Introduction

The Payment of Wages Act, 1936 is one of the most important labour and welfare
legislations, which aims to prevent the exploitation of the labourers. The need to protect the
wages earned by the workers employed in industrial establishments was felt necessary in
early 20th century. As such, a Bill on Payment of Wages Act in pursuance of the
recommendations of the Royal Commission on Labour, the Payment of Wages Act was
passed in 1936 and it came into force on March 21, 1937. The Act has been amended from
time to time and drastically in 1982 to be more effective and beneficial.

(i) Extent and application: The Act extends to the whole of India. It applies to the
payment of wages to persons employed in any factory or/and to persons
employed upon by Railway or by a person fulfilling a contract with a Railway
Administration. Section 1 (5) empowers the State Government to extend the
provisions of the Act to the payment of wages to any class of persons employed
in any industrial establishment or in any class of persons employed in any
industrial establishment or in any class or group of industrial establishments.
Such application can be after giving three months’ notice in the Official
Gazette of its intention to extend the provisions of the Act.
The State Government will thus be competent to extend the application of the Act, other
conditions being confirmed, if

(a) three months” official notification is given : and

(b) it relates to an industrial establishment.

The Act does not apply to wages payable in respect of wage period if the average wage for
such wage periods is more than Rs. 1000/a month to a person employed. An employee whose
monthly wages are more than what is prescribed under Section 1 (b) is barred from invoking
the provisions of the Act.

Object of the Act

The main object of the Payment of Wages Act, 1936 is to remove the irregularities in
payment of wages and unauthorized deductions by the employer. It ensures payment of
wages in a particular form and at regular intervals without any unauthorized deductions. The

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preamble of the Act States that the object of the Act is “to regulate the payment of wages to
certain classes of employed persons”. The regulation contemplated by the Act is twofold; first
the date of payment of wages and Secondly the deductions from wages whether as fine or
otherwise. To ensure payment of wages to persons covered by the Act certain provisions have
been made in this Act.

Scheme of the Act

The Payment of Wages Act, 1936 comprises of 26 Sections.

Sections 12-A, 13-A, 14A, 15A, 17-A, 22-A and 25 A have been inserted by the subsequent
amendments. There are no schedules. But, the Central Government framed various rules viz.
The Payment of Wages (Procedure) Rules, 1937, The Payment of Wages (Air Transport
Services) Rules, 1968, The Payment of Undisbursed Wages (Air Transport Services) Rules,
1988, The Payment of Wages (Manner of Recovery of Excess Deductions) Rules, 1965,
Payment of Wages (Mines) Rules, 1956, The Payment of Undisbursed Wages (Mines) Rules
1989, The Payment of Wages (Railways) Rules, 1938, The Payment of Wages (Deductions
for National Defence Fund & Defence Savings Scheme) Rules, 1972 etc. Similarly, the State
Governments concerned framed/enacted such rules".

Section 1 of the Act speaks about the title, extent and application of the Act. Section 2
provides for various definitions viz., (i) Appropriate Government, (ii) industrial or other
establishment, (iii) Plantation, (iv) Prescribed, (v) Railway administration, (vi) Wages etc.
Sections 3 to 13 (including Sec. l2-A) lay down the provisions relating to payment of wages
and deductions from Wages. Sections 14 to 18 (including Sec. 14-A, I5-A and l 7-A) provide
for authorities under the Act viz., Inspectors (for Payment of Wages Act) and other
Government officers Viz. Commissioners for Workmen’s Compensation, Commissioner of
Labour, Presiding Officer of Labour Court etc., to decide the claims/ disputes under the Act.
Sections l3-A and Sections 20 to 26 deal with miscellaneous provisions.

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 Definitions

Section 2 of the Payment of Wages Act, 1936 provides for various definitions as Stated
below:-

(a)Appropriate Government (See. 2 (i): ‘Appropriate Government’ means, in relation to

railways, air transport services, mines and oilfields, the Central Government and, in relation
to all other cases, the State Government.

