This chapter will enable students to explain:
- Explain the malpractices associated with the payment of wages prior to the enactment of the Payment of Wages Act, 1936
- Explain the objectives and scope of the Payment of Wages Act, 1936
- Understand the meaning and coverage of ‘wages’ as defined in the Payment of Wages Act, 1936
- Describe the responsibilities of the employer with regard to the mode and manner of wage payment
- Explain the deductions from wages as permissible under the Payment of Wages Act, 1936, along with the conditions for such deductions
Payment of wages legislation in India has been patterned after the Truck Acts of Great Britain, first enacted in 1831. The Act of 1831 with subsequent amendments still constitutes law in the country. The truck system prevalent in England for centuries involved remunerating workers in kind or any other way, but not in money. The more widely prevalent practice was to pay workers by giving them a share of what they helped to produce. The rise of manufacturing industry saw many company owners cashing in on their workers by paying them in full or in part with tokens, rather than coins. These tokens were exchangeable for goods at the company stores, often at highly inflated prices. The Truck Act, 1831, nullified this practice and prohibited contracts which directly or indirectly made the workman agree to take his wages otherwise than in cash. The bargain must be for wages payable in cash and must contain no terms binding the workman to expend his wages wholly at any particular place or in any particular manner. The employer must perform his side of contract strictly in accordance with its terms. The entire earnings of the workman must be paid in cash and the payment of wages actually made in goods or otherwise than in cash could be treated as gifts, and the whole of money wage recovered in a court of law.
The Truck Acts in force in the country also lay down the deductions which could be made from wages. These include: (i) fines for infringement of disciplinary rules, (ii) compensation for spoilt work or damage to materials, tools and equipments, (iii) charges for services rendered by the employer by way of supply of materials, light, heat, etc.,(iv) bad or negligent work, (v) damage to employer’s property (vi) unauthorized absence and (vii) recovery of advances. The Truck Acts also contain provisions relating to inspection, rights of workers and obligations of employers.
With the emergence of the industrial revolution and the consequent industrialization, large masses of the population lost their status as independent workers and became wage labourers. Wages have come to be the main source of their livelihood. Today, in the industrially developed countries, wage-labourers account for an overwhelming majority of the total labour force. In the early days of the process of industrialization within a capitalistic economic framework, it had always been presumed that the terms and conditions of employment, including the mode and manner of the payment of wage and its quantum, were determined by negotiations between the individual worker and his employer. It was also presumed that such negotiations resulted in a contract mutually acceptable. It was further believed that the worker would not accept an employment if he had found that the manner of the wage payment and its quantum were unsatisfactory. However, in reality, the strong economic position of the employer and the economic helplessness of the worker never allowed him a say in the matter. As a result, the employer unilaterally laid down the mode and manner of wage payment and also determined the wage rates in his own interests. The worker suffered both ways.
Gradually, the evils of this unilateral action on the part of the employers became so glaring that the state was forced to legislate in order to regulate the mode and manner of wage payment.
OBJECTIVES OF PAYMENT OF WAGES LEGISLATION
The main evils flowing from the unilateral determination of the mode and manner of wage payment by the employer were: payment in kind; when paid in cash, payment in illegal tender; arbitrary deductions; irregular payments; and non-payment altogether.
Payment in Kind
In the ancient economy, prior to the introduction of money, wages were paid in kind. That was characteristically true of many agricultural economies, and in fact, continues to exist in India till date. Even after the introduction of money, the system of payment of wages in kind persisted. The payment of wages in kind led to certain evil practices which are familiar to all those who have seen its operation in the Indian villages. Chief among these evils were under-weighment and payment in terms of inferior quality of goods or commodities supplied. Apart from these evils, the payment of wages in kind imposed a severe restriction on the freedom of the worker to spend his wages as he liked. The goods had to be directly consumed or if they are to be exchanged for money, the worker ran the danger of losing a part of the value of the wage-goods in the process of exchange. But there was also an advantage flowing from payment of wages in kind, that is, when prices started to rise and inflationary trends operated, the real wages did not depreciate. However, the disadvantages of and the evil practices sheltered under the system of wage payment in kind outweighed the advantage mentioned above. Hence, it became socially desirable that the mode and manner of wage payment be regulated by law, rather than be left to the choice of the employers.
Widely prevalent in England prior to the enactment of Truck Act, 1831, the system involved remunerating the workers in kind or in any other way, but not in money. In its early form, the practice was characterized by paying the workers a share of what they helped to produce. With the rise of the manufacturing industry, many companies started paying their workers in full or in part with tokens which were exchangeable at the company stores, often at highly inflated prices.
Even when payment was made in cash, employers would prefer to pay, in many cases, in illegal tender such as tokens under the truck system and in the form of depreciated currency. The workers had neither the means nor the will to resist such practices.
Besides making payment to workmen in illegal tender and depreciated currency, the employers also made arbitrary deduction from the wages of the workers. These deductions related primarily to fines for breach of discipline, compensation to the master for spoilt work or damage done to materials, and charges for materials, tools, services, and others supplied by the employer; but on many occasions arbitrariness was exercised both in the frequency and amount of wage deductions.
