Payment of Wages Act, 1936 Rules

The Payment of Wages Act, 1936 is a central legislation which has been enacted to regulate the payment of wages to workers employed in certain specific industries.

Definitions Under Payment of Wages

Appropriate Government: Appropriate Government is “Central Government” for railway, air transport services, mines, and oilfields.

For all other establishments, it is “State Government”.

Employed Person: Employed person includes the legal representative of a deceased employed person.

Employer: Employer includes the legal representative of a deceased employer.

Factory: Factory means a factory as defined in the Factories Act, 1948.

Mine: Mine has meaning assigned to it in the Mines Act, 1952.

Plantation: Plantation has the meaning assigned to it in the Plantation Labour Act, 1951.

Industrial or other establishment means any

  • tramway service, or motor transport service engaged in carrying passengers or goods
  • air transport service other than military
  • dock, wharf or jetty, inland vessel, mechanically propelled
  • mine, quarry or oil field, plantation
  • workshop or other establishments in which articles are produced, adapted or manufactured
  • establishment in which any work relating to the construction, development or maintenance of buildings, roads, bridges or canals, or connected with navigation, irrigation or the supply of water

Wages: Wages mean all remuneration (whether by way of salary, allowances, or otherwise). It includes:

  • any award or settlement between the parties or order of a court
  • overtime work or holidays or any leave period
  • any additional remuneration payable under the terms of employment
  • any sum at the time of termination of employment
  • any sum under any scheme

But it does NOT include:

  • any bonus, profit sharing or otherwise, which is not form part of the remuneration payable
  • any house accommodation, or of the supply of light, water, medical attendance
  • contribution to any pension or provident fund, and the interest
  • any travelling allowance or the value of any travelling concession
  • any sum paid to defray expenses entailed on him by the nature of his employment
  • any gratuity payable on the termination of employment

Applicability of Payment of Wages

  • The Act is applicable to persons employed in any factory, to persons employed upon any railway, either directly or through a sub-contractor, and to persons employed in industrial or other establishments.
  • The State Government may extend the provision of this Act to any class of persons employed in any establishment after giving 3 months’ notice.
  • Earlier the Act was applicable only to workers with wages up to Rs. 6500 per month. The Central Government, in 2007, on the basis of figures from the Consumer Expenditure Survey published by the National Sample Survey Organisation, NSSO, increased it to Rs. 10000 per month. Further in 2012, the Central Government enhanced this limit to Rs. 18000 per month. Further in August 2017, the Government revised it to Rs. 24000 per month.

Time and Mode of Payment of Wages

  • The wages will be paid before the 7th day of every month if less than 1000 persons are employed.
  • The wages will be paid before the 10th day of every month, for all other cases.
  • No wage period shall exceed 1 Month.
  • If the workman is terminated, he shall be paid wages before the expiry of the 2nd working day from the date of termination.
  • All wages shall be paid in current coins, currency notes, or both. After obtaining the written authorisation of the employed person, the Employer may pay him by cheque or by crediting in his bank account.
  • After the 2017 amendment in the Act, Now Employers can pay the wage via:
    • in coin or currency notes; or
    • by cheque; or
    • by crediting them to his bank account. (The amendment has removed the requirement of obtaining written authorization from employees.)

Deduction Which May Be Made From Wages

Any loss of wages resulting from the imposition of the following penalties will not be deemed as a deduction:

  • the withholding of increment or promotion
  • the reduction to a lower post or time scale or to a lower stage in a time scale
  • suspension

Deduction from the wages can be made only for:

  • fines
  • deductions for absence from duty
  • deductions for damage/loss of goods/money directly attributable to the neglect of workman
  • deductions for house-accommodation
  • deductions for amenities and services supplied by the employer
  • deductions for recovery of advances or loans made from any labour welfare fund
  • deductions of income tax payable by the employed person
  • deductions required to be made by order of a Court or other authority
  • deductions for subscriptions to provident fund
  • deductions for payments to co-operative societies
  • deductions for life insurance policy or trade union fund or any insurance policy
  • deductions for payment of insurance premiums on Fidelity Guarantee Bonds
  • deductions for recovery of losses sustained by a railway administration

The total amount of deductions, from the wages of any employed person, shall not exceed:

  • 75% of wages in cases where deductions are wholly or partly made for payments to co-operative
  • 50% of wages in any other case

Fines Under Payment of Wages

  • No fine shall be imposed on any workman, without the approval of the State Government.
  • Information of Fines will be prominently displayed in the establishment.
  • No fine shall be imposed on any workman until he has been given an opportunity of showing cause.
  • The total amount of fine in a month, can not exceed an amount equal to 3% of the wages.
  • No fine shall be imposed on any employed person who is under the age of 15 years.
  • No fine shall be recovered after the expiry for 90 days from the day on which it was imposed.

