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Payment of Wages Act

Payment of Wages Act in India: Know legalities of payment of wages in India, penalties and fines for non payment of wages and deductions to be made from wages in India.

A. Pay in India

What does the Indian Labour Law say about pay and minimum pay?


Our Constitution enjoins on the Government to endeavour to secure of work ensuring a decent standard of life and full enjoyment of leisure, social and cultural opportunities. Minimum Wages Act, 1948 was passed to provide fixing minimum wages in certain employments and provisions of the Act are intended to achieve the object of doing social justice to the workers employed in schedule employment by prescribing minimum rates of wages for them.

Along with above mentioned Act, there is the Payment of Wages Act, 1936 which guarantees payment of wages on time and without any deductions except those authorised under the Act.

Are contract workers covered under the Payment of Wages Act?

The provisions of the Act are duly applicable to the contract labour employed by any factory or establishment if the employment in which they are engaged is otherwise covered by the Payment of Wages Act.

What type of deductions can be made on pay?
The following mentioned are the main deductions that are allowed under the Payment of Wages Act, 1936-

  • Fines;
  • Deduction for the actual period of absence
  • Deduction for the damage or loss of goods expressly entrusted to the employed person;
  • Deduction for house accommodation;
  • Deduction for the amenities and service supplied by employer with agreement to the employee;
  • Deduction for recovery of advances and interest, and adjustment of overpayment;
  • Deductions for recovery of loans from any fund constituted for the welfare of labour as agreed between employer and employee;
  • Deduction for income tax;
  • Deduction on orders of a court or other authority;
  • Deduction for subscription and repayment of advance from any Provident Fund;
  • Deduction for payments to cooperative societies as agreed between employer and employee;
  • Deduction of premium for LIC policy on written authorization of the employed person; or any other investment for Post Office Saving Schemes;

However, as mentioned in section 7 of the Act, the total amount of deductions should not exceed 75% of wages of the employee in any wage period if whole or part of the deductions is meant for the payments to cooperative societies. In other cases it should not exceed 50%.

As per Payment of Wages Act, what are the procedure and provisions relating to fine deduction from the pay?
Incase of fines that need to be imposed on the employee it should only be for the acts and omissions that are mentioned in the list of which has been approved by the appropriate Government. Fines should not exceed 3% of the wages in a month. This needs to be recovered within 90 days of the date of act or omission, be imposed after a proper show cause procedure and cannot be imposed on an employee of less than 15 years of age.

Employers have compulsorily to maintain following registers in the prescribed forms-

  • Register of wages;
  • Register of fines;
  • Register of deduction for damages or loss
  • Register of advances.

What is said in collective agreements about pay and minimum pay?

As per the manner and procedure mentioned under the Minimum Wages Act, 1948 for fixation and revising of minimum wages, the Government appoints a committee which consists equal number of representatives of employers and employees in the scheduled employment and independent persons not exceeding one-third of total number nominated by Government. Committee makes the recommendation to the Government and on acceptance will be published in the Official Gazette and will come into force from the date of notification.

What is the provision relating to timely payment of wages to employees?

As per the provisions under Payment of Wages Act, 1936 wages needs to be paid-

  • Before the expiry of the 7th day after the last day of the wage period, where there are less than 1000 workers employed and in rest case on the 10th day;
  • In current coin or currency notes and by cheques or by crediting the wages in the employee’s bank account after obtaining his written authority;
  • On a working day;
  • Before the expiry of the second day, to the person whose employment is terminated.

What is the responsibility of the employer towards payment of wages to employee?

Every employer shall be responsible for the payment of all wages required to be paid under the Payment of Wages Act, 1936 to persons employed by him and in case of persons employed-

  • In the case of contractor, a person designated by such contractor who is directly under his charge;
  • A person designated by the employer as a person responsible for complying with the provisions of the Act

What penalties can be imposed on employers for contraventions of any provisions of the Act?

  • For contravention of Section 5, 7 8, 9, 10, 11, 12 and 13, which mentions timely payment of wages, payment of wages in current coins and currency, fines, deductions for damage/loss or recovery of advances and loans. In such case fine not less than Ra. 1000 which may extent to Rs. 5000. On subsequent conviction fine not less than Rs. 5000 may extend to Rs. 10000.
  • For failing to maintain registers, willfully refusing or without lawful excuse neglecting to furnish information or refusing to answer or willfully giving a false answer to any question necessary for obtaining any information required to be furnished under this Act. For such offences, fine shall not be less than Rs. 1000 and may be extended to Rs. 5000. For second or subsequent conviction fine not less than Rs. 5000 and may extend to Rs. 10000.
  • For willfully obstructing an Inspector in discharge of his duties and on refusal to produce of any register or other documents fine not less than Rs. 1000 extendable upto Rs. 5000. On subsequent conviction fine not less than Rs. 5000 and may be extended upto Rs. 10000.
  • On conviction for any offence and again guilty of contravention of same provision. Failing or neglecting to pay wages to any employee punishment of imprisonment not less than one month which may extend upto six months and fine not less than Rs. 2000 extendable upto Rs. 15000 may be done. Additional fine upto Rs. 100 for each day.

B. Payment of Minimum Wages in India

Are contract workers covered under the Minimum Wages Act?

The provisions of the Act are applicable to the contract labour if the employment in which they are engaged is duly covered by the Minimum Wages Act, 1948.

Is probationer entitled for minimum wages in India?

The probationer although not being a permanent employee performs same work as a regular employee and no such distinction has been made under the Minimum Wages Act, 1948 and thus he is entitled to minimum wages.

What penalties can be imposed on employers for contraventions of any provisions of the Minimum Wages Act?

  • Offences of employers such as paying his employees less than the minimum wages fixed to his class of work or fails to pay them overtime wages and for work done by them on the day of rest, etc. is punishable under Section 22 of Minimum Wages Act, 1948 by imprisonment upto six months or fine or both.
  • Section 22 B provides that cognizance of offence should be taken only when the Authority under Section 20 of the Act sanctions the application and the appropriate Government gives its sanction to file a complaint.
  • Section 22 C of the act clarifies who could be held guilty in case the employer happens to be an incorporated body, firm, association of persons, etc.
  • Section 22 D deals with the case of payments found due to an employee who is dead or not traceable.