Fines were imposed on slight infringements of the factory rules and for acts or omissions arbitrarily decided by the employers. These acts, omissions and commissions were not specified in many cases and sometimes, fines were imposed even when no damage or loss or interruption or hindrance was caused to the employer or to his business.
Arbitrary deductions were also made in respect of bad or negligent work or damage to the materials or other property of the employer. In many cases, these deductions were unfair and unreasonable and no particulars showing the acts or omissions for which deductions were made were furnished by the employers. Moreover, on many occasions, the amount of deduction far exceeded the actual or estimated damage or loss occasioned to the employer by the act or omission of the workman.
It has been the general practice of the employers to deduct certain amount from the wages of the workmen with respect to the use or supply of materials, tools, machines and other amenities. In the absence of any control by the state, the employers charged excessive amounts in comparison to the actual value of these materials and services supplied to the workmen. Apart from these, deductions were also made for charitable purposes without obtaining the consent of the workmen concerned and without any guarantee that the amount so deducted would be spent on purposes for which they were meant. As a result of these deductions, the quantum of wages received by the worker was much less than what he actually earned on the basis of wage rates decided upon at the time of employment.
Irregular Payment and Non-payment Altogether
The employers, in their desire to economize on working capital and to escape payment of interest on borrowed capital, would postpone payment of wages on various pretexts. There was no guarantee that payment would be made even at the end of the various postponements. In many cases, the employers withheld paying wages altogether depriving the workers of their hard-earned income. Illiterate and ignorant as they were, many workers were helpless in absence of any trade union or legal support to protest against these unjust practices of the employers. Under the Common Law they could, of course, go to court of law and file a civil suit for damages, which for them, would be like jumping from the frying pan into the fire. Thus, they could do nothing but meekly submit to the mighty employers.
A system of laws, especially in England and extended to its colonies, that have been developed from customs and from decisions made by judges, not created by Parliament.
Gradually, there was a realization of the injustice involved in the situation and the state was forced to come to the rescue of the workers and such legislations as the Truck Acts in Great Britain and Payment of Wages Act in India, were enacted.
The widespread existence of numerous evils, as had been continuously alleged by trade unions and social workers, was confirmed by the findings of a committee appointed by the Government of India in 1925. With a view to removing the malpractices, legislative proposals were formulated in 1928, but were subsequently placed before the Royal Commission on Labour in 1929 for reconsideration. The Royal Commission, after examining the connected problems, made several recommendations, on the basis of which the Payment of Wages Act, 1936, the first legislation of its kind in India, was enacted. The Act, with subsequent amendments, is still in force in the country.
As has been pointed out earlier in the introduction to this chapter, the Act intends to remedy the evil practices growing out of the freedom of the employers to determine the mode and manner of wage payment as they liked. The objectives of the Act can be grouped under the following heads according to the evils which they seek to remedy or the benefits that they intend to confer:
- Ensuring regularity of payment
- Ensuring payment in legal tender
- Preventing arbitrary deductions
- Restricting employers’ right to impose fines
- Providing remedy to workers
In order that the due wages are paid in time and the payment is not postponed indefinitely, the Act puts the employers under a legal obligation to fix a wage period, at the end of which, they are liable for the payment of wages. With a view to guaranteeing that the payment is made in legal tender, the Act makes the employers legally responsible for the payment of wages in prescribed manner only. In order that the employers are prohibited from making arbitrary deductions, the Act lays down the authorized deductions and restricts the employers’ right to make any other deductions. In order to ensure that the employers do not impose arbitrary fines and collect them as they like, the Act restricts their rights in this regard. Finally, in order that the workers have an easy and quick remedy against the violation of their rights by the employers, the Act provides for an inspectorate and appointment of Authority and Appellate Authority which they can utilize. The institution of an inspectorate to prevent and institute proceedings against the employers for violating the provisions of the Act and denying the workers their due and appointment of Authorities to hear and decide the claims arising out of deductions from, or delay in, payment of wages are a real source of help to the mass of workers. Workers no longer need resort to the time-consuming and expensive litigations in the courts of law for claiming their dues from their defaulting employers.
The main provisions of the Act as they stand amended up-to-date are summarized below.
The Act applies to payment of wages to:
- Persons employed in any factory.
- Persons employed upon any railway by a railway administration or either directly or through a subcontractor, by a person fulfilling a contract with a railway administration.
- Persons employed in any of the following industrial or other establishments:
- Tramway service or motor transport service engaged in carrying passengers or goods or both by road for hire or reward
- Air transport service other than such service belonging to or exclusively employed in the military, naval or air forces of the union or the civil aviation department of the government of India
- Dock, wharf or jetty
- Inland vessel, mechanically propelled
- Mine, quarry or oil-field
- Workshop or other establishment in which articles are produced, adapted or manufactured, with a view to their use, transport or sale
- Establishment in which any work relating to the construction, development or maintenance of buildings, roads, bridges or canals or relating to operations connected with navigation, irrigation or the supply of water or relating to the generation, transmission and distribution of electricity or any other form of power is being carried on
- Any other establishment or class of establishments which the appropriate government may, having regard to its nature, the need for protection of persons employed therein and other relevant circumstances, specify by notification in the official gazette.
The appropriate government in relation to railways, air transport services, mines and oilfields is the central government, and in relation to all other cases, the state government.
