CLAT PG Exam > CLAT PG Notes > Labour and Industrial Law > Cheat Sheet: The Payment of wages Act, 1936
Cheat Sheet: The Payment of wages Act, 1936
1. Overview and Applicability
1.1 Objective
- Regulates payment of wages to certain classes of employed persons
- Ensures timely payment without unauthorized deductions
- Prevents exploitation of wage earners
1.2 Geographical and Temporal Extent
- Extends to whole of India
- Enacted: 23rd April 1936; Enforced: 28th March 1937
1.3 Applicability
| Category | Details |
|---|---|
| Persons Covered | Employed persons receiving wages up to Rs. 24,000 per month (as amended in 2017) |
| Establishments | Factories, railways, industrial/other establishments employing persons; amended to include all persons irrespective of wage limit for certain provisions |
| Exemptions | State Government may exempt establishments by notification |
2. Key Definitions (Section 2)
| Term | Definition |
|---|---|
| Wages | All remuneration (salary, allowances, overtime) expressed in money payable to employed person; excludes bonus not part of remuneration, gratuity, PF, retrenchment compensation, travel allowance, special expenses |
| Employed Person | Person employed for hire/reward in any establishment to do any skilled, semi-skilled, or unskilled work; includes persons on muster roll even if not working |
| Employer | Person responsible to employed person for payment of wages; includes manager, agent, or any person with control and supervision |
| Factory | As defined in Factories Act, 1948 |
| Industrial Establishment | Tramway service, motor transport, dock, wharf, jetty, inland vessel, mine, quarry, plantation, workshop or other establishment notified by State Government |
| Wage Period | Period in respect of which wages are ordinarily payable (daily, weekly, fortnightly, monthly) |
3. Responsibility for Payment of Wages (Section 3)
| Establishment Type | Person Responsible |
|---|---|
| Factory | Manager or person designated by employer |
| Industrial Establishment | Person responsible to employer for supervision and control; if no such person, the employer |
| Railway | Person nominated by railway administration |
| Contractor's Employment | Contractor; if contractor fails, employer is responsible |
4. Fixation of Wage Periods (Section 4)
- Every person employed must have wage periods fixed by employer
- Wage period shall not exceed one month
5. Time of Payment of Wages (Section 5)
| Type of Establishment | Payment Timeline |
|---|---|
| Less than 1,000 persons employed | Before 7th day after last day of wage period |
| 1,000 or more persons employed | Before 10th day after last day of wage period |
| Termination of Employment | Before 2nd working day from date of termination |
| Dock, Wharf, or Jetty | Before expiry of 2nd working day from day wages become payable |
| Railway (removed/dismissed) | Within specified period as per provisions |
6. Mode of Payment (Section 6)
6.1 General Rule
- Wages must be paid in current coin or currency notes
- Employer may pay by cheque or by crediting to bank account after obtaining written authorization from employed person
6.2 Electronic Mode
- Payment by cheque or direct bank credit permissible with employee's consent
7. Deductions from Wages (Sections 7-13)
7.1 Permissible Deductions (Section 7)
| Type of Deduction | Details |
|---|---|
| Fines | Must comply with Section 8 |
| Absence from Duty | Proportionate deduction for absence |
| Damage/Loss | For damage or loss of goods/property entrusted; must comply with Section 10 |
| House Accommodation | For house accommodation provided by employer; must not exceed prescribed limit |
| Amenities and Services | For amenities/services provided; must comply with Section 12 |
| Advances/Loans | Recovery of advances or loans; interest if any must be reasonable |
| Insurance Scheme | For payment to cooperative society, insurance scheme approved by State Government |
| Provident Fund/ESI | Contributions required by law |
| Court Orders | For compliance with court orders or for payment to cooperative societies |
| Income Tax | Deduction of income tax under Income Tax Act |
| Breach of Contract | Deductions for recovery of loss due to breach of contract (only in special employment) |
7.2 Deductions by Way of Fines (Section 8)
- Fines can be imposed only for such acts and omissions approved by State Government
- No fine on person below 15 years of age
- Total fine in wage period shall not exceed 3% of wages
- Employer must maintain register of fines showing name, amount, reason
- Notice of acts/omissions for which fine imposed must be displayed
7.3 Deductions for Absence (Section 9)
- Deduction proportionate to period of absence
- For absence without leave/without due notice: additional deduction up to 8 days' wages or actual absence period, whichever is less
7.4 Deductions for Damage or Loss (Section 10)
- Deduction allowed only if damage/loss directly attributable to neglect or default of employed person
- Total deduction shall not exceed amount of damage/loss
- Opportunity of showing cause against deduction must be given
- Deduction shall not exceed 5% of wages in wage period
- Deduction shall not be made until inquiry held after giving 7 days' notice
7.5 Deductions for Services/Amenities (Section 12)
- Allowed only if services/amenities are specified in rules by State Government
- Value of services must not exceed amounts prescribed
7.6 Limit on Deductions (Section 7)
- Total deductions shall not exceed 50% of wages in any wage period (increased to 75% if payable to cooperative society/insurance scheme)
8. Maintenance of Registers and Records (Section 13)
- Employer must maintain registers and records showing details of persons employed, work performed, wages paid, deductions made, and other particulars
- Form and manner prescribed by State Government
