TABLE OF CONTENT

INTRODUCTION......................................................................................................1
WHAT ARE WAGES ................................................................................................2
PAYMENT OF WAGES ACT, 1936 .........................................................................2
OBJECTIVES OF THE PAYMENT OF WAGES ACT .............................................3
SHORT TITLE EXTENT COMMENCEMENT AND APPLICATION .....................4
DEFINITIONS ...........................................................................................................4
RESPONSIBILITY FOR PAYMENT OF WAGES ...................................................7
FIXATION OF WAGE-PERIODS .............................................................................7
TIME OF PAYMENT OF WAGES ...........................................................................8
WAGES TO BE PAID IN CURRENT COIN OR CURRENCY NOTES OR BY
CHEQUE OR CREDITING IN BANK ACCOUNT ...................................................8
DEDUCTIONS WHICH MAY BE MADE FROM WAGES......................................9
DEDUCTIONS ........................................................................................................ 10
LIMIT FOR DEDUCTIONS .................................................................................... 11
FINES ...................................................................................................................... 11
DEDUCTIONS FOR ABSENCE FROM DUTY ...................................................... 12
DEDUCTIONS FOR DAMAGE OR LOSS ............................................................ 13
DEDUCTIONS FOR SERVICES RENDERED ....................................................... 13
DEDUCTIONS FOR RECOVERY OF ADVANCES .............................................. 13
DEDUCTIONS FOR RECOVERY OF LOANS ..................................................... 14
DEDUCTIONS FOR PAYMENTS TO CO-OPERATIVE SOCIETIES AND
INSURANCE SCHEMES ........................................................................................ 14
MAINTENANCE OF REGISTERS AND RECORDS ............................................. 14
INSPECTORS.......................................................................................................... 14
FACILITIES TO BE AFFORDED TO INSPECTORS ............................................. 15
CLAIMS ARISING OUT OF DEDUCTIONS FROM WAGES OR DELAY IN
PAYMENT OF WAGES AND PENALTY FOR MALICIOUS OR VEXATIOUS
CLAIMS .................................................................................................................. 15
SINGLE APPLICATION RESPECT OF CLAIMS FROM UNPAID GROUP ......... 17
APPEAL .................................................................................................................. 17
PENALTY FOR OFFENCES UNDER THE ACT ................................................... 17
PROCEDURE IN THE TRIAL OF OFFENCES ...................................................... 18
BAR OF SUITS .......................................................................................................19
CONTRACTING OUT ............................................................................................ 19
DISPLAY BY NOTICE OF ABSTRACT OF THE ACT ......................................... 19
PAYMENT OF UNDISBURSED WAGES IN CASE OF DEATH OF EMPLOYED
PERSON .................................................................................................................. 20
RULE-MAKING POWER ....................................................................................... 20
CONCLUSION ........................................................................................................ 21
REFERENCES......................................................................................................... 22
INTRODUCTION

It is a well-known fact that India’s economy depends not just on the formal
sector but also on the informal sector. The significance of the informal sector in India
cannot be ignored. Before independence in 1947, the informal sector, primarily
agriculture, contributed to 95 per cent of the Gross Domestic Product (GDP). Even
today, 70 per cent of the national income of India consists of income generated
through agriculture (Food and Agriculture Organisation of the United Nations).

As per the Employment – Unemployment Survey of 2011-12, presented by

the National Sample Survey Office (NSSO), the total workforce of India is 474.23
million. However, out of this total workforce, only 8 per cent belong to the formal
sector, and the remaining 92 per cent are working in the informal sector.
Additionally, 60 percent of the growth of GDP is due to the contribution of these
informal sector workers.

According to the Indian Constitution, the Government of India is required to

create employment opportunities and ensure that all workers (formal and informal
sectors) have access to a reasonable standard of living that includes all socioeconomic
and other welfare opportunities1.

Adhering to the Constitution of India, the Indian Government in the year 1948,
right after independence, introduced legislation named the Minimum Wages Act of
1948. The legislative intent behind the Act was to make sure that workers in the
informal sector receive at least a minimum amount of money as wages to avoid
exploitation. However, before this Act, the Payment of Wages Act of 1936 was
introduced2. The Act made efforts so that informal sector workers could be linked
with mainstream development by providing minimum wages, which can be utilised to
increase living standards and benefit social development schemes.

The Act has occasionally undergone modifications to ensure that the law is
effectively implemented and that workers receive adequate pay in a timely manner to
maintain themselves and their families.

1 Avtar Singh & Harpreet Kaur. Introduction to Labour and Industrial Law, LexisNexis, 3rd Edition
2 ibid

1
WHAT ARE WAGES

Wage is the monetary compensation or payment, sometimes known as personnel

expenses, that an employer pays to employees in exchange for work performed. Wage can
be computed as a fixed amount for each task accomplished, or as an hourly/daily rate
based on an easily measured quantity of work completed.

Wages comprise all monetary remunerations and "including" the following:

 Amount payable under the terms of employment

 Amount payable under any award, settlement, or court order
 Paid as overtime labor or for vacations / leave period
 Payable on account of Termination of employment

PAYMENT OF WAGES ACT, 1936

The Payment of Wages Act of 1936 governs how wages are paid to employees
(direct and indirect). The statute is intended to protect employees from unlawful employer
deductions and/or unjustifiable salary delays.

• Define laws around wage period, time, and mode of payment of wages to
particular classes of workers working in industry without any unjust deductions other than
those specified in the Act

• Regulates the rights of the workers covered by this Act

Applicability

All persons employed in a factory or certain designated industrial or other

institutions, whether directly or through contractors, are covered by this Act.

• The Central Government is in charge of enforcing the Act in the areas of railways,
mines, oilfields, and air transportation.

• All other establishments (factories and other establishments) are under the control
of the state government.

2
 • The Act does not apply to those whose monthly wage is Rs. 24,000/- or more.

Regular Pay

Payments should be made before the 7th day of the month if the number of
workers is less than 1000, and before the 10th day if the number of workers is greater than
1000. The wage-period cannot be more than one month. Only employees earning less than
Rs. 6500 per month are covered by the Act.

Mode of Payment

Payment must be paid in monetary notes or coins, according to the statute.

Payment by check or credit to a bank account is permitted with the employee's written
authorization.

Wages are deducted

Only approved deductions, as defined by the Act, are permitted by the employer.
Fines (Section 8), absence from duty (Section 9), damages or loss (Section 10), deduction
for services (amenities) provided to the employer (Section 11), recovery of advances and
loans (Section 12, 13), and payment to cooperative societies and insurance are all
examples of this (Section 13).

Employers can seek remedy from the authority (Labor Office) on their own or through a
trade union.

OBJECTIVES OF THE PAYMENT OF WAGES ACT

The Payment of Wages Act governs the payment of wages to specific types of
workers in the industrial sector, and its significance cannot be overstated. The Act ensures
that salaries are paid on time and without deductions unless specifically permitted by the
Act.

The Act establishes the employer's responsibility for wage payment, as well as the
wage period, time and mode of payment, and permissible deductions, as well as a duty on
the employer to seek the Government's approval for acts and permissions for which fines
may be imposed by him, as well as the sealing of the fines, and a machinery to hear and

3
decide complaints about wage deductions or delays, as well as a penalty for malicious and
vexatious acts.

The Act does not apply to anybody earning more than Rs. 24,000 per month. The
Act also states that a worker cannot contract out of any of the rights granted to him by the
Act.

SHORT TITLE EXTENT COMMENCEMENT AND APPLICATION

(1) The Payment of Wages Act of 1936 is the name of the law.

(2) It covers the entire country of India.

(3) It shall take effect on the date specified by the Central Government in a notification
published in the Official Gazette.