The wage ceiling for coverage under the Act was originally 200 per month, which was raised to 400 and in 1982 to 1,600 per month. The ceiling was raised to 6,500 per month in 2002. All these wage ceilings were fixed after amendments of the Act, which consumed a lot of time and involved uncertainties. An amendment of the Act in 2005 empowered the central government to increase the ceiling in future by way of notification. In pursuance of this power, the central government enhanced the ceiling to 10,000 per month with effect from August 2007.
Definition of ‘Wages’
The term ‘wages’ as defined in the Act is reproduced in Box 17.1.
DEFINITION OF ‘WAGES’ UNDER THE PAYMENT OF WAGES ACT, 1936
The term ‘wages’ has been defined as all remuneration (whether by way of salary, allowances or otherwise) expressed in terms of money or capable of being so expressed which would, if the terms 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 the following:
Any remuneration payable under any award or settlement between the parties or order of a court.
Any remuneration to which the person employed is entitled in respect of overtime work or holidays or any leave period.
Any additional remuneration payable under the terms of employment (whether called a bonus or by any other name).
Any sum which by reason of the termination of employment of the person employed is payable under any law, contract or instrument which provides for the payment of such sum, whether with or without deductions, but does not provide for the time within which the payment is to be made.
Any sum to which the person employed is entitled under any scheme framed under any law for the time being in force.
The following do not come under the definition of wages:
Any bonus (whether under a scheme of profit-sharing or otherwise) which does not form part of the remuneration payable under the terms of employment or which is not payable under any award or settlement between the parties or order of a court.
The value of any house accommodation, or of the supply of light, water, medical attendance or other amenity or of any service excluded from the computation of wages by a general or special order of the state government.
Any contribution paid by the employer to any pension or provident fund, and the interest which may have accrued.
Any travelling allowance or the value of any travelling concession.
Any sum paid to the employed person to defray special expenses entailed on him by the nature of his employment.
Any gratuity payable on the termination of employment in cases other than those specified in sub-head (d) [Sec.2 (vi)].
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 (otherwise than by a contractor) in the factory. In case of persons employed in industrial or other establishments (otherwise than by a contractor) the person responsible to the employer for the supervision and control of the establishment and in case of persons employed upon railways (otherwise than in factories), the person nominated by railway administration for the local area are responsible for payment of wages. In case of a contractor, a person designated by such contractor who is directly under his charge, and in any other case, the person designated by the employer are responsible for wage payment [Sec.3].
Fixation of Wages Period
The person responsible for payment of wages has to fix wage periods in respect of which wages are payable, but no wage period is to exceed 1 month [Sec.4].
Time of Payment of Wages
The wages of every person employed upon or in any railway, factory or industrial or other establishment upon or in which less than one thousand persons are employed will have to be paid before the expiry of the seventh day after the last day of the wage period, in respect of which wages are payable. Where one thousand or more persons are employed, wages are to be paid before the expiry of the 10th day after the last day of the wage period. However, in the case of persons employed on a dock, wharf or jetty or in a mine, balance of wages found due on completion of the final tonnage account of the ship or wagons loaded or unloaded, as the case may be, will have to be paid before the expiry of the seventh day from the day of such completion. In case the employment of any person is terminated by or on behalf of the employer, the wages earned by him will have to be paid before the expiry of the second working day from the day on which his employment is terminated. Where the employment of any person in an establishment is terminated due to the closure of the establishment for any reason other than the weekly or other recognized holiday, the wages earned by him will have to be paid before the expiry of the second day on which his employment is so terminated. Every such payment is to be made on a working day. The state government is empowered to make exempting orders subject to specified conditions [Sec.5].
Payment in Legal Tender
All wages are to be paid in current coins or currency notes or both. However, on the worker’s written authorization payment may also be made by cheque or by crediting the wages in his bank account [Sec.6].
Money, mainly in the form of coins and currency notes, that can be legally used to pay for things in a particular country.
The Act requires the payment of wages free from any deductions except those authorized under it. The permissible deductions under the Act are discussed below.
- Deductions for Fines: Deductions with respect to fines are authorized under the Act but several conditions have to be fulfilled before they are made. (i) In the first place, fine can be imposed on any employed person only in respect of such acts and omissions on his part which have been specified by notice after the previous approval of the state government or of the prescribed authority. The notice specifying such acts and omissions has to be exhibited in the prescribed manner on the premises in which employment is carried on. (ii) No fine is to be imposed on any employed person until he has been given an opportunity to show cause against the fine. A procedure may also be prescribed for the imposition of fines. (iii) No fine is to be imposed on any person who has not attained his 15th year of age. (iv)The total amount of fine which may be imposed in any one wage period on any employed person is not to exceed three per cent of the wages payable to him in respect of that wage period. (v) Fine imposed on any employed person is not recoverable from him by instalments or after the expiry of 90 days from the day on which it was imposed and every fine is to be deemed to have been imposed on the date of the act or omission in respect of which it was imposed. (vi) All fines and realizations have to be recorded in a prescribed register and all such realizations will have to be applied only to purposes beneficial to the persons employed in the factory or establishment as are approved by the prescribed authority [Secs.7(a), 8].