- Must display abstracts of Act and rules in prominent place at work premises
9. Inspectors (Sections 14-15)
9.1 Appointment
- Appropriate Government may appoint Inspectors
- Inspector has powers to examine registers, hear complaints, seize/take copies of documents
9.2 Powers of Inspector
- Enter, inspect, examine any premises at reasonable time
- Require production of registers, records, notices
- Examine any person found in premises
- Exercise prescribed powers
10. Claims and Authority (Sections 15-17)
10.1 Authority for Hearing Claims (Section 15)
- Appropriate Government appoints Authority (Presiding Officer) to hear claims arising out of deductions from wages or delay in payment
- Application must be made within 12 months from date of deduction or payment due
- Authority may direct refund of deduction or payment with compensation up to 10 times the amount
10.2 Limitation Period
- Application must be made within 12 months from date of accrual of claim
- Authority may entertain claim after limitation if sufficient cause shown
10.3 Powers of Authority (Section 15)
- Authority has powers of Civil Court: summoning witnesses, requiring production of documents, receiving evidence on affidavits
- Inquiry deemed judicial proceeding under Indian Penal Code, 1860
10.4 Procedure
- Authority shall follow summary procedure
- Opportunity of hearing to be given to both parties
- Decision to be given in writing with reasons
11. Appeals (Section 17)
| Aspect | Details |
|---|---|
| Appellate Authority | Prescribed by Appropriate Government; must not be below rank of District Judge |
| Time Limit | Within 30 days from date of direction/decision of Authority |
| Extended Time | Further 30 days if sufficient cause shown |
| Powers | May confirm, modify, or reverse decision; remand case for fresh consideration |
| Finality | Decision of Appellate Authority is final |
12. Penalties and Offences (Sections 20-21)
12.1 Offences
| Offence | Punishment |
|---|---|
| Unauthorized deduction from wages | Fine up to Rs. 7,500 |
| Delay in payment of wages | Fine up to Rs. 7,500 |
| Payment of wages otherwise than in prescribed manner | Fine up to Rs. 7,500 |
| Non-maintenance of registers/records | Fine up to Rs. 7,500 |
| Contravention of any provision or rule | Fine up to Rs. 7,500 |
12.2 Enhanced Penalty for Repeat Offence
- For second or subsequent conviction: imprisonment up to 1 month or fine up to Rs. 15,000 or both
12.3 Offence by Company (Section 20A)
- If offence committed by company: every person in charge of and responsible to company for conduct of business shall be deemed guilty
- Exception: if person proves he had no knowledge or exercised due diligence to prevent commission of offence
- Company and director/manager/officer liable if offence committed with consent or connivance
12.4 Cognizance (Section 22)
- Court shall not take cognizance of complaint except on complaint made by or with sanction of Inspector
- Court of Magistrate of First Class or higher has jurisdiction
- Limitation: within 6 months from date on which offence came to knowledge of Inspector
13. Special Provisions
13.1 Protection of Action (Section 23)
- No suit, prosecution, or legal proceeding shall lie against any person for anything done in good faith under this Act
13.2 Contracting Out (Section 24)
- Any contract or agreement whereby employed person relinquishes or reduces rights conferred by Act is null and void
13.3 Power to Make Rules (Section 26)
- Appropriate Government may make rules for carrying out purposes of Act
- Rules subject to previous publication; laid before State Legislature
13.4 Application of Fines (Section 11)
- Fines realized shall not be recovered from employed person until inquiry opportunity given
- Fines must be applied only for purposes beneficial to employed persons as approved by prescribed authority
13.5 Exemptions (Section 27)
- Appropriate Government may exempt any establishment or class of establishments from all or any provisions of Act
14. Important Case Law Principles
| Principle | Details |
|---|---|
| Wages Definition | Wages must be capable of being expressed in terms of money; remuneration payable under contract of employment |
| Burden of Proof | Once deduction admitted, burden on employer to prove deduction was authorized |
| Timely Payment | Even one day delay in payment constitutes offence; strict liability |
| Deduction Validity | Deductions not falling under permitted categories are illegal even if employee consents |
| Remedial Legislation | Act is beneficial legislation; must be construed liberally in favor of employees |
| Authorized Deductions | Only deductions expressly authorized under Sections 7-13 are permissible; list is exhaustive |
15. Key Amendments
15.1 2017 Amendment
- Wage ceiling increased from Rs. 18,000 to Rs. 24,000 per month
- Enhanced penalties for violations
15.2 Electronic Payment
- Mode of payment expanded to include electronic transfer with employee's consent
- Promotes cashless transactions and reduces disputes
16. Important Points for Exam
- Wage ceiling: Rs. 24,000 per month (post-2017 amendment)
- Wage period: shall not exceed 1 month
- Payment timeline: 7 days for establishments with less than 1,000 persons; 10 days for 1,000 or more
- Termination payment: within 2 working days
- Fine limit: maximum 3% of wages per wage period
- No fine on person below 15 years of age
- Total deductions: maximum 50% of wages (75% for cooperative society payments)
- Claim limitation: 12 months from date of accrual
- Appeal period: 30 days extendable by further 30 days
- Cognizance period: 6 months from knowledge of offence
- Compensation by Authority: up to 10 times the amount
- Act is beneficial legislation for protection of wage earners from exploitation
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Apr 20, 2026 Last updated
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