Wage Legislation: Payment of

Wages Act, 1936

PGDM HR 2013-15 Term III
Industrial Relations I
6(2 Classes) /9 January 2014
Learning Outcomes
Develop working knowledge of remuneration, wage and social
security benefits related enactments
Learn the compliance framework connected with wage laws
in the country
Develop the managerial skill necessary to implement and
address issues concerning wages, bonus and gratuity
Establish linkage to the process of designing compensation
and benefit policy for an organisation
Appreciate the need for and limitations of wage limitations in
India


INTRODUCTION
Recommended by Royal Commission of labour to regulate delays &
deductions in payment of wages to industrial plantation labour.
Act came into force from 28
th
March 1937
On same grounds, Maharashtra Payment of Wages Rules passed in 1963.
This Act is in 3 parts:



Part I
Regulation and
payment of wages
Part II
Specifies head
under which
deductions can be
made
Part III
Provides
machinery
enforcing specific
claims
OBJECT OF THE ACT


To regulate the payment of wages to certain classes
of employed persons
To fix the wage period and the date for payment of
wages
To prevent unauthorised deductions
Commencement and Applicability of The
Act

The Act extends to whole of India
It comes into force from the notified date
The Act is applicable to
payment of wages to persons employed in factory, railway
establishment, railway administration and to industrial or
other establishment as specified in the Act
Wages payable to employed persons not exceeding ten
thousand rupees per month or higher sum if so notified by
the Central Government


Definitions
o appropriate Government means central government for
railways, air transport, mines and oil fields and state
government for other establishments
o Factory as defined in Factories Act, 1948
o Industrial or other establishment means
tramway service or motor transport service engaged in carrying
passengers or good or both by road for hire or reward
Air transport service, Dock, Wharf or Jetty, Inland vessel,
mechanically propelled
Mine, quarry or oil-field plantation
Workshop or other establishment etc.
Establishments engaged in construction, development or
maintenance of buildings, roads, bridges or canals etc

DEFINITIONS: WAGE
Wage means all remuneration payable in terms of
employment contract and includes
Remuneration payable under any award or settlement between the
parties or on orders of a Court
Payments for over time work, holiday or any leave period
Any additional remuneration under the terms of employment
Amounts payable in terms of contract in the event of termination
Amounts payable under a scheme framed by a law
Wage does not include
any bonus, contributions for pension fund or provident fund,
gratuity
travelling allowance or value for travel assistance, value of house
accommodation, medical assistance
Discussion Questions

What is the object of the Act ?
To which establishments is the Act applicable?
Will overtime payments be taken into account
for deciding the applicability of the Act ?

Responsibility for payment, wage period
and time for payment of wages
Responsibility for payment of wages is of the employer or his representative
Manager in the factory
Person responsible for supervision and control in respect of industrial or
other establishment
In case of contractor the person so authorised

Employer includes legal representative of deceased employer

Wages may be payable daily, weekly, fortnightly and monthly. Should not
extend a period longer than one month

For establishments employing less than 1000 person , the wage shall be paid
before expiry of the 7
th
day

For other establishments, the wage shall be paid before expiry of 10
th
day

In the event of termination payment will be made before the expiry of the
2
nd
working day from the day on which his service has been terminated



Wages to be Paid in Current Coins or
Currency Notes

a. All wages shall be paid in current coins or currency notes or
in both.
b. After obtaining the authorization, either by Cheque or by
crediting the wages in employees banks Account {Section 6}
Andhra Pradesh State Amendment: Provided further that the
State Government may, by notification in the Andhra Pradesh
Gazette, specify the industrial establishments , the employers of
which shall pay to the persons employed therein, the wages
either by cheque or by crediting the wages in their bank
account-[Vide Andhra Pradesh Act 15 of 1982, sec.2 (w.e.f 7-10-
1982).