- Deductions for Absence from Duty: The Act also authorizes deductions with respect to absence from duty. Such deductions can be made only on account of the absence of an employed person from the place or places where he is required to work in accordance with the terms of his employment. The amount of such deduction is not to exceed the wage for the actual period of unauthorized absence. If 10 or more persons acting in concert, absent themselves without due notice and without reasonable cause, such a deduction for absence from duty may include such amount not exceeding their wages for 8 days as may by any such terms be due to the employer in lieu of the notice as required under the terms of contract of employment, but these provisions are subject to relevant rules made by the state government. An employed person is deemed to be absent from the place where he is required to work, if although present in such place, he refuses in pursuance of a stay-in-strike or for any other unreasonable cause to carry out his work [Secs.7(b), 9].
- Deductions for Damage or Loss: Deductions for damage to or loss of goods expressly entrusted to the employed person for custody or 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. However, the amount of such deduction is not to exceed the amount of the damage or loss caused to the employer. Such a deduction is not to be made until the employed person has been given an opportunity of showing cause against the deduction. All the deductions and realizations have to be recorded in a prescribed register [Secs.7(c), 10].
- Deductions for House Accommodation and Services Rendered: Deductions may also be made for house accommodation supplied by the employer and for such amenities and services supplied by the employer as the state government may authorize. Deductions for the services rendered can be made only when the employed person has accepted the house accommodation, amenity or service as a term of employment. The amount of such deductions is not to exceed the value of the house accommodation, amenity or services supplied. The state government is empowered to prescribe conditions subject to which deductions for services can be made [Secs.7(d) (e),11].
- Deductions for Recovery of Advances or for Adjustment of Over-payment for Wages: Deductions for recovery of advances or for adjustment of over-payments of wages are also permissible under the Act. However, the recovery of an advance of money given before employment began is to be made from the first payment of wages in respect of a complete wage period but no deduction is to be made for advances for travelling expenses. The recovery of advances of money given after employment began and of wages not already earned is subject to conditions prescribed by the state government [Secs.7(f), 12].
- Deductions for Recovery of Loans: The Act authorizes deductions for recovery of loans made from any fund constituted for the welfare of labour subject to the rules framed by the state government relating to the extent to which such loans may be granted and the rate of interest payable on the loans. Deductions for recovery of loans granted for house building or other purposes approved by the state government and the interests on such loans are also permissible [Secs.7(ff),(fff), 12A].
- Deductions of Income Tax: payable by the employed person [Sec.7(g)].
- Deductions Required to be Made by the Order of a Court: or other authority competent to make such order [Sec.7(h)].
- Deductions for Subscription to and for Repayment of Advances: from any provident fund to which the Provident Funds Act, 1925, applies or any recognized provident fund as defined in the Indian Income-tax Act, 1922, or any provident fund approved by the state government during the continuance of such approval [See.7(i)].
- Deductions for Payments to Cooperative Societies and Insurance Scheme: The Act further authorizes deductions for payments to cooperative societies approved by the state government or any officer authorized by it; or to a scheme of insurance maintained by the Indian post office; or for payment, on written authorization of the employed person, of any premium on his life insurance policy to the Life Insurance Corporation of India; or for the purchase of securities of the government of India or of any state government; or for being deposited in any post office savings bank in furtherance of any savings scheme. These deductions are subject to conditions imposed by the state government [Secs.7(j) (k),13].
- Deductions for Payment of Insurance Premia: on Fidelity Guarantee Bonds [Sec.7(l)].
- Deductions for Recovery of 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 [Sec.7(m)].
- Deductions for Recovery of Losses: sustained by a railway administration on account of the failure of the employed person to invoice, bill, collect or account for the appropriate charges due to that administration, whether in respect of fares, freight, demurrage, wharfage and cranage or in respect of sale of food in catering establishments or in respect of sale of commodities in grain shops or otherwise [Sec.7(n)].
- Deductions for Recovery of Losses Sustained: by a railway administration on account of any rebates or refunds incorrectly granted by the employed person where such loss is directly attributable to his neglect or default [Sec.7(o)].
- Deductions, on the Written Authorization of the Employed Person: for contribution to the Prime Minister’s National Relief Fund or to such other Fund as the central government may by notification in the official gazette specify [Sec.7(p)].
- Deductions, on the Written Authorization of the Employed Person: for the payment of his contribution to any fund constituted by the employer or a trade union registered under the Trade Unions Act, 1926, for the welfare of the employed persons or the members of their families or both and approved by the state government or any officer specified by it for the purpose during the continuance of such approval [Sec.7(kk)].
- Deductions, on the Written Authorization of the Employed Person: for the payment of the fees payable by him for the membership of any trade union registered under the Trade Unions Act, 1926 [Sec.7(kkk)].
- Deductions for Contributions to any Insurance Scheme: framed by the central government for the benefit of its employees [Sec.7(q)].
Total Amount of Deductions
The total amount of deductions in any wage period is not to exceed 75 per cent of wages in cases where such deductions are wholly or partly made for payments to cooperative societies and 50 per cent in other cases. Where the total deductions exceed the percentages noted above, the excess may be recovered in the prescribed manner. However, the employer is authorized to recover from the wages of the employed person or otherwise any amount payable by such person under any law in force other than the Indian Railway Act, 1890 [Sec.7(3,4)].
