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Saturday, November 28, 2009

Payment of Wage Act. 1936

Explain the purpose and application of the payment of Wages Act,1936. discuss the procedure of fine deduction from wages of employee in an organization you are familiar with.

Payment of Wage Act. 1936

The purpose of the Act :

The Payment of Wages Act, 1936 was enacted with a view “to regulate the payment of wages to certain classes of persons employed in industry”. The regulation contemperated by the Act is two-fold :

i. to ensure regular and prompt payment of wages
ii. to prevent exploitation of wage-earners by prohibiting arbitrary fines and deduction from wages.

Application of the Act

The payment of Wages Act, 1936 extends to the whole of India. It came into operation of 28th March, 1937. it applies in the first instance to the payment of wages to :

i)  persons employed in any factory;
ii) persons emplyed (otherwise than in factory) upon any railway by a railway administration, either directly or, through a subcontractor, by a person fulfilling a contract with railways administration; and
iii) persons employed in an industrial or other establishment specified in sub-clauses (a) to (g) of clause (iii) of section.

The Act empowers the state government to extend the application of the whole or a part of the Act to any class of persons employed in the establishment or class of establishments specified by the Central/ State Government under Section 2(h)(ii).

However, before doing so the State Government is required to
i) Issue three months notice of its intention to do so;
ii) Issue a notification of the extension in the official Gazette. But in relation to establishment owned by the Central Government, no such notification shal be issued with the concurrence of that Government.

Who are covered by the Act :

The Act covers persons drawing less than one thousand six hundred rupees a month. (original Act)

The Parliament of India widened the scope of the Payment of Wages Act, which would cover those drawing wages up to Rs 6,500/- a month against Rs 1600/- earlier with government assuring that it would soon come forward with a measure aimed at welfare of workers in the unorganised sector.

The Payment of Wages (Amendment) Bill that was earlier passed by the Rajya Sabha was adopted by the Lok Sabha, on 17th August 2005.

With the passage of the bill, the salary and wages of workers would be protected and they would get timely payment and employers would not be able to make illegal deductions.

Responsibility for Payment of Wages :

Section 3 makes every employer responsible for the paymebnt to persons employed by him of all wages required to be paid under the Act. Quite apart from this the following persons shall also be responsible for the payment of wages for persons employed otherwise by a contractor :

i) In a factory, a person named as manager of a factory under the Factories Act, 1948.
ii.) In industrial or other establishment a person responsible to the employer for the supervision and control of the industrial or other establishment : and
iii) Upon railways (otherwise than in factories), if the employer is the railway administration and the person nominated in this behalf.

Fixation of Wage Period

Section 4 imposes an obligation on every person responsible for payment of wages under section 3, to fix periods in respect of which such wages shall be payable. Such wage -period shall not exceed one month.

Time of Payment of Wages

Section 5 of the Act lays down that the wages of every person employed upon or in :

(a) Any railway, factory or other establishment upon or in which less than one thousand persons are employed, shall be paid before the expiry of the seventh day.

(b) Any other railway, factory or industrial or other establishment, shall be paid before the expiry of the tenth day after the last day of the wage-period in respect of which the wages are payable.

(c) In the case of persons employed on a dock, wharf or jetty or in a mine, the balance of wages found due on the completion of a final tonnage amount of the ship or wagons loaded or unloaded, as the case may be, shall be paid before the expiry of the seventh day from the day of such completion.

(d) Where the employment of any person is terminated by or on behalf of the employer the wages earned by him shall be paid before expiry of the second working day from the date on which his employment is terminated.

Exemption from compliance with the time limit for Payment of wages :

The Act empowers the state Govt to exempt , the person responsible for the payment of wages to persons employed upon in railways (otherwise than in factory), or to persons employed as daily-rated workers in the control, public works Department or the state from the operation of this section. However, no such order shall be made without consultation of the central Government. In case of daily-rated workers.

Wages to be paid in current coin or currency notes

All wages shall be paid in current con or currency notes or in both.

Payment by Cheque

An employer may, after obtaining the written authorization of the employed person, pay him the wages either by cheque or by crediting the wages in his bank account.


a) Concept of deduction
The following shall be deemed to be deduction from wages :

  1. Every payment made by the employed person to the employer or his agent.
  2. Any loss of wages resulting from thea imposition, for good and sufficient cause, upon a person employed, of any of the following penalties :

          -The withholding of increment or promotion (including the shortage of increment at an efficiency bar);
          -The reduction to a lower post or time scale or to a lower stage in a time scale; or

b) Deduction which may be made from wages

Deduction authorized under the Act are enumerated in section 7(2). Any other deduction is unauthorized. Further, the authoried deduction can be made only in accordance with the provisions of the Act.

i) fines
ii) deduction for absence from duty;
iii) deduction 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;
iv) deduction for house accommodation supplied by the employer of by Govt of any housing board set up under any law for the time being in force (whether the Govt. or the board is the employer or not) or any other authority engaged in the business of subsidizing house-accommodation which may be specified in this behalf by the State Govt. by notification in the Official Gazette.
v) Deduction for such amenities and services supplied by the employer as the state Government or any officer specified by it in this behalf may, by general or special order, authorize;

Brief about the organisation refering to :

Our organization ECO-CARE & AWARE is a non profit organization providing training and support service to Developmental Sector. Support services includes planning and formulation of developmental projects, technical support during implementation, Monitoring & Evaluation, Training and Capacity Building, Research & Study, Micro Planning & PRA (Participatory Rural Appraisal).The organization caters its best services for the judicious use of Natural, Human and Physical resources.

The areas of activities include Environment, Watershed Development, Forestry, Biodiversity, Sanitation, Minor Irrigation, Biotechnology, Sustainable Agriculture, Horticulture, Capacity Building, Micro Finance, Training and Awareness.

The procedure of fine deduction from wages of employee in an organization is as per the rules of deduction of fines [ Section 7(2)(a) and 8 ] of Payment of the Wage Act :

Fines [Section 7(2)(a) and 8 ]

  1. The fine shall be imposed on any employed person only for acts and omissions which has received approval of the State Government or of the prescribed authority, and has been specified by notice under Sub-section (2).
  2. A notice specifying such acts and omissions shall be exhibited in the prescribed manner on the premises which the employment is carried on or in the case of persons employed upon a railway (otherwise than in a factory), at the prescribed place or places. 
  3. The fine shall not be imposed on any employed person unless he has been given an opportunity of showing cause against the fine. 
  4. The total amount of fine which may be imposed in any one wage-period on any employed person shall not exceed an amount equal to three percent of the wages payable to him in respect of that wage-period. 
  5. No fine shall be imposed on any employed person who is under the age of fifteen years.
  6. No fine shall be imposed on any employed person shall be recovered from him by installments or after the expiry of sixty days from the day on which it was imposed.
  7. Every fine shall be deemed to have been imposed on the day of the Act or omission in respect of which it was imposed.
  8.  All fines and all realization thereof shall be recorded in a register to be kept by the person responsible for the payment of wages under Section 3 in such from as may be prescribed; and all such realizations shall be applied only to such purposes beneficial the persons employed in the factory or establishment as are approved by the prescribed authority.

All the amounts realized in our organization are credited to a common fund maintained for the staff as a whole and are applied for common welfare of the employees as a whole increasing the Quality work life of the employees.


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