Payment of wage act 1936The Royal Commission on Labour in its report (1931) recommended, among other things, that legislation on timely payment of wages, deductions from wages and fines, was necessary and desirable. In the light of its recommendations, the Government of India introduced a bill in 1936, and the Act came into force from 28th March, 1937.

The Payment of Wages Act is in three parts. Part I deals with the regulation and payment of wages by the employer. Part II specifies the heads under which deductions can be made from wages. Part III provides machinery for enforcing specific claims arising out of delayed payments, deduction from wages, appeals, etc. It is a self-contained Act and provides its own machinery for the disposal of the claims. The Act contains 26 Sections. 


The object of the Act is to regulate the payment of wages to certain classes of persons employed in industry in a particular form and at regular intervals; and to prevent unauthorised deductions from the wages. The Act is concerned merely with the fixation of wage periods and not with the fixation of wages. 


The Act is applicable to persons employed in any factory, railway, and to such other establishments to which the State Government may, by notification, extend the provisions of the Act after giving three months’ notice to that effect. In the case of industrial establishments owned by the Central Government the notification can be issued with the concurrence of the Central Government.

Employees whose average wage is less than rupees 1,600 a month are covered under the Act. The Payment of Wages (Amendment) Bill, 2002 provides for the enhancement of the wage ceiling to rupees 6,500 per month. 


“Wages” means all remuneration (whether by way of salary, allowances or otherwise) expressed in terms of money or capable of being so expressed which, if the terms of employment express or implied were fulfilled, would be payable to a person employed in respect of his employment or of work done in such employment. It includes:

i) Any remuneration payable under any award or settlement between the parties or order of a court;

ii) Any remuneration to which the person employed is entitled in respect of overtime work or holidays or any leave period;

iii) Any sum which by reason of the termination of employment of the person employed is capable under any law, contract or instrument which provides for the payment of such sum, whether with or without deduction but does not provide for the time within which the payment is to be made.

iv) Any sum to which the person employed is entitled under any scheme framed under any law for the time being in force.

However, it does not include:

i) 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;

ii) 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;

iii) Any contribution paid by the employer to any pension or provident fund and the interest which may have accrued thereon;

iv) Any travelling concession;

v) Any sum paid to the employed person to defray special expenses entailed on him by the nature of his employment; or

vi) Any gratuity payable on the termination of employment

The term “establishment” includes:

a) tramway service or motor transport engaged in carrying passengers and goods or both by road for hire or reward;

b) air transport service other than such service belonging to, or exclusively employed in the military, naval or airforce of the Union, or the Civil Aviation Department of the Govt. of India;

c) dock, wharf, or jetty;

d) inland vessel mechanically propelled;

e) mine, quarry or oil field;

f) plantation;

g) workshop, or other establishments in which articles are produced, adapted, or manufactured, with a view to their use, transport or sale;

h) establishment in which any work relating to the construction, development or maintenance of building, roads, bridges or canals or relating to transmission, or distribution of electricity, or any other form of power is being carried on;

i) any other establishment, or class of establishments, which the Central or a State Government may notify in the Official Gazette. 


The responsibility for the payment of wages under the Act is that of the employer or his representative. In the absence of the employer, a person who employs the labourers and with whom they enter into a contract of employment will be regarded as the employer.

No wage period shall exceed one month in any case. The main purpose of this provision is to ensure that inordinate delay is not caused in the payment of wages and that a long time does not elapse before wages are paid for the period for which an employee has worked.

Wages may be payable daily, weekly, fortnightly and monthly. But the payment thereof must not extend over a period longer than one month (month means a solar month; a period of four weeks or 30 days).

Where less than 1,000 persons are employed, wages shall be paid before the expiry of the 7th day and in other cases before the expiry of the 10th day, after the last day of the wage period. If for instance, the wage period fixed is the first day of January to the thirty-first day of January an employed person working in any railway, factory or industrial establishment in which less than one thousand persons are employed would be entitled to receive his wages before the seventh day of February and in other cases on the tenth day of February in respect of the wage period of January.

In case the employer terminates the services of an employee, the employee is entitled to receive the wage earned by him before the expiry of the 2nd working day from the day on which his employment has been terminated. The weekly or other recognised holiday is to be excluded in computing the second working day.

All wages shall be paid in current coin or currency notes or in both. The employer may, after obtaining the written authorisation of the employed person, pay the wages either by cheque or by crediting the wages into his bank account. 


Wages shall be paid to an employed person without deductions of any kind except those authorised by or under the Act. Withholding of increment or promotion (including the stoppage of increment at an efficiency bar); reduction to a lower post or time scale or to a lower stage in a time scale and suspension are not deemed to be deductions from wages.

The term ‘deduction from wages’ has not been defined in the Act. However, the Act specifies the heads from which deductions from wages may be made.

