This article is written by Shraileen Kaur, a student at ICFAI University, Dehradun. In this exhaustive article, the author discusses in detail the Payment of Wages Act, its historical background, features, objectives, purpose, and relevant case laws related to the Act.
Table of Contents
It is a well-known fact that India’s economy depends not just on the formal sector but also on the informal sector. The significance of the informal sector in India cannot be ignored. Before independence in 1947, the informal sector, primarily agriculture, contributed to 95 per cent of the Gross Domestic Product (GDP). Even today, 70 per cent of the national income of India consists of income generated through agriculture (Food and Agriculture Organisation of the United Nations).
As per the Employment – Unemployment Survey of 2011-12, presented by the National Sample Survey Office (NSSO), the total workforce of India is 474.23 million. However, out of this total workforce, only 8 per cent belong to the formal sector, and the remaining 92 per cent are working in the informal sector. Additionally, 60 percent of the growth of GDP is due to the contribution of these informal sector workers.
According to the Indian Constitution, the Government of India is required to create employment opportunities and ensure that all workers (formal and informal sectors) have access to a reasonable standard of living that includes all socioeconomic and other welfare opportunities.
Adhering to the Constitution of India, the Indian Government in the year 1948, right after independence, introduced legislation named the Minimum Wages Act of 1948. The legislative intent behind the Act was to make sure that workers in the informal sector receive at least a minimum amount of money as wages to avoid exploitation. However, before this Act, the Payment of Wages Act of 1936 was introduced. The Act made efforts so that informal sector workers could be linked with mainstream development by providing minimum wages, which can be utilised to increase living standards and benefit social development schemes.
The Act has occasionally undergone modifications to ensure that the law is effectively implemented and that workers receive adequate pay in a timely manner to maintain themselves and their families. This article explains numerous significant clauses of the Act and related amendments and case laws.
Since labourers and workers constituted the oppressed class, the concern of arbitrary deductions from wages and payments of wages that were not uniform was not given much attention. However, in 1925, a private Bill known as the Weekly Payment of Wages Bill was presented in the Legislative Assembly that dealt with these issues. However, at that time, the government rejected the Bill by claiming that the problem was already under assessment.
The Indian Government maintained a connection with the regional or state-level administrations in 1926. It encouraged them to look into and gather the necessary data, materials, etc., about the challenges, as mentioned earlier, faced by the oppressed classes, specifically workers and labourers.
The information gathered made it clearly evident that the problems, which included the employers’ arbitrary deduction of large amounts of money from wages and the inconsistent and delayed distribution of payments, which left workers in the most precarious of circumstances, were quite real.
The Royal Commission on Labour was established in 1929 under the chairmanship of John Henry Whitley. The commission was established to investigate and evaluate the current working conditions in factories and other production sites in pre-independent India. The Commission provided the data collected from the provincial governments in British India. It was given the responsibility to do extensive research on the physical and mental well-being, productivity, access to health services, and living standards of the workforce, as well as on the relationships between employers and employees. Also, the Commission had to offer suggestions for the betterment of the workers. The Government of India collected information from the provincial governments.
The report by the Royal Commission on Labour (1929) covered a wide range of problems faced by workers in various manufacturing facilities, including textiles, leather goods, underground mining, steam engines, and silvicultural factories, as well as employees engaged in public service departments. It covered nearly all of the problems that employees experience, from low pay, long working hours, and no leave considering bad health and well-being, no accommodation, lack or absence of trade unions, the establishment of workmen’s compensation fund, industrial disputes, etc.
The report is so thorough that almost all worker welfare legislation and economic laws currently in existence, such as the Trade Union Act of 1926, the Industrial Disputes Act of 1947, the Payment of Wages Act of 1936, and the Minimum Wages Act of 1948, etc., can be linked directly in some capacity to this document.
In many industries, factories and other places where workers were employed, penalising was a pretty common practice. Mining facilities and other industrial sites had far lower rates of fines imposed on workers. On the other hand, plantation facilities hardly ever had a system of imposing penalties on their workers. It was thought to be most common in textile factories. Also, the Presidency of Bombay, before independence, being the hub of such textile mills, had one of the largest arbitrary systems of penalising workers.
While the average fine reduction from a worker’s total pay was about 1%, it was more important to focus on specific cases than the average because they were more relevant.
There were also deductions for numerous additional reasons, including required perks or causes like medical care, skills training, interest on pay advances, charitable contributions, employer-selected religious causes, and a variety of other amenities. It was a harsh reality that the amount was deducted from the wages of the workers. However, they never received any benefit, directly or indirectly, from these deductions. The workers were expected to pay for their own medical expenses, education, or other basic necessities. In fact, the interest on the advances given to workers was extremely high compared to the formal sector banking facilities at that time. Moreover, the deduction of two days’ salary for one day of absence is another frequent practice that some mills implement.
