Payment of wages act

Payment Of Wages Act

By

Manisha Vaghela

1

Evolution of concept of wages in India.
In the earlier days, the imposition of fine was
a fairly general practice in perennial factories and
railways. There used to be other deductions from the
wages paid to the workers, such as for medical
treatment, education, interest on advances of the
workers’ own wages, charities, and religious purposes
selected by the employer. An important feature which
added to the embarrassment of the workers at
various places was paid. There was no uniformity in
the payment of wages. Long comparatively the longer
period in respect of which wages were intervals
between wage payments invariability added to the in
convenience of the
workers.
BY:MANISHA VAGHELA vaghela_manisha13@yahoo.com 2

The Royal Commission on Labour in its report
(1931) recommended, among other things, that
legislation on deduction from wages and fines was
necessary and desirable. The commission examined the
delays in the payment of wages and the practice of
deductions from the wages of an employed person. In
the light of its recommendations, the Government of
India introduced a Bill seeking to regular the delays
and deduction in the payment of wages to industrial
and plantation labour. The Bill was passed in 1936 and
the Act came into force from 28th March, 1937. In
exercise of the powers conferred under the Act, the
Maharashtra Government framed rules known as the
Maharashtra Payment of Wages Rules,1936.


The Act is in three parts.

1. Part I deals with the regular and payment of wages
by the employer.
2. Part 2 specifies the heads under which deduction
can be made from wages.
3. Part 3 provides a machinery for enforcing specific
claim arising out of delayed payments, deduction
from wages, appeals, etc. It is a self – contained Act
and provides its own machinery for the disposal of
the claims. The Act contains 26 sections.


INTRODUCTION was passed to
The Payment of Wages Act, 1936
regulate the payment of wages to certain classes of
persons employed in industry. It ensures payment of
wages in a particular form and at regular intervals
without unauthorized deductions. The Act extends to
the whole of India [Sec. 1(2)]. It was extended to
Jammu and Kashmir by the Central Labour Laws
(Extension to Jammu and Kashmir) Act, 1970.


The payment of wages to persons employed in any
factory, to persons employed (otherwise than in a
factory) upon any railway by a railway administration
and to an industrial or other establishment. In various
States the Act has been extended to shops and
establishments also. The Act does not apply to
persons whose wages exceed Rs. 1,600 per month.
This limit was raised from Rs, 1,000 to Rs, 1.600 by
the payment of Wages (Amendment) Act, 1982.
It is provided that, in relation to the central
government owned establishment, any notification
will be issued only after the concurrence of central
government.


DEFINITION OF WAGES
Wages :-
‘Wages’ means all remuneration (whether by way of
salary, allowances or otherwise) expressed in terms
of money or capable of being so expressed which
would, if the terms of employment, express or implied,
were fulfilled, be payable to a person employed in
respect of his employment or of work done in such
employment. Simply stated ‘wages’ means all
remuneration due to any worker or employee if the
terms of contract of employment are fulfilled. The
definition of ‘wages’ includes the following:


(a) Any remuneration payable under any award or
settlement between the parties or order of a
court;
(b) Any remuneration to which the person
employed is entitled in respect of overtime
work or holidays or any leave period:
(c) Any additional remuneration payable under
the terms of employment (whether called a
bonus or by any other name);
(d) Any sum which by reason of the termination
of employment of the person employed is
payable under any law, contract or instrument
which provides for

the payment of such sum, whether with or without
deductions, but does not provide for the time within which
the payment is to be made;
(e) Any sum to which the person employed is entitled under
any scheme framed under any law for the time being in
force.
The expression ‘wages’ does not include:
(1) Any bonus (whether under a scheme of profit-sharing or
otherwise) which does not form part of the remuneration
payable under the terms of employment or which is not
payable under any award or settlement between the
parties or order of a Court;


(2) The value of any house accommodation, or of the
supply of light, water, medical attendance or other
amenity or of any service excluded from the computation
of wages by a general or special order of the State
Government:
(3) Any contribution paid by the employer to any pension or
provident fund, and the interest which may have
accrued thereon:
(4) Any travelling allowance or the value of any travelling
concession:


(5) Any sum paid to the employed person to defray
special expenses entailed on him by the nature of
his employment:
(6) Any gratuity payable on the termination of
employment in cases other than those specified in
Clause (d) above.


APPLICABILITY
The Act is applicable to persons employed in any
factory, railway, and to such other establishments to
which the appropriate Government may, by notification,
extend the provisions of the Act after giving three
months’ notice to that effect. In the case of industrial
establishments owned by the Central Government the
notification can be issued with the concurrence of the
Central Government.


