THE PAYMENT OF WAGES

ACT, 1936
THE PAYMENT OF WAGES
ACT, 1936
Preamble:- An act to regulate the
Payment of wages to certain classes of
employed persons.
Objective of the Act : To avoid
withholding wages, delays in paying wages
& making unauthorized deductions out of
wages.
 APPLICABILITY OF THE ACT
• This Act is applicable to persons whose
wages does not exceed Rs. 6500 per
month (2005) 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.
• It extends to the whole of India.
 IMPORTANT DEFINTIONS
• Section 2 (Vi)- 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 .
 Definition of Wages:
• Wages includes- (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,
 Definition of Wages:
• 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 that may have accrued thereon
(4) any traveling allowance or the value of any traveling concession;
(5) any sum paid to the employed person to defray special expenses
entailed on him by the nature of his employment; or
(6) any gratuity payable on the termination of employment in cases other
than those specified in Sub-clause (d).
 IMPORTANT DEFINITIONS:
• FACTORY: factory" means a factory as defined in
clause (m) of section 2 of the Factories Act, 1948
(63 of 1948) and includes any place to which the
provisions of that Act have been applied.
• workshop or other establishment in which
articles are produced, adapted or manufactured,
with a view to their use, transport or sale;
 IMPORTANT DEFINITIONS
• “Employee” means any person employed by or through any agency
( including a contractor) with or without the knowledge of the principal
employer, for remuneration in any factory or establishment to do any work
connected with its affairs, whose average wages do not exceed 6500
rupees per month or such amount as may be specified by the Central
government from time to time, on the basis of rise in the consumer price
index number, by notification in the Official Gazette;
• ”employed person" includes the legal representative of a deceased
employed person
– “Employer” means-
• in relation to an establishment which is a factory under the Factories Act,
1948 the person who has been named as a manager under Section 7 of
that Act; and
• in relation to any other establishment, the person who has ultimate
control over the affairs of the establishment and where the said affairs are
entrusted to a manager, managing director or managing agent, such
manager, managing director or managing agent;
• “employer" includes the legal representative of a deceased employer;
 IMPORTANT FEATURES OF THE ACT
• Fixation of Wage period: Sec. 4 - The
‘employer’ may fix the wage period for
employees as either daily, or weekly or
fortnightly or monthly. Provided that no
wage period in respect of any employee
shall be more than a month.
• Medium of payment of wages (Sec 6) –
current coin or currency notes (but not kinds) or
both, after obtaining written authorization of the
employed person, payment can be made either by
Cheque or by crediting the wages in bank
account.
 IMPORTANT FEATURES OF THE ACT

• Time of payment of wages

– <1000 persons – before the expiry of the 7th
day of the following wage period
– >1000 persons - before the expiry of the 10th
day of the following wage period
– Termination of employment – before 2nd
working day from the terminated day
– Wages to be paid on a working day
 DEDUCTIONS 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 this Act.
The list of authorised deductions:
– Fines (shall not exceed 3% of wages payable to him in that wage period)
– Damage or loss to the property of employer
– Absence of duty
– Services like house accommodation, amenities etc
– Recovery of advances
– Contribution to PF or welfare funds.
– Recovery of loans
– Subscription to recognized union
– Payments to co-operative societies & insurance schemes
– Other deductions such as income tax, LIC Premium, PM’s Relief fund etc
 DEDUCTIONS FROM WAGES:-
Sec-8-Fines: -
• Before making recovery of fine from the wages
of an employee, he must be given an
opportunity by way of ‘ Show-Cause notice, to
explain his say on the reasons for which fine
is being proposed.
• Fine shall not exceed 3% of the gross wages;
• Fine shall not be recovered by installments, or
later then sixty days of the date of imposition:
• Shall be recorded in a register .
• Shall not be imposed on a child (less than 15
years).
 DEDUCTION FOR ABSENCE FROM DUTY:

• (1) Deductions may be made only on account of the absence of an employed

person from the place or places where, by the terms of his employment, he is
required to work, such absence being for the whole or any part of the period
during which he is so required to work.
• (2) The amount of such deduction shall in no case bear to the wages payable
to the employed person in respect of the wage-period for which the deduction
is made in a larger proportion than the period for which he was absent bears
to the total period, within such wage-period, during which by the terms of his
employment, he was required to work:
• PROVIDED that, if ten or more employed persons acting in concert absent
themselves without due notice (that is to say without giving the notice which is
required under the terms of their contracts of employment) and without
reasonable cause, such deduction from any such person may include such
amount not exceeding his wages for eight days as may by any such terms
be due to the employer in lieu of due notice.
• Explanation : For the purposes of this section, an employed person shall be
deemed to be absent from the place where he is required to work if, although
present in such place, he refuses, in pursuance of a stay-in strike or for any
other cause which is not reasonable in the circumstances, to carry out his
work.
IMPORTANT FEATURES OF THE ACT

LIMIT OF DEDUCTIONS:
• The total deductions shall not exceed 75%
of gross wages, in cases where such
deductions are wholly or partly made for
payments to co-operative societies/ Bank.
• In other cases, 50% of gross wages.
 IMPORTANT FEATURES OF THE ACT
MAINTENANCE OF REGISTERS AND RECORDS
(Sec 13):
• Every employer is required to maintain following
registers and records under this Act-
-Register of particulars of persons employed by him.
-Register of Fine.
-Register of wages (Showing wage rate, days payable, OT other payments
made and also details of deductions made from wages).
-Register of deductions.
-Register of advances and loans given to employees.
-Such other particulars and in such form as may be prescribed.

• Every register and records required to be maintained under this Act, be

preserved for a period of 3 years after the date of the last entry made
therein.
 IMPORTANT FEATURES OF THE ACT
• The employer is required to give ‘Pay-slip’
to every employee, showing the details of
earnings and deductions made.
• The amount of wages remained unpaid
(Not disbursed/paid for any reason) for
last more than 3 years, has to be
deposited with the ‘ Welfare
Commissioner’ of the state.
• Single application in respect of claims
from unpaid group.
 DISPLAY BY NOTICE OF ABSTRACTS
OF THE ACT (SEC 25)
• The person responsible for the payment of
wages to persons ; [employed in a factory
or an industrial or other establishment] shall
cause to be [displayed in such factory or
industrial or other establishment] a notice
containing such abstracts of this Act and of
the rules made thereunder in English and in
the language of the majority of the persons
employed [in the factory, or industrial or
other establishment], as may be prescribed.
 PENALTY FOR OFFENCES UNDER THE ACT

Whosoever contravenes the provisions of the Act-

• Unauthorized deductions- Rs. 200-1000
• Sec 4,5,6,10 or Sec 25- Rs upto 500
• Not maintaining the registers and records properly – Rs 200- 1000.
• Not co-operating to Inspectors- Rs. 200-1000
• Again guilty of an offence involving same provisions- Imprisonment one month – six
months and with fine Rs 500- 3000.
• If any person fails or wilfully neglects to pay the wages of any employed person
by the date fixed by the authority in this behalf, he shall, without prejudice to
any other action that may be taken against him, be punishable with an
additional fine which may extend to one hundred rupees for each day for which
such failure or neglect continues.
THANKS