CHAPTER III – PAYMENT OF WAGES
Topic Overview
Modes & Time Limits
Rules regarding how wages can be paid, fixation of wage periods, and specific statutory time limits for payment (Sections 15-17).
Deductions & Fines
Detailed provisions on permitted deductions, caps on fines, and recovery of loans and advances (Sections 18-25).
CHAPTER III – PAYMENT OF WAGES
- Section 15 – Mode of Payment of Wages
Wages can be paid through:
- Current coin
- Currency notes
- Cheque
- Credit to employee’s bank account
- Electronic mode (UPI, NEFT, RTGS etc.)
Government power: Appropriate Government may order certain establishments to pay wages only through bank transfer, cheque, or electronic mode to ensure transparency and prevent misuse of cash.
- Section 16 – Fixation of Wage Period
Employer must fix a wage period.
Wages may be paid:
- · Daily
- · Weekly
- · Fortnightly
- · Monthly
Wage period cannot exceed one month.
- Section 17 – Time Limit for Payment of Wages
Employer must pay wages within the following limits:
| Employee category | Time for payment |
|---|---|
| Daily basis | At the end of the shift |
| Weekly basis | On the last working day of the week |
| Fortnightly basis | Within 2 days after the fortnight ends |
| Monthly basis | Before the 7th day of the next month |
If an employee is: Dismissed, Removed, Retrenched and Resigns Wages must be paid within 2 working days.
Special power of Government - Government may prescribe a different time limit due to special circumstances.
If any other law provides a specific time limit, that rule will also apply.
- Section 18 – Deductions Which May Be Made from Wages
No deduction is allowed unless specifically permitted by the Code.
Any payment made by the employee to the employer is treated as a deduction from wages.
Not treated as deductions
- Withholding of increment
- Withholding of promotion
- Reduction to a lower post or pay scale
- Suspension
Permitted Deductions - Deductions may be made for:
- a. Fines imposed on employees
- b. Absence from duty
- c. Damage or loss of goods or property
- d. House accommodation provided by employer/Government/Housing Board
- e. Amenities or services (water, electricity, etc.) authorized by Government
- f. Recovery of advances or overpayments (travel allowance, conveyance advance, excess wages etc.)
- g. Recovery of loans for approved purposes (e.g., house building)
- h. Income tax and court-ordered deductions
- i. PF, pension, health insurance and other social security contributions
- j. Co-operative society payments
- k. Trade union subscription fees
- l. Special deductions for railway employees for losses due to counterfeit coins, failure to account for collections, incorrect refunds etc.
- m. Contributions to relief funds
- n. With written authorization, contributions to PM Relief Fund or other approved funds
Maximum deduction -Total deduction in a wage period cannot exceed 50% of wages. Excess amount can be recovered in future wage periods.
Important -If employer deducts money but fails to deposit it in the required fund/account, employee is not responsible for that default.
- Section 19 – Fines
Conditions for imposing fine
Fine can be imposed only for acts or omissions:
- Approved by Appropriate Government
- Specified in rules
Notice requirement
List of acts/omissions must be:
- Displayed on notice board
- Shown at workplace premises
Before imposing fine - Employee must be given an opportunity to show cause.
Limit - Fine in one wage period cannot exceed 3% of wages.
Other rules
- No fine on employees below 18 years.
- Fine cannot be recovered in instalments.
- Fine cannot be recovered after 90 days from the date imposed.
- Fine is deemed imposed on the day the act/omission occurred.
- All fines must be recorded in a register.
- Money collected from fines must be used only for employee welfare purposes approved by the prescribed authority.
- Section 20 – Deduction for Absence from Duty
Deduction may be made when an employee is absent according to the terms of employment.
Absence may be:
- For the whole working period, or
- For any part of the working period.
- Section 21 – Deduction for Damage or Loss
Deduction cannot exceed the actual amount of damage or loss.
Before deduction: Employee must get an opportunity to show cause.
Prescribed procedure must be followed.
Employer must
- Maintain registers of deductions.
- Record all deductions and recoveries in the prescribed form.
- Section 22 – Deduction for Services Rendered
Deduction for: House accommodation, Amenities and Services provided under Section 18(2)(d) and (e) can be made only if the employee has accepted them voluntarily or as a term of employment.
Limits - Deduction must not exceed the value of accommodation/amenity/service provided and it must follow conditions imposed by the Appropriate Government.
- Section 23 – Deduction for Recovery of Advances
Deductions for recovery of advances given to an employee are allowed, but they are subject to the following conditions:
(a) Advance given before employment begins
It may be recovered from the first payment of wages for a complete wage period. However, advance given for travelling expenses cannot be recovered.
(b) Advance given after employment begins
Recovery is subject to the conditions prescribed by the Appropriate Government.
(c) Recovery of advance of unearned wages
If wages are paid in advance before they are actually earned, the amount can be recovered from future wages.
- Section 24 – Deduction for Recovery of Loans
Deduction may be made for recovery of loans granted to an employee.
The following matters are regulated by the prescribed rules:
- Purpose of the loan
- Rate of interest
- Method of recovery from wages
- Section 25 – Chapter Not Applicable to Certain Establishments
The provisions of this Chapter relating to deductions from wages do not automatically apply to all establishments.
Certain establishments may be exempted or dealt with separately according to the provisions of the Code or rules made by the Appropriate Government.