This Act applies to wages payable to an employed
person in respect of a wage period if such wages for
that wage period do not exceed Rs. 10,000 per month
or such other higher sum, which on the basis of figures
of the Consumer Expenditure Survey published by the
National Sample Survey Organisation, the Central
Government may, after every five years, by notification
in the Official Gazette, specify.


RULES FOR PAYMENT OF WAGES
(SECS. 3 TO 6)
 Responsibility for Payment of Wages (Sec.3)

 Fixation of Wage-Periods (Sec.4)

 Time of Payment of wages(Sec. 5)

 Mode of payment of wages (Sec. 8)


1) Responsibility for Payment of Wages (Sec.3) :-
Every employer shall be responsible for the payment
to persons employed by him of all wages required to be
paid under the Payment of Wages Act. But in the case
of persons employed (otherwise than by a contractor) in
factories, industrial establishment or upon railway, the
following persons shall also be responsible for the
payment of wages:
(a) In factories, the person named as the manager;
(b) In industrial or other establishment, the person,
if any, who is responsible to the employer for
the supervision and control of the industrial or
other establishment;


(c) Upon railways (otherwise than in factories), the
person nominated by the railway administration in this
behalf for the local area concerned (Sec. 3)
The person so named, the person so responsible
to the employer, or the person so nominated, as the
case may be, shall also be responsible for such
payment.


2) Fixation of Wage-Periods (Sec.4) :-
Every person responsible for the payment of wages
shall fix periods, known as wage-periods, in respect of
which such wages shall be payable. A wage-period shall
not exceed one month.


3) Time of Payment of wages(Sec. 5) :-
(i) Wages to be paid before 7th or 10th day :-
The wages of every person employed upon or in
any railway, factory or industrial or other establishment
upon or in which less than 1,000 persons are employed,
shall be paid before the expiry of 7th day of the following
wage-period. In case the number of workers exceeds
1,000, the wages shall be paid before the expiry of the
10th of the following wage-period. In the case of persons
employed on a dock, wharf or jetty or in a mine, the
balance of wages due on completion of the final tonnage
account of the ship or wagons, loaded or unloaded, as
the case may be, shall be paid before the expiry of The
second working day from the day on which his
employment is terminated:


(ii) Wages in case of termination of employment :-
Where the employment of any person is terminated
by or on behalf of the employer, the wages earned by
him shall be paid before the expiry of the 2nd working
day from the day on which his employment is
terminated. Where the employment of any person in an
establishment is terminated due to the closure of the
establishment for any reason other than a weekly or
other recognised holiday, the wages earned by him
shall be paid before the expiry .


of the 2nd day from the day on which his
employment is so terminated.
(iii) Exemption :-
The State Government may, by general or
special order, exempt the person responsible for the
payment of wages from the operation of the above
provisions in certain cases.
(iv) Wages to be paid on a working day :-
All payment of wages shall be made on a
working day.


4) Mode of payment of wages (Sec. 8) :-
section 6 provides that all wages shall be paid in
currency coin or currency notes or in both:
It is provided that the employer may, after
obtaining the written authorization of employed person,
pay him the wages either by cheque or by crediting the
wages in his bank account.
All wages shall be paid in current coins or
currency notes or both. Payment of wages in kind is not
permitted. The process of payment of wages in cash is
very cumbersome where the number of workers is very
large. It is also risky where the sum involved is large
and the factory or industrial establishment is situated at
a remote place.


 In order to obviate these difficulties and save the worker
from carrying cash on the pay day and mis-spending it,
the employer may after obtaining the written authorization
of the employed person, pay him the wages either by
cheque or by crediting the wages in his bank account.


DEDUCTIONS FROM WAGE (SECS. 7
TO 13)
Deduction which may be made from wages (Sec.
7) :- The wages of an employed person shall be paid
to him without deductions of any kind except those
authorised by or under the Payment of Wages Act,
1936. the deductions from wages of an employed
person may be of the following kinds only, namely;
1) Deductions for fines:-
(a) No fine shall be imposed on any employed person
save in respect of such acts or omission on his part
as the employer, with the Previous


approval of the State Government or of the prescribed
authority, may have specified by a notice.
(b) The notice specifying the acts and omissions for which
fines may be imposed shall be exhibited in the prescribed
manner on the premises (and in case of persons
employed upon a railway, at the prescribed place or
places) in which the employment is carried on.
(c) No fine shall be imposed on an employed person until
he has been given an opportunity of showing cause
against the fine and has completed the age of 15 years.


