The Payment of Wages Act, 1936
What are the organisations to which this law will apply?
The Act applies to every establishment including (Section 2)
- Factories
- Industrial establishments
- Tramway and motor services
- Air transport services
- Dock, Wharf, Jetty
- Plantations
- Workshops
- Establishments where construction work, work-related to bridges and canals, or work related to electricity generation, distribution and transmission of electricity is carried out
- Establishments notified by the appropriate government.
Note :It is not applicable to shops and establishments by default. However, in some states the Act is applicable to shops and establishments also.
What are the important compliances under the statute?
Mode of Payment of wages
As per section 6, the mode of payment of wages is coins or currency notes currently in circulation or by cheque or by crediting the wages in the bank account of the worker.
Wage Period
As per Section 4, wage period fixed by the employer shall not exceed one month.
Maintenance of registers and records (Section 13-A)
As per the section 13 - A, the employer must maintain registers and records of persons employed with the following particulars.
● Name/Particulars of persons employed
● Designation/Nature of work performed by employees
● Wages paid to employees
● Record of deductions made if wages not paid in full.
Deductions from wages (Section 7)
Employer can only make deductions provided u/s 7. Such deductions cannot exceed the limits provided under Sections 8 to 13 of the Payment of Wages Act.
Time for the payment of wages (Section 5)
● All payments are to be made on a regular working day.
● When the employment of any person is terminated by the employer or is done on his behalf, wages earned by him shall be paid before the expiry of the Second working day from the day from which he was effectively terminated.
● Where less than 1000 persons are employed, the wages shall be paid before the expiry of the seventh day of the following month.
● Where more than 1000 persons are employed, the wages shall be paid before the expiry of the tenth day of the following month.
What are the Penalties? ([Amended]
● Failing to maintain registers and records, or willfully refusing or without excuse neglecting to furnish information or return, or willfully furnishing or making any information which he is aware is false shall result in a fine not less than ₹1,500 it may also extend to ₹7,500. [Section 20(3)(d)]
● Willful obstruction while an inspector is performing their duty shall result in a fine not less than ₹1,000 which may extend to ₹5,000.
● For failing or neglecting to pay wages to the workers, imprisonment of not less than one month which may extend upto six months with fine of ₹2,000 which may extend upto ₹15,000 and additional fine upto ₹750 each day until such neglect/failure continues. [(Section 20(6)].
● If the person responsible for the payment of wages under this act contravenes any of the following provisions of the act, namely, Section 5(except sub-section 4),Section 7, section 8(except sub-section 8), section 9, section 10(except sub-section 2), and section 11,12, and 13, shall be punished with a fine of not less than ₹1,500 which may extend upto ₹7,500. [(Section 20(1)]
● If a person having responsibility, contravenes any of the following provisions of the Act, namely, Section 4, sub-section 4 of section 5, section 6, sub-section 8 of section 8, sub-section 2 of section 10, or section 25, will be punished with fine which may extend upto ₹3,750 (Section 20(2)).
● If a person is convicted subsequently for the same offence, a fine of ₹3,750 which may extend upto ₹22500. [(Section 20(5)]
What are the biggest challenges?
- Creation of an appropriate wage structure keeping in mind the provisions of the Payment of Wages Act, provident fund contribution and gratuity, which is statutorily correct and does not increase the employer’s liability disproportionately and also represents the true costs of the employer to the employee.
- Ensuring the wage structure for a large organization with presence in multiple states is uniform keeping in mind the state-level minimum wages legislation and cost of living requirements.
- Implementing full and final settlement on a timely basis.
- Creation of leave and attendance policy and list of holidays keeping in mind the provisions of the applicable central and state level holidays acts, and, in states where Payment of Wages Act is notified to be applicable to shops and establishments, the Shops and Establishments Act.
- Imposition of fines in accordance with the provisions of the Act and other applicable laws, after giving a due hearing.
- Application of the Act in harmony with the Industrial Employment (Standing Orders) Act, where both Acts are applicable.