Overview: The Payment of Wages Act, 1936 | Labour and Industrial Law - CLAT PG PDF Download

Object of the Act

• The Payment of Wages Act ensures timely payment of wages to certain workers in industries, with a focus on preventing unauthorized deductions.
• It outlines the employer's responsibilities regarding wage payments, including wage periods, payment methods, and permissible deductions.
• The Act also establishes a mechanism for addressing complaints related to wage deductions and delays.
• It excludes workers earning Rs. 24,000 or more per month and ensures that workers cannot waive their rights under the Act.

Application of the Act

• The Act applies to the whole of India.
• Initially, it covers wage payments to persons employed in factories, on railways, and in specified industrial or other establishments.
• The State Government can extend the Act's provisions to other classes of workers in specific establishments.

Definitions

• Employed person (Section 2(i)): Includes the legal representative of a deceased employed person.
• Employer (Section 2(ia)): Includes the legal representative of a deceased employer.
• Industrial or other establishments (Section 2(il)): Refers to various services and establishments such as tramway, air transport, docks, mines, plantations, workshops, and others specified by the government.
• Wages (Section 2(vi)): Refers to all remuneration expressed in money terms, including salary, allowances, overtime pay, bonuses, and certain sums payable under law or contract, but excluding specific items like bonuses not part of the remuneration, value of amenities, and certain deductions.

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Responsibility for Payment of Wages

• Every employer is responsible for paying all wages required to be paid to persons employed by him.
• In the case of a factory, the manager is responsible for paying wages to employees.
• In industrial or other establishments, the person responsible for supervision is liable for wage payment.
• In railways, a nominated person by the railway administration is responsible for wage payment.
• In the case of a contractor, a designated person under the contractor is responsible for wage payment. If they fail, the person who employed the employees is liable for payment.

Fixation of Wage-periods

• Every person responsible for wage payment shall fix periods for wage payment.
• No wage-period shall exceed one month.
• Wages can be paid on daily, weekly, fortnightly, or monthly basis, but not on quarterly, half-yearly, or yearly basis.

Time of Payment of Wages

• In railway, factory, or industrial or other establishment with less than 1000 employees, wages should be paid within 7 days after the wage period.
• In other railway, factory, or industrial or other establishment with more than 1000 employees, wages should be paid within 10 days after the wage period.
• For employees in port area, mines, wharf or jetty, wages should be paid within 7 days after the wage period.
• For terminated or removed employees, wages should be paid within 2 days of termination.
• All wages should be paid on working days only, except for terminated employees.

Wages to be Paid in Current Coin or Currency Notes

• All wages shall be paid in current coin or currency notes or in both.
• With written authorization, employers may pay wages by cheque or by crediting to the employee's bank account.

Deductions Which May Be Made From Wages

• Employers can only make deductions from wages as specified in the Act.
• Deductions include fines, absence from duty, damage or loss of goods, house accommodation, amenities, recovery of advances, loans, income-tax, court orders, provident fund, and certain approved payments.
• The total deductions should not exceed 50% of wages, except for payments to co-operative societies where it can be up to 75%.

In the case of Align Components Pvt. Ltd., and another Vs. Union of India and others

• Managements were willing to offer work to workers, and workers were willing to perform the work.
• Restrictions on manufacturing activities were imposed to prevent the spread of Covid-19, leading to a reduction or shutdown of manufacturing activities.
• Managements requested exemption from paying monthly wages during the restriction period.
• Managements offered to pay 50% of gross wages or the minimum rates of wages prescribed under the Minimum Wages Act, whichever is higher.
• The court held that the petitioners should pay gross monthly wages to employees, except for conveyance allowance and food allowance.
• Workers were expected to report for duties as per shift schedules with adequate protection from Corona Virus infections.
• If workers voluntarily remained absent, management could deduct their wages for absence following legal procedures.

Fines: Section 8

• Employer Approval: Fines can only be imposed on employees with the approval of the state government or a prescribed authority.
• Notice Board: A notice board displaying the activities that may incur fines should be displayed in the workplace.
• Employee Explanation: Fines should not be imposed until the employee is given an opportunity to explain their actions.
• Limit on Fines: The total amount of fines should not exceed 3% of the employee's wage.
• Age Restriction: Fines cannot be imposed on employees under the age of 15 years.
• One-Time Fines: Fines should be imposed only once for each act or omission.
• No Installments: Fines should not be recovered in installments.
• Recovery Period: Fines should be recovered within 60 days from the date they were imposed.
• Timing of Fines: Fines should be imposed on the day the act or omission occurs.
• Common Fund: All fines collected should be credited to a common fund for the benefit of employees.