(4) It applies in the first instance to the payment of wages to persons employed in any
factory, to persons employed (other than in a factory) by a railway administration or by a
person fulfilling a contract with a railway administration, and to persons employed in an
industrial or other establishment specified in sub-clauses (a) to (g) of clause (ii) of section
2, and to persons employed in an industrial or other establishment specified in sub-clauses
(a) to (g) of clause (ii).

(5) The State Government may, after giving three months' notice in the Official Gazette of
its intention to do so, extend the provisions of this Act or any of them to the payment of
wages to any class of persons employed in any establishment or class of establishments
specified by the Central Government or a State Government under sub-clause (h) of clause
(ii) of section 2: Provided, however, that in relation to any such establishment owned by
the Central Government,

(6) This Act applies to wages payable to an employed person for a wage period if those
wages do not exceed $24,000 per month or such other higher sum as the Central
Government may specify, based on figures from the Consumer Expenditure Survey
published by the National Sample Survey Organization, after every five years by
notification in the Official Gazette.

DEFINITIONS

4
"employed person" [sec 2 (i)] includes the legal representative of a deceased employed
person;

"employer"[sec 2 (ia)] includes the legal representative of a deceased employer;

"industrial or other establishment"[sec 2 (i1)] means any -

(a) tramway service or motor transport service engaged in carrying passengers or goods or
both by road for hire or reward;

(aa) air transport service other than such service belonging to or exclusively employed in
the military naval or air forces of the Union or the Civil Aviation Department of the
Government of India;

(b) Dock wharf or jetty

(c) inland vessel mechanically

(c) inland vessel mechanically propelled;

(d) mine quarry or oil-field;

(e) plantation;

(f) workshop or other establishment in which articles are produced adapted or

manufactured with a view to their use transport or sale;

(g) Any place where work is being done on the construction, development, or maintenance
of buildings, roads, bridges, or canals, or on operations related to navigation, irrigation, or
water supply, or on the generation, transmission, and distribution of electricity or any other
form of power;

(h) any other establishment or type of establishments that the Central Government or a
State Government may specify by publication in the Official Gazette, having regard to the
nature of the establishment, the necessity for protection of persons employed within, and
other relevant circumstances.

5
"Wages" [sec 2 (iv)] means all remuneration (whether in the form of salary allowances or
otherwise) expressed in money or capable of being expressed in money that would be
payable to a person employed in respect of his employment or work done in such
employment if the terms of employment express or implied were fulfilled, and includes –

(a) any income due by a court order, award, or settlement between the parties;

(b) any additional payment due under the terms of employment (whether called a bonus or
by any other name);

(c) any remuneration to which the person employed is entitled in respect of overtime work,
holidays, or any leave period;

(d) any sum payable due to the person's termination of employment under any legislation,
contract, or instrument that allows for the payment of such sum, with or without
deductions, but does not specify a time limit within which the payment must be paid;

(e) any payment to which the employee is entitled under any system framed under any law
in force at the time, but excluding –

(1) any incentive (whether through a profit-sharing arrangement or elsewhere) that is not
included in the remuneration payable under the terms of employment or that is not payable
under any award, settlement, or court order;

(2) any house-accommodation, light water supply, medical attendance, or other amenity,
or any service excluded from the computation of wages by a general or special order of the
State Government;

(3) any contribution made by the employer to any pension or provident fund, and any
interest accrued thereon;

(4) any travel allowance or the value of any travel concession;

(5) any sum paid to the employed person to offset particular expenses imposed on him by
the nature of his work; or

6
(6) any gratuity payable on termination of employment in circumstances other than those
listed in sub-clause (d).

RESPONSIBILITY FOR PAYMENT OF WAGES3

Every employer is accountable for paying the needed wages to those who work for
him.

 In the event of a factory, the management of that factory is responsible for paying
the salary of his employees.
 In the event of industrial or other businesses, those in charge of monitoring are
responsible for paying wages to employees who work for them.
 In the case of railways, a person designated by the railway administration for a
certain area is responsible for paying the employees' wages.
 In the event of a contractor, the payment of wages to employees is the
responsibility of a person chosen by the contractor who is directly under his
control. If he fails to pay wages to employees, the person who hired them is
responsible for paying those wages.

The state government has the power to change the person responsible for the
payment of salaries in the railways, or the person responsible for daily-rated personnel in
the Public Works Department of the Central Government or the State Government, with
the approval of the central government.

FIXATION OF WAGE-PERIODS4

Every person who is responsible for the payment of salaries under section 3 must
establish payment schedules for such wages. A salary period of more than one month is
prohibited. This means that wages can only be paid on a daily, weekly, fortnightly (every
15 days), or monthly basis. According to this statute, the salary period for payment of
wages to employees by the employer should not exceed 30 days, or one month. Wages, on
the other hand, cannot be paid quarterly, half-yearly, or once a year.

3
Section 3 of The Payment Of Wages Act,1936.
4
Section 4 of The Payment Of Wages Act,1936.

7
TIME OF PAYMENT OF WAGES5

 If there are less than 1000 employees in a railway factory, industrial, or other
institution6, pay should be paid before the 7th day after the last day of the wage
period. (For example, wages should be paid within 7 days of the beginning of the
current month, i.e. before the 7th day if wages were paid on the 1st of the previous
month.)
 If there are more than 1000 employees in another railway factory, industrial, or
other facility, pay should be paid before the 10th day after the last day of the wage
period. (For example, wages should be paid within 10 days of the beginning of the
current month, i.e. before the 10th date if wages were paid on the 1st of the
previous month)
 For employees of the port area, mines, wharf, or jetty, wages should be paid before
the end of the 7th day after the last day of the wage period.

If an employee is terminated or removed from employment by the employer, his or

her wage should be paid within two days of the date of termination or removal.

For example If an employee was dismissed or removed from employment by the

employer on the 10th of this month, his wage should be paid within two days of the date
he was removed or terminated, i.e. by the 12th of this month, and this date should not be
exceeded7.

Except for the compensation of a terminated employee, all employees' wages shall
be paid by their employer on a working day only.

WAGES TO BE PAID IN CURRENT COIN OR CURRENCY NOTES OR BY

CHEQUE OR CREDITING IN BANK ACCOUNT8

All wages shall be paid in current coin or currency notes, by cheque, or by

crediting the wages into the employee's bank account: Provided, however, that the
5
Section 5 of The Payment Of Wages Act,1936.
6
Subs. by Act 38 of 1982, s. 6, for “industrial establishment” (w.e.f. 15-10-1982).
7
S.N.Misra, Labour and Industrial Law Central Law Publication, 28th Edition
8
Section 6 of The Payment Of Wages Act,1936.

8
appropriate Government may, by notification in the Official Gazette, specify the industrial
or other establishment, the employer of which shall pay the wages only by cheque or by
crediting the wages into the employee's bank account to every person employed in such
industrial or other establishment."

DEDUCTIONS WHICH MAY BE MADE FROM WAGES9

Employers should only make deductions in accordance with this statute when
paying wages to employees. The employer should not be able to make whatever
deductions he wants. Deductions are the amounts paid by an employee to his employer.

The following are not called as the deduction

 Employee increase has been halted.

 The employee's promotion has been halted.
 Lack of performance by the employee causes the incentive to be halted.
 The employee was demoted.
 Suspension of employment

The employer's activities should have a good and sufficient reason for them.

