Provisions for the Wage Payment for the

employees in India
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Deductions from Wages

Wages are the return paid to the employees for their work done
for the organization. Constitution of India has framed various
laws for setting of provisions for safeguarding employees for any
injustice caused to them by employer by depriving them of their
wages. Payment of Wages Act, 1936 regulates the payment of
wages to certain classes of people employed in industry and its
importance cannot be under-estimated. The Act guarantees
payment of wages on time and without any deductions except
those authorized under the Act. The Act provides the
responsibility for payment of wages, fixation of wage period, time
and mode of payments of wages, permissible deduction as also
casts upon the employer a duty to seek the approval of the
Government for the acts and permission for which fines may be
imposed by them. This Act does not apply to persons whose
wage is Rs. 1000 or more per month.
 Provision for timely payment of wages

Wages needs to be paid-

1. Before the expiry of the 7th day after the last day of the wage period, where there are less
than 1000 workers employed and in rest case on the 10th day;
2. In current coin or currency notes and by cheques or by crediting the wages in the
employee’s bank account after obtaining his written authority;
3. On a working day;
4. Before the expiry of the second day, to the person whose employment is terminated.

 Responsibility for payment of wages

Every employer shall be responsible for the payment of all wages required to be paid under this
Act to persons employed by him and in case of persons employed-
 1. In the case of contractor, a person designated by such contractor who is directly under his
charge;
2. A person designated by the employer as a person responsible for complying with the
provisions of the Act

 Deductions from wages

The following mentioned are the main deductions that are allowed under the Act-

1. Fines;
2. Deduction for the actual period of absence
3. Deduction for the damage or loss of goods expressly entrusted to the employed person;
4. Deduction for house accommodation;
5. Deduction for the amenities and service supplied by employer with agreement to the
employee;
6. Deduction for recovery of advances and interest, and adjustment of overpayment;
7. Deductions for recovery of loans from any fund constituted for the welfare of labour as
agreed between employer and employee;
8. Deduction for income tax;
9. Deduction on orders of a court or other authority;
10. Deduction for subscription and repayment of advance from any Provident Fund;
11. Deduction for payments to cooperative societies as agreed between employer and
employee;
12. Deduction of premium for LIC policy on written authorization of the employed person; or
any other investment for Post Office Saving Schemes;

However, as mentioned in section 7 of the Act, the total amount of deductions should not exceed
75% of wages of the employee in any wage period if whole or part of the deductions is meant for
the payments to cooperative societies. In other cases it should not exceed 50%.

 Fines

Incase of fines that need to be imposed on the employee it should only be for the acts and
omissions that are mentioned in the list of which has been approved by the appropriate
Government. Fines should not exceed 3% of the wages in a month. This needs to be recovered
within 90 days of the date of act or omission, be imposed after a proper show cause procedure
and cannot be imposed on an employee of less than 15 years of age.

Employers have compulsorily to maintain following registers in the prescribed forms-

1. Register of wages;
2. Register of fines;
3. Register of deduction for damages or loss
4. Register of advances.

 Penalties

1. For contravention of Section 5, 7 8, 9, 10, 11, 12 and 13, which mentions timely payment
of wages, payment of wages in current coins and currency, fines, deductions for
damage/loss or recovery of advances and loans. In such case fine not less than Ra. 1000
which may extent to Rs. 5000. On subsequent conviction fine not less than Rs. 5000 may
extend to Rs. 10000.
2. For failing to maintain registers, willfully refusing or without lawful excuse neglecting to
furnish information or refusing to answer or willfully giving a false answer to any question
necessary for obtaining any information required to be furnished under this Act. For such
 offences fine which shall not be less than Rs. 1000 and may be extended to Rs. 5000. For
second or subsequent conviction fine not less than Rs. 5000 and may extend to Rs. 10000.
3. For willfully obstructing an Inspector in discharge of his duties and on refusal to produce of
any register or other documents fine not less than Rs. 1000 extendable upto Rs. 5000. On
subsequent conviction fine not less than Rs. 5000 and may be extended upto Rs. 10000.
4. On conviction for any offence and again guilty of contravention of same provision. Failing
or neglecting to pay wages to any employee punishment of imprisonment not less than
one month which may extend upto six months and fine not less than Rs. 2000 extendable
upto Rs. 15000 may be done. Additional fine upto Rs. 100 for each day

- Shailja Tripathi

Source: "Payment of Wages Notification"

Deductions from Wages

Section 7 of the Payment of Wages Act, 1936, outlines the deductions
from wages permitted under the Act. An employer cannot make
deductions of any kind except those specified under the Act. In this
article, we will take a look at these rules pertaining to deductions from
wages.

