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Wage Legislation: Payment of

Wages Act, 1936

PGDM HR 2013-15 Term III

Industrial Relations I6(2 Classes) /9 January 2014

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Learning Outcomes

Develop working knowledge of remuneration, wage and social

security benefits related enactments

Learn the compliance framework connected with wage laws

in the country

Develop the managerial skill necessary to implement and

address issues concerning wages, bonus and gratuity

Establish linkage to the process of designing compensation

and benefit policy for an organisation

Appreciate the need for and limitations of wage limitations in

India

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INTRODUCTION

Recommended by Royal Commission of labour to regulate delays &

deductions in payment of wages to industrial plantation labour.

Act came into force from 28thMarch 1937

On same grounds, Maharashtra Payment of Wages Rules passed in 1963.

This Act is in 3 parts:

Part I

Regulation andpayment of wages

Part II

Specifies headunder whichdeductions can bemade

Part III

Providesmachineryenforcing specificclaims

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OBJECT OF THE ACT

To regulate the payment of wages to certain classes

of employed persons To fix the wage period and the date for payment of

wages

To prevent unauthorised deductions

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Commencement and Applicability of The

Act

The Act extends to whole of India

It comes into force from the notified date

The Act is applicable to

payment of wages to persons employed in factory, railwayestablishment, railway administration and to industrial orother establishment as specified in the Act

Wages payable to employed persons not exceeding tenthousand rupees per month or higher sum if so notified by

the Central Government

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DEFINITIONS: WAGE

Wage means all remuneration payable in terms ofemployment contract and includes

Remuneration payable under any award or settlement between theparties or on orders of a Court

Payments for over time work, holiday or any leave period

Any additional remuneration under the terms of employment

Amounts payable in terms of contract in the event of termination

Amounts payable under a scheme framed by a law

Wage does not include

any bonus, contributions for pension fund or provident fund,gratuity

travelling allowance or value for travel assistance, value of houseaccommodation, medical assistance

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Discussion Questions

What is the object of the Act ?

To which establishments is the Act applicable? Will overtime payments be taken into account

for deciding the applicability of the Act ?

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Responsibility for payment, wage period

and time for payment of wages

Responsibility for payment of wages is of the employer or his representative Manager in the factory Person responsible for supervision and control in respect of industrial or

other establishment In case of contractor the person so authorised

Employer includes legal representative of deceased employer

Wages may be payable daily, weekly, fortnightly and monthly. Should notextend a period longer than one month

For establishments employing less than 1000 person , the wage shall be paidbefore expiry of the 7thday

For other establishments, the wage shall be paid before expiry of 10thday

In the event of termination payment will be made before the expiry of the2ndworking day from the day on which his service has been terminated

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Wages to be Paid in Current Coins or

Currency Notesa. All wages shall be paid in current coins or currency notes or

in both.

b. After obtaining the authorization, either by Cheque or by

crediting the wages in employees banks Account {Section 6}

Andhra Pradesh State Amendment: Provided further that the

State Government may, by notification in the Andhra Pradesh

Gazette, specify the industrial establishments , the employers of

which shall pay to the persons employed therein, the wages

either by cheque or by crediting the wages in their bank

account-[Vide Andhra Pradesh Act 15 of 1982, sec.2 (w.e.f 7-10-

1982).

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Deductions from Wages

No Deductions can be made from wages unless authorised

under the Act

Any payment made by the employed person to the employershall amount to deductions for the purpose of the Act

Loss of wages on account of penalty withholding of

increment, withholding of promotion, reduction to a lower

grade and suspension, in accordance with rules in conformity

with law, shall not be construed to be deduction

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Deductions from wages

Deductions for Damage/Loss- not more than the value of damageand unless show cause made or in accordance with the procedureso defined

Deduction for Recovery of Losses Sustained by Railway

Deduction for house, other amenities & services- if provided and

accepted Deduction for recovery of advances

Deduction against loans for the welfare of labour

Deduction for loans granted for house building

Deduction for payment to co-operative societies

Total deductions shall not exceed seventy five percent of wages iffull or part payment is to co-operative societies In other cases total deductions shall not exceed fifty percent

All deductions towards payments under law

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Deductions from Wages

Deduction for Absence from Duty For Absence( refuses to work in pursuance to a stay-in strike or other causes) for

whole or any part of the day from place of work

Amount of deduction may not have bearing to the wages payable and the wageperiod

If ten or more persons acting in concert absent without reasonable cause,

deduction of wages up to 8 days is permissible {Section 9} Deduction of Income Tax

Deduction under Orders of Court

Deduction for Contribution to Provident Fund

Deduction for Contribution to a Welfare Fund for Employed Person + FamilyMembers and to fund constituted by the Trade Union

Deduction of Fees for Membership to Trade Union on individual request Deduction for Payment of Insurance Premia on written request

Deduction for Contribution to Prime Ministers National Relief Fund on writtenauthorisation

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Discussion Questions

Can an employer fix the pay day on any day of

the month, if not, what are the limitations ?

What modes are prescribed for payment of

wages by the Act ?

Discuss the deductions authorised under the

Act ?