In the case of Janaki Ram Mills Vs Addl Commissioner For W.C10 The
deduction itself postulates certain entitlements on behalf of the workmen. Where on
the contrary exhibit R-3 prescribes a particular workload which workload is the basis
for the award of wages, for turning out the lesser workload, deduction as otherwise
the very basis for fixing the workload would be defeated. which is described under
exhibit R-3 could not and would not constitute any Not again is it necessary to state
that for giving less production there would be deduction of wages because the wages
are related to the production as would be obvious from exhibit R-3. Therefore, the
impugned order is liable to be set aside since it proceeds upon an erroneous basis that
Exhibit R-3 should state that for giving less production there will be corresponding
decrease in wages. whereas in the case of UOI Vs. Chhagan.11 If absence is not in

9
Section 7 of The Payment Of Wages Act,1936.
10
1997 35 FLR 404
11
1973 26 FLR 347

9
dispute, the deduction can be made by the employers and the authority cannot go into
the question of justification of absence

DEDUCTIONS12

Employer deductions should only be made in compliance with this act. The
following are the deductions that are said to be permitted under this act.

 Fines,
 Deductions for absence from duty,
 Deductions for damage to or loss of goods made by the employee due to his
negligence,
 Deductions for contributions to any insurance scheme framed by the Central
Government for the benefit of its employees with the acceptance of employee,
 Deductions for house-accommodation supplied by the employer or by government
or any housing board,
 Deductions made if any payment of any premium on his life insurance policy to
the Life Insurance Corporation with the acceptance of employee,
 Deductions for such amenities and services supplied by the employer as the State
Government or any officer,
 Deductions for recovery of advances connected with the excess payments or
advance payments of wages,
 Deductions for recovery of loans made from welfare labor fund,
 Deductions for recovery of loans granted for house-building or other purposes,
 Deductions of income-tax payable by the employed person,
 Deductions for recovery of losses sustained by a railway administration on account
of acceptance by the employee of fake currency,
 Deductions by order of a court,
 Deduction for payment of provident fund,
 Deductions for payments to co-operative societies approved by the State
Government,
 Deductions for payments to a scheme of insurance maintained by the Indian Post
Office

12
Section 7(2) of The Payment Of Wages Act,1936.

10
  Deduction made if any contribution made as fund to trade union with the
acceptance of employee,
 Deductions, for payment of insurance premium on Fidelity Guarantee Bonds with
the acceptance of employee,
 Deductions for recovery of losses sustained by a railway administration on account
of failure by the employee in collections of fares and charges,
 Deduction made if any contribution to the Prime Minister’s National Relief Fund
with the acceptance of employee,

It has been rightly observed in Divisional Accounts Officer Vs Dalsingar. 13 that

Section 7(2) of the Payment of Wages Act presupposes existence of an order issued
by a court of law or by a competent Authority which include officers of the Railway
Administration authorised under the rules, directing for the deduction of wages of the
employee. If no such order is produced or proved to have been issued, the authority
shall have full jurisdiction to reject the employer's plea. When the employer has not
filed any order as contemplated by Section 7(2) of the Act, he is not entitled to deduct
the wages.

LIMIT FOR DEDUCTIONS 14

The entire amount of deductions from employees' earnings should not exceed 50%,
although deductions from employees' wages can be up to 75% in the case of payments to
co-operative organizations.

FINES15

The employer should impose a fine on the employee with the agreement of the
state government or other appropriate body16. Before imposing a fine on an employee, the
employer should follow the rules outlined below.

13
1972 ALJ 56
14
Section 7(3) of The Payment Of Wages Act,1936.
15
Section 8 of The Payment Of Wages Act,1936.
16
K.D. Srivastava, commentaries on Payment of wages Act, 1936, Eastern Book
Company, 8 Edition

11
1. A penalties notice board for employees should be posted in the workplace, and it
should include actions that employees should not engage in.

2. No fine should be imposed on the employee until he provides an explanation and

justification for his actions or omissions.

3. The total amount of the fine shall not exceed 3% of his annual salary.

4. No fines shall be levied on employees under the age of fifteen.

5. A one-time fine should be imposed on the employee's wage for the conduct or omission
he committed.

6. Fines should not be collected from the employee in installments.

7. The fine must be paid within 60 days of the day the fine was imposed.

8. A fine should be issued for the employee's daily act or omission.

9. All fines collected from employees should be credited to the common fund and used for
employee benefit.

DEDUCTIONS FOR ABSENCE FROM DUTY17

 Employers can make deductions for an employee's absence from work for a single
day or for a period of time.
 The amount deducted from duty for absence should not be more than a sum that
bears the same connection to the wage payable in respect of the wage period as
this duration of absence does to such payment period 18 . (For example, if an
employee's monthly compensation is 6000/- and he is absent for one month.)
Absence from duty should not be deducted more than 6000/- from the salary.)

Employees who arrive at work and refuse to work for no apparent reason are
considered absent from duty. If ten or more people are away from work without notice or

17
Section 9 of The Payment Of Wages Act,1936.
18
K.D. Srivastava, commentaries on Payment of wages Act, 1936, Eastern Book
Company, 8 Edition

12
reasonable cause, the employer has the right to withdraw eight days' salary from their
pay19.

In V. Ramachandran v. Indian Bank,20 the Madras High Court held that the
principle to be followed is 'no work no pay', and in order to earn his wages an
employee will have to work, absence from duty would undoubtedly mean that the
employee had not worked during the period of absence and he is not entitled to wages,
for such a period of absence.

DEDUCTIONS FOR DAMAGE OR LOSS21

Employers should offer employees the opportunity to explain why and how the
damage or loss occurred, and deductions from employee wages should not exceed the
value or quantity of damage or loss suffered by the employee. All such deductions and
realizations shall be recorded in the form provided in a register to be kept by the person
responsible for the payment of wages under section 3.2223

DEDUCTIONS FOR SERVICES RENDERED 24

If the employee accepts the employer's house-accommodation amenity or service,

the employer is the only one who can take from the employee's pay. The amount deducted
shall not exceed the value of the house-accommodation amenity or service provided.

DEDUCTIONS FOR RECOVERY OF ADVANCES25

If the employer paid an advance to the employee before the employment began,
the employer should be reimbursed from the first payment of wages/salary to the
employee. However, the employer should not be able to recoup the advance granted for
the employee's travel expenses.

19
Section 9(2) of The Payment Of Wages Act,1936.
20
(1979) I LLJ 182
21
Section 10 of The Payment Of Wages Act,1936.
22
Section 10(2) of The Payment Of Wages Act,1936.
23
Dr. V.G.Goswami, Labour and Industrial Laws Central Law Agency, 10 Edition
24
Section 11 of The Payment Of Wages Act,1936.
25
Section 12 of The Payment Of Wages Act,1936.

13
DEDUCTIONS FOR RECOVERY OF LOANS26

Any rules set by the State Government governing the extent to which such loans
may be given and the rate of interest due thereon will apply to deductions for recovery of
loans provided for house-building or other purposes.

DEDUCTIONS FOR PAYMENTS TO CO-OPERATIVE SOCIETIES AND

INSURANCE SCHEMES27

Deductions for payments to co-operative societies, deductions for payments to the

Indian Post Office's insurance scheme, and employee acceptance deductions for payment
of any premium on his life insurance policy to the Life Insurance Corporation are subject
to any conditions imposed by the State Government.

MAINTENANCE OF REGISTERS AND RECORDS28

Every employer is required to keep such registers and records as may be

prescribed, including information about the people he employs, the job they do, the pay
they are paid, the deductions taken from their earnings, the receipts they provide, and other
information.

Every registration and record must be kept and preserved for three years from the
date of the last entry. It means that every transaction between the employer and the
employee should be recorded for three years.

INSPECTORS29

For the purposes of this act, the state government may designate an inspector.
Every Inspector shall be considered a public servant within the meaning of the Indian
Penal Code, 186030. The inspector of this act has the following authorities31.

26
Section 12A of The Payment Of Wages Act,1936.
27
Section 13 of The Payment Of Wages Act,1936.
28
Section 13A of The Payment Of Wages Act,1936.
29
Section 14 of The Payment Of Wages Act,1936.
30
Section 14(5) of The Payment Of Wages Act,1936.