(b) Employed Person (Sec. 2 (ia)): ‘Employed Person’ includes the legal representative of
deceased employed person.

(c) Employer (Sec. 2 (ib)): ‘Employer’ includes the legal representative of a deceased
employer.

(d) Factory (Sec. 2 (ic)): ‘Factory’ means a factory as defined in. Section 2 (m) of the
Factories Act, l948 and includes any place to which the provisions of that Act have been
applied under Section 85 (l) thereof
The following have been held “factory” within the meaning of the term in the Factories Act,
I948 -
(i) A Saw Mill and Ginning Factory under the same roof and operated by same locomotive
power employing not less than ten persons.
(ii) Premises where anything is done towards making or finishing of an article upto the
saleable stage.
(iii) Any premises where manufacturing process is carried on, such as machine rooms, sheds,
godowns and yards etc.
(iv) A Gurhal Ghar factory, a railway workshop and a yard ' used for drying ground nuts.

(e) Industrial or other Establishment (Sec. 2 (ii)): ‘Industrial or other establishment’ means
any –
(i) tramway service, or motor transport engaged in carrying passengers, goods or both by road
for hire or reward,

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(ia) air transport service, other than such service belonging to, or exclusively employed in the
military, naval, or air force of the Union or Civil Aviation Department of the Government of
India ;
(ii) Dock, wharf or jetty ;
(iii) inland vessel, mechanically propelled ;
(iv) mine, quarry or oil field ;
(v) plantation,
(vi). workshop or other establishment in which articles are produced, adapted or
manufactured with a view to their use, transport or sale;
(vii) establishment in which any work relating to the construction, development or
maintenance of bu1ld1ngs roads, bridges or canals, or relating to Operations connected With
navigation, irrigation or the supply of water or relating to the generation, transmission and
distribution of electricity or any other form of power is being carried on;
(vii) any other establishment or class of establishments which the Central Government or a
State Government may having regard to the nature thereof, the need for Protection of persons
employed therein and other relevant circumstances, specitied by notification in the Official
Gazette.
(f) Mine (See. 2 (iia): ‘Mine’ has the meaning assigned to it in clause (1) of Section 2 (l) of
the Mines Act, 1952.

(a) Plantation (Sec. 2 (iii)): ‘Plantation’ has the meaning assigned to it in clause (1) of Section
2 of the Plantations Labour Act, 1951.

(h) Prescribed (Sec. 2 (IV)): ‘Prescribed’ means prescribed by rules made under this Act.

(i) Railway Administration (Sec. 2 (v)): ‘Railway Administration’ has the meaning assigned
to it in Clause (32) of Section 2 of the Railways Act, 1989 (24 of 1989).

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 Main Provisions of the Act

The main provisions of the Payment of Wages Act, 1936 may be explained with reference to
the following heads:

(i) Meaning and Definition of Wages; ’

(ii) Time of Payment of Wages;
(iii) Unlawful Deductions;
(iv) Authorized Deductions;
(v) Mode of Payment;
(vi) Responsibility for payment of Wages; 
(vii) Inspectors;
(viii) Authority to hear claims; and
(ix) Miscellaneous. ‘
(i) Meaning and Definition of Wages (Sec. 2 (vi): According to Section 2(vi) of the
Payment of Wages Act, 1936, “Wages” means all remuneration, whether by way of salaries,
allowances or otherwise, expressed in terms of money or capable of being so expressed
which would, if the terms of employment, express or implied were fulfilled, by payable to a
person employed in respect of his employment or of work done in such employment.

‘Wages’ includes -
(a) any remuneration payable under any award or settlement between the parties or order of a
Court ;
(b) any remuneration to which the person employed is entitled in respect of overtime work or
holidays or any leave period ;
(c) any additional remuneration payable under the terms 0f employment, whet-her called a
bonus or by any other name;

The definition of wages is not limited to remuneration payable under an agreement or

contract; The amended definition would apply to all kinds of remuneration, whether arising
from a contract, an award, a settlement or under a statute;

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(d) any sum which by reason of the termination of employment of the person employed is
payable under any law, contract or instrument which provides for the payment of such sum
whether with or without deductions, but does not provide for the time within which the
payment is to be made ;
(c) any sum to which the person employed is entitled under any scheme framed under any'
law for the time being in force.