The state government is empowered to appoint officers to hear and decide, for any specified area, all claims arising out of deductions from or delay in payment of wages. The authorities which may be appointed to hear and decide such claims may be a presiding officer of Labour Court or Industrial Tribunal constituted under the Industrial Disputes Act, 1947, or under any corresponding law relating to the investigation and settlement of industrial disputes in force in the state, a Commissioner for Workmen’s Compensation, or some other officer with the experience of a judge of a civil court or a stipendiary magistrate. If necessary, more than one authority may be appointed. Applications in this respect can be made by the person himself, or any legal practitioner or any official of a registered trade union, authorized in writing, to act on his behalf or any inspector under the Act or any other person acting with the permission of the authority appointed for this purpose. Such an application has to made within 12 months from the date on which the deduction from wages was made, or from the date on which the payment of the wages was due to be made. Applications may be admitted after 12 months if the applicant satisfies the authority that he had sufficient cause for not making the application within such period.
On receiving an application, the authority appointed for this purpose is required to hear the applicant and the employer or other person responsible for payment of wages or to give them an opportunity of being heard. He may also conduct inquiries into the matter. In case the employer or other person responsible for payment of wages is held liable, the authority is required to direct him to refund the amount deducted or the payment of the delayed wages, together with the payment of such compensation as the authority may think fit. Such compensation is not to exceed 10 times the amount deducted in case of unauthorized deductions and not exceeding 3,000 not less than 1,000 in case of delay in payment. A claim under the Act has to be disposed of within a period of 3 months from the date of the registration of the claim by authority, but it may be extended on the joint request of the parties. Payment of compensation is not to be allowed if the authority is satisfied that the delay was due to a bonafide error or bonafide dispute as to the amount payable to the employed person or due to the occurrence of an emergency, or the existence of exceptional circumstances (so that the person responsible for the payment of wages was unable, though exercising reasonable diligence to make prompt payment) or the failure of the employed person to apply for or accept payment.
If such a claim is simply of malicious or vexatious nature, the authority may impose a fine not exceeding 375 on the person presenting the application and it has to be paid to the employer or other person responsible for the payment of wages. Where there is any dispute as to a person being the legal representative of an employer or an employed person, the decision of the authority on such dispute is final. When the authority or court is unable to recover such amount from any person (other than employer) responsible for payment of wages, the authority may recover the amount from the employer of the employed person concerned [Sec.15].
A single application may be made on behalf or in respect of any number of employed persons belonging to the same unpaid group. The authority may also deal with any number of separate pending applications together [Sec.16].
Every authority appointed for this purpose has all the powers of a civil court under the Code of Civil Procedure, 1908, for the purpose of taking evidence and of enforcing the attendance of witnesses and compelling the production of documents [Sec.18].
An appeal against the decision of an authority, appointed under the Act may be made within 30 days before the Court of Small Causes in a presidency town and before the District Court in other cases. Such an appeal can be made by the employer or other person responsible for payment of wages, if the total sum directed to be paid by way of wages and compensation exceeds 300 or such direction has the effect of imposing on the employer or other person, a financial liability exceeding 1,000. No such appeal is, however, to lie unless the memorandum of appeal is accompanied by a certificate by the authority to the effect that the appellant has deposited the amount payable under the direction appealed against. An appeal by an employed person or a legal practitioner or an official of a registered trade union authorized by the employed person or an inspector under the Act or other person permitted to do it can be made if the total amount of wages claimed to have been withheld from the employed person exceeds 20 or from the unpaid group to which the employed person belongs exceeds 50. An appeal may also be made by a person directed to pay a penalty on account of malicious or vexatious nature of an application for claims. The District Court of Small Causes may submit any question of law for the decision of the High Court [Sec.17].
The authority empowered to decide claims or the appellate court may direct the attachment of the property of an employer or other person responsible for payment of wages if it is satisfied that he is likely to evade payment of any amount that have been directed to be paid. Such an attachment may be ordered only after giving the employer or other person an opportunity of being heard [Sec.l7A].
Any contract or agreement, whether made before or after the commencement of this Act, whereby an employed person relinquishes any right conferred by the Act is null and void in so far as it purports to deprive him of such right [Sec.23].
Registers, Records and Notices
Every employer is required to maintain such registers and records giving particulars of persons employed, the work performed by them, the wages paid to them, the deductions made from the wages, the receipts given by them and such particulars and in such form as may be prescribed. The registers and records required to be thus maintained are to be preserved for a period of 3 years after the date of the last entry made [Sec.13A].
The person responsible for payment of wages in a factory or an industrial or other establishment is required to display the prescribed abstract of the Act and the rules in English and in the language of the majority of the persons employed in the factory or establishment [Sec.25].
An Inspector of Factories appointed under the Factories Act, 1948, is an inspector for the purposes of the Act in respect of all factories within the local limits assigned to him. The state government may appoint inspectors in respect of persons employed upon a railway and may also appoint such other persons as it thinks fit to be inspectors for the purpose of the Act. The powers of inspectors under the Act are described in Box 17.2.
