Paying wages: deadlines, deductions and fines

In short

• Pay wages in coin or notes, by cheque, by credit to the employee’s bank account, or electronically s. 15.
• No wage period may be longer than a month s. 16.
• Monthly wages are due before the end of the seventh day of the following month s. 17(1)(iv).
• When an employee leaves, is removed, dismissed or retrenched, or the establishment closes, pay their wages within two working days s. 17(2).
• Make only the deductions the Code allows, and keep the total within fifty per cent of the wages for the wage period s. 18(2)–(3).

Does this apply to you?

• The payment rules apply to private employers; they apply to Government establishments only if the appropriate Government extends them by notification s. 25.
• The appropriate Government may require certain establishments to pay only by cheque or bank credit s. 15.

What the law requires

When to pay

• Daily-rated: at the end of the shift s. 17(1)(i).
• Weekly-rated: on the last working day of the week, before the weekly holiday s. 17(1)(ii).
• Fortnightly-rated: before the end of the second day after the fortnight ends s. 17(1)(iii).
• Monthly-rated: before the end of the seventh day of the following month s. 17(1)(iv).
• On removal, dismissal, retrenchment, resignation or closure: within two working days s. 17(2).
• The appropriate Government may set other time limits where it considers that reasonable s. 17(3).

What you may deduct

• Only deductions authorised by the Code are allowed, whatever any other law says s. 18(1).
• The permitted purposes include fines, absence from duty, damage or loss caused by the employee’s neglect, housing and approved amenities, recovery of advances and loans, income tax and other statutory levies, court orders, provident fund, pension or health scheme contributions, co-operative society payments, and trade union fees with written consent s. 18(2).
• All deductions together may not exceed fifty per cent of the wages in any wage period; any excess is recovered in the prescribed manner s. 18(3)–(4).
• If you deduct an amount for a fund or the Government and do not deposit it, the employee is not responsible for your default s. 18(5).

Deductions with extra conditions

• Absence: the deduction may not be a larger share of the wages than the absence is of the working period s. 20(2).
• Absence in concert: if ten or more employees stay away together without notice and without reasonable cause, the deduction may include up to eight days’ wages owed in lieu of notice s. 20(2), proviso.
• Damage or loss: no more than the loss actually caused, and only after the employee has had a chance to show cause s. 21(1)–(2).
• Housing, amenities and services: only if the employee accepted them, and no more than their value s. 22.
• Advances given before employment began are recovered from the first full wage period, but advances for travel expenses are not recovered s. 23(a).

Fines

• Fine only for acts and omissions listed in a notice approved in advance by the appropriate Government or prescribed authority, and displayed on the premises s. 19(1)–(2).
• Give the employee a chance to show cause before imposing a fine s. 19(3).
• Fines in one wage period may not exceed three per cent of the wages for that period s. 19(4).
• Do not fine anyone under the age of fifteen years s. 19(5).
• Do not recover a fine in instalments, or later than ninety days after it was imposed s. 19(6).
• Record fines in a register, and use the money only for purposes that benefit the employees, as approved s. 19(8).

Numbers at a glance

What	Figure	Where
Longest wage period	a month	s. 16
Monthly wages due by	the seventh day of the next month	s. 17(1)(iv)
Final wages on leaving	within two working days	s. 17(2)
Total deductions	not more than fifty per cent	s. 18(3)
Fines	not more than three per cent of the wage period’s wages	s. 19(4)
Fine recovery	within ninety days, not in instalments	s. 19(6)
Underpayment	fine up to ₹50,000	s. 54(1)(a)

Records and deadlines

• Keep the register of wages, overtime, advances, fines and deductions for damage and loss in Form IV, and record all fines and realisations in it rule 51.
• Record deductions for damage or loss and their realisations in a register s. 21(3).
• Failing to maintain records, or maintaining them improperly, is punishable with a fine of up to ₹10,000 s. 54(2).

Not covered here

• The detailed conditions the Rules set for recovering advances and loans s. 23 s. 24.
• State rules, where the State is the appropriate Government.

In short

• Your wages must be paid in money, by cheque, into your bank account, or electronically s. 15.
• If you are paid monthly, you must be paid before the end of the seventh day of the next month s. 17(1)(iv).
• If you resign, are dismissed or retrenched, or your workplace closes, your wages are due within two working days s. 17(2).
• Your employer can deduct money only for reasons the Code allows, and never more than half of your wages for the period s. 18(2)–(3).

Does this apply to you?

• Yes, if you work for a private employer s. 25.
• If you work in a Government establishment, these rules apply only if the Government has extended them by notification s. 25.

What the law requires

When you must be paid

• Paid by the day: at the end of your shift s. 17(1)(i).
• Paid by the week: on the last working day of the week, before your weekly holiday s. 17(1)(ii).
• Paid by the fortnight: before the end of the second day after the fortnight s. 17(1)(iii).
• Paid by the month: before the end of the seventh day of the next month s. 17(1)(iv).
• Your pay period can never be longer than a month s. 16.

What can be cut from your pay

• Allowed reasons include fines, absence, loss caused by your own neglect, housing or amenities you accepted, advances and loans, taxes, provident fund and similar contributions, and union fees you agreed to in writing s. 18(2).
• All cuts together cannot be more than fifty per cent of your wages for the period s. 18(3).
• For absence, the cut cannot be a bigger share of your pay than the time you were absent s. 20(2).
• For damage or loss, the cut cannot be more than the actual loss, and you must be given a chance to explain beforehand s. 21(1)–(2).
• If your employer deducts money for your provident fund or another fund and does not deposit it, you are not responsible for that failure s. 18(5).

Fines

• You can be fined only for acts listed in an approved notice displayed at your workplace, and only after you have been allowed to explain s. 19(1)–(3).
• Fines in one pay period cannot be more than three per cent of your wages for that period s. 19(4).
• Nobody under fifteen years of age can be fined s. 19(5).
• A fine cannot be taken in instalments, or more than ninety days after it was imposed s. 19(6).

