Payment of Wages Act

The main objective for the introduction of the Payment of Wages Act, 1936, is to avoid unnecessary delay in the payment of wages and to prevent unauthorized deductions from the wages.

Applicability of Payment of Wages Act

As per section 1(6) of the Payment of Wages Act, the wages averaging less than INR 6,500 per month are covered and protected by the Act. Further, the Act is applicable to the payment of wages to persons employed in factories, upon railways, or in other establishment as specified in the Payment of Wages Act.

Definition of Wages

The term wages has been defined as all remuneration payable to a person employed in respect of his employment or of work done in such employment. Under the Payment of Wages Act, wages include:

Any remuneration payable under any award or settlement between the parties or order of a Court;
Any remuneration to which the person employed is entitled in respect of overtime work or holidays or any leave period;
Any additional remuneration payable under the terms of employment (whether called a bonus or by any other name);
Any sum which by reason of the termination of employment of the person employed is payable under any law, contract or instrument which provides for the payment of such sum
Any sum to which the person employed is entitled under any scheme framed under any law for the time being in force, but does not include:
- Any bonus which does not form part of the remuneration payable under the terms of employment or which is not payable under any award
- Any sum paid to the employed person to defray special expenses entailed on him by the nature of his employment; or
- Any gratuity is payable on the termination of employment.

Due Date for Salary Payment and Wages

As per the provisions of the Payment of Wages Act, 1936, wages need to be paid to employees before the expiry of the 7th day of the last day of the wage period, where the number of employees is less than 1000. In case the number of employees is more than 1000, wages must be paid before the expiry of the 10th day of the last day of the wage period.

Mode of Payment of Salary and Wages

Salary and wages should be paid only in current coins or currency notes or both. The wages can also be paid by cheque or by crediting into bank account, however, in order to do so, the employer has to obtain written authorization from the employed person.

Deductions from Salary or Wages under the Payment of Wages Act

The employer is allowed to deduct the following from the salary or wages of an employee under the Payment of Wages Act.

Deduction for absence from the duty;
Deduction for the damage to or loss of goods of an employed person;
Deduction for house accommodation supplies by the employer;
Deduction for the amenities and service supplied by employer;
Deduction for recovery of advances and interest, and adjustment of overpayment;
Deductions for recovery of loans from any fund constituted for the welfare of labor;

The total amount of deductions should not exceed 50 % of the wages of the employee in any wage period. If whole or part of the deductions is meant for the payments to co- operative societies, then the deductions cannot exceed 75%.

Delay in Salary Payment or Wages

When there is a delay in payment of wages or any deduction has been made from the wages, in such cases, the application can be made to the authority. Following is the list of person, who can make application to the authority:

The person himself; or
Any legal practitioner; or
Any official of a registered trade union, duly authorized in writing;
Any inspector; or
Any other person acting with the permission of the authority.

The authority, on receipt of the application, will hear the applicant and the employer or other person responsible for delay in payment of wages. The compensation amount cannot exceed 10 times the amount deducted and cannot exceed INR 3000, but the same should not be less than INR 1500.

Compensation is not payable in cases where authority is satisfied that:

The delay was due to bona fide error/dispute as to the amount payable to the employed person;
The person responsible was unable to make a payment due to exceptional circumstances, even though exercised due diligence;
The delay was due to the failure of the employed person to apply for or accept payment.

Penalty under Payment of Wages Act

The following are some of the penal provisions under the Payment of Wages Act:

Penalty for Contravention – When the person responsible for the payment of wages to an employed person contravenes any of the provisions of sections of the payment of wages act than the person would be liable to pay penalty amount.
Penalty for Not Maintaining Records – When person required to maintain any records or register or furnish any information or return, fails to maintain the register or records or willfully refuses or neglects to furnish any information, such offence would be punishable with fine which will not be less than INR 1,500/- but which could extend to INR 7,500/-.
Penalty for Serial Offenders – Where any person who has been convicted of any offence punishable under this Act is again guilty of an offence involving contravention of the same provision, he would be punishable on a subsequent conviction with imprisonment for a term which shall not be less than one month but which may extend to six months and fine payable would be not less than INR 3,750/- but which could extend to INR 22,500/- or both.