POWERS OF INSPECTORS UNDER THE PAYMENT OF WAGES ACT, 1936
An inspector is empowered to (a) make such examination and inquiry as he thinks fit in order to ascertain whether the provisions of the Act or rules made there under are being observed; (b) enter, inspect and search any premises of any railway, factory or industrial establishment at any reasonable time for the purpose of carrying out the objects of the Act; (c) supervise the payment of wages to persons employed upon any railway or in any factory or industrial establishment; (d) require, by a written order, the production of any register or record maintained in pursuance of the Act and take statements of any persons which he may consider necessary for carrying out the purposes of the Act; (e) seize or take copies of such registers or documents or their portion relevant in respect of an offence; and (f) exercise other prescribed powers. No person is, however, to be compelled to answer any question or make any statement tending to incriminate himself. The inspector is deemed to be a public servant within the meaning of the Indian Penal Code. Every employer is required to afford an inspector all reasonable facilities for making any entry, inspection, supervision, examination or enquiry necessary under the Act [Sec.14].
The appropriate government is empowered to appoint authorities to hear and decide claims arising out of deductions from wages or delay in payment of wages including incidental matters. The authorities who may be appointed for the purpose include: (i) Commissioner of Workmen’s Compensation, or (ii) any officer of the central government exercising functions as Regional Labour Commissioner or Assistant Labour Commissioner with a minimum of 2 years’ experience, or (iii) any officer of the state government not below the rank of Assistant Labour Commissioner, or (iv) a presiding officer of a labour court or tribunal constituted under the Industrial Disputes Act, 1947, or state law, or (v) any other officer with experience of a Judge of a Civil Court. Application in this regard may be made by the person himself or any legal practitioner or any official of a registered trade union authorized in writing to act on his behalf or an inspector appointed under the Act or any other person with the permission of the authority. Such an application has to be made within 12 months from the date on which the deduction from wages was made or from the date on which the payment of wages was due to be made. Applications may be admitted after the expiry of the above period of 12 months if the applicant satisfies the authority that he had sufficient cause for not making the application within such a period [Secs.15–16].
Penalties for different kinds of offences are mentioned in Box 17.3.
PENALTIES UNDER THE PAYMENT OF WAGES ACT, 1936
Non-payment of wages in time (except contravention relating to payment on a working day) [Sec.5], or making unauthorized deductions from wages [Sec.7] or imposing fines in contravention of the provisions of the Act (except those relating to recording them in register) [Sec.8] is punishable with fine not less than 1,500 and which may extend to 7,500 [Sec.20(1)].
Failure or refusal to maintain required records or registers or to furnish required information or return or giving false information is also punishable with fine from 1,500 to 7,500 [Sec.20(2)].
Wilfully obstructing an inspector in the discharge of his duties or refusing or neglecting to afford him facilities of inspection, inquiry and so on, or to produce the required register or document or preventing any person from appearing before an inspector is punishable with a maximum fine of 7,500 but a minimum of 1,500 [Sec.20(4)].
Contravention of the provisions relating to fixation of wage periods [Sec.4] or failure to make payment of wages on a working day [Sec.5(4)] or non-payment of wages in current coin or currency notes or by cheque or crediting in bank account on the employee’s authorization [Sec.6] or non-maintenance of register for recording fines [Sec.8(8)] or deductions for damage or loss [Sec.10(2)] or non-display of abstracts of the Act [Sec.25] is punishable with fine which may extend to 3,750 [Sec.20(2)].
If a person repeats an offence involving contravention of the same provision, he is punishable on a subsequent conviction with imprisonment for a term not less than 1 month but not more than six months and with fine which is not to be less than 3,750 but not more than 22,500 [Sec.20(5)].
Failure or neglecting to pay wages by the date fixed by the authority is punishable with an additional fine which may extend to 750 for each day of default [Sec.20 (6)].
Failure of the employer to nominate or designate a person with regard to responsibility for wage payment [Sec.3] is punishable with fine of 3,000 [Sec.20(2A)].
Contravention of the rule framed by the government is punishable with a fine which shall not be less than 750 but which may extend to 1,500.
Procedure in the Trial of Offences
No court is to take cognizance of a complaint against any person for an offence pertaining to time of wage payments and authorized deductions (except that concerning payment on a working day, maintenance of records of fines and their expenditure, and making of entry of deductions for damages or loss) unless an application in respect of the facts constituting the offence has been presented [Sec.15] and has been granted wholly or in part, and the authority or court has sanctioned the making of the complaint. Before giving sanction for making a complaint against any person for the offences noted above, the authority or court must give the person an opportunity of showing cause. No court is to take cognizance of a contravention of the provisions pertaining to fixation of wage periods, payment of wages in current coin or currency notes, or the rules made under the Act except on a complaint made by or with the sanction of an inspector. Similarly, a court can take cognizance of an offence pertaining to maintenance of records and registers, production of information, or obstructing an inspector in the discharge of his duties, and so on, only when a complaint has been made by or with the sanction of an inspector [Sec.21].
Payment of Undisbursed Wages in Case of Death
If, on account of the death of an employee or his whereabouts not being known, the amount payable to him as wages could not be paid, it is to be paid to the person nominated by him in accordance with the rules framed under the Act. In case no such nomination has been made or for any reason the amount cannot be paid to the person so nominated, it is to be deposited with the prescribed authority which is to deal with the deposited amount in the prescribed manner. If the amount payable to an employed person as wages has been paid by the employer to the person nominated by the employee or deposited with the prescribed authority, the employer is absolved of his responsibility to pay it [Sec.25 A].
