisions to their laws.
Through these changes made to the Payment of Wages Act of 1936, the Central Government has formally adopted the crucial policy of elevating electronic transactions in prominence. Adopting such a system will be beneficial in the modern period as it will undoubtedly streamline the process of paying wages while also making it easier to keep track of those payment records.
Moreover, through a notification, the central government raised the salary level in 2017 from 18,000 to 24,000 in order to make the Act more applicable. This limit was raised in order to expand the number of employees the Act will apply to. In today’s typical and lower-middle-class families, the earning member makes at least 20,000 rupees per month or more.
As a result, raising this barrier will broaden the reach of the current Act. The Payment of Wages Act’s revised “salary threshold” and its potential effects on pari materia laws (pari materia is a doctrine in statutory construction which states that the statutes on the same topic or subject must be interpreted collectively) in our nation will need to be examined in the future. The need for it increases in light of Parliament’s consideration of passing the Labour Code on Wages, which would unify all existing laws, including the Payment of Wages Act of 1936, the Minimum Wages Act of 1948, the Equal Remuneration Act of 1976, and the Payment of Bonus Act of 1965.
Therefore, the new Labour Code, which is basically a compilation of the labour laws in the country, would have a significant impact not just on the payment of wages but on the overall conditions of the workers.
Recommendations concerning the Payment of Wages Act
Recommendations concerning the deduction from the wages of the workers
- In order to keep salary deductions to a minimum, all necessary steps should be followed. When considered necessary, efforts should be made to protect the workers and their families’ ability to pay for their basic necessities.
- Deductions from wages for the recovery of loss occurred or damage to the employer’s products, goods, or installations are permitted only when loss or damage has occurred for which the employee in question is indisputably held accountable.
- Such fines and penalties should be reasonable and should not be in excess of the actual value of the damage or expense.
- The employee in question should have a fair chance to explain why such a deduction shouldn’t be made before the decision is taken to make one such deduction from the wages of the concerned worker.
- The proper actions must be taken to restrict deductions from wages for toolkits, raw materials, or machinery supplied by the employer. Also, there is a need to look at situations where such fines and penalties are:
- An accepted custom of the trading activities or profession concerned;
- Provided for by a collective bargaining agreement or arbitral proceedings award, or in compliance with applicable law; or
- They are authorised in another way through a process that is accepted by national laws or regulations.
The frequency of payment of wages
- The optimum periods for wage payments should ensure that wages are paid. These periods shall include –
- If a worker’s wages are determined on an hourly, daily, or weekly basis, they must be paid at least twice every month for periods of no more than sixteen days.
- Payment of wages not less than once a month in the case of employees whose pay is fixed on a yearly or monthly basis.
- Wages paid to employees may be determined on a case-by-case basis. These instances include-
- In the event of employees whose compensation is based on production or manual labour, the optimum periods for payment of wages must, to the extent practicable, be set so as to guarantee that wage payments are made not less frequently than twice every month at intervals not exceeding sixteen days.
- Appropriate steps should be taken to ensure the following in the event of workers hired to complete a task that will take longer than a fortnight to complete and for whose periods for the payment of wages are not expressly established by a collective agreement or arbitration award –
- Those payments are made on the account not less often than twice a month at intervals not exceeding sixteen days, in proportion to the amount of work completed, and
- That final settlement will be made within a fortnight of the completion of the task.
Notification of pay conditions to employees
- The specifics of the salary conditions that should be made known to the workers should, if necessary, include information about—
- The amounts of wages that are due, how they are calculated, and how frequently they are paid;
- The location of payment;
- The restrictions on when deductions may be imposed.
Statements of wages and payroll records
In all instances where it is relevant, labourers should be notified, along with each payment of wages, of the following information regarding the payment time frame in question, particularly as it may be subject to alteration.
- The gross amount of earnings received;
- Any deductions that may have been made, together with the justification for them and their total cost; and
- The net amount of wages owed.