Wages does not include

(1) 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 ;
The bonus payable under the Payment of Bonus Act, 1965 amounts to wages within the
definition in this sub-Section.
(2) 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 a special order of the State Government;
(3) any contribution paid by the employer to any pension or provident fund, and the interest
which may have accrued thereon ;
(4) any traveling allowance or the value of any traveling concession;
(5) any sum paid to the employed person to defray special expenses entailed on him by the
nature of his employment; or
(6) any gratuity payable on the termination of employment in cases other than those specified
in clause (d) of Section 2 (vi).

(ii) Time of Payment of Wages (Sec. 5): Section 5 of the Act lays down the rules with
regard to the time of payment of wages as follows:

(a) Wages of a person employed in any railway, factory or industrial or other establishment in
which less than 1000 persons are employed, shall be paid before the expiry of the 7th day,
after the last day of the wage-period.

(b) In case of others i.e., if the number of workers employed is 1000 or more, the wages of a
person (employed upon or in any other railway, factory or industrial or other establishment)
shall be paid before the expiry of the 10th day after the last day of the wage period.
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(iii) Unlawful Deductions: Section7 of the Act provides for authorized deductions. Any
deduction other than those authorized under Section 7 of the Act are unlawful and would be
declared null and void.
(iv) Authorized Deductions (sec7): Section 7 (2) of the Act lays down that deductions from
the wages of an employed person shall be made in accordance with the provisions of the Act.
Such deductions are said to be authorized deductions as Stated below:
(a) Fines (Sec. 7 (2) (a);
(b) Deductions for absence from Duty (Sec. 7 (2) (b);
(c) Deduction for damage of loss of goods (Sec. 7 (2) (C);
(d) Deduction for House Accommodation (Sec. 7 (2) (d);
(e) Deduction for Amenities and Services (5607 (2) (e);
(f) Deduction for Recovery of Advances (Sec. 7 (2) (f);
(g) Loans made from the welfare fund (Sec. 7 (2) (ff);
(h) Loans made for Specified Purpose (Sec. 7 (2) (fff);
(i) Deduction for Income Tax (Sec; 7 (2) (g);
(J) Deduction by the Order of the Court (Sec. .7 (2) (h);
(k) Deduction for Provident Fund (Sec. 7 (2) (i);
(l) Deduction for Payment to Co-operative Societies (Sec. 7 (2) 0);
(m) Deduction with the Consent of Employed Person (Sec. 7 (2) (k);
(n) Deduction for Welfare Fund (Sec. 7 (2) (kk);
(o) Trade Union Membership Fees (Sec. 7 (2) (kkk);
(p) Deduction for Fidelity-Guarantee Bonds (Sec. 7 (2) (1));
(q) Recovery of Losses Sustained by a Railway Administration (Sec.7 (2) (m))
(r) Prime Minister’s National Relief Fund (Sec. 7 (2) (p)).

(a) Fines (Sec. 7 (2) (a): Section 7 (2) (a) of the Act authorizes deduction by way of
fines. Sec. 8 lays down the rules for imposition of such fines. It (Sec. 8) says that “No
time shall be imposed on any employed person save in respect of such acts and
omissions on his part, as the Employer has specified by notice (with prior approval of
the Government or prescribed authority).
(b) Deductions for absence from duty (Sec. 7 (2) (b)): section 7 (2) (b) permits
deduction for absence from duty. Sec. 9 lays down the rules of such deduction. The
deduction extends to period of absence, whole day or even a part of the day.
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Surendranathan Nair and Others vs. Senior Divisional Personal Officer (Rlys.) (1988, I
L.L.J. 227 (Kerala) :

In this case some of the railway employees had applied for casual leave for participating in an
agitation against the railway administration. The leave was refused but the employees
participated in the agitation. The management deducted the wages treating the period of leave
applied for as absence from duty. It was held that the leave rules to the railway employees are
contained in the Railway Establishment Code and the rules made thereunder. The Code
derives its authority from Article 309 of the Constitution and the rules are made under the
delegated power. These rules have general application to all non-gazetted railway servants.
Rejection of leave under such circumstances was legal and proper. Absence from duty,
especially for the purpose of participation in an agitation against the management is
unauthorized. An unauthorized absentee has no right to compel payment of wages for the
period of unauthorized absence.