In general terms, deductions from pay can be divided into three categories:
Furthermore, in each of the three cases, the Royal Commission on Labour found compelling justification for enacting a law.
Under what circumstances should a deduction be made from the wages of the workers? How much should be deducted from the wages of the workers?
Generally, these deductions are made by the employer. However, there have been instances where employers have delegated their powers to their subordinates. These penalising practices are not just followed in India but across the globe. This is why various nations have come up with different laws, rules, and regulations to prevent arbitrariness in the imposition of penalties.
The Commission further noted that even a modest deduction from the wages of workers is problematic for many employees because their pay often only covers the basic requirements of life, while higher deductions put them further into debt and may even temporarily deplete their resources.
The Commission also suggested that children should not be subject to fines because of their incapacity, lack of prior experience, and low pay scale.
The Commission recommended that a maximum of one month following the date the fine was levied be allowed for the payment of a fine in order to avoid spreading it out over an excessively long period of time, which would lead to increased indebtedness.
The smallest amount that could be taken out of a worker’s paycheck as a fine in any given month must not be less than half an anna in rupees (anna was a recognised denomination of the British Indian Rupee during the colonial rule).
The money collected as a fine must be used for an initiative that benefits the entire group of workers and must receive approval from a recognised authority.
The Commission suggested that the notification outlining the actions, conduct, and violations for which penalties may be levied should be posted, and any additional fine should be considered to be unlawful in order to safeguard the workforce from unjustified penalties.
The amount deducted for damaged items must not be greater than the wholesale cost of the product, and the damage to the concerned goods must be directly related to the labourer’s ignorance and recklessness.
Employers should keep records of deductions made for product damage, as doing so will, in any event, give authorities the information they need to decide if additional regulations are needed or not.
It is permissible to deduct money for the purchase of equipment and raw materials as well as for housing accommodations.
Any penalty can be directed at the employer for the imposition of fines and deductions that are not allowed by the law.
Based on these Commission recommendations, the Government of India re-examined the issue, and in February 1933, the Payment of Wages Bill of 1933 was introduced in the Legislative Assembly and debated for the purpose of gathering opinions, but it was unable to take the form of an Act due to the dissolution of the legislative assembly.
Later on, the Payment of Wages Bill was reintroduced in the Legislative Assembly on February 15, 1935, with standards that were similar to those of the previous Bill from 1933 but completely modified for better protection of labourers and prevention of loopholes. The Select Committee was given the Bill for evaluation. On September 2, 1935, the Select Committee presented its report.
Lastly, the Payment of Wages Bill of 1935, which incorporated the Select Board of Trustees’ suggestions, was once more presented to the Legislative Assembly before being enacted in 1936 and entering into force on March 21, 1937.
Due to the overabundance of labour that was available in India during the industrial revolution, which gave British merchants significant socioeconomic leverage, the labour force was reduced to a low economic condition with no negotiating market power.
As a result, Indian employees had to work and live in abhorrent circumstances. Regarding their work hours, there were no regulations in place until 1891. Any type of social protection against illness, old age, joblessness, accidents, or unexpected death did not exist.
There was no provident fund programme; instead, a substandard maternity benefits programme was implemented in the 1930s. Between 1889 and 1929, manufacturing workers’ real wages decreased, and the average worker’s standard of living fell below the poverty line.
Among the most oppressed groups in the history of modern capitalism were the Indian Industrial Workers, who were underprivileged and confined like animals without access to the basic necessities of life like food, shelter, and clothing.
After 1858, the modern capitalist class in India began to emerge. Additionally, on one hand, with influential and effective government assistance, the modern businesses of France, Germany, and Japan were established. On the other hand, the government’s formal business, customs, transportation, as well as fiscal and monetary policies eventually forced it into rivalry with British capitalists. It gradually became apparent that these policies were limiting the ability of capitalists to thrive.
The Indian capitalist class required effective and prompt government assistance to make up for its preliminary vulnerability in contending with the well-established industries of European countries. This had to be done while striving for self-reliant economic progress that was at odds with the colonial rule on almost every underlying economic concern.
However, capitalists and industrialists in India were not given this assistance. The top administration was ruled by the Crown and antagonistic to Indian industrial initiatives, or rather unsympathetic; after all, their ultimate objective was to squeeze the wealth of the “golden bird”.
Moreover, Indian capitalists feared being dominated and repressed by the much more powerful foreign capitalists, who were given considerable concessions and the free flow of goods around the country. The massive British Industrial Corporation began establishing affiliates and subsidiaries in India after 1918 as a result of the large-scale influx of foreign investment capital into the Indian industry. This was done in order to make the most of the tariff protections offered throughout the 1920s and 1930s, the less expensive Indian labour, and the proximity of the marketplace. At this time, Indian businessmen had proclaimed their dominance over Indian markets.