In suitable circumstances, businesses should be mandated to keep records that show, with regard to each employee employed, the information mentioned in the preceding paragraph.
Association of Employees in Workplace Administration Stores
Proper actions should be taken to promote arrangements for the association of leaders of the affected workers and, more specifically, representatives of worker welfare commissions or related organisations where such bodies emerge, in the general management of worker stores or related sites founded in association with an undertaking for the sale of goods or facilitation of services to the workers thereof.
The Payment of Wages Act makes an effort to unify the definition of “wages,” which is a step toward providing more clarity. However, there is room for misinterpretation given how the terms “employee” and “worker” are used within the Act and how their separate definitions are arranged.
It’s no longer a problem, though. It is anticipated that the newly passed Labour Code, which will be put into effect soon nationwide, will close any gaps left by the country’s prior labour laws. By describing observers as facilitators rather than just inspectors, the Code also seeks to alter the impression of the “Inspector Raj” in relation to the government’s work guidelines.
There have been significant changes made to the offences and penalties under the new Code. The reformative measures make a strong case for their necessity and proportionality, with the intention of assisting rather than impeding corporate leadership.
The Code encourages creativity in decisions about topics like wage payment methods and assessment procedures that are intended to help it achieve its administrative digitalisation goals.
Hence, it will be exciting to see how the new labour code (which is inspired by the previous labour laws such as the Minimum Wages Act, Payment of Wage Act, Factories Act, etc.) will improve the prevalent situation of labourers across the country.
Frequently Asked Questions (FAQs)
Does the Payment of Wages Act apply to contract employees?
If the work that they are doing is otherwise included under the Payment of Wages Act, then the Act’s provisions are properly applicable to the contract workers that are hired by any factory or facility.
What are the steps and guidelines for deducting fines from pay in accordance with the Payment of Wages Act?
If a penalty is to be levied on a worker, it should only be imposed for actions or inactions that are included in the schedule that has been authorised by the respective authority. Fines shouldn’t be more than 3% of the monthly wages.
This can only be applied to employees who are at least 15 years old, must be retrieved within 90 days of the date of the action or omission, and be imposed following a proper show cause procedure.
Employers are required to keep the following records in the appropriate formats.
- A wage register;
- A fines register;
- Register of Loss or Damage Deductions
- A list of advancements.
What is the employer’s duty with regard to paying wages to the employees under the Payment of Wages Act, 1936?
Every employer is liable for paying all salaries owed to his employees under the Payment of Wages Act of 1936, and in the case of those employees:
A worker designated by the contractor who is immediately under his supervision in the case of a contract; an individual selected by the employer who is in charge of enforcing the Act’s provisions.
What punishments can be meted out to employers who break any of the provisions of the Payment of Wages Act?
For violating Sections 5, 7, 8, 9, 10, 11, 12, and 13 of the Payment of Wages Act, 1936, which address timely wage payment, reimbursement of wages in modern coins and bills, penalties, and reductions for damages or losses or the repayment of loans or advances. In such a circumstance, a fine of at least Rs. 1000 and up to Rs. 5000 may be imposed. If convicted again, the fine must be at least 5000 rupees and might be as high as 10,000.
For failing to keep records, wilfully refusing to provide information without a valid justification, omitting to respond to a request for information, or willfully providing a false response to a request for information under this Act, the maximum fine for such offences is Rs. 5000, with a minimum fine of Rs. 1000. For a second or subsequent offence, the fine must be at least 5000 rupees and might be as high as 10,000 rupees.
A fine of at least Rs. 1000, extendable up to Rs. 5000, must be paid for knowingly interfering with an inspector’s fulfilment of his responsibilities and for refusing to submit any register or other papers. If convicted again, the fine must be at least 5000 rupees and might be as high as 10,000.
Failure to pay wages to any worker may result in a minimum one-month sentence that may be increased to six months in prison and a minimum fine of Rs. 2000 which may be increased to Rs. 15,000 in fines. Each additional day carries a punishment of up to Rs. 100.
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