(c) Deduction for damage of loss of goods (Sec. 7 (2) (c)): If any money or goods entrusted
to the employee is lost by his negligence or default, the employer is entitled to deduct such
loss.
(d) Deduction for House Accommodation (Sec. 7 (2) (d)): The employer is entitled to
deduct rent for providing house accommodation.
(e) Deduction for Amenities and Services (Sec. 7 (2) (e)): Section 7 (2) (e) authorizes
employer to make deduction from the wages of his employee for providing such amenities
and services.
(f) Deduction for Recovery of Advances (Sec. 7 (2) (f): Recovery of advances includes
advance for T.A., conveyance, allowance etc ;
(g) Loans made from the Welfare Fund (Sec. 7 (2) (m): If the employee takes a loan from
welfare fund, it may be deducted With interest from his salary in easy instalments. ’

(h) Loans made for specified purpose (Sec. 7(2) (fff): Loans granted for house-building
etc., subject to regulations by the State Government may be deducted (Sec. 12-A).

(i) Deduction for Income Tax (See. 7 (2) (g)): Section 7 (2) (g) permits the Employer to
make this deduction subject to the Provisions of the Income Tax Act.
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(j) Deduction by the order of the Court (Sec. 7 (2) (11)): Section 7 (2) (h) permits an
employer to effect any deduction by the Order of a Court.

(k) Deduction for provident fund (Sec. 7 (2) (i)): The Employer should deduct provident
fund contributions from his employees’ salary and shall also make contributions of his share,
which is mandatory. '

(l) Deduction for Payment to Co-operative Societies (Sec. 7 (2) (j)): This Section
authorizes the deduction for payments to co-operative societies approved by the State
Government.

(m) Deduction with the consent of employed person (Sec. 7 (2) (k)): An employee by
written undertaking may authorize the Employer to make certain deductions viz. LIC,
Savings Schemes of any such Government, Recovery of Bank Loans etc.

(n) Deduction for welfare fund (Sec. 7 (2) (kk)): This clause was inserted in 1982 (by the
amending Act No. 38). It permits, deduction for contribution to welfare fund.

(o) Trade Union membership fees (Sec. 7 (2) (kkk)): It was inserted by Act No. 38 of 1982.
It permits deduction for Trade Union Membership fees.

(p) Deduction for Fidelity-Guarantee Bonds (Sec. 7 (2) (l)): This Section authorizes
deduction for payment of Insurance Premia on Fidelity-Guarantee Bonds.

(q) Recovery of losses sustained by a railway administration (Sec. 7 (2) (m)): Section 7(2)
(m) permits this deduction on account of acceptance by the employee of counterfeit or base
coins or mutilated forged currency notes. The employed person must be given an opportunity
of showing cause against such deduction.

(r) Prime Minister’s National Relief Fund (Sec. 7 (2) (p)): The employee by written
undertaking may authorize the employer to deduct some amount from his wages towards the
contribution to the Prime Minister’s Relief Fund.

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(v) Mode of Payment (Sec.6): According to Sec. 6 of the Act, wages shall be paid in current
coins or current notes or in both.

(vi)Responsibility for payment of Wages (Sec. 3): Section 3 of the Act, imposes
responsibility on the Employer to pay all wages to the persons employed by him.

(vii) Inspectors (Sec. 14) :For effective and successful implementation of the provisions of
the Payment, of Wages Act, provision is made under Section 14 of the Act for appointment of
three kinds of Inspectors as follows:-
(a) An Inspector of factory appointed under Section 8 (l) of the Factories Act shall be an
In5pector for the purposes of this Act in respect of all factories within the local limits
assigned to him.