14
  Inspectors can investigate and examine employers to see if they are following the
requirements set forth in this legislation.
 Inspector may enter, inspect, and search any premises of any railway, factory,
industrial, or other institution at any reasonable time for the purpose of carrying
out the objects of this Act with such assistance as he deems necessary.
 The inspector has the authority to supervise the payment of wages to persons
employed on any railway, in any factory, industrial, or other establishment, and
 To seize or copy any registers or documents, or portions thereof, that he considers
relevant in relation to an offence under this Act that he has reason to believe has
been committed by an employer.

FACILITIES TO BE AFFORDED TO INSPECTORS32

Every employer must provide all reasonable facilities for an Inspector to conduct
any entry, inspection, supervision, examination, or inquiry required by this Act.

CLAIMS ARISING OUT OF DEDUCTIONS FROM WAGES OR DELAY IN

PAYMENT OF WAGES AND PENALTY FOR MALICIOUS OR VEXATIOUS
CLAIMS33 (2005 AMENDMENTS)

A person named below will be chosen by the competent government to hear and
decide all claims arising from deductions from wages or delays in payment of wages of
persons hired or paid34, including all things ancillary to such claims.

(a) any Commissioner for Workmen's Compensation; or

(b) any officer of the Central Government with at least two years' experience performing
the functions of – I Regional Labor Commissioner; or (ii) Assistant Labor Commissioner;
or

(c) any officer of the State Government with at least two years' experience performing the
functions of – I Regional Labor Commissioner; or (ii) Assistant Labor Commissioner; or

31
Section 14(3) of The Payment Of Wages Act,1936.
32
Section 14A of The Payment Of Wages Act,1936.
33
Section 15 of The Payment Of Wages Act,1936.
34
S.N.Misra, Labour and Industrial Law Central Law Publication, 28th Edition

15
(d) a presiding officer of any Labor Court or Industrial Tribunal established under the
Industrial Disputes Act, 1947 (14 of 1947) or any corresponding law in force in the State
relating to the investigation and settlement of industrial disputes; or

(e) any other officer with experience as a Civil Court Judge or a Judicial Magistrate, as the
authority to hear and decide for any specified area all claims arising out of deductions from
wages, or delays in payment;

If the appropriate government deems it necessary, it may appoint more than one
authority for any given area and provide for the distribution or allotment of work to be
undertaken by them under this Act by general or special order.

Any lawyer, any Inspector under this Act, or an official of a registered trade union
authorized to write an application to the authority appointed by the government for
direction of payment of wages according to this act if any employer does anything
contrary to the provisions of this act, any unreasonable deduction from an employed
person's wages has been made, or any payment of wages has been delayed, in such case
any lawyer, any Inspector under this Act, or any official of a registered trade union
authorized to write an application to the authority appointed by government for direction
of payment of wages according to this act.

Any such claim must be submitted within 12 months of the date on which the
deduction from wages was made or the date on which the wages were due to be paid. If
there is a good reason, the time it takes to submit an application can be extended.

Following receipt of the application, the authority will hold a hearing with the
applicant and the employer or other person responsible for wage payment, and if required,
will undertake an investigation.

If an error with the employer is discovered, the authority may compel the
employer to pay the wage or return to the employee the amount deducted unfairly or pay
the delayed wages, as well as pay any other compensation the authority deems appropriate.
If there is a fair and genuine basis for the delay in the payment of wages, the employer will
not be liable for any compensation.

16
SINGLE APPLICATION RESPECT OF CLAIMS FROM UNPAID GROUP35

If there are numerous employees whose wages have not been paid, there is no need
for a large number of applications. As a result, all employees can submit a single
application to the authority for wage payment under this legislation.

APPEAL36

Parties who are displeased with the outcome might take their case to the district
court.

 If the application is denied by the above-mentioned agencies,

 The authorities ordered a compensation of more than 300/- rupees on the employer.
 If the amount withheld by the employer exceeds 25/- rupees for a single unpaid
employee. 50/- in the case of a large number of underpaid employees.

PENALTY FOR OFFENCES UNDER THE ACT37(2005 AMENDMENTS)

Reasons for penalty

 Delay in payment of wages

 Unreasonable deductions
 Excess deduction for house-accommodation amenity or service
 Failure to maintain record for collected fines from employee.
 Improper usage of fine collected from employees.
 Excess deduction for absence of duty
 Excess deduction for damage or loss to employer
 Failure of employee to display notice containing such abstracts of this Act and of
the rules made.

Punishable with fine which shall not be less than 1000/- rupees but which may extend
to 7500/- rupees. If Wage period exceed one month.

35
Section 16 of The Payment Of Wages Act,1936.
36
Section 17 of The Payment Of Wages Act,1936.
37
Section 20 of The Payment Of Wages Act,1936.

17
  Failure in payments of wages on a working day.
 Wages not paid in form of current coin or currency notes or in both.

Punishable with fine which may extend 3000/- rupees

 Whoever obstructs an Inspector in the discharge of his duties under this Act
 Whoever refuses or willfully neglects to afford an Inspector any reasonable facility
for making any entry, inspection, examination, supervision, or inquiry authorized
by or under this Act
 Whoever willfully refuses to produce on the demand of an Inspector any register
or other document.

Fines of not less than 1000/- rupees, but not more than 7500/- rupees, may be
imposed.

Whoever does the same offence more than once. Imprisonment for a period of not
less than one month, but not more than six months, and a fine of not less than 3750 rupees,
but not more than 20500 rupees.

PROCEDURE IN THE TRIAL OF OFFENCES38

 No Court will consider an objection against an individual for an offence under

subsection (1) of section 20 unless an application in regard to the realities
establishing the offence has been displayed under section 15 and has been allowed
entirely or partially, and the authority engaged under the last section of the
investigative Court has authorized the creation of the grievance.
 Before authorizing the creation of a protest against any individual for an offence
under subsection(1) of section 20, the power granted under section 15 or the
Appellate Court, all things considered, will give such individual a chance to show
cause why such approval should not be granted, and the assent will not be granted
if such individual fulfills the position or Court that his default was expected to—
 a bona fide error or bona fide dispute about the amount payable to the employed
individual, or the occurrence of a crisis, or the presence of exceptional
circumstances, such that the individual responsible for wage payment was unable,

38
Section 21 of The Payment Of Wages Act,1936.

18
 despite exercising reasonable persistence, to make prompt payment, or the failure
of the employed individual to apply for or acknowledge payment.

Apart from an objection filed by or with the assent of an Inspector under this Act,
no Court lobby takes notice of a repudiation of section 4 or section 6, or of a negation of
any standard established under section 26.

The Court will consider the amount of any payments already granted against the
defendant in any procedures conducted under section 15 when imposing any fine for an
offence under paragraph (1) of section 20.

BAR OF SUITS39

No Court will entertain any suit for the recovery of wages or any deduction from
compensation to the extent that the entirety so guaranteed-

 has shaped the subject of a course under section 15 for the offended party; or
 structures the subject of an application under section 15 which has been displayed
by the offended party and which is pending before the power selected under that
section or of intrigue under section 17; or
 has been decreed, in any proceeding unrelated to the offended party
 could have been recovered by an application under section 15.

CONTRACTING OUT40

Any agreement or arrangement, whether established before or after the start of this
Act, in which an employed individual relinquishes any privilege granted by this Act will
be null and void to the extent that it implies depriving him of such right.

DISPLAY BY NOTICE OF ABSTRACT OF THE ACT41

The person responsible for paying wages to individuals employed in a plant will
post a notice in the plant stating such summaries of this Act and the standards promulgated

39
Section 22 of The Payment Of Wages Act,1936.
40
Section 23 of The Payment Of Wages Act,1936.
41
Section 25 of The Payment Of Wages Act,1936.

