The timely and full payment of wages is a foundational element of labour welfare and industrial justice. In India, wage protection has historically been governed by fragmented legislation, often leading to overlaps, inconsistencies and compliance challenges. The Code on Wages, 2019 (“Code”) represents a significant step towards consolidation and simplification of wage related laws, bringing uniformity in definitions, obligations and enforcement mechanisms. The provisions relating to payment of wages under the Code aim to ensure certainty in wage periods, prescribe clear timelines for disbursement, regulate permissible deductions and strengthen safeguards against arbitrary fines or delays. By modernising modes of payment and reinforcing accountability of employers, the Code seeks to balance ease of doing business with the fundamental right of workers to receive their lawful earnings without undue deprivation.
In what modes can wages be paid to an employee?
Wages shall be paid in any of the following modes:
(a)
current coin, or
(b)
currency notes, or
(c)
by cheque, or
(d)
by crediting the wages in the bank account of the employee, or
(e)
by electronic mode.
However, the appropriate Government may, by notification, specify certain industrial or other establishments where the employer shall pay wages only by cheque or by crediting the wages in the employee’s bank account.
How is the wage period for employees to be fixed?
The employer shall fix the wage period for employees as one of the following:
(a) daily, or
(b) weekly, or
(c) fortnightly, or
(d) monthly.
No wage period shall exceed one month for any employee. Different wage periods may be fixed for different establishments.
What are the time limits for payment of wages to employees?
The employer shall pay wages as follows:
(a)
to daily-rated employees, at the end of the shift;
(b)
to weekly-rated employees, on the last working day of the week, before the weekly holiday;
(c)
to fortnightly-rated employees, before the end of the second day after the end of the fortnight;
(d)
to monthly-rated employees, before the expiry of the seventh day of the succeeding month.
What is the time limit for payment of wages when employment comes to an end?
Where an employee has been removed or dismissed from service or retrenched, or has resigned from service, or became unemployed due to closure of the establishment, the wages payable shall be paid within two working days of such removal, dismissal, retrenchment, resignation, or closure.
Can the Government prescribe a different time limit for payment of wages?
Yes. The appropriate Government may prescribe any other time limit for payment of wages if it considers such time limit reasonable, having regard to the circumstances under which the wages are to be paid.
Does this affect payment timelines under other laws?
No. Any time limit for payment of wages provided under any other law for the time being in force remains unaffected.
Are deductions from wages generally allowed?
No. There shall be no deductions from the wages of an employee except those authorised under the Code, notwithstanding anything contained in any other law.
What is deemed to be a deduction from wages?
Any payment made by an employee to the employer or his agent is deemed to be a deduction from wages. However, loss of wages resulting from withholding of increment or promotion (including stoppage of increment), reduction to a lower post or time-scale, or suspension, shall not be deemed to be a deduction if the employer’s provisions for such action satisfy the requirements notified by the appropriate Government.
For what purposes can deductions be made from wages?
Deductions may be made only for the following purposes:
(a)
fines imposed on the employee;
(b)
absence from duty;
(c)
damage to or loss of goods entrusted for custody, or loss of money for which the employee is required to account, where directly attributable to his neglect or default;
(d)
house accommodation supplied by the employer, Government, housing board, or other notified authority;
(e)
authorised amenities and services supplied by the employer, not exceeding their value (excluding tools and raw materials);
(f)
recovery of advances (including travel or conveyance advances) and interest, or adjustment of overpayment of wages;
(g)
recovery of loans from labour welfare funds and interest;
(h)
recovery of loans for house building or other approved purposes and interest;
(i)
deductions of income tax or other statutory levies, or deductions ordered by a court or competent authority;
(j)
subscriptions to and repayment of advances from social security funds or schemes, including provident fund, pension fund, or health insurance;
(k)
payments to cooperative societies subject to Government conditions;
(l)
deductions, with written authorisation, for trade union membership fees and contributions;
(m)
recovery of losses suffered by railway administration due to acceptance of counterfeit or forged currency;
(n)
recovery of railway losses due to failure to invoice, bill, collect, or account for charges or sale proceeds;
(o)
recovery of railway losses due to incorrect rebates or refunds attributable to employee neglect or default;
(p)
deductions, with written authorisation, for contribution to the Prime Minister’s National Relief Fund or any other notified fund.
