Unit 4 Part A: The Payment of Wages Act, 1936
Q. Define wages' and 'industrial establishment' under the Payment of Wages Act, 1936. 2018
Q. Discuss the salient features of the Payment of Wages Act, 1936.
Q. What are the permissible deductions from wages under the Act? 2019, 2023
Q. Write a brief note on Responsibility for payment of wages under Payment of Wages Act, 1936. 2023
Q. Write a note on the employer's liability for paying wages. Is he entitled to make any deductions at the time of payment? 2016, 2023
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Features of the Payment of Wages Act, 1936
Salient Features of the Act are given below:
1. Obligations of Employers: Every employer is responsible for the payment of wages to all the employees that he employs. Additionally, apart from the Employer, all the person so named / person so responsible to the employer/the person so nominated shall also be responsible for such payment.
2. Wage Period: Every person responsible for Wage Payment shall fix periods in respect of which such wages shall be payable. No wage-period shall exceed one month.
3. Time and Mode of Payment of Wages: Every establishment having employees in excess of 1,000 persons shall pay the wages before the expiry of the 10th day. All other employers shall make the Wage payment by the expiry of 07th day.
4. Employers shall make the payment of wages in current currency notes i.e. cash or via Bank transfer.
5. Deductions from Wages: Employers shall ensure that wages are paid to all employees without deduction of any kind except those authorized by or under this Act.
Deduction includes the reduction of wages for the following:
- Fines
- Absence from duty
- Damage to or loss of goods including loss of money where such damage or loss is directly attributable to employee’s neglect or default
- Recovery of advances / loans and the interest due in respect thereof
- Adjustment of over-payments of wages
- Payments made by the employed person to the employer or his agent shall also be deemed to be a deduction from wages.
Deductions does not include following penalties (provided the rules w.r.t. penalty are in conformity with the requirements as specified by the State Government):
- Withholding of increment or promotion
- Reduction to a lower post
- Suspension
Applicability of the Payment of Wages Act, 1936
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.
- The Act does not apply to those whose monthly wage is Rs. 24,000/- or more.
Meaning of Wages under The Payment of Wages Act, 1936
Wage is monetary compensation or remuneration, personnel expenses, of the labor paid by an employer to the employees in exchange for work done. Wage may be calculated as a fixed amount for each task completed or at an hourly / daily rate / based on an easily measured quantity of work done.
Wages include all remunerations which are expressed in terms of money and “includes” the following:
- Amount payable under the terms of employment
- Payable under any award / settlement or order of a Court
- Paid as Overtime work or for holidays / leave period
- Payable on account of Termination of employment”
Wages does “not include” the following Payments:
- Bonus which does not form a part of remuneration
- Value of any house accommodation, supply of light, water, medical assistance etc.
- Any traveling concession
- Contribution payable by employer to any pension or provident fund
- Any sum paid to defray special expenses incurred as requirement of the Employment
- Gratuity payable on termination of employment
Meaning of Industrial Establishment under the Payment of Wages Act, 1936
"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.
Deductions from Wages Under the Payment of Wages Act, 1936
Section 7 of the Payment of Wages Act, 1936: Notwithstanding the provisions of the Railways Act, 1989 (24 of 1989), an employer must pay the wages of an employed person without deductions of any kind except those specified under the Payment of Wages Act, 1936. A deduction can be made only in the following manner.
1. Fines
2. Absence from duty
3. Damage to or loss of goods expressly entrusted in the employed person
4. House-accommodation or other amenities or services that the employer provides
It is important to note that the term ‘services‘ does not imply the supply of tools and also the raw materials required for fulfilling the job.
5. Recovery of Advances
- The recovery of loans made from any fund constituted for labour welfare
- Also, the recovery of loans granted for house-building or other purposes
6. The income tax that the employed person is liable to pay
7. Any deduction under the order of the court or any other competent authority
8. Provident fund – subscription and also the repayment of advances
9. Payments that the employee makes to cooperative societies
10. Payment of premium of the life insurance policy to the Life Insurance Corporation of India, of the employed person. Further, this requires written authorization from the person employed.
11. Payment of the contribution of the employed person towards any fund that the employer or the trade union constitutes. This also requires written authorization from the person employed.
12. Payment of the fees for the membership of any trade union registered under the Trade Union Act, 1926. Also, this requires written authorization from the person employed as well.
13. The payment of insurance premium on Fidelity Guarantee Bonds
14. Recovery of losses which the railway administration sustains on account of the employed person accepting counterfeit coins or mutilated or forged currency notes.
15. If the railway administration sustains losses due to the employed person failing to invoice or bill or collect or account for the appropriate charges, then the losses are recovered as deductions.
16. Recovery of losses which the railway administration sustains on account of the employed person incorrectly granting any rebates or refunds
17. A contribution that the employed person makes to the Prime Minister’s National Relief Fund or any similar Fund which is notified in the Official Gazette. Further, this needs written authorization from the person employed.
18. A contribution to an insurance scheme that the Central Government may make for its employees
Limit on Deductions from wages
As per Section 7(3) of the Payment of Wages Act, 1936, the total amount of deductions cannot exceed:
- 75 percent of the wages when the deductions are wholly or partly for payments to cooperative societies.
- 50 percent of the wages in every other case
Responsibility of Payment of Wages under the Payment of Wages Act, 1936
The obligation of the employer to pay wages
In Section 3 of the Payment of Wages Act, it is stated who is accountable for paying wages to the workers. Each and every worker that an employer engages or employs for labour purposes is entitled to receive payment of all wages due to them.
In other circumstances, if the employer identifies a person or, on the rare chance, realises that there is a person qualified for the job or is authorised for the same task, at that point, such a person is responsible for the payment of wages.
These points must be noted concerning the obligation of the employer to pay wages –
- Regardless of what is said in sub-section (1), the company is competent to pay any wages that are required under the Act.
- Also, if the contractual employee or any person to whom the employer designates to make the payment in favour of the workers forgets to do so, then the employer is the one to be held responsible.
- Each employer shall be held responsible for paying all necessary wages and benefits to the individuals they employ.
- The manager of that production facility will be responsible for paying the wages of the employees he employs as a result of the industrial setting.
- The obligation to supervise will be conditioned on the payment of remuneration to any staff they use or employ due to mechanical or other grounds.
- Concerning the payment of wages to the workers in the railway line department, an individual is appointed by the department for a specific region, and such a person is under the obligation to pay wages to the workers.
- A person appointed by a contractual worker who is directly under his supervision will be held responsible for the payment of the representatives’ wages on account of the contractual worker.
- In the event that he fails to pay wages to the representatives, the people who hired the workers could be held liable for the payment of their wages.
Fixation of wage-periods
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.
Time of Payment of Wages
If there are less than 1000 employees in a railway factory, industrial, or other institution, 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.
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 exceeded.
Except for the compensation of a terminated employee, all employees' wages shall be paid by their employer on a working day only.