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Employers Obligations

Every employer is required to maintain registers and records

containing particulars of employed persons, their work,

wages, deductions and other particulars in the form so

prescribed

These records will be preserved for three years

Every employer shall extend all reasonable facilities to an

inspector enabling him to discharge his responsibility

Every employer is obliged to comply with the decision of the

authority under section 15 in respect of claims arising out

deductions from wages or delay in payment of wages

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Authorities for deciding on claims

Act provides for appointing persons as authorities to hear

and decide, for the specified area, such claims including

incidental matters from amongst the following:

Any Workmens Compensation Commissioner

Officer of central/state government not below Assistant Labour

Commissioner

Presiding Officer of any Labour Court or Industrial Tribunal

Officer with experience as judge of civil court or a judicial magistrate

Authorities under the Act shall have the powers of a civil courtfor taking evidence, enforcing attendance of witnesses and

compelling production of documents

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Claims: Submission and allied issues

In case of delay in wage payment the compensation, besides

payment of wages due, will be up to three thousand rupees

but not less than fifteen hundred rupees

For delayed wage payments no compensation will be payable

if the delay is on account of bonafide error, bonafide dispute

regarding the amount, emergency or reluctance of the person

to accept payment

In case of a malicious application the applicant can be

penalised in accordance with the provisions of the Act-up tothree hundred seventy five rupees

Employer or the person responsible can be directed to pay

penalty in addition to the compensation

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Authorities under This Act

Inspectors Inspector of Factories shall be the Inspector for Factories within the

limits physically defined for the purpose of this Act

For railway services exclusive Inspectors will be appointed

For other establishments inspectors with defined area of operation

will be appointed Functions of the Inspector

To examine and inquire to ensure compliance

To enter, inspect and search premises of the factory, railways andother establishments to ensure compliance

To supervise payment of wages

To access any record or register and/or to obtain statements for thepurpose of fulfillment of objects of the Act

To attach property conditionally

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Offences and Penalties

For contravention of Section(s) 5 except sub-section 4; section 7-8,section10 except sub-section (2) and section 11 to 13 of the Act, by anyperson responsible for the payment of wages to an employed person willbe punishable with fine which shall not be less than one thousand fivehundred rupees but which may extend to seven thousand five hundred

rupees For other acts falling in the category of the sub-sections omitted above the

fine may extend up to three thousand seven hundred and fifty rupees

Not nominating an authority is also an offence and is punishable with fineup to three thousand rupees

Not maintaining required records or failing to produce is also an offenceand is punishable with fine up to one thousand five hundred rupees whichmay extend up to seven thousand five hundred rupees

For second offence involving contravention of same provision may warrantpenalty including imprisonment

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APPEAL

An appeal may be preferred against the following orders or directions of

the authority:-

an order dismissing the application or directing the employer or the

persons responsible for payment of wages, to refund the deductions

wrongfully made or to pay the delayed wages an order directing payment of compensation to the employed person

under Section 15(3)

an order imposing penalty whether on the employee or the employer

under Section 15(4)

An appeal can be made within thirty days of the date on which the

order or direction was made along with a certificate to the effect that the

appellant has deposited the amount payable under the direction

The authority, whose orders have been appealed will withhold all

payments of sum in deposit with it

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Special Provisions

Bar of suits

Protection of action taken in good faith

Contracting out

Payment of undisbursed wages in case of death of employedperson

To the person nominated in accordance with rules made under this

Act

If nomination is not made or for reasons it cannot be paid to the

nominee, amount will be deposited with Government

Delegation of powers to subordinate authority to exercise all

such powers so delegated

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Special Provisions

Rule-making power for :

Maintenance of records & registers

Display of notices specifying wage rates

Regular inspection of measures used for ascertaining the wages of

employed persons Manner of notifying wage payment days

Prescribing the authority to approve acts and omissions for which

fines can be imposed

Procedure for imposing fines

Prescribing conditions for effecting deductions

Defining an authority to decide on spending of proceeds of fines

Prescribing the powers of Inspectors

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Discussions & Review

The strike must be both legal and justified to entitle the

workmen for wages of the strike period otherwise the striking

workers will not be entitled to wages on the principle of no

work no wages

Basic wages include salary and additional emoluments,

whatsoever payable, either in cash or kind

The principle of no work no wages will apply only when the

workers refuse to work of their own volition

No wages will be payable if the lock-out is legal

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Discussions & Review

An employer can deduct wages when there is excess payment

to an employee

The principles of natural justice are not applicable for failure

to give notice for the normal deduction of wages for the

period of absence under section 9(1) of the Act

Principle of no work no pay will apply if an employee

overstays his leave

Cutting of full days wages will be justified when the bank

employees have partially struck work

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Discussions & Review

Action of the employer deducting wages for the period for which

the office bearer of the union had gone to attend the proceedings

in court will not be justified

Ex-gratia payment made to the employees will not be wages under

the Act An employer can deduct wages when there is excess payment to an

employee

The principles of natural justice are not applicable for failure to give

notice for the normal deduction of wages for the period of absence

under section 9(1) of the Act

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OBLIGATIONS

To fix wage period not exceeding one month.

To pay wages in cash or by cheque after taking written authorization of the employed person

To pay wages on a working day

To make deductions permissible only under section 7 from wages of the employed person

To ensure the deductions do not exceed 75% where payment to a cooperative society has to

be made, in any other cases, deductions do not exceed 50% Not to impose fines exceeding 3% of wages of the employees

To recover fines within 90 days of the date of offence.

To display abstract of the Act and the Rules in English and in language understood by the

majority of workmen.

To maintain:

a. Register of fines

b. Register of wages

c. Register of deductions for damage or loss

d. Register of advances

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Assignment

Are the provisions of Section 9(2) of the Payment of Wages

Act permitting deduction in wages for the participation in

illegal strike affected by the provisions of Section 26 of the

Industrial Disputes Act providing for penalty for illegal strikes?

Search and go through some of the case laws and write your

answer based on the analysis .

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Issues for clarification

Date of the Act coming into force

Who is the appropriate government in respect

of mines and oil fields

Examples of payments under government

scheme

Views on value of house and payment of HRA

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hank You