Indian businessmen consequently came into open conflict with the British economic system, government operations, and policies. They eventually came to the realisation that they required a sovereign nation and a political class that supported local entrepreneurs. As long as British imperialists ruled the nation, India’s economy and trade could not grow properly.
The catastrophic famines that struck India from 1866 to 1901 completely crushed each and every hope of planned growth. By the end of the 19th century, the working and living circumstances of the labour force had deteriorated significantly.
Employees made intermittent efforts to voice their displeasure with their employers and the authorities in the beginning, about 1880, through protests, general strikes, and public gatherings. However, after the Madras Labour Union was established in 1918, real trade unionism in India started.
As is evident from the discussion above, the conventional Indian industry was destroyed during colonial times as a consequence of the industrial revolution in British India. British capitalist industries stepped in to fill the void, and because they had full control over the methods and means of production, they were empowered to abuse this power.
On the other hand, there weren’t many contemporary industries in India, which meant that the factors of production were concentrated in the hands of a very small number of Indians. Additionally, the Crown was in charge of overseeing and controlling these enterprises through taxes, rules, and regulations. The cottage industry was unsuccessfully revived despite their efforts.
In other words, the authority over the factors of production was concentrated in a small number of people, allowing them to act arbitrarily and according to their preferences.
At the same time, there was an abundance of labour available in India, ready to be employed in dangerous industries with few or no safety precautions, bad living situations, longer working hours, and no nutritious food to add, and meagre or starvation leading wages.
Trade unionism was present in India, but when compared to other nations, it was unable to lead the labour movement to its final victory, where it would have gained sufficient collective bargaining power to exercise authority in negotiations about topics like salaries and benefits, conditions of employment, safety precautions, social welfare, etc. In other words, the conditions for workers were terrible, and they had no leverage in negotiations.
The period of crisis for labourers started in the mid-period of struggle and lasted till the early years of the development of trade unionism. During this period, the conditions of workers were degraded in the worst possible manner. The majority of the labour was in a debt trap, leading to high rates of defaults and suicides. The condition of the labourers was further deteriorated by arbitrary deductions from their wages, making them incapable of fulfilling even the basic needs of their families, like food and clothing. The grounds for the wage deduction were not certain. Hence, the employers abused them at their own discretion. A deduction in wages was imposed irrespective of the fact of whether the worker in question was actually liable or not. Further, the amount of such a deduction was leading to an unbalanced deduction of wages.
There were numerous wage periods, which added to the anguish of labourers. Additionally, despite having certain wage periods, wages to be paid to the workers were often months late. The working class, who rarely understood the notion of savings and investment, depended on prompt payments to provide for their family members by giving them food, clothing, and a roof over their heads. These essentials are required for any person’s survival, and denying them to workers, even if indirectly, would result in a huge labour crisis.
In this way, the cumulative effects of various variables like a colonial rule, lack of proper trade unionism, the politicisation of the concern of labourers, and the Industrial Revolution in Britain led to the ultimate crisis of the labourers.
All these factors made the general public realise that in order to protect the rights of labourers, a joint effort is required. Hence, the concern of the labourers was connected with the need for “Swaraj.” This resulted in increased pressure on the governmental authorities, which finally led to the introduction of the Payment of Wages Act of 1936.
Considering the efforts of the public at large, the Payment of Wages Act of 1936 was passed by the British Government on April 23, 1936. As previously stated, this Act was enacted to regulate the payment of wages for a specific group of workers. In accordance with the Payment of Wages Act, “wages” refers to any compensation given to employees, with some exceptions listed in the specific exclusions mentioned under the Act. These exclusions include any monetary value for housing accommodations or incentives, as well as gratuities, travel expenses, and the amount offered for the delivery of electricity or water.
The Payment of Wages Act 1936 is a useful piece of legislation that governs how specific kinds of people employed in industries get paid.
The primary goals of the Act are-
The Payment of Wages Act, 1936 applies to the entirety of India and is implemented by the competent government in each jurisdiction on a state and national level. The Central Government is the competent authority in cases involving railroads, air transportation, mining, and oil and gas fields. In all other situations, the State Government is the competent authority to take decisions.
This legislation follows a specific approach to governing the payment of wages to workers by their employers. It is a 2-step approach. It involves –
According to Section 1(4) of the Payment of Wages Act, 1936, all individuals who have worked in factories, for the Railway Administration or a subcontractor, or in other manufacturing or commercial facilities must be paid their wages accordingly.
According to the Payment of Wages Act, 1936, the state government has the authority to apply the requirements of the Act to any category of employed individuals after publishing a three-month notice in the Official Gazette of India. All employers are now compelled by Section 3 of the Payment of Wages Act, 1936, to undertake the obligation to pay the entitled wages as specified by the Act to all of the employees who come under the ambit of Section 1(4) of the Act.