Deductions may be made by an employer, with the written authorisation of theemployed person, from the wages payable to such an employed person, for payment of contribution to any welfare fund constituted by the employer for thewelfare of employed persons and the members of their families, and also for the payment of the fees payable by the employed person for membership of any registered trade union.

There are also certain deductions peculiar to railways, such as deductions for recovery of losses sustained by railway administration on account of certain omissions and commissions on the part of the employees.

The total amount of deduction which may be made in any wage period from the wages of an employed person shall not exceed 75 per cent of such wages in cases where such deductions were wholly or partly made for payment to co-operative societies; and in any other case, 50 per cent of such wages.

There are certain conditions and limits subject to which fines may be imposed.

These are:

i) A fine can be imposed only for such acts or omissions as are specified by the employer and previously approved by the State Government;

ii) A notice specifying such acts or omissions must be exhibited on the premises in which employment is carried on;

iii) A person involved must be informed in writing the reasons for imposing fine;

iv) No fine shall be imposed on an employed person who is under the age of 15 years.

v) No fine shall be recovered from an employed person by instalments after the expiry of 60 days from the day on which it was imposed;

vi) The total amount of fine in one wage period shall not exceed an amount equal to 3 per cent for that wage period;

vii) All realisations by way of fine have to be recorded in a register and must be applied only for such purpose as are beneficial to the persons employed in the factory or establishment as are approved by the prescribed authority.

The Act authorises deductions for actual absence from duty. However, if 10 or more employed persons acting in concert absent themselves without due notice and without reasonable cause, such deductions may be made for a maximum period of 8 days.

Deductions from wages for damage or loss caused to the employer by the neglect or default of the employed person have been laid down under the Act. Such deductions can be made only after giving the person concerned an opportunity of showing cause against the deductions. All such deductions and realisations are to be recorded in a register.




1) Deductions for fines.

2) Deductions for absence from duty.

3) Deductions for damage or loss.

4) Deductions for house accommodation.

5) Deductions for amenities and services.

6) Deductions for recovery of advances or for adjustment of over payment of wages.

7) Deductions for recovery of loans made for the welfare of labour.

8) Deductions for recovery of loans granted for house building.

9) Deductions for payment to co-operative societies and insurance schemes.

10) Deductions of income tax.

11) Deductions made under orders of court.

12) Deductions for contributions to provident fund.

13) Deductions for the welfare of the employed persons.

14) Deductions in respect of fees payable for the membership of trade union.

15) Deductions for payment of insurance premia on fidelity guarantee bonds.

16) Deductions for recovery of losses sustained by railway administration.

17) Deductions for contribution to the Prime Minister’s National Relief Fund.

18) Deductions for contributions to any insurance scheme. 


The Act makes provision for the appointment of inspectors. The Inspector of Factories is also the Inspector under this Act.

The Act also provides for the appointment of a person to be the authority to hear and decide, for any specified area, claims arising out of deductions from wages or delay in payment of wages.

The authority under the Act can only adjudicate upon claims regarding deductions and delay in payment of wages and not upon any dispute in respect of wages.

An appeal lies against the decision of the authority to a Court of Small Causes in a metropolitan town and before the District Court elsewhere within a period of one month.

The Act prescribes penalties for offences committed under the Act.

Any contract or agreement whereby an employed person relinquishes any right conferred by this Act shall be null and void. 


1) To fix the wage-period not exceeding one month.

2) To pay wages in cash or by cheque after taking written authorisation of the employed person.

3) To pay wages on any working day.

4) To make deductions permissible from the wages of the employed person.

7) To ensure that deductions do not exceed 75% where payment to a cooperative society is to be made, and in other cases, deductions do not exceed 50%.

6) To seek, before imposing fines approval of list of acts and omissions from the prescribed authority.

7) Not to impose fines exceeding 3% of the wages on the employee.

8) To give show-cause notice to the employed person before imposing fines.

9) To recover fines within 60 days of the date of offence.

10) To afford facilities to Inspectors for entry, inspection, supervision, examination or inquiry under the Act.

11) To display abstract of the Act and the Rules in English and in a language understood by the majority of workmen.

12) To maintain following register in the prescribed forms:

i) Register of wages;

ii) Register of fines;

iii) Register of deductions for damage or loss;

iv) Register of advances.

Apart from maintaining necessary records and registers, the employer is required to display an abstract of the Act at a conspicuous place.


Every employee is entitled:

1) To receive his wages in the prescribed wage period in cash or by cheque or by credit to his bank account.

2) To refuse to agree to any deductions and fines other than those authorised under the Act.

3) To approach within six months the prescribed authority to claim unpaid or delayed wages, unauthorised deductions and fines along with compensation.

4) To appeal against the direction made by the authority if the amount of wages claimed exceeds rupees one hundred.

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