(d) The total amount of fine which may be imposed in
one wage period on any employed person shall not
exceed 3 per cent of the wages payable to him in
respect of that wage-period. Such a fine shall not be
recovered from the employed person by installments or
after the expiry of 60 days from the day on which it was
imposed [ Sec. 8(6) ]

2) Deductions for absence from duty:-
Deduction may be made on account of the absence
of an employed person from duty from the place or
places where, by the terms of his employment, he is
required to work. But the ratio between the amount of
such deductions and the


wages payable shall not exceed the ratio between the
period of absence and total period within such wage-
period. It has however been held in K.S.R.T.
Employees’ Assn. Vs General Manager, K.S.R.T.,
(1985) that in a strike by workers in a public utility
service like transport service, if employees absent for
a part of the day without notice, deduction of full day’s
wages would not be unjustified or illegal.
3) Deductions for Damage or Loss:-
A deduction for damage to or loss of goods
expressly entrusted to the employed person for
custody or for loss of money for which he is required to
accounts shall not exceed the amount


of the damage or loss caused to the employer by the
neglect or default of the employed person. Same is the
case as regards losses sustained by a railway
administration on account of any rebates or refunds
incorrectly granted by the employed person.
4) Deductions for services:-
A deduction for house accommodation and such
amenities and services supplied by the employer as
have been authorised by the State Government shall not
be made from the wages of an employed person, unless
such services have been accepted by him as a term of
employment or otherwise. Deductions in


respect of these services shall not exceed the value
thereof. In case of deductions as regards services and
amenities, the State Government may impose
conditions.
5) Deductions for recovery of advances:-
A deduction for recovery of an advance given to an
employed person is subject to the following conditions
viz., (i) recovery of an advance of money given before
employment began shall be made from the first
payment of wages in respect of complete wage-period,
but no recovery can be made of such advance given for
travelling expenses: (ii) recovery of an advance of
money given after employment


began shall be subject to such conditions as the State
Government may impose: (iii) recovery of advances of
wages not already earned shall be subject to any rules
may by the State Government in this regard. The State
Government may regulate the extent to which such
advances may be given and the instalments by which
they may be recovered.
6) Deductions for recovery of loans:-
Deductions for loans granted for house-building or
other purposes and the interest due in respect thereof
approved by the State Government shall be subject to
any rules made by the State Government regulating the
extent to which such loans may be


granted and the rate of interest payable thereon.
7) Deductions for payments to co-operative
societies and insurance Schemes:-
These deductions shall include (a) deductions for
payments to co-operative societies approved by the
State Government or to a scheme of insurance
maintained by the Indian Post Office; and (b)
deductions made with the written authrisation of the
person employed for the payment of any premium of his
life insurance policy to the Life Insurance Corporation
(LIC) of India or for the purchase of securities of the
Government of India or of any


State Government or for being deposited in any Post
Office Saving Bank in furtherance of any saving scheme
of any such Government.
8) Other Deductions:-
The following deductions shall also be permitted
under the Act: (a) deductions of income-tax payable by
the employed person. (b) deductions required to be
made by order of a Court or other authority competent
to make such order [Sec. 7 (2) (h)] (c) deductions for
contributions to any insurance scheme framed by the
Central Government for the benefit of its employees.


MAINTENANCE OF REGISTERS AND
RECORDS (SECTION-13 A)
 1) Every employer shall maintain such registers and
records giving such particulars of persons employed by
him, the work performed by them, the wages paid to
them, the deductions made from their wages, the receipts
given by them and such other particulars and in such
forms as may be prescribed.
 2) every register and record required to be maintained
under this section shall, for the purpose of this act, be
preserved for a period of three years after the last entry
made therein.


BIBLIOGRAPHY
1. LEGAL SYSTEM IN BUSINESS
(BUSINESS LAW , COMPANY LAW,
INDUSTRIAL LAW )
BY :- P. SARAVANAVEL
S. SUMATHI
HIMALAYA PUBLISHING HOUSE
2. INDUSTRIAL JURISPRUDENCE AND LABOUR
LEGISLATION
BY :- A.M. SARMA
HIMALAYA PUBLISHING HOUSE
3.INDUSTRIAL& LABOUR LAWS
BY:- SANJEEV KUMAR
BHARAT LAW HOUSE PVT.LTD.

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