19
there under in English and the language of the majority of the people working in the plant
as may be recommended.

PAYMENT OF UNDISBURSED WAGES IN CASE OF DEATH OF

EMPLOYED PERSON42

The employer pays the individual whom the employee has nominated.The
employer is relieved of his obligation to pay those wages if the wages are deposited with
the specified body.

If no such nomination has been made or if the amounts cannot be given to the
person so nominated for whatever reason, they must be deposited with the appropriate
authority, who will deal with the funds in the way provided.

RULE-MAKING POWER43

Specifically and without bias to the simplification of the previous power, rules
made under sub-section (2) may-

(a) require the upkeep of such records, registers, returns, and notification as are necessary
for the Act's authorization and recommend the structure thereof;

(b) necessitate the posting of notices defining the rates of wages payable to employees
employed on such premises in a visible location on-premises where work is done;

(c) to allow for the routine verification of weights, measures, and weighing equipment
used by employers to verify the wages of their employees;

(d) suggest a method for withdrawing from the days on which pay will be paid;

(e) suggest the position that can be favored under section 8 sub-section (1), as well as
deductions for which fines may be imposed;
42
Section 25A of The Payment Of Wages Act,1936.
43
Section 26 of The Payment Of Wages Act,1936.

20
(f) recommend a system for calculating the annoyance of fines under section 8 and
creating discounts under section 10;

(g) suggest the conditions under which deductions under section 9's proviso to subsection
(2) may be made;

(h) recommend the power capable of defending the causes for why fines will be consumed;

(i) in relation to clause (b) of section 12, define the extent to which advances may be made
and the portions by which they may be recovered;

(j) direct the scale of costs which might be permitted in procedures under this Act;

(k) prescribe the amount of court-charges payable in connection with any procedures
under this Act; and

(l) prescribe the amended works to be included in the notification required by section 25.

(4) The State Government may provide in any regulation made under this section that any
violation of the rule would be punished by a fine of up to 200 rupees.

(5) All guidelines issued under this section will be based on the state of previous
publication, and the date determined under clause (3) of section 23 of the General Clauses
Act, 1897, will not be less than a quarter of a year after the suggested principles drafting
was circulated.

CONCLUSION

The Payment of Wages Act makes an effort to unify the definition of “wages,”
which is a step toward providing more clarity. However, there is room for
misinterpretation given how the terms “employee” and “worker” are used within the
Act and how their separate definitions are arranged.

It’s no longer a problem, though. It is anticipated that the newly passed Labour Code,
which will be put into effect soon nationwide, will close any gaps left by the country’s
prior labour laws. By describing observers as facilitators rather than just inspectors,

21
the Code also seeks to alter the impression of the “Inspector Raj” in relation to the
government’s work guidelines.

There have been significant changes made to the offences and penalties under
the new Code. The reformative measures make a strong case for their necessity and
proportionality, with the intention of assisting rather than impeding corporate
leadership.

The Code encourages creativity in decisions about topics like wage payment
methods and assessment procedures that are intended to help it achieve its
administrative digitalisation goals.

Hence, it will be exciting to see how the new labour code (which is inspired by
the previous labour laws such as the Minimum Wages Act, Payment of Wage Act,
Factories Act, etc.) will improve the prevalent situation of labourers across the
country.

REFERENCES

1) Avtar Singh & Harpreet Kaur. Introduction to Labour and Industrial Law,
LexisNexis, 3rd Edition
2) S.N.Misra, Labour and Industrial Law Central Law Publication, 28th Edition
3) K.D. Srivastava, commentaries on Payment of wages Act, 1936, Eastern Book
Company, 8 Edition
4) Dr. V.G.Goswami, Labour and Industrial Laws Central Law Agency, 10 Edition
5) The Payment of wages Act, 1936
6) The Code on Wages, 2019
7) https://www.casemine.com
8) https://labour.gov.in

22
 LAW AND POLICY ON WAGES

DELAY AND DEDUCTIONS UNDER THE PAYMENT OF WAGES ACT, 1936

Under the guidance and supervision of

Dr. MAHALAKSHMI M.L., Ph.D.,

Submitted by
DEEPIKA.N
REG.NO: LAL2111
IIYEAR- LL.M–LABOUR AND ADMINISTRATIVE LAW

SCHOOL OF EXCELLENCE IN LAW(SOEL)

INTRODUCTION

The Payment of Wages Act, 1936 is a labor law in India that ensures that wages are
paid on time and in the correct amount. The act applies to all employees who are engaged in
industries, factories, railways, and other establishments. Deductions from wages are allowed
under the act, but they must meet certain conditions. Section 7 of the act allows for
deductions that are required by law, such as income tax or contributions to a provident fund.
Deductions can also be made for the employee's failure to work, as long as they are in
proportion to the amount of time missed. However, there are certain deductions that are
prohibited under the act. These include fines, deductions for damage or loss, and deductions
for services that are not provided by the employer. Additionally, no deductions can be made
without the employee's written consent. It's important to note that the total amount of
deductions made cannot exceed 50% of the employee's total wages. Failure to comply with
the Payment of Wages Act can result in penalties and legal action. Employers should ensure
that they are following the guidelines set out in the act to avoid any legal complications.

MEANING OF DEDUCTION IN WAGES

The Payment of Wages Act allows for certain deductions, such as those required by
law, such as income tax or contributions to a provident fund. Other deductions that are
permitted under the act include those for the employee's failure to work, as long as they are in
proportion to the amount of time missed. For example, if an employee misses a day of work,
the employer can deduct a day's wage from their salary.

However, there are certain deductions that are prohibited under the act. These include
fines, deductions for damage or loss, and deductions for services that are not provided by the
employer. Additionally, no deductions can be made without the employee's written consent.
The purpose of this act is to ensure that employees are paid their wages in a timely and fair
manner, and to prevent employers from making arbitrary or excessive deductions from an
employee's wages. Failure to comply with the Payment of Wages Act can result in penalties
and legal action, so it is essential for employers to understand and follow the guidelines set
out in the act to avoid any legal complications. Any loss of wages resulting from the
imposition, for good and sufficient cause, upon a person employed of any of the following
penalities, namely;

 With holding the increment or promotion including the stoppage of an

increment at an efficiency bar
  Reduction to a lower post or time scale or to a lower stage in timescale
 Suspension

In this way Section 7(1) of the Act provides that wages shall be paid without any deductions
except those authorised by or under this Act. Section 7 mentions certain items which alone
can be deducted from the wages. Anything outside that list is not liable to deduction. 1

It has been observed by the High Court of Orissa in Sambunath Battacharjee v.

Orient Paper Mills,2 that having made a contract to pay an employer cannot refuse to pay by
deduction from the pay or make delay in payment. With object of protecting classes of
employees as provided, by making available cheap and speedy remedy, Legislature brought
the Act to statute book creating special forum. Being a benevolent statute liberal
interpretation is to be given to deduction and delay. Non-payment of entire salary on the due
date is delay and non-payment of a part of whole of the salary for the period when payment is
to be made is deduction. It does not cover only admitted deduction or delayed payment.
Where entitlement to payment by an employee is disputed, Authority appointed under Section
15(1) can go into the merits of the dispute.

In Karnataka Central Co-operative Bank Ltd. v. Karpi,3 where pending

disciplinary enquiry an employee was kept under suspension and was paid 1/4th of the basic
salary by way of subsistence allowance. An application was filed under Section 15(2)
alleging that he was entitled to full salary and that the payment of 1/4th of the basic salary
amounted to deduction from wages. It has been held that in order to attract Section 15(2) it
must be shown that contrary to the provisions of the Act the deductions have been made from
the wages. Section 7 of the Act makes it clear that any loss of wages on account of
suspension shall not be deemed to be a deduction from wages within the meaning of Section
15(2). Subsistence allowance is given for enabling the employee to survive and face the
enquiry. Payment of such allowance is not on account of services rendered to the employer
and it is not given by way of wages. It will not amount to wages within the meaning of the
Act. Hence subsistence allowance does not amount to any loss of wages or to a deduction
from wages.