(b) In respect of all persons employed upon a railway otherwise than in a factory, to whom
this Act applies, the State Government is empowered to appoint Inspector for the purposes of
this Act.

(c) The State Government is further empowered to appoint such other persons, as it
thinks fit, as Inspectors for the purposes of this Act in respect of persons employed in
case of factories and industrial or other establishment as specified by such.
Government by a Gazette notification. The State Government shall also define the
local limits within which such inspectors shall exercise their functions.

(viii) Authority to hear claims (Sec. 15 (1)) According Section l5 (l) of the Act, the State
Government by notification in Official Gazette, may appoint one or more of the following as
authority for a specified area to hear the claims/disputes under the Act.
(a) A Presiding Officer of any Labour Court or Industrial Tribunal constituted under
Industrial Disputes Act, 1947; or
(b) Any Commissioner for workmen’s compensation; or
(c) Other officer with experience as a Judge of a Civil Court or as stipendiary Magistrate.

Section 15 (l) of the Act is to ensure payment of wages in particular form and at regular
intervals without any Unauthorized deductions.

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(ix) Miscellaneous: Penal provisions, procedure for trial of offences etc., are contained in this
head.

Claims arising out of deductions or delay/default in payment of wages

Section 15 (l) of the Payment of Wages Act, 1936 envisages payment of wages in particular
form and at regular/periodical intervals without any defaults or unauthorized deductions. This
Section provides for the appropriate authorities for a specified area to hear and decide all
claims arising out of deductions from wages or delay in payment of wages. Section 15 runs as
follows-

The appropriate Government may, by notification in the Official Gazette, appoint:-

(a) any Commissioner for Workmen’s Compensation ; or
(b) any officer of the Central Government exercising functions as -
(i) Regional Labour Commissioner ; or
(ii) Assistant Labour Commissioner with at least two years’ experience; or
(c) any officer of the State Government not below the rank of Assistant Labour
Commissioner with at least two years’ experience ; or

(d) A Presiding Officer of any Labour Court or industrial Tribunal, constituted under the
Industrial Disputes Act, 1947 (14 of 1947), or under any corresponding law relating to the
1nvest1gat1on and settlement of industrial disputes in force in the State; or

(e) Any other officer with experience as a Judge of a Civil Court or a Judicial Magistrate,
As the authority to hear and decide for any specified area all claims arising out of deductions
from the wages, or delay in payment of the wages, of persons employed or paid 1n that area,
including all matters incidental to such claims:

Provided that where the appropriate Government considers it necessary so to do, it may
appoint more than one authority for any specified area and may, by general or special order,
provide for the distribution or allocation of work to be performed by them under this Act.

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The State Government 1s further empowered to appoint more than one authority for the same
specified area, and where 1t so appoints it shall, by general or special order, provide for the
distribution or allocation of work to be performed by them under this Act.

Powers of the Authority

The above authorities shall have all powers of a Civil Court.

Who can file an application: An application for claim may be filed by -

(a) the employee himself; or
(b) any legal practitioner; or
(c) any official of a registered trade union authorized in writing to act on his (employee’s)
behalf, or
(d) any Inspector under the Act; or
(e) any other person with the permission of the authority.
Procedure for deciding the claims: When an application for claim is made under the Act,
the authority shall hear both the parties (i.e., the applicant and the Employer). The authority
shall make necessary enquiry. If satisfied, it may direct the employer to refund the deductions
made or payment or wages so delayed with compensation. The compensation shall not
exceed to times of the amount deducted unauthorized. If the application is malicious, the
applicant is directed to pay Rs.50/to the employer.

Appeal: An appeal may be preferred within 30 days from date of order or direction (by the
authority) before the Court of Small Causes in case of Presidency Town and District Court in
respect of other places. The Court of appeal may refer the matter involving question of law to
the High Court.