Is there a limit on total deductions from wages?
Yes. Total deductions in any wage period shall not exceed fifty per cent of the wages.
What happens if deductions exceed fifty per cent of wages?
The excess amount may be recovered in such manner as may be prescribed.
Is the employee responsible if deducted amounts are not deposited by the employer?
No. If deductions are made but not deposited into the required trust, Government fund, or other account, the employee shall not be held responsible for the employer’s default.
When can fines be imposed on employees?
Fines may be imposed only for acts and omissions specified by the employer with prior approval of the appropriate Government or prescribed authority.
How must acts and omissions attracting fines be communicated?
A notice specifying such acts and omissions must be exhibited in the prescribed manner at the premises where employment is carried on.
Is an opportunity of hearing required before imposing a fine?
Yes. No fine shall be imposed unless the employee has been given an opportunity of showing cause, and fines must be imposed following the prescribed procedure.
What is the maximum fine that can be imposed?
The total fine in any wage period shall not exceed three per cent of the wages payable for that period.
Can fines be imposed on minors?
No. No fine shall be imposed on an employee below the age of fifteen years.
What are the time limits for recovery of fines?
No fine shall be recovered by instalments or after the expiry of ninety days from the day it was imposed.
How are fines to be recorded and used?
All fines and realisations must be recorded in a prescribed register and applied only for purposes beneficial to employees, as approved by the prescribed authority.
When can deductions be made for absence from duty?
Deductions may be made for absence from the place where the employee is required to work, for the whole or part of the period during which he was required to work.
How is the amount of deduction for absence calculated?
The deduction shall not exceed the proportion of wages corresponding to the period of absence. If ten or more employees act in concert and absent themselves without due notice and without reasonable cause, deductions may include wages up to eight days, subject to prescribed rules.
When is an employee deemed to be absent despite being present?
An employee is deemed absent if, though present at the workplace, he refuses to work due to a stay-in strike or for any other unreasonable cause.
What rules apply to deductions for damage or loss?
Such deductions shall not exceed the actual damage or loss caused by the employee’s negligence or default and shall be made only after giving the employee an opportunity to show cause.
How are deductions for damage or loss to be recorded?
All such deductions and realisations shall be recorded in a prescribed register.
When can deductions be made for house-accommodation, amenities or services?
Such deductions can be made only if the employee has accepted them as a term of employment or otherwise, shall not exceed their value, and shall be subject to Government-imposed conditions.
What conditions govern deductions for recovery of advances?
(a)
Advances given before employment may be recovered from the first wage payment, excluding travel advances;
(b)
advances given after employment began shall be recovered subject to prescribed conditions;
(c)
advances of wages not yet earned shall also be recovered subject to prescribed conditions.
How are deductions for recovery of loans regulated?
Deductions for recovery of loans, the extent of such loans, and the rate of interest shall be as prescribed.
Do the above provisions apply to Government establishments?
No. The provisions do not apply to Government establishments unless the appropriate Government applies them to specified Government establishments by notification.
Therefore, the payment of wages framework under the Code reflects a deliberate shift towards transparency, predictability and worker centric protection in wage administration. By mandating defined wage periods, fixed timelines for payment, limited and regulated deductions, and procedural safeguards in matters of fines and recoveries, the Code fortifies the principle that wages are not a discretionary benefit but a statutory entitlement. At the same time, the allowance of electronic payment modes and government notified flexibilities demonstrates an effort to align labour regulation with contemporary employment practices. Effective implementation and awareness among employers and employees alike will be crucial in translating these provisions into real economic security for workers and improved compliance across establishments.
Muneeb Rashid Malik is an Advocate. He tweets @muneebmalikrash.