1
Hindustan Journals Ltd. V. Govind Ram, 1962 (2) L.L.J. 242
2
(1995) I L.L.J. 159
3
(1987) I L.L.J. (Karn.).
AUTHORIZED DEDUCTIONS

According to Section 7(2) of the Payment of Wages Act, deductions from an

employed person's salary may only be made in line with the rules of this Act and may only be
of the kind listed below:

(1) Fines

The Act's Section 8 establishes the following guidelines for the imposition of fines:

(1) It states that "No fine shall be imposed on any employed person unless in respect
of such acts and omissions on his part as the Employer may have specified by notice under
subsection, with the prior permission of the competent Government or of the prescribed
authority.4

(2) In the event of individuals working on a Railway (other than in a Factory), at the
prescribed location or places, a notice identifying such actions and omissions should be
displayed in the prescribed manner on the premises where the employment is carried out.

(3) No employee may receive a fine before being given the chance to contest it or in
any other way than in line with the procedure that may be established for the imposition of
penalties. The chance for the hired person to defend themselves from sanctions must be
provided.

(4) In any one pay period, the total fine cannot be more than 3% of the earnings owed
to the offender for that pay period.

(6) No fine imposed on an employee may be paid back to him in installments or after
90 days have passed from the day it was imposed.

(7) Each fine is considered to have been assessed on the day of the conduct or
omission for which it was levied.

All fines and their realisations must be recorded in a register kept by the person in
charge of paying wages in the manner that may be prescribed. Realizations must only be used
for activities that benefit the people working in the factory or establishment and that have
been authorised by the relevant authority.

4
The payment of wages act, 1936, section 7(2)
 The U.P.State has amended Section 8 and it has added a proviso that in case of any
factory or establishment to which the U.P. Labour Welfare Fund Act, 1965, applies, all such
realizations shall be paid into the fund established under the said Act. 5

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
realizations 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.6

Thus, in Bombay Dyeing and Manufacturing Co. Ltd. V. The state of Bombay,7 the fines
can be imposed only in accordance with the provisions of Section 8 as mentioned above and
under Section 8, the fines constitute a trust fund and the employers are bare trustees in respect
of such trust. It cannot be held that there is any such substantial deprivation of property as
would offend Article 31 (2) or such unreasonable interference with rights to property as
would infringe Article 19(1) (f) of the Constitution.

(2) Deductions for absence from duty

Section 7(2) (b) permits deductions for absence from duty, while Section 9 lays down
certain rules in this respect. First, Section 9 provides that 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. It means, deductions may be made from the
wages of a person who absents himself from the place of duty where he is required to work.

Secondly, the amount of such deductions 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 a large
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. It
means that the amount deducted for absence from duty shall not exceed a sum which bears
the same relationship to the wages payable in respect of the wage-period as this period of
absence does to such wage-period.

5
U.P. Labour Welfare Fund act, 1965, Section 23
6
Section 8 of Payment of Wages act,1936
7
AIR 1958 S.C.328
 Thirdly, subject to any rules made in this behalf by appropriate Government, if 10 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 8 days as may by any such terms of contract be due to
the employer in lieu of due notice. 8

For the purpose 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.

It may be remarked that under Section 7(2) (b) deductions can be made for absence
from duty. This absence is voluntary absence by the employee. It cannot be absence of the
employee when he is forced by circumstances, created by the employer from carrying out his
duties. Hence, no deduction from wages of an employee can be made under Section 7(2)
when the absence from duty is for the period between his dismissal and re-instatement as the
absence from duty cannot be said to be voluntary is stated in the case of Anant Ram v.
District Magistrate, Jodhpur.9

In case of an illegal strike under Section 22 of the Industrial Disputes Act, 1947, the
words without reasonable cause' in the proviso will have no meaning because there cannot be
a reasonable cause to something which the law treats as an illegality. Once it is held that the
strike was illegal, it cannot be justified by a reasonable cause for committing an illegality and
that being the case, in a case of an illegal strike in the public utility service, the question of
reasonable cause will not arise.34 Tool-down-strike amounts to absence from duty within the
meaning of Section 9. 10

In V. Ramachandran v. Indian Bank, 11 the Madras High Court held that the
principle to be followed is 'no work no pay', and in order to earn his wages an employee will
have to work, absence from duty would undoubtedly mean that the employee had not worked
during the period of absence and he is not entitled to wages, for such a period of absence.

8
The payment of wages Act 1936, section 9 (2)
9
AIR 1956 Raj.145.
10
1971 Lab I.VC.1339
11
(1979) I LLJ 182
 In Surendranathan Nair and others v. Senior Divisional Personnel Officer
(Rlys.) 12where some railway employees had applied for casual leave for participating in an
agitation against the Railway Administration. The Management refused to grant leave. Yet the
employees participated in the agitation and the Management cut wages for absence. The
revision was filed in the High Court. It was held that rejection of leave under the
circumstances was legal and proper. Absence from duty in such a situation, especially for the
purpose of participation in an agitation against the Management is unauthorised. An
unauthorised absentee has no right to compel the Management to disburse wages for the
period of unauthorised absence.

In Mineral Mines' Union v. Kundremukh Iron Ore Co. Ltd.13 where the appellant
Union served a notice on the respondent-management in terms of Section 22 of the Industrial
Disputes Act without specifying any date for the strike. Meanwhile, conciliation proceedings
started and it ended in failure. Thereafter, workers went on a strike. The Management termed
it illegal as a fresh notice was not given as the six week period had already ended and
deducted one day's wages for going on a day's illegal strike as also 8 days' wages as per the
provisions of the Payment of Wages Act. The Workers' Union filed a writ petition challenging
the order of the management.

It was held that the provisions of Section 22 of the Industrial Disputes Act are
mandatory. The date on which the workmen propose to go on strike has to be specified in the
notice contemplated by the said provision read with the relevant rules and the Form
prescribed for the notice. If by the time stated in Section 22 (1) (d) the date of the strike
specified in the notice of strike expires, the workmen have to issue a fresh notice as provided
under Section 22 of the Act once again, and all other statutory consequences flowing out of
the said statutory notice would follow on issuance of the said notice. In absence of a fresh
notice the strike resorted to by the workmen on 10th December, 1984 was illegal. Therefore
the deduction for the day of the strike was justified. The question as to the legality or
propriety of the deduction of 8 days' wages under Section 9(2) of the Payment of Wages Act
is left open for decision in case the workmen invoke any other available remedy.

12
(1998) I LLJ 227 (Kerala)
13
(1989) I LLJ 277 per Shivashankar Bhat, J.
 In General Manager, India Cements Ltd. v. Subramanian, N. S.,14 where
deduction for strike period was made. It was held by the High Court of Madras that there are
two prerequisites for invoking the provision of Section 9(2) of the Act.

(1) There must be a strike without notice and (2) there must be a strike without a
reasonable cause. In the instant case both the authorities: Prescribed Authority and the
Appellate Authority under Payment of Wages Act found that the strike was illegal and
therefore the management is right in deducting the wages. However, the enabling provision is
subject to the Rules made by the Government. Rule 16 of the Tamil Nadu Payment of Wages
Rules, 1937, prescribed the conditions subject to which deductions may be made under the
proviso to sub-section (2) of Section 9 of the Act.