Penal Liability (Sec. 20): The person (Employer) found guilty of delaying payment of wages
or making unauthorized deductions from the wages of the employee is subject to penal
liability. Section 20 prescribes/provides for penal liability for offences under the Act. It runs
as follows-

Section 20 (1) of the Act makes contravention of the following provisions of the Act, by any
person responsible for the payment of wages to an employed person, punishable with fine

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which shall not be less than one thousand five hundred rupees but which may extend to ,
seven thousand five hundred rupees :

(i) Section 5 (except sub-Section (4) thereof);

(ii) Section 7 and Section 8 (except sub-Section (2) thereof);
(iii) Section 9 and Section 10 (except sub-Section (2) thereof); and
(iv) Sections 11 and 13.

Sub-Section (2) of Section 20 makes contravention of the following provisions by any person
punishable with fine which may extend to three thousand seven hundred fifty rupees

(i) Section 4, (ii) Section 5(4), (iii) Section 6, (iv) Section 8 (8), (v) Section 10 (2) or (vi)
Section 25 :
Sub-Section (2) of Section 20 says that whoever being required to nominate or designate a
person under Section 3 fails to do so, such person shall be punishable with fine which may
extend to three thousand rupees;

Section 20 (3) provides that any person, required under this Act go maintain any records or
registers or to furnish any information or return, shall in case of the following lapses, be
punishable for each such offence with line which shall not be less than one thousand five
hundred rupees, but which may extend to seven thousand five hundred rupees;
(a) Failure to maintain such register or record; or

(b) Willful refusal or neglect without lawful cause to furnish such information or return; or

(c) Willfully furnishing or causing to be furnished any information or return which he knows
to be false; or

(d) Refusal to answer or willfully giving a false answer to any question necessary for
obtaining any information required to be furnished under this Act

The following offences shall be punishable with fine which shall not be less than one
thousand five hundred rupees but which may extend to seven thousand five hundred rupees
under Section 20 (4) of the Act: ‘

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(a) Willfully obstructing an Inspector 1n the discharge of his duties under this Act; or

(b) refusal or willfully neglecting to afford an Inspector any reasonable facility for making
any entry, inspection, examination, supervision or inquiry authorized by or under this Act 1n
relation to any railway, factory or industrial or other establishment; or .

(C) Willful refusal to produce on demand of an Inspector any register or other document kept
1n pursuance of this Act; or

(d) preventing or attempting to prevent or doing anything which he has any reason to believe
is likely to prevent any person from appearing before or being examined by an Inspector
acting in pursuance of his duties under this Act.

Section 20 (5) lays down that if any person who has been convicted of any offence
punishable under this Act, is again guilty of an offence involving contravention of the same
provision, he shall be punishable on subsequent conviction with imprisonment for a term
which shall not be less than one month but which may extend to six months and with fine
which shall not be less than seven thousand seven hundred fifty rupees but which may extend
to twenty two thousand five hundred rupees. But for the purposes of th1s sub-Section no con
gn1zance shall be taken of any conviction made more than two years before the date on
which the commission of the offence which 15 being punished came to the knowledge of the
Inspector.

According to Section 20 (6), 1f any person fails or willfully neglects. to pay the wages of any
employed person by the date fixed by the‘ _ authority in this behalf, he shall, without
prejudice to any other action that may be taken against him, be punishable with additional
line, which may extend to seven hundred fifty rupees for each day for which such failure or
neglect continues.

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 Conclusion
The Payment wages act is a regulation drawn up to protect the employee’s rights from being
infringed by the employer. The employee should be paid on time and should not be harassed
against anything during the employment. It has however given a lot of protections to
employees and will continue to do so in the future as well.

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 BIBLIOGRAPHY
Primary sources
Books-
Shrivastav K.D., Commentaries on Payment of Wages Act 1936 (‘995), Eastern, Lucknow
R.C Sexena. Labour problems & Social welfare.
S.C. Shrivastav , Social Security & Labour Laws,1985.

Secondary sources
Website-
 Indialawsite.com
 Lawadiv.com
 Waqalat.com
 Lawyersclubindia.com
 Legalpundits.com
 Mahalibrary.com

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