Deductions for Absence from Duty (Section 9)

• Deductions for absence from duty can be made by the employer for one day or any period of absence.
• The amount deducted for absence should not exceed a sum that bears the same relationship to the wage payable as the period of absence does to the wage-period.
• For example, if an employee's salary is ₹6000 per month and they are absent for the entire month, the deduction should not exceed ₹6000.
• If 10 or more employees absent from duty together without notice and without reasonable cause, the employer can deduct 8 days' wages from their wages.
• Employees present at the workplace but refusing to work without a valid reason will be considered absent from duty.

Deductions for Damage or Loss (Section 10)

• Employers should provide employees with a chance to explain the reasons for any damage or loss before making deductions from their wages.
• Deductions for damage or loss should not exceed the actual value or amount of the damage or loss caused by the employee.
• All deductions and recoveries should be recorded in a register maintained by the person responsible for wage payments.

Deductions for Services Rendered (Section 11)

• Deductions for house accommodation, amenities, or services provided by the employer can only be made if accepted by the employee.
• The deduction should not exceed the value of the house accommodation, amenity, or service supplied.

Deductions for Recovery of Advances (Section 12)

• Advances paid to employees before employment begins should be recovered from the first payment of wages or salary.
• Advances given for travel expenses should not be recovered.

Deductions for Recovery of Loans (Section 12A)

• Deductions for loans granted for house-building or other purposes are subject to State Government regulations regarding loan amounts and interest rates.

Deductions for Payments to Co-operative Societies and Insurance Schemes (Section 13)

• Deductions for payments to co-operative societies or insurance schemes are subject to conditions set by the State Government.

Maintenance of Registers and Records (Section 13A)

• Employers must maintain registers and records with details of employees, work performed, wages paid, deductions made, and receipts given.
• These records should be preserved for three years after the last entry.

Inspectors (Section 14)

• The State Government may appoint inspectors to ensure compliance with the Act.
• Inspectors have the authority to enter, inspect, and search premises, supervise wage payments, and seize relevant documents.
• Employers must provide inspectors with reasonable facilities for inspections.

Claims Arising Out of Deductions from Wages or Delay in Payment of Wages and Penalty for Malicious or Vexatious Claims (Section 15)

• An officer appointed by the appropriate government will hear and decide claims related to deductions from wages or delays in wage payments.
• The officer may be a Commissioner for Workmen's Compensation, a Regional Labour Commissioner, an Assistant Labour Commissioner, or a presiding officer of a Labour Court or Industrial Tribunal.
• If an employer violates the Act by making unreasonable deductions or delaying payments, a lawyer, inspector, or trade union official can file a claim on behalf of the employee.
• Claims must be filed within 12 months of the deduction or due payment date, but extensions may be granted for valid reasons.
• The authority will conduct a hearing and may order the employer to pay the owed wages or refund deducted amounts, along with compensation if applicable.
• No compensation is required if the employer had a valid reason for the delay.

Powers of Authorities Appointed Under Section 15 (Sec 18)

• Authorities appointed under Section 15 have the same powers as a Civil Court under the Code of Civil Procedure, 1908.
• They can take evidence, enforce the attendance of witnesses, and compel the production of documents.
• These authorities are considered Civil Courts for the purposes of Section 195 and Chapter XXVI of the Code of Criminal Procedure, 1973.

Appeal (Sec 17)

• Parties can appeal to the district court in the following situations:
• If the application is dismissed by the authorities.
• If the employer is imposed with compensation exceeding 300 rupees by the authorities.
• If the amount withheld by the employer exceeds 25 rupees for a single unpaid employee or 50 rupees in case of multiple unpaid employees.

Reasons for Penalty

• Delay in payment of wages.
• Unreasonable deductions.
• Excess deduction for absence of duty.
• Excess deduction for damage or loss to the employer.
• Excess deduction for house-accommodation amenity or service.
• Wage period exceeding one month.
• Failure in payments of wages on a working day.
• Wages not paid in the form of current coin or currency notes or both.
• Failure to maintain records for fines collected from employees.
• Improper usage of fines collected from employees.
• Failure to display notice containing abstracts of the Act and rules made.

Punishments and Penalties

• Delay in payment of wages, unreasonable deductions, or excess deductions can lead to a fine ranging from 1000 to 7500 rupees.
• Failure to pay wages on time or in the correct form may incur a fine of up to 3000 rupees.
• Obstructing an Inspector in their duties or refusing to provide requested documents can result in imprisonment from one to six months and a fine between 3750 and 22500 rupees.
• Repeating the same offense may lead to similar penalties as mentioned above.