The Payment of Wages Act, 1936 was enacted to ensure that wages are paid to employees in a regular and timely manner and to protect them from unauthorized deductions. Below are the key provisions regarding the fixation and deduction of wages.
1. Provisions Relating to Fixation of Wages
The Act mandates that every employer must follow a systematic procedure for fixing and paying wages to avoid ambiguity and exploitation.
Fixation of Wage Periods (Section 4): Every person responsible for the payment of wages must fix periods (known as 'wage periods') in respect of which such wages shall be payable. No wage period shall exceed one month. This means wages can be paid daily, weekly, or fortnightly, but never less frequently than once a month.
Time of Payment (Section 5):
Establishments with <1,000 persons: Wages must be paid before the expiry of the 7th day of the following month.
Establishments with >1,000 persons: Wages must be paid before the expiry of the 10th day of the following month.
Termination: If an employee is discharged or terminated, their earned wages must be paid before the expiry of the second working day from the day of termination.
Mode of Payment (Section 6): All wages must be paid in current coin or currency notes. However, the employer may, after obtaining written authorization from the employee, pay wages by cheque or by crediting the wages into the employee's bank account.
2. Provisions Relating to Deductions from Wages (Section 7 to 13)
The core strength of the Act lies in Section 7, which states that the wages of an employed person must be paid to them without deductions of any kind except those authorized by or under this Act.
Authorized Deductions
The Act provides an exhaustive list of deductions that an employer can legally make:
Fines (Section 8): Fines can only be imposed for acts and omissions specified by the employer with prior approval from the Government. The total amount of fine in one wage period cannot exceed 3% of the wages. Fines cannot be recovered by installments or after 90 days.
Absence from Duty (Section 9): Deductions may be made if the employee absents themselves from the place where they are required to work. The deduction must be proportionate to the period of absence.
Damage or Loss (Section 10): Deductions can be made for damage to or loss of goods expressly entrusted to the employed person for custody, or for loss of money for which they are required to account, where such damage/loss is directly attributable to their neglect or default.
Housing and Amenities: Deductions for house accommodation, water, electricity, or other amenities provided by the employer (provided the employee has accepted them).
Recovery of Advances/Loans (Sections 12 & 13): Deductions for the recovery of advances given before employment or for loans granted from any welfare fund.
Statutory Deductions: Deductions for Income Tax, Provident Fund (PF), and Insurance premiums.
Other Deductions: Payments to cooperative societies or fees for trade union membership (if authorized by the employee in writing).
3. Limit on Deductions
To prevent workers from taking home "zero" or negligible pay, Section 7(3) imposes a ceiling on the total amount of deductions:
In cases where deductions are made wholly or partly for payments to Cooperative Societies, the total deductions shall not exceed 75% of the wages.
In any other case, the total deductions shall not exceed 50% of the wages.
4. Responsibility and Maintenance of Records
Responsibility (Section 3): Every employer is responsible for the payment of all wages required to be paid under the Act. In factories, the "Manager" is held responsible.
Registers and Records (Section 13A): Every employer must maintain such registers and records giving particulars of persons employed, the work performed by them, the wages paid to them, and the deductions made from them. These must be preserved for a period of 3 years.
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