Power to Make Rules
The state government is empowered to make rules to regulate the procedure to be followed by the authorities and courts and for the purposes of carrying into effect, the provisions of the Act. In making any such rule, the state government may provide that contravention of the rule will be punishable with a fine which may extend to 200. All rules made under the Act are subject to previous publication. The rules made by the central government require to be confirmed by the parliament.
Working and Assessment
Based on the British Truck Acts, which had their beginnings in the fifteenth century,1 the Payment of Wages Act, 1936, is intended to check certain malpractices pertaining to the mode and manner of wage payment. These malpractices have already been discussed in detail at the beginning of the chapter. Initially the British Truck Acts applied only to a few selected industries or employments, but during the course of time, their scope was widened and a consolidating Act was passed. The Payment of Wages Act, 1936, was started with a large coverage and its scope was subsequently widened, but even today, a number of industries or employments are outside the purview of the Act. Even where applicable, the enforcement of Act involves difficulties. The legislation itself has certain deficiencies, especially in view of its incompatibility with the changing conditions. Some of the more pertinent aspects of the working of the Act and its limitations are examined below.
- The Act has for a long time covered only such employees whose monthly wages were less than 1,600 a month. Earlier, the limit was 200 and later 400 a month. In view of the fact that the term ‘wages’ as defined in the Act includes not only the basic wage, but also dearness allowance and other allowances, the ceiling of 1,600 has been very low for a large number of employees, who are is receipt of much higher wages. This has been true not only of the employees in the organized sector, but also of a vast bulk of them in the unorganized sector. Report on the Act in major ports had to be discontinued as no worker was drawing wages at a rate less than 1,600 per month.2 In 2002, the wage ceiling was raised to 6,500 per month. The amendment of the Act consumed a lot of time and procedural hurdles. As such, there was a need to ensure flexibility in the matter. In 2005, the central government was empowered to enhance the wage ceiling. In pursuance of that power, the central government raised the ceiling to 10,000 per month in 2007.
- The administration of the Act in respect of railways, mines, oil fields and civil air transport service is the responsibility of the central government, and in respect of other industries or employments that of the state government. In practice, the strength of the inspecting machinery has never been adequate to ensure an effective enforcement of the Act. As per the report of the Central Industrial Relations Machinery (Office of the Chief Labour Commissioner), Government of India, the number of irregularities rectified in the implementation of the Act in mines was mostly more than 50,000 per year in mines and above 10,000 per year in railways during the period 1995–2005.3 An appreciably large number of irregularities are detected in industries or employment under the jurisdiction of the state governments. In the words of the first National Commission on Labour, ‘… malpractices of the type mentioned do prevail in many industrial pockets, mostly in the unorganized and small-scale industries where the arm of law does not reach and where workers have still little awareness of their rights’.4
- Insignificant penalties and complex procedure for prosecution under the Act have also contributed towards violations of various provisions of the Act. ‘On a number of occasions, the enforcement machinery found itself helpless to bring round defaulting employers because of the cumberous procedure for prosecution laid down under the Act, and the insignificant penalties—the amount of fines being negligible as compared to the monetary benefits reaped by the employers by delaying the payment of workers’ wages’.5
- Additional difficulties are encountered in the enforcement of the Act where piece-rate payments are prevalent. In many cases, work is not properly measured or weighed and fractions are generally not adjusted upwards. Matters of measurement or weight are mostly dealt with at the level of supervisors where malpractices are frequent. It often becomes difficult for the inspectors to go into the details of particular cases.
- In many cases, the employers do not pay for sub-standard product but they sell them in the market at a slightly lower rate, yielding a margin for them. The Act permits deduction for damage or loss and many employers, especially those of small establishments, derive advantage of this provision and refuse to make payments even for marginal defects in the quality of products. This practice is particularly noticed in the bidi industry.
- The Act permits a wide variety of deductions from wages, which may go up to 50 per cent in general and 75 per cent in cases where payments are to be made to cooperative societies. Illiterate and ignorant workers’ are bewildered by the complexities involved and the conditions under which deductions are made. ‘In small establishments in the more traditional industries this malady would be cancerous and, in such cases, more drastic remedies should be thought of.’6
RECOMMENDATIONS OF THE SECOND NCL (2002)
The second National Commission on Labour (2002) has recommended enactment of an integrated wages legislation covering such areas as fixation and revision of minimum wages, mode and manner of wage payment, and bonus.7 The Commission has also suggested the appointment of recovery officers under the Act, as has been done under the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952.8
- The main objectives behind the enactment of the Payment of Wages Act, 1936, which is based on the recommendation of the Royal Commission on Labour (1929) are: (i) ensuring regularity of wage payment, (ii) ensuring payment of wages in legal tender, (iii) prohibiting arbitrary deductions from wages, (iv) restricting employer’s right to impose fines, and (v) providing remedies to workers in case of infringements of their rights by the employer.