Deductions Under Payment of Wages

Deduction for absence from duty: The amount of deduction can not be greater than the proportion of the wage period for which he was absent. However, if 10 or more persons acting in concert absent themselves without due notice and without reasonable cause, the such deduction can be up to wages for 8 days.

Deduction for damage or loss:  Deduction can not exceed the amount of the damage/loss caused to the employer by the neglect or default of the employed person.

Deduction for recovery of advances: Recovery of an advance of money given before employment began shall be made from the first payment of wages but no recovery shall be made of such advances given for travelling expenses.

Maintenance of Registers and Records

Every employer shall maintain Register / Records, for wages, fines, deductions and receipts for a period of 3 years from the date of last entry.

Annual Return of Payment of Wages

  • Every employer is compulsory to file the Annual Return of Payment of Wages on or before the due date.
  • The employer needs to submit FORM IV with the details as prescribed under this to the Labour Inspector.
  • Form IV with a Cover Letter has to be submitted by the employer to the Labour Inspector in the concerned Labour Office.
  • The last date for filing the Annual Return of Payment of Wages is 30th January.

Inspectors

An Inspector appointed under “Factories Act, 1948” shall be an Inspector for this Act also. The State Government may also appoint Inspectors for the purpose of this Act.

Claim Arising Out of Deductions / Delay From the Wages

The appropriate Government may appoint any of the following as the authority to hear and decide all claims arising out of deductions/delays from the wages:

  • any Commissioner of Workmen’s Compensation
  • any officer of the Central Government exercising functions as
    • Regional Labour Commissioner; or
    • Assistant Labour Commissioner with at least 2 years of experience
  • any officer of the State Government not below the rank of Assistant Labour Commissioner with at least 2 years of experience
  • the presiding officer of any Labour Court or Industrial Tribunal, under the Industrial Disputes Act, 1947
  • any other officer with experience as a Judge of a Civil Court or a Judicial Magistrate

Each such application for the claim shall be presented within 12 months from the date on which the deduction from the wage was made. The authority may consider the application beyond 12 months if the applicant satisfies the authority with sufficient cause.

Appeal

An appeal can be made within 30 days of the date on which the order was made, before the District Court:

  • by the employer, if the total wages and compensation exceeds Rs. 300
  • by an employed person if the amount of wages claimed exceeds Rs. 20

Penalties

  • Failure to maintain any records or registers or to furnish any information or return – Fine between Rs. 1500 to Rs. 7500.
  • Wilfully obstructs an Inspector in the discharge of his duties – Fine between Rs. 1500 to Rs. 7500.
  • If any person is again guilty Second Time of an offence involving contravention of the same provision, he shall be punishable – Imprisonment for 1-6 months and Fine of Rs. 3750-22500. (For this Second offence should be within 2 years from First Offence)
  • Failure to pay the wages by the fixed date – Fine of Rs. 750 for each day of failure.

Amendments In The Act 2017

As per earlier provisions, Under the Act, all wages must be paid either in coin or currency notes, or both. However, the employer may pay his employee’s wage either by cheque or by crediting it into his bank account, after obtaining his written authorisation.

After this 2017 amendment, the Act will now allow employers to pay wages via:

  • in coin or currency notes; or
  • by cheque; or
  • by crediting them to his bank account

The Amendment has removed the requirement of obtaining written authorization from employees.

Payment of Wages Act, 1936 PDF Download

The Payment of Wages Act, 1936.pdf

Download FORM IV Annual Return of Payment of Wages

FORM IV – Annual Return of Payment of Wages.docx

You may visit the Official Website for more details.

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