Rule 16(2) (c) of the Payment of Wages Act states that no deduction for breach of
contract shall be made unless a notice has been displayed giving the names of persons from
whose wages deduction is proposed to be made, the number of days wages are to be deducted
and the conditions if any on which the deduction will be remitted. It is a cardinal rule of
interpretation that where a State provides that a particular thing should be done, it should be
done in the manner prescribed by the statute and not in any other way. The provisions of the
Act have not been complied with in their letter and spirit. The Act provides for payment of
wages to employed persons at regular intervals and without any unauthorised deductions. It is
a penal act, not an act of civil nature, to punish the employer for non-payment of wages.

(3) Deduction for damage to or loss of goods

Section 7(2) (c) provides for deductions 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
account, where such damage or loss is directly attributable to his neglect or default. Under
this section, deduction can be made for damage to or loss of goods only when such damage or
loss has incurred due to his neglect or default directly and not otherwise. Section 10 contains
certain detailed rules for this purpose. It says that a deduction under Section 7(2) (c) shall not
exceed the amount of the damage or loss caused to the employer by the neglect or default of
the employed person. It further provides that a deduction shall not be made until the
employed person has been given an opportunity of showing cause against the deduction, or
otherwise than inaccordance with such procedure as may be prescribed for the making of
such deductions All such deductions and all realisation thereof shall be recorded in a register

14
1998 (1) LLJ 584 (Madras)
to be kept by the person responsible for the payment of wages under Section 3 in such form
as may be prescribed.

In State of Madras v. K. Ramaswami,15 it has been observed that the word

'expressly' in Section 7(2) (c) of the Payment of Wages Act is not used in any technical sense
but is used in antithesis to the word 'impliedly' and only means 'clearly". The word 'custody'
in the section is not used in the sense of safe custody. Where the driver of a motor vehicle is
put in charge of the vehicle by the employer, though for use on the road, it is a case falling
within the words 'expressly entrusted to the employee for custody in Section 7(2) (c) of the
Payment of Wages Act and the employer is entitled to deduct the wages for any loss or
damage to the vehicle due to the neglect or default of the employee.

In a case Union of india v. kundan Lal, 16 where certain deductions were made by the
employer from the pay of an employee under Section 7(2) (c) and (h) and an application was
made under Section 15 of the Act, it was held that the Magistrate had a right to consider
whether the case had been proved under clause (c) or not, but he had no right to set aside an
order which was covered by clause (h) provided the rules applicable to the case had been
followed. The order contemplated in clause (h) is an order by a court or other authority, and
the mere passing of an order of deduction by a court or other authority is sufficient for
enabling the employer to make the deduction.

In M/s. Rampur Engineering Co. Ltd. V. City magistrate,17 it has been observed by
the Allahabad High Court that deductions for loss of electric bulbs and tools entrusted to the
employees even for their use are justified under Section 7(2) (c) of the Payment of Wages
Act. In the absence of any definition of 'goods' in the Payment of Wages Act, the word must
be deemed to have been used with the meaning given to it in the Sale of Goods Act. Thus, the
word 'goods' cannot be confined to what the company manufactures but must mean every
kind of movable property. The fact that the goods have been given to the employees for their
use would still be entrustment to them for the term 'expressly in the expression expressly
entrusted to the employed persons for custody" means clearly and the term 'custody merely
denotes custody. Hence the goods do not cease to be entrusted merely because they are given
to them for their use.

15
AIR 1958 Mad 585
16
AIR 1958 All 363
17
AIR 1966 All.544
 In Nathu Lal v. M.P. State Road Transport Corpn., where a driver was found
responsible for causing accident and was directed to pay Rs. 3700/- as damages to the
Transport Corporation and same was directed to be deducted in the monthly instalment of Rs.
25/- from his salary. It has been held that under Section 72) (c) of the Payment of Wages Act,
deduction for damage is permissible only when the damage or loss is directly attributable to
the negligence or default of employee and in order to hold a person or an employee negligent
it is essential that he should be afforded an opportunity of being heard against such a charge.
Even while interpreting Section 7(2) (e) one cannot overlook the basic principles of natural
justice and interpret the provisions divorced from reason. Rules of natural justice demand and
dictate that before attributing negligence or default to an employee he must be given an
opportunity of being heard against such charge of negligence or default. Accordingly, the
petition was allowed with costs.

(4) Deduction for Provident Fund

Section 7(2) (i) permits deduction for subscriptions to any provident fund or for
repayment of advances taken from any provident fund to which the Provident Funds Act,
1925, applies or any recognised provident fund as defined in Clause 38 of Section 2 of the
Income Tax Act, 1961, or any provident fund approved in this behalf by appropriate
Government, during the continuance of such approval, In view of this provision employer can
make deduction for subscription to such provident fund or for repayment of advance from
such provident fund. The provident fund I may be of specified nature. It may be fund to
which the Provident Funds Act, 1925, applies or it may be provident fund within the meaning
of Clause 38 of Section 2 of the Income Tax Act, 1961, or it may be provident fund which has
been approved by the appropriate Government in this behalf. The last category of the
provident fund requires one condition to be fulfilled that its deduction can be made during the
period in which such approval of the appropriate Government continues. The provident fund
constituted under the Employees' Provident Funds Act, 1925, shall be deemed to be a
recognised provident fund within the meaning of Chapter IX-A of the Income Tax Act, 1922,
and deductions towards subscriptions to or towards repayment of advances taken from the
said provident fund will be covered by this clause.

(5) Deductions for payments to Co-operative Societies

Section 7(2) (j) authorises the deductions for payments to co-operative societies
approved by appropriate Government or any officer specified by it in this behalf or to a
scheme of insurance maintained by the Indian Post Office. However, the deductions shall be
subject to such conditions as the appropriate Government may impose. 18

Such deductions falling under clause (j) of Section 7(2) would not require any order of a
court as would be the case in clause (h). There is, therefore, no analogy between the two
clauses, nor would it be correct to say that because clause (h) deals with deductions required
to be made by an order of the court, the deductions spoken of by clause (j) would not mean
deductions in the case of debts which are adjudged as such either under the provisions of the
Co-operative Societies Act or otherwise.

It may be further pointed out that the deductions for payment to co-operative societies
as contemplated by clause (j) of Section 7(2) of the Payment of Wages Act must mean
deductions for payment to a co-operative society in satisfaction of an outstanding debt or
demand and not otherwise. The requirement is that such deduction for payment must be for
satisfaction of a debt due to the society and not merely a claim or allegation by a society that
a member owes an amount to it. The requisition for payment by a co-operative society,
therefore, can be for a debt which is adjudged as such and which is still outstanding, and not
merely a mere allegation or a claim for a debt made by a co-operative society. 19

(6) Deductions with the consent of employed person

Section 7(2) (k) permits deductions made with the written authorization of the persons
employed for payment of any premium of his L.I.C. policy to the L.I.C of India established
under L.I.C. Act, 1956, or for the purchase of securities of the Government of India or of any
State Government or for being deposited in any Post Office Savings Bank in furtherance of
any Savings Scheme of any such Government. These deductions are also similarly subject to
conditions imposed by the Appropriate Government in this behalf. 20

(7) Deduction for Welfare Fund

The clause (kk) inserted by the amending Act 38 of 1982 permits deduction for
payment of his contribution to any fund constituted by the employer or a registered trade
union for welfare of the employed persons or members of their families, or both, and
approved by appropriate Government or any officer specified by it in this behalf provided
that there is written authorisation of the employed person concerned to this effect. Such

18
The Payment of wages Act, 1936, Section 13
19
Mazdoor Sahkari Bank Ltd. V. Jasmat Gopal and another, 1965 (2) LLJ 243 (HC)
20
Payment of Wages act, 1936, Section 13
deduction is allowed only during the continuance of approval of the appropriate Government
and not thereafter.

(8) Deduction for trade union membership fees

The clause (kkk), inserted by Act No. 38 of 1982 permits deduction for payment of
the fees payable by the employed person for membership of any trade union registered under
the Trade Unions Act, 1926 provided that the employed person authorises the deduction in
writing.