- The Act applies to factories, railways and a number of industrial and other establishments such as construction, air transport, motor transport, mines, plantations, oil-fields, docks, wharfs and jetties. The wage limit for the coverage under the Act is now 10,000 per month. The Act also gives a wide definition of ‘wages’ covering various kinds of remuneration such as that payable under any award or settlement, or in respect of overtime work, holidays and leave period, termination of employment, incentive payments and any sum payable under schemes framed under law, but does not include profit-sharing bonus, value of house accommodation, contributions to provident fund, gratuity and travelling allowance.
- The Act has specified the responsibilities of the employer with regard to the mode and manner of wage payment. Ordinarily, the employer himself is responsible for the payment of wages to his workmen, but in certain specified categories of establishments, the factory, manager, the person responsible for the supervision of the establishment and the person nominated by railway administration are responsible for the wage payment. No wage period is to exceed 1 month. The prescribed day for paying wages to workers is the 7th day of the expiry of the wage period in case of establishments employing less than 1,000 workers and the 10th day of the expiry of the wage period in case of establishments employing 1,000 or more workers. All wages are to be paid in current coins or currency notes. On workers’ written authorization, payment may also be made by cheque.
- The employer is required to pay wages to his workers free from any deductions, except those permitted under the Act. The permissible deductions from wages include: amount of fines, absence from duty, damage or loss to goods and materials, housing facilities and services provided, adjustment of advances, recovery of loans, income tax, insurance premia, contributions to cooperative societies, provident fund contributions, payment of trade union membership fees and union welfare fund, and contribution to approved relief funds. The total amount of deductions should not exceed 50 per cent of the wages payable in wage period, but in case of payments to cooperative societies it may be up to 75 per cent of the wages.
- The Act provides for the appointment of inspectors for proper enforcement of the Act, and also for designation of Authorities and Appellate Authority for disposal of matters of claims under the Act. The Act also specifies the penalties for different kinds of offences.
- The main deficiencies experienced during the course of the working of the Act have been: (i) limited coverage on account of low level of wage ceiling, (ii) inadequate strength of inspecting personnel resulting in frequent violations of the provisions, (iii) insignificant penalties for offences and complex procedure involved in launching prosecution and the disposal of claims, (iv) loop-holes with regard to deductions, particularly those related to deductions for sub-standard products and damage or loss to goods and materials, and (v) high level of total permissible deductions.
QUESTIONS FOR REVIEW
- Explain the malpractices associated with the mode and manner of wage payment prior to the enactment of payment of wages legislation and the importance of Payment of Wages Act, 1936, for checking them.
- Define the term ‘wages’ under the Payment of Wages Act, 1936, and explain the responsibilities of the employer with regard to the mode and manner of wage payment to the worke
- Describe the various kinds of deductions from wages as permissible under the Payment of Wages Act, 1936, along with the conditions to be observed.
- Describe the penalties for different kinds of offences under the Payment of Wages Act, 1936, and the machineries of its enforcement and disposal of claims.
- Explain the limitations of the Payment of Wages Act, 1936, and suggest measures for improving its effectiveness.
Can transaction tax on cash withdrawals be deducted from wages?
The Bharat Sanchar Nigam Ltd. used to recover from employees’ wages transaction tax of 0.1 per cent on cash withdrawals of 1,00,000 and above. The National Federation of Telecom Employees objected to this practice contending that the practice was in contravention of the provisions of the Payment of Wages Act, 1936. The matter came up for decision before the Calcutta High Court, which held that the employer had no authority to collect the said tax nor could he compel employees to accept wages in cheque, in absence of employees’ written authorization. As such, the deduction made to recover transaction tax from employees’ wages was not tenable (National Federation of Telecom Employees V. Bharat Sanchar Nigam Ltd. and others, 2007 (Calcutta High Court), LLR 671).
Will it be illegal if transaction tax on withdrawals from the bank is deducted from the amount of cheque received by an employee for his wages?
On what condition is the payment of wages by cheque permissible under the Payment of Wages Act, 1936?
Is deduction for payment of income tax from employees’ wages permissible under the Payment of Wages Act, 1936?
Case Study 2
Is withholding of increments consequent to disciplinary action permissible under the Payment of Wages Act, 1936?
The management of Punjab Roadways withheld increments of an employee Gurudev Singh subsequent to disciplinary action taken against him. On the objection of Gurudev Singh, the matter came up before the Authority and Appellate Authority appointed under the Payment of Wages Act, 1936. Both the Authority and Appellate Authority held the action of the general manager of the roadways illegal and directed the restoration of the increments and payment of the arrears. A writ petition against the order of the Appellate Authority was filed by the general manager before the Punjab and Haryana High Court. The court held that if the delinquent employee was aggrieved with the order of punishment passed against him in the departmental disciplinary action, he could have challenged that order before the appropriate authority, but he could not challenge that order before the Authority or Appellate Authority under the Payment of Wages Act, 1936. Hence, the impunged orders passed by the authorities were without jurisdiction (General Manager, Punjab Roadways, Nawanshahr V. Gurudev Singh, (2008) (Punjab and Haryana High Court), LLR, 218).
Is the employer authorized to make deductions from employees’ wages towards the amount of fine imposed on them for their act of indiscipline?
What can be the maximum amount of fine imposable on an employee in a wage period?
What machineries are available under the Payment of Wages Act, 1936, to decide claims arising out of deductions from or delay in payments of wages?