Section 7 – Deductions from Wages

Notwithstanding the provisions of the Railways Act, 1989 (24 of
1989), an employer must pay the wages of an employed person
without deductions of any kind except those specified under the
Payment of Wages Act, 1936. A deduction can be made only in the
following manner.

1. Absence from duty (explained in Section 9)

Deductions for absence from duty

(1) Deductions may be made under clause (b) of sub-section (2) of section 7 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
employments he was required to work:

Provided that subject to any rules made in this behalf by the State Government
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.

2. Damage to or loss of goods expressly entrusted in the employed

person(explained in Section 10)

(1) A deduction under clause (c) or clause (o) of sub-section (2) of section 7 shall
not exceed the amount of the damage or loss caused to the employer by the
neglect or default of the employed person.

(1A) A deduction shall not be made under clause (c) or clause (m) or clause (n)
or clause (o) of sub-section (2) of section 7 until the employed person has been
given an opportunity of showing cause against the deduction or otherwise than
in accordance with such procedure as may be prescribed for the making of such
deductions.
(2) All such deductions and all realisations thereof shall be recorded in a register
to be kept by the person responsible for the payment of wages under section 3
in such form as may be prescribed

3. House-accommodation or other amenities or services that the

employer provides (explained in Section 11).

Deductions for services rendered:—

A deduction under clause (d) or clause (e) of sub-section (2) of section 7 shall
not be made from the wages of an employed person, unless the house-
accommodation amenity or service has been accepted by him, as a term of
employment or otherwise, and such deduction shall not exceed an amount
equivalent to the value of the house-accommodation amenity or service
supplied and, in the case of a deduction under the said clause (e), shall be
subject to such conditions as [the appropriate Government] may impose. State
Amendments Section 11A
(Pondicherry) —After section 11, insert the following section, namely:— “11A.
The employer shall, if so required by a requisition in writing, by the Electricity
Department of the Government of Pondicherry or by an officer authorized by it
in this behalf, make the deductions authorized under clause (dd) of sub-section
(2) of Section 7 from the wages of the employed person and remit the amount
so deducted in such manner as the State Government may, by general or
special order, specify.” [Vide Pondicherry Act 9 of 1970, sec. 3 (w.e.f. 25-5-
1970)]. Tamil Nadu.—After section 11, insert the following section, namely:—
“11A. Deductions in respect of house accommodation.—The employer shall
make the deductions authorized under clause (d) of sub-section (2) of section 7
from the wages of the employed person and remit the amount so deducted in
such manner as the State Government may, by general or special order
specify.” [Vide Tamil Nadu Act 9 of 1959, sec. 4 and Act 14 of 1962, sec. 2 and
First Sch. (w.e.f. 9-1-1963)]. Section 11B Tamil Nadu.—Same as section 11A in
Pondicherry. [Vide Tamil Nadu Act 20 of 1963, sec. 3 (w.e.f. 6-11-1963)].
Section 11C Tamil Nadu.—After section 11B, insert the following section,
namely:— “11C. Deductions in respect of profession tax.—The employer shall,
if so required by a requisition in writing, by the local authority concerned or by
an officer authorized by it in this behalf, make the deductions authorized under
clause (gg) of sub-section (2) of section 7 from the wages of the employed
person and remit the amount so deducted to the credit of the local authority
concerned in such manner as the State Government may, by general or special
order, specify.” [Vide Tamil Nadu Act 47 of 1974, sec. 3].