In Mansukh Gopinath Jadhav v. W. M. Bapat, 21 the question for decision was

whether a clause in a settlement between the employer and a union of employees providing
for the employer to deduct a certain amount from the wages of the employees and paying it to
the union is legal. It was held that there is nothing illegal in the action of employer or the
representative union in arriving at a settlement and the clause in the settlement providing for
such deduction, in no way contravenes Section 7 of the Act.

(9) Deductions for losses caused due to failure of proper collection charges

Section 7(2) (n) permits deductions for recovery of losses sustained by a Railway
administration on account of the failure of the employed person to invoice, to bill, to collect
or to account for the appropriate charges due to that administration, whether in respect of
fares, freight, demurrage, wharfage and cranage or in respect of sale of food in catering
establishments or in respect of sale of commodities in grain shops or otherwise.

However, such deductions cannot be made until the employed person has been given
an opportunity of showing cause against the deduction, or otherwise than in accordance with
prescribed procedure for the making of such deductions.

(10) Deduction for Prime Minister's National Relief Fund etc

Section 7(2) (p) permits deductions with the written authorization of the employed
person for contribution to the Prime Minister's National Relief Fund or to such other Fund as
the Central Government may, by notification in the Official Gazette, specify.

(11) Contribution to any Insurance Scheme

21
(1982) 1 LLJ 114 (Bom).
 Section 7 (2) (q) permits deductions for contributions to any insurance scheme framed
by the Central Government for the benefit of its employees. 22

In view of the above discussion, In K. P. Mushram v. B. C. Patil, 23 the court held that
it becomes quite clear that the list of deductions as contained in Section 7(2) is exhaustive
one, and the words "in accordance with the provisions of this Act." occurring under Section
7(2) refer to Sections 8 to 13 of this Act,62 which provide rules pertaining to deductions
permissible under Section 7(2) of the Act. Thus, anything outside the list of items under
Section 7(2) is not liable to deduction.

(12) Reversion to substantive post: Non-payment of wages for higher post : whether
deduction

In Railway Employee Co.Operative Credit Society Vs P.W. authority24 An

employee was reverted to his substantive post. He represented against the reversion but with
no success. He filed an application under Section 15 of the Act claiming that the higher pay
due to him had been deducted from his pay and should be allowed. It was held that the claim
did not fall within the scope of deduction of wages as it was a claim for allowing wages of a
higher post in which he was never employed having been reverted to his substantive post.
Non-payment of wages between the period of wrongful dismissal and reinstatement of an
employee is a case of deduction.

(13) Transfer to an area having lesser minimum wages: Payment of such reduced
wages: whether deduction

In Sri Ramadas Motor Transport Vs Authority of Pw Act.25 employer has a right

to transfer the employees anywhere he likes because that is one of the terms of their
employment. That does not, however, necessarily mean that they would be paid less than the
wages which the employer had accepted and paid to them for some time. While they may be
thus transferred, the obligation on the employer would make him continue to pay the wages
which he had accepted to pay. The transfer cannot produce an effect detrimental to the
interest of the employees. The transfer need not, therefore, be connected with the minimum

23
A.I.R.1952 Bom. 235
24
1971 LLJ 185
25
1968 2LLJ 500
wage. Merely because these drivers are transferred, they cannot be deprived of the wages
which they were already getting, which is higher than the minimum wage for the mofussil
area. The relevant provisions of the Payment of Wages Act cast an obligation on the
employer not to deduct anything unlawful. The employees were entitled to receive Rs 91 as
that was their wage accepted by the employer and the employees amounting to a contract
between them, it cannot be reduced and if it is so reduced, that would amount to unlawful
deduction within the meaning of Section 7. It does not amount to reclassification of the
drivers. When once the pay of the drivers was fixed by the employer himself at Rs 91 and
they were getting those wages, merely because the employer transfers them to another area,
the employer has no right to deduct anything from their wages on the ground that the
minimum wage in that area is less than what these drivers were paid.

(14) Reduction in wages due to fresh contract: Not a deduction

Section 7 provides for deductions that can lawfully be made from wages payable to
employees. Thus, except the deductions enumerated in sub-section (2) no other deduction can
be legally made. Should an employer terminate his existing contract with a servant, but offer
to re-employ him on a lower rate of pay, there is nothing is this Act against it, and no
question of deduction under the Act would arise, this was held in the case of Mir
Mohammad Haji Umar Vs Divisional Superintendent N.W Railways.26 A reduction of
certain amount per month from future pay of an employee as a penalty or punishment for the
delinquencies committed by him amounts, in the absence of a fresh contract of service at a
reduced rate of wages, to deduction within the meaning of Section 15 of the Act and as such
deduction is not covered by Sections 7 and 8. the employee is entitled to the refund of the
deduction.

The question arise in the case of Mysore Sugar Co Employee Union Vs

Commissioner of Labour27 as to the prohibition by Section 7 of the Payment of Wages Act
is a deduction from the wage which is payable. But if by a contract or agreement the wage
which is so payable becomes smaller and so the smaller sum of money is the wage payable it
would not be right to say that the substitution of a smaller wage for the higher wage is a
deduction within the meaning of Section 7. What is prohibited by that section is a deduction

26
AIR 1941 SIND 191
27
1968 1 LLJ 491
which is not authorised by the Act from a wage which is payable. But if the wage payable
becomes smaller by reason of a contract or agreement there would be no impermissible
deduction from that wage within the meaning of Section 7 since Section 7 concerns itself
with deductions from the wage which is claimable by employed persons

(15) Pay for notice period by employee: Deduction if valid

In Appadurai Vs Addl Commissioner Workman Compensation 28 Upholding the

employer's right to deduct wages where the employee resigned without the requisite notice, a
single Judge of the Madras High Court observed:

The standing order enjoins upon the employee to give fourteen days? notice. The
absence of any provision for deducting the salary for this period, if such notice is not given, is
no doubt not expressly stated in the standing order. It would, however, be meaningless to
insist upon the requirement of this notice unless there was a corresponding liability on the
employee to forego the wages for the period of the notice not given. The learned counsel for
the respondent suggested that under the rules framed under the Payment of Wages Act no
deduction for such reason is possible. Rule 16(2) states:

No deduction for breach of contract shall be made from the wages of any employed
person unless there is a provision in writing forming part of the terms of the contract of
employment requiring the employee to give notice of the termination of such employment
and the period of notice does not exceed.

It is not in dispute that the standing orders formed part of terms of the contract of
employment. What the rule requires in order to enable deduction in the wages claimed is only
that there should exist a provision for the giving of the notice. It does not further expressly
require that there should be a stipulation that for want of the notice the pay is deductible for
the period of the notice. That is inherent in the provision for the giving of the notice and the
rule clearly brings this out. It follows, therefore, that the view taken by the Additional
Commissioner for Workmen's Compensation that unless a standing order specifically
provided for withholding of the salary for the notice period such salary should not be
withheld or deducted is clearly erroneous.

28
1964 LLJ 704
CONCLUSION

In conclusion, the Payment of Wages Act is an essential piece of legislation that

protects the rights of employees and ensures timely payment of wages. Employers should
adhere to the provisions of the Act and ensure that employees are paid on time, and any
deductions made are done so in compliance with the law. Failure to comply with the Act can
result in legal action against the employer, which can lead to penalties and other
consequences. Therefore, it is essential for employers to understand and follow the provisions
of the Act to avoid any legal issues.

The provisions of the Code move trust in the business network and further clearness
can be acknowledged once the subordinate enactments and rules under the Code are set up. It
would likewise be interesting to measure how different codes identifying with government
disability, mechanical wellbeing and welfare, and modern relations will associate with the
Code of Wages once they are passed.