Meanwhile, if any employers violate Sections 5 or 7 of the Act, which deal with the prompt payment of wages in existing authorised “coins and currency”, then in such a scenario, the employer could be fined, which should not be less than INR 1,000. However, such a fine can go as high as INR 5,000.
In general, people think that the Minimum Wages Act of 1948 is simply an extension of the Payment of Wages Act, 1936. However, this is not true at all. Both the Acts are entirely different. As per the Payment of Wages Act of 1936, workers must be able to get their wages on time, and it also specifies the minimum wages that must be paid to them.
| Basis | Payment of Wages Act of 1936 | Minimum Wages Act of 1948 |
| Objective of the Act | The objective behind the introduction of this Act was to prevent delays in the payment of wages that led to a debt trap for the informal sector workers. | The objective behind the introduction of this Act was to ensure that every worker receives at least a minimum amount of money as wages and to avoid the exploitation of the informal sector workers. |
| Application and scope of the Act | Payment of Wages Act of 1936 applies uniformly to the whole territory of India, including the State of Jammu and Kashmir. | Minimum Wages Act of 1948 is applicable to the whole of India. However, its scope varies depending on states and regions. |
| Definition of Wages | Payment of Wages Act of 1936 defines “wages” under Section 2 (VI) of the Act. | Minimum Wages Act of 1948 defines “wages” under Section 2 (h) of the Act. |
| Purpose of the Act | The Act aims to control how certain types of people who work in the industry are paid their wages. Its goal is to guarantee the regular payment of wages free from any unlawful deductions. | The Act is designed to set up the minimum wage determining mechanism in industries where there is no plan in place for the absolute management of wages. This mechanism is built by collective bargaining agreements or other means. It prevents the exploitation of workers. |
| Inclusion of housing allowance | The housing allowance is not a part of wages under the Payment of Wages Act of 1936. | Wages include a housing rent allowance under the Minimum Wages Act of 1948. |
| Additional remuneration | Regardless of whether it is referred to as a monetary incentive or by another name, any additional compensation due under the conditions of employment is not considered as “wages.” | The additional payments due under the conditions of employment to the employee are not considered wages. |
| Scope of wages | “Wages” encompasses compensation for extra hours, holidays, and leave time. | Compensation for extra hours, holidays, and leave time is excluded. |
| Compensation by the court | Any compensation that is due under a court’s orders, judgments, or settlements is considered wages. | It excludes any compensation due in accordance with a court’s decision, settlement, or decree. |
| Other monetary amounts payable regarding employment | Wages also comprise any amount that is payable by the employer to the employee related to his or her termination of work under any law, etc. | Wages under the Minimum Wages Act of 1948 does not comprise any amount that is payable by the employer to the employee related to his or her termination of work under any law, etc. |
| Scheme-related monetary benefit | Any amount that the employee is eligible to receive under a scheme created in accordance with law is included in wages. | Any amount that the employee is eligible to receive under a scheme created in accordance with a law is not included in the wages. |
The financial reimbursement or remuneration that a company gives to workers in return for work completed is known as a wage. It is also referred to as ‘personnel expenses’. The calculation of wages can be done either as a fixed sum for each project executed or as an hourly, daily, or weekly price based on a quantifiable number of tasks performed.
All financial compensation, ‘including’ the following, is considered to be waged.
Wages have been defined under Section 2(iv) of the Payment of Wages Act, 1936. “Wages” refers to all remuneration (whether paid in the category of wage entitlements or otherwise) represented in cash or qualified to be presented in finances that would be due for payment to a worker in respect of his occupation or work performed in such employment. Also, wages include payments if the express or implied terms of employment are satisfied, and include:
In Section 3 of the Payment of Wages Act, it is stated who is accountable for paying wages to the workers. Each and every worker that an employer engages or employs for labour purposes is entitled to receive payment of all wages due to them.
In other circumstances, if the employer identifies a person or, on the rare chance, realises that there is a person qualified for the job or is authorised for the same task, at that point, such a person is responsible for the payment of wages.
These points must be noted concerning the obligation of the employer to pay wages –
Each person responsible for the payment of wages under Section 3 will establish the time frames for which those earnings are due. No pay term shall be longer than one month. The Payment of Wages Act, 1936 clearly indicates that wages can be paid to workers in the following way –
Also, the Act clearly mentions that under no circumstances shall the payment of wages to the representatives by the manager go beyond the intervals of 1 month, i.e., 30 days.
Moreover, considering the then-prevalent situation where the workers were paid wages –
The Act mentioned that wages could not be paid following this system as it leads to increased indebtedness of the workers.