Deductions from Wages

No Deductions can be made from wages unless authorised
under the Act
Any payment made by the employed person to the employer
shall amount to deductions for the purpose of the Act
Loss of wages on account of penalty withholding of
increment, withholding of promotion, reduction to a lower
grade and suspension, in accordance with rules in conformity
with law, shall not be construed to be deduction
Deduction from Wages
Following kinds of Deductions from wages of employed
persons are permissible under the Act :
Deduction for Fines
Only for such acts and omissions which are authorised
Acts of omission are required to be exhibited
Employed person shall be given the chance to show cause
Total amount of fine shall not exceed three percent of wages
All fines shall remain documented in a prescribed form
Fines so deducted shall be credited to a common fund for the staff
Fines will not be deducted in installments and will be deducted and
will be deducted before expiry of ninety days from the day of
imposition



Deductions from wages
Deductions for Damage/Loss- not more than the value of damage
and unless show cause made or in accordance with the procedure
so defined
Deduction for Recovery of Losses Sustained by Railway
Deduction for house, other amenities & services- if provided and
accepted
Deduction for recovery of advances
Deduction against loans for the welfare of labour
Deduction for loans granted for house building
Deduction for payment to co-operative societies
Total deductions shall not exceed seventy five percent of wages if
full or part payment is to co-operative societies
In other cases total deductions shall not exceed fifty percent
All deductions towards payments under law




Deductions from Wages
Deduction for Absence from Duty
For Absence( refuses to work in pursuance to a stay-in strike or other causes) for
whole or any part of the day from place of work
Amount of deduction may not have bearing to the wages payable and the wage
period
If ten or more persons acting in concert absent without reasonable cause,
deduction of wages up to 8 days is permissible {Section 9}
Deduction of Income Tax
Deduction under Orders of Court
Deduction for Contribution to Provident Fund
Deduction for Contribution to a Welfare Fund for Employed Person + Family
Members and to fund constituted by the Trade Union
Deduction of Fees for Membership to Trade Union on individual request
Deduction for Payment of Insurance Premia on written request
Deduction for Contribution to Prime Ministers National Relief Fund on written
authorisation
Discussion Questions

Can an employer fix the pay day on any day of
the month, if not, what are the limitations ?
What modes are prescribed for payment of
wages by the Act ?
Discuss the deductions authorised under the
Act ?
Employers Obligations
Every employer is required to maintain registers and records
containing particulars of employed persons, their work,
wages, deductions and other particulars in the form so
prescribed
These records will be preserved for three years
Every employer shall extend all reasonable facilities to an
inspector enabling him to discharge his responsibility
Every employer is obliged to comply with the decision of the
authority under section 15 in respect of claims arising out
deductions from wages or delay in payment of wages
Authorities for deciding on claims
Act provides for appointing persons as authorities to hear
and decide, for the specified area, such claims including
incidental matters from amongst the following:
Any Workmens Compensation Commissioner
Officer of central/state government not below Assistant Labour
Commissioner
Presiding Officer of any Labour Court or Industrial Tribunal
Officer with experience as judge of civil court or a judicial magistrate
Authorities under the Act shall have the powers of a civil court
for taking evidence, enforcing attendance of witnesses and
compelling production of documents


Claims: Submission and allied issues
For any unauthorised deduction or delay in wage payment,
employed person himself or a legal practitioner or a
registered trade union official or an Inspector or an individual
with the permission may seek remedy in writing
Claim will be made within twelve months except under special
circumstances
Decision will be made within three months except under
extraordinary situation provided both parties agree on a
bonafide reason
Authority is empowered to direct payment of compensation
up to ten times of deducted amount in addition to the refund
of deducted sum
Claims: Submission and allied issues
In case of delay in wage payment the compensation, besides
payment of wages due, will be up to three thousand rupees
but not less than fifteen hundred rupees
For delayed wage payments no compensation will be payable
if the delay is on account of bonafide error, bonafide dispute
regarding the amount, emergency or reluctance of the person
to accept payment
In case of a malicious application the applicant can be
penalised in accordance with the provisions of the Act-up to
three hundred seventy five rupees
Employer or the person responsible can be directed to pay
penalty in addition to the compensation
Claims: Submission and allied issues
Employed persons belonging to same group,
same establishment affected collectively for
same cause can submit one claim jointly
All such applications will be treated as a single
application
Compensation, if any, directed to be paid will
be paid to each of the claimant
Authorities under This Act
Inspectors
Inspector of Factories shall be the Inspector for Factories within the
limits physically defined for the purpose of this Act
For railway services exclusive Inspectors will be appointed
For other establishments inspectors with defined area of operation
will be appointed
Functions of the Inspector
To examine and inquire to ensure compliance
To enter, inspect and search premises of the factory, railways and
other establishments to ensure compliance
To supervise payment of wages
To access any record or register and/or to obtain statements for the
purpose of fulfillment of objects of the Act
To attach property conditionally




