PAYMENT OF WAGES LEGISLATION

Prof. Hiteshwari Jadeja

Why Wage Legislations were required?

• The main evils flowing from the unilateral determination of the mode and the manner of the wage payment by the employer were:

– Payment in Kind– When paid in cash, payment in illegal tender– Arbitrary deductions– Irregular payment and non payment

• Payment in kind: In the ancient economy, prior to the introduction of money, wages are made in kind. Chief among these evils were under weighment and payment in terms of inferior quality of goods or commodities supplied.

• When paid in cash, payment in illegal tender: Even when payment was made in cash, employers would prefer to pay, in many cases, in illegal tender and in the form of depreciated currency

• Arbitrary deductions: Besides making payment to workmen in illegal tender and depreciated currency, the employers also made arbitrary deduction from the wages of the workers

• Irregular payment and non payment:

the employers, in their desire to economise on working capital and to escape payment of interest on borrowed capital, would postpone payment of wages on various pretexts

PAYMENT OF WAGES ACT,1936

• This act intends to remedy the evil practices growing out the freedom of the employers to determine the mode and manner of wage payment as they like.

• The objectives are as follows.1.Ensurig regularity of payment2.Ensuring payment in legal tender3.Preventing arbitrary deductions 4.Restricting employers right to impose fines5.Providing remedy to workers

• It applies to wages payable to an employed person in respect of a wage period if such wages for that wage period do not exceed 6500 rupees per month or such other higher sum which, on the basis of figures of the Consumer Expenditure Survey published by the National sample survey Organization, the central Government may, after every 5 years, by notification in the official gazette, specify.

Applicability (section 1)

SCOPE

• The act applies to payment of wages to;

1.Persons employed in any factory

2.Persons employed upon any railway by a railway administration

3.Tramway service or motor transport service engaged in carrying passengers or goods

4.dock, wharf or jetty

5.Mine, quarry or oil field

6.plantation

7. Establishment where articles are produced.

8. Where work relating to construction, development of buildings, roads, bridges or canals is carried on

SCOPE(cont..)

Definition of “WAGES”[sec 2(h)] Wages means all remuneration capable of being

expressed in terms of money, which would, if terms of contract of employment, express or implied, were fulfilled, be payable to a person employed in respect of his employment or of work done in such employment and includes 

(A) Any remuneration payable under any award or settlement between the parties or order of court

(B) Any remuneration to which a person employed is entitled in respect of over time work or holidays or any leave period

(C) Any additional remuneration payable under the terms of employment

(D) Any other sum payable under law

Cont…..

• Following do not come under the definition of wages:

(A) Any Bonus(B) Value of house accomodation(C) Any contribution paid by the employer to any pension

or pf, and the interest which may have accrued(D) Any traveling allowance or value of any traveling

concession (E) Any sum paid to the employed person to defray

special expenses entailed on him by the nature by his employment

(F) Gratuity

Sec. 3 Responsibility for wage payment

• Every employer is ordinarily responsible for payment of wages to persons employed by him. However the manager of a factory is responsible for such payment in case of persons employed in the factory

Sec.4 Fixation of wage-periods

• (1) Every person responsible for the payment of wages under section 3 shall fix periods (in this Act referred to as wage periods) in respect of which such wages shall be payable. (2) No wage period shall exceed one month

Sec. 5 Time of payment of wages

• The wages of every person employed upon or in a railway, factory or industrial other establishment upon or in which less then 1000 persons are employed will have to be paid before the expiry of 7th day after the last day of the wage period, in respect of wages are payable.

• When 1000 or more employees are employed, wages are to be paid before the expiry of the tenth day after the last day of the wage period.

• In the case of persons employed on a dock, wharf or jetty or in a mine, balances of wages found due on completion of the final tonnage account of the ships or wagons loaded or unloaded will have to be paid before the expiry of the 7th day from the day of such completion

Sec. 6: Wages To Be Paid In Current Coins Or Currency

Notes • All wages shall be paid in current coins or

currency notes or in both. After obtaining the authorization, either by Cheque or by crediting the wages in employees banks Account

Sec 7: Permissible or Authorized Deductions

• The act requires the payment of wages free from any deductions except those authorised under it:

1. Deduction from fines: (i) No fine is to be imposed on any person until he has been given an opportunity to show a cause against the fine. (ii) No fine for the person who has not attained his 15th year.(iii) The total amount of fine which may be imposed in any one wage period on any employed person is not to exceed 3% of the wages payable to him in respect of that wage period. (Sec 8)

2. Deductions for absence from duty: Such deductions can be made only on the account of the absence of the employed person from the pace or places where he is require to work in accordance with the terms of his employment. The amt of such deduction is not to exceed the wage for the actual period of the unauthorised absence.  If ten or more persons absent without reasonable cause, deduction of wages upto 8 days. (Sec 9)

3. Deduction for damage of loss: Such deductions for damage to loss of goods expressly entrusted to the employed person for loss of money for which he is required to account, where such damage or loss is directly attributable to his neglect or default are also permissible under the act. (Sec 10)

4. Deduction for house accommodation and service is rendered:

deduction may also be made for house accommodation supplied

by the employer and for such amenities and services supplied by

the employer as state govt may authorized (sec 11)

5. Deduction for recovery of advances or for adjustment of over

payment of wages: the recovery of advance of money given

before employment begin is to be made from the first payment of

wages in respect of the complete wage period but no deduction is

to be made for advances for traveling expense (Sec 12)

6. Deduction for recovery of loans: this loan made from any fund

constituted for the welfare of labor subject to the rules frame by the

state govt relating to the extent to which such loans may be

granted and the rate of interest payable on the loans. (Sec 12A)

7. Deduction of income tax: payable by the employed person

8. Deduction required to be made by the order of a court: or

other authority competent to make such order.

9. Deduction for subscription to and for payment of advances: deductions for subscriptions to, and for repayment of advances from any provident fund

10. Deductions for payments to co-operative societies ad insurance schemes: deductions, made with the written authorisation of the person employed for payment of any premium on his life insurance policy to the Life Insurance Corporation Act of India

11. Deductions recovery of losses: losses sustained by a railway administration on account of acceptance by the employed person of counterfeit or base coins or mutilated or forged currency notes

12. Deductions, made with the written authorisation of the employed person, for contribution to the Prime Minister’s National Relief Fund or any other fund like Trade Union.

Total amount of deductions

• It should not exceed 75% of wages in any wage period in cases where such deductions are wholly or partly made for payment to cooperative societies, and 50% in other cases. When this exceeds, the excess may be recovered in prescribed manner.

Registers, records and notices

• Every employer is required to maintain such register and records giving particulars of persons employed, work performed by them, wages paid, deduction made from wages, receipts given.

Inspectors

• Inspector is appointed under factories act 1936, is an inspector for the purpose of the act in respect of all factories within the local limits appoint to him

• A) make such examination and inquiry to ascertain whether the provisions of act made are being observed

• B) supervise payment of wages to persons, employed upon any railway or factory establishment

• C) sees or take copy of such register in respect of an offence

• D) exercise other prescribed powers

Penalties

• Non payment of wages lead to fine not less than Rs 200 and not more than1000\

• Failure or refusal to maintain records- fine from 200 to 1000

• Not fulfilling inspector orders- 200 to 1000• Repetition of an offence- imprisonment for term

not less than 1 month but more than 6 months and fined 500 to 3000

• Failure or neglecting to pay wages- 100 for each day of default.

THANK YOU