4. Fines (explained in Section 8)

(1) No fine shall be imposed on any employed person save in respect of such
acts and omissions on his part as the employer, with the previous approval
of 38 [the appropriate Government] or of the prescribed authority, may have
specified by notice under sub-section (2).
(2) A notice specifying such acts and omissions shall be exhibited in the
prescribed manner on the premises in which the employment is carried on or
in the case of persons employed upon a railway (otherwise than in a factory),
at the prescribed place or places.
(3) No fine shall be imposed on any employed person until he has been given
an opportunity of showing cause against the fine, or otherwise, than in
accordance with such procedure as may be prescribed for the imposition of
fines.
(4) The total amount of fine which may be imposed in any one wage-period on
any employed person shall not exceed an amount equal to 39 [three per cent.
of the wages] payable to him in respect of that wage-period.
(5) No fine shall be imposed on any employed person who is under the age of
fifteen years.
(6) No fine imposed on any employed person shall be recovered from him by
instalments or after the expiry of 40 [ninety days] from the day on which it was
imposed.
(7) Every fine shall be deemed to have been imposed on the day of the act or
omission in respect of which it was imposed.
(8) All fines and all realisations thereof shall be recorded in a register to be
kept by the person responsible for the payment of wages under section 3 in
such form as may be prescribed; and all such realisations shall be applied only
to such purposes beneficial to the persons employed in the factory or
establishment as are approved by the prescribed authority.
Explanation.—When the persons employed upon or in any railway, factory
or [industrial or other establishment] are part only of a staff employed under
the same management, all such realisations may be credited to a common
fund maintained for the staff as a whole, provided that the fund shall be
applied only to such purposes as are approved by the prescribed authority.
Statement of Objects and Reasons [The Payment of Wages (Amendment) Act,
2005] Removing the ambiguities/weakness from the extant provisions of the
Act and prescribing more effective grievance redresal: Over the years, it has
been noticed that certain provisions of the Act have been differently
interpreted thus leading to administrative difficulties in implementing the
same. In order to remove ambiguities, appropriate changes are being proposed
in sections 3, 7, 8 and 15 of the Act which respectively deal with responsibility
for payment of wages, deductions from wages fines and claims in certain
cases. State Amendments Andhra Pradesh.—In section 8, in sub-section (8),
before the Explanation insert the following, namely: — “but in the case of any
establishment to which the Andhra Pradesh Labour Welfare Fund Act, 1987
applies, all such realizations shall be paid into the fund constituted under the
said Act.” [Vide Andhra Pradesh Act 34 of 1987, sec. 39 (w.e.f. 1-5-1988)].
Gujarat (Bombay Area).—Same as that of Maharashtra.
(Karnataka) —In section 8, in sub-section (8), add the following before the
Explanation, namely:— “but in the case of any factory establishment to which
the Mysore Labour Welfare Fund Act, 1965 applies, all such realizations shall
be paid into the fund constituted under the said Act.” [Vide Mysore Act 15 of
1965. sec. 25 (w.e.f. 5-8-1965)].
(Kerala) —In section 8, in sub-section (8), before the Explanation, the following
proviso shall be inserted, namely:— “Provided that in the case of any
establishment to which the Kerala Labour Welfare Fund Act, 1975, applies, all
such realizations shall be paid into the fund constituted under that Act.” [Vide
Kerala Act 11 of 1977, sec. 43 (w.e.f. 1-5-1977)].
(Maharashtra) —In its application to the Bombay Area of the State of
Maharashtra, in section 8, in sub-section (8), before the Explanation add the
following namely:— “but in the case of any factory or establishment to which
the Bombay Labour Welfare Fund Act, 1953, applies, all such realizations shall
be paid into the fund constituted under the said Act.” [Vide Bombay Act 40 of
1953, sec. 23]. Punjab, Haryana.—See Proviso II to section 10(2) of the Punjab
Labour Welfare Fund Act, 1965 (Punjab Act 17 of 1965) and Act 31 of 1966,
sec. 88. Tamil Nadu.—In section 8, in sub-section (8), in the last sentence the
following shall be added at the end, namely:— “but in the case of any
establishment to which the Tamil Nadu Labour Welfare Fund Act, 1972 applies
all such realization shall be paid into the Fund constituted under the aforesaid
Act.” [Vide Tamil Nadu Act 36 of 1972, sec. 43 (w.e.f. 1-1-1973)]. Uttar
Pradesh.—In section 8, in sub-section (8), add the following proviso, namely:—
“Provided that in the case of any factory or establishment to which the U.P.
Welfare Fund Act, 1965, applies, all such realization shall be paid into the fund
established under the said Act.” [Vide Uttar Pradesh Act 14 of 1965, sec. 23
(w.e.f. 26-7-1965)].