Offences and Penalties
For contravention of Section(s) 5 except sub-section 4; section 7-8,
section10 except sub-section (2) and section 11 to 13 of the Act, by any
person responsible for the payment of wages to an employed person will
be punishable with fine which shall not be less than one thousand five
hundred rupees but which may extend to seven thousand five hundred
rupees
For other acts falling in the category of the sub-sections omitted above the
fine may extend up to three thousand seven hundred and fifty rupees
Not nominating an authority is also an offence and is punishable with fine
up to three thousand rupees
Not maintaining required records or failing to produce is also an offence
and is punishable with fine up to one thousand five hundred rupees which
may extend up to seven thousand five hundred rupees
For second offence involving contravention of same provision may warrant
penalty including imprisonment
APPEAL
An appeal may be preferred against the following orders or directions of
the authority:-
an order dismissing the application or directing the employer or the
persons responsible for payment of wages, to refund the deductions
wrongfully made or to pay the delayed wages
an order directing payment of compensation to the employed person
under Section 15(3)
an order imposing penalty whether on the employee or the employer
under Section 15(4)
An appeal can be made within thirty days of the date on which the
order or direction was made along with a certificate to the effect that the
appellant has deposited the amount payable under the direction
The authority, whose orders have been appealed will withhold all
payments of sum in deposit with it

Special Provisions
Bar of suits
Protection of action taken in good faith
Contracting out
Payment of undisbursed wages in case of death of employed
person
To the person nominated in accordance with rules made under this
Act
If nomination is not made or for reasons it cannot be paid to the
nominee, amount will be deposited with Government
Delegation of powers to subordinate authority to exercise all
such powers so delegated
Special Provisions
Rule-making power for :
Maintenance of records & registers
Display of notices specifying wage rates
Regular inspection of measures used for ascertaining the wages of
employed persons
Manner of notifying wage payment days
Prescribing the authority to approve acts and omissions for which
fines can be imposed
Procedure for imposing fines
Prescribing conditions for effecting deductions
Defining an authority to decide on spending of proceeds of fines
Prescribing the powers of Inspectors



Discussions & Review
The strike must be both legal and justified to entitle the
workmen for wages of the strike period otherwise the striking
workers will not be entitled to wages on the principle of no
work no wages
Basic wages include salary and additional emoluments,
whatsoever payable, either in cash or kind
The principle of no work no wages will apply only when the
workers refuse to work of their own volition
No wages will be payable if the lock-out is legal
Discussions & Review
An employer can deduct wages when there is excess payment
to an employee
The principles of natural justice are not applicable for failure
to give notice for the normal deduction of wages for the
period of absence under section 9(1) of the Act
Principle of no work no pay will apply if an employee
overstays his leave
Cutting of full days wages will be justified when the bank
employees have partially struck work

Discussions & Review
Action of the employer deducting wages for the period for which
the office bearer of the union had gone to attend the proceedings
in court will not be justified
Ex-gratia payment made to the employees will not be wages under
the Act
An employer can deduct wages when there is excess payment to an
employee
The principles of natural justice are not applicable for failure to give
notice for the normal deduction of wages for the period of absence
under section 9(1) of the Act



OBLIGATIONS
To fix wage period not exceeding one month.
To pay wages in cash or by cheque after taking written authorization of the employed person
To pay wages on a working day
To make deductions permissible only under section 7 from wages of the employed person
To ensure the deductions do not exceed 75% where payment to a cooperative society has to
be made, in any other cases, deductions do not exceed 50%
Not to impose fines exceeding 3% of wages of the employees
To recover fines within 90 days of the date of offence.
To display abstract of the Act and the Rules in English and in language understood by the
majority of workmen.
To maintain:
a. Register of fines
b. Register of wages
c. Register of deductions for damage or loss
d. Register of advances

Assignment

Are the provisions of Section 9(2) of the Payment of Wages
Act permitting deduction in wages for the participation in
illegal strike affected by the provisions of Section 26 of the
Industrial Disputes Act providing for penalty for illegal strikes?
Search and go through some of the case laws and write your
answer based on the analysis .


Issues for clarification
Date of the Act coming into force
Who is the appropriate government in respect
of mines and oil fields
Examples of payments under government
scheme
Views on value of house and payment of HRA