“(1) Every person employed upon or in:
These points must be noted with regard to the payment of wages. The points are as follows –
The employer or person in charge of paying wages must pay the wages to the workers in the currently prevalent currency, either coins, cash notes, or a combination of both. Furthermore, the employer is also not allowed to make a kind payment. Moreover, after receiving written authorisation from the employee, the employer may pay the employee’s earnings via cheque or bank transfer into his bank. The employer of each employee working in such commercial or other facilities shall pay the employee’s wages only by issuing a cheque or by depositing the money to his bank account, as specified by the competent government by notification in the Official Gazette.
Manufacturing or production firms should deduct money in accordance with this Act as simply as possible at the time that employees are paid their wages. The employer would no longer be permitted to deduct what he deems fit. Deductions relating to all payments made by an employee to his employer must be stated beforehand.
The following are not included in the definition of a deduction:
The aforementioned actions taken by the organisation must have a good and appropriate justification before initiation.
Employers should impose a fine on employees only with prior approval from the state government or other authorised institutions. Before imposing a fine on the employee, the employer must go by the rules listed below.
The worker’s absence from work for either a single day or for any other duration of time may result in deductions from wages by the employer.
The worker’s absence from work for either a single day or for any other duration of time may result in deductions from wages by the employer.
The amount deducted for the absence during working hours must not be greater than a total that has a comparable connection to the pay. This pay is due in reference to the payment period as this absence does to that wage period.
For instance, if a worker’s monthly salary is INR 15,000 and he misses one month of work due to another obligation, the penalty for failure to fulfil an obligation should not exceed INR 15,000.
Employees who show up for work and refuse to participate in the business operation without a valid excuse will be seen as being absent from their duties.
The employer may withdraw eight days’ worth of wages from the pay of the workers if at least ten persons collectively fail to report for duty without being given a cause and without prior notice.
A register is to be maintained by the person responsible for the payment of the wages in such a framework as might be recommended. Also, it will contain all such observations and all confirmations thereof.
According to Section 10(2) of the Payment of Wages Act, 1936, the employer should give the worker an opportunity to provide justification and reason for the damage that took place. The deductions made by the employer from the wages of the worker should not exceed the value or measure of the damage done by the worker.
If a worker does not consider or admit the house-convenience service or administrative structure provided by the employer, in this case, only the employer is authorised to deduct the cost from the employee or worker’s pay.
The amount of the deduction should not be greater than the estimated value of the house-convenience services or administrative structure.
If an advance was given to employees by the employer prior to the start of business, the company should be able to recover or recuperate that advance from the worker’s primary payment of wages or salary. On the other hand, the employer shouldn’t be allowed to recoup or recover the loans made for the employee’s travel expenses.
Resolutions for the recovery of loans granted for home construction or other objectives will be based on any rules established by the State Government that control the amount of flexibility with which such loans may be permitted and the rate of interest payable afterwards.
Payments to cooperative organisations and insurance systems – subject to deductions.
The conditions that the State Government may impose will determine the justification for pension contributions to cooperative organisations, deductions for payments to insurance coverage maintained by the Indian Postal Service, or for worker recognition deductions made for compensation of any premium on their additional security strategic plan to the Life Insurance Corporation.
Every employer is required to maintain the registers and information necessary to provide information on the individuals they employ, the work they do for them, the pay they get, the deduction taken from that pay, the receipts they provide, and other details in the format that may be advised.
Every registration and record must be maintained and protected for a duration of three years following the date of the last addition made to them. It means that both the employer and the employee need to have a three-year history of transactions.
Authority for the purposes of this Act may be chosen by the state government. Any authority will be regarded as a public servant for the purposes of Section 14 of the Indian Penal Code, which was passed in 1860.
A monitor may be chosen by the state government to oversee the implementation of this legislation. Each inspector will be treated as a member of the general public or a public worker for the purposes of Section 14 of the Indian Penal Code, 1860.
The Inspector under this law has the following authority:
Inspectors have the authority to conduct investigations and evaluate whether employers are appropriately adhering to the rules mentioned in this Act or not.
For the purposes of carrying out the purposes of this Act, the Inspector may, with the assistance, if any, he deems necessary, may enter, investigate, and examine any property of any railway, production system, industrial, or other establishments.
An inspector is capable of overseeing the payment of wages. It includes the payments to those working on any foundation, whether it be a factory, machinery, other establishments, or a railway. It includes taking possession of or making copies of any registers, records, or sections thereof that he deems important in relation to a violation of the Act.
For each registration, inspection, observation, evaluation, or request made in accordance with this Act, each employer shall fund the reasonable costs of an inspector.
There shall be an authority mentioned below appointed by the competent authority to hear and decide on all matters arising from observations regarding the payments or postponement in payment of the salaries and benefits of people who are employed and compensated, along with all concerns incidental to such claims.
The portion of this Act makes reference to the aforementioned title. If many employees have not had their wages paid, there is no requirement for multiple applications. According to this Act, all such employees may submit a single application to the specialist for the payment of their wages.
Section 17 of this Act mentions the right to appeal. The parties who are dissatisfied may file an appeal with the district court under the following circumstances:
In accordance with Section 15 of the Payment of Wages Act of 1936, the authorities have the following powers –
“Where whenever after an application has been made under sub-section (2) of Section 15 the authority or where whenever after an intrigue or appeal has been filed under Section 17 by an employed individual or any legitimate professional or any authority of an enlisted worker’s organisation approved recorded as a hard copy to follow up for his sake or any Inspector under this Act or some other individual allowed by the power to make an application under sub-section (2) of Section 15.”
The court, at times, has referred to this Section and is satisfied that the company or another person responsible for paying wages under Section 3 is likely going to avoid paying any sum that may be arranged to be compensated under Section 15 or Section 17 by the officials or the court, as the case may be, with the sole exception of circumstances where the institution or court has made the decision that the components of the contractual arrangements be destroyed by the temporary suspension.
After giving the employer or any other party an opportunity to be heard, it is feasible to make arrangements for the connection of a significant amount of the employer’s or another party’s liability for the payment of wages as determined by the authority or court to be sufficient to cover the potential payment under the heading. Any application for connection under subsection (1) will be subject to the provisions of the Code of Civil Procedure (1908) (5 of 1908) dealing with connection before judgement under that Code.
No court will hear any cases involving the recovery of salaries or other deductions from benefits if the complete amount of the promised benefits has not been received. It involves –
Any authority that the appropriate government may exercise under this Act will, in relation to such matters and pursuant to such requirements, presuming any, as may be mentioned in the course, be further enforceable, the appropriate government may direct by notice in the Official Gazette. Such matters related to the decentralisation of power are mentioned below –
Rules issued under subsection (2) of Section 15 of the Payment of Wages Act of 1936 may, expressly and without favour to the minimisation of the preceding power:
When establishing any regulation under this Section, the State Government may stipulate that violating the rule shall result in a fine of up to INR 200.
All recommendations made pursuant to this Section shall be based on the State of the preceding publication, and the date to be ascertained pursuant to clause (3) of Section 23 of the General Clauses Act, 1897, shall not be less than one-fourth of a year after the date on which the document of the suggested fundamentals was made available.
On April 30, 2020, the Aurangabad bench of the Bombay High Court issued a landmark decision in the case of Align Components Pvt. Ltd. and another v. Union of India and others – (2020), which was filed alongside a number of other petitions. The decision stated that workers’ wages do not have to be paid if they choose not to report to work in regions where the lockdown has been removed.
| Petitioner | Align Components Private Limited and another |
| Respondent | The Union of India and others |
| Representatives of Petitioner | Mr. T. K. Prabhakaran |
| Representative for Respondent | Mr. S.B. Deshpande (Assistant Solicitor General) and Mr. D.R. Kale (Government Pleader) |
| Judges | 2-Judge Bench consisting of Justices S. V. Gangapurwala and R. G. Avachat. |
In this case, the petitioner has called into question the MHA Order, a notification/order that the Government of India, Ministry of Home Affairs, issued on March 29, 2020. The order instructed employers to compensate full wages to the employees during the lockdown. This notification was made in accordance with Section 10(2)(l) of the Disaster Management Act of 2005.
The businesses were compelled to scale back or cease their manufacturing operations as a result of the lockdown restrictions issued by the Ministry of Home Affairs in India.
The petitioners said that the employees would be ready to take on any work that was offered to them and that they would be fairly prepared to do it. Although the petitioners requested a complete exemption from paying wages, they also said that they would be willing to pay 50% of the gross earnings or the minimum rates of wages set by the Minimum Wages Act, whichever is greater. The legal representatives for the respondents – the Union of India and other parties – asked for more time to get information.
Considering the facts and circumstances of the case, the High Court of Bombay held that –
“I am of the opinion that since the Hon’ble Apex Court is dealing with a related cause of action, I would not be inclined to interfere with the impugned order and would expect the petitioners to pay the gross monthly wages to the employees, save and except for conveyance allowance and food allowance, if being paid on a month-to-month basis in the cases of those workers who are not required to report for duties.”
“It is made clear that workers will be expected to report for duty according to shift schedules, subject to the employer providing adequate protection against coronavirus infections since the State of Maharashtra recently partially lifted the lockdown in some industrial areas in the State of Maharashtra. If these employees choose to stay away from work, the management is free to deduct their salary as a result, as long as it follows the legal process for doing so. Even in places where there may not have been a lockdown, this would still be applicable.”
Moreover, the High Court of Bombay observed the following –
Although the Court did make two important exceptions to the general norm, they are as follows:
Additionally, the Court, elaborating on the exception, stated that –
“It is made clear that workers will be obliged to appear for duty according to shift schedules under the condition that the employer provides proper protection against coronavirus infections. Recently, the State of Maharashtra partially lifted the lockdown in some industrial districts. If these employees choose to stay away from work, the management is free to deduct their salary as a result, as long as it follows the legal process for doing so. Even in places where there may not have been a lockdown, this would still be applicable.”
The issue, in this case, revolves around clause (iii) of the Ministry of Home Affairs order in 2020 concerning worker migration and the COVID-19 lockdown.
| Petitioner | Ludhiana Hands Tools Association |
| Respondent | Union of India |
| Representatives of Petitioner | Mr. Jamshed P. Cama (Senior Advocate), Mr. Jawahar Raja (Advocate), Mr. Krishan Kumar, (Advocate on record). |
| Representative for Respondent | Mr. Tushar Mehta (Solicitor General), Mr. Pukhrambam Ramesh Kumar (Advocate on record). |
| Judges | 3-Judge Bench consisting of Hon’ble Mr. Justice L. Nageswara Rao, Hon’ble Mr. Justice Sanjay Kishan Kaul, and Hon’ble Mr. Justice B.R. Gavai. |
In the case of Ludhiana Hands Tools Association v. Union of India (2020), a Public Interest Litigation (PIL) was filed before the Apex Court under Article 32 of the Indian Constitution, asserting that the order is outside the purview of the government under the Disaster Management Act as this Act facilitates the Commission to combat natural and man-made disasters and is not formed for the objective of addressing the employers’ failure to pay wages during the lockdown. Due to this, the statute under which it was passed does not apply to this order. Aside from being arbitrary and in violation of Articles 14, Article 19(1)(g) as well as Section 300A of the Indian Constitution, Section 10(2)(i) of the Disaster Management Act of 2005, which has been read in the manner described above, must be scrapped.
Although it has ordered that no deterrent measures be taken against the petitioners, the Supreme Court has indeed given the temporary remedy in this case.
The same arguments were put out in the other case, Twin City Industrial Employers Association v. Union of India (2020); however, the Supreme Court refrained from interfering with the Ministry’s ruling preventing small-size businesses from having to pay their workers any wages.
In both cases, the Apex Court issued inconsistent rulings; nonetheless, in the first, the Payment of Wages Act’s provisions are being violated because the workers’ payments are not being paid on time.
Moreover, in this case, the Apex Court also made reference to a landmark judgement of Anant Ram v. District Magistrate of Jodhpur (1956). In this case, it was held that in order to be eligible for a payment deduction on the ground of absence from work, such absence should be voluntary. Therefore, no deduction must be made under Section 7(2) when an employee is absent from work during the time between being fired and being reinstated because such an absence cannot be characterised as voluntary.
If one is to comprehend the Payment of Wages’ applicability in the modern day, it is crucial to understand the numerous revisions that have been periodically added to this Act in order to modify it to meet the needs of the modern workforce. This law was created many years ago, so it might not be applicable in its fullest meaning to the current generation. However, this is not true. Through the creation of the Payment of Wages (Amendment) Bill, 2017, major revisions to the Payment of Wages Act of 1936 were made. The Minister of Labour and Employment – Mr. Bandaru Dattatreya, presented this Bill in the Lok Sabha on February 3, 2017.
Section 6 of the Payment of Wages Act of 1936 enables the employer to pay compensation solely in coins or currency. However, the proviso said that if the employer so chooses, they may pay the salaries via check or by depositing the amount in the employees’ bank accounts—but only after getting the necessary consent from them.
Compared to the era when the 1936 legislation took effect, technology has advanced and evolved in the present era. Nowadays, a lot of workers have their own bank accounts.
Hence, the new Act makes several substantial improvements, but the most important one is that companies no longer need to obtain written consent before paying employees’ salaries by check or bank account.
Regardless of their financial situation, the government has pushed every individual to get a bank account. Most employees and labourers, about 80%, have a bank account. As a result, the ability to transfer wages through a cheque or bank account is now convenient for both companies and employees. In doing so, employers will encounter fewer complaints from workers about inadequate and tardy wage payments.
The government has made it clear that only checks or electronic transfers may be used to pay compensation to the manufacturing and other entities listed under the legislation. Thus, the goal of the digital economy will be furthered. A lot of state governments, including those in Punjab, Andhra Pradesh, Haryana, Kerala, etc., have already enacted the aforementioned revisions to their laws.
Through these changes made to the Payment of Wages Act of 1936, the Central Government has formally adopted the crucial policy of elevating electronic transactions in prominence. Adopting such a system will be beneficial in the modern period as it will undoubtedly streamline the process of paying wages while also making it easier to keep track of those payment records.
Moreover, through a notification, the central government raised the salary level in 2017 from 18,000 to 24,000 in order to make the Act more applicable. This limit was raised in order to expand the number of employees the Act will apply to. In today’s typical and lower-middle-class families, the earning member makes at least 20,000 rupees per month or more.
As a result, raising this barrier will broaden the reach of the current Act. The Payment of Wages Act’s revised “salary threshold” and its potential effects on pari materia laws (pari materia is a doctrine in statutory construction which states that the statutes on the same topic or subject must be interpreted collectively) in our nation will need to be examined in the future. The need for it increases in light of Parliament’s consideration of passing the Labour Code on Wages, which would unify all existing laws, including the Payment of Wages Act of 1936, the Minimum Wages Act of 1948, the Equal Remuneration Act of 1976, and the Payment of Bonus Act of 1965.
Therefore, the new Labour Code, which is basically a compilation of the labour laws in the country, would have a significant impact not just on the payment of wages but on the overall conditions of the workers.
In all instances where it is relevant, labourers should be notified, along with each payment of wages, of the following information regarding the payment time frame in question, particularly as it may be subject to alteration.
In suitable circumstances, businesses should be mandated to keep records that show, with regard to each employee employed, the information mentioned in the preceding paragraph.
Proper actions should be taken to promote arrangements for the association of leaders of the affected workers and, more specifically, representatives of worker welfare commissions or related organisations where such bodies emerge, in the general management of worker stores or related sites founded in association with an undertaking for the sale of goods or facilitation of services to the workers thereof.
The Payment of Wages Act makes an effort to unify the definition of “wages,” which is a step toward providing more clarity. However, there is room for misinterpretation given how the terms “employee” and “worker” are used within the Act and how their separate definitions are arranged.
It’s no longer a problem, though. It is anticipated that the newly passed Labour Code, which will be put into effect soon nationwide, will close any gaps left by the country’s prior labour laws. By describing observers as facilitators rather than just inspectors, the Code also seeks to alter the impression of the “Inspector Raj” in relation to the government’s work guidelines.
There have been significant changes made to the offences and penalties under the new Code. The reformative measures make a strong case for their necessity and proportionality, with the intention of assisting rather than impeding corporate leadership.
The Code encourages creativity in decisions about topics like wage payment methods and assessment procedures that are intended to help it achieve its administrative digitalisation goals.
Hence, it will be exciting to see how the new labour code (which is inspired by the previous labour laws such as the Minimum Wages Act, Payment of Wage Act, Factories Act, etc.) will improve the prevalent situation of labourers across the country.
If the work that they are doing is otherwise included under the Payment of Wages Act, then the Act’s provisions are properly applicable to the contract workers that are hired by any factory or facility.
If a penalty is to be levied on a worker, it should only be imposed for actions or inactions that are included in the schedule that has been authorised by the respective authority. Fines shouldn’t be more than 3% of the monthly wages.
This can only be applied to employees who are at least 15 years old, must be retrieved within 90 days of the date of the action or omission, and be imposed following a proper show cause procedure.
Employers are required to keep the following records in the appropriate formats.
Every employer is liable for paying all salaries owed to his employees under the Payment of Wages Act of 1936, and in the case of those employees:
A worker designated by the contractor who is immediately under his supervision in the case of a contract; an individual selected by the employer who is in charge of enforcing the Act’s provisions.
For violating Sections 5, 7, 8, 9, 10, 11, 12, and 13 of the Payment of Wages Act, 1936, which address timely wage payment, reimbursement of wages in modern coins and bills, penalties, and reductions for damages or losses or the repayment of loans or advances. In such a circumstance, a fine of at least Rs. 1000 and up to Rs. 5000 may be imposed. If convicted again, the fine must be at least 5000 rupees and might be as high as 10,000.
For failing to keep records, wilfully refusing to provide information without a valid justification, omitting to respond to a request for information, or willfully providing a false response to a request for information under this Act, the maximum fine for such offences is Rs. 5000, with a minimum fine of Rs. 1000. For a second or subsequent offence, the fine must be at least 5000 rupees and might be as high as 10,000 rupees.
A fine of at least Rs. 1000, extendable up to Rs. 5000, must be paid for knowingly interfering with an inspector’s fulfilment of his responsibilities and for refusing to submit any register or other papers. If convicted again, the fine must be at least 5000 rupees and might be as high as 10,000.
Failure to pay wages to any worker may result in a minimum one-month sentence that may be increased to six months in prison and a minimum fine of Rs. 2000 which may be increased to Rs. 15,000 in fines. Each additional day carries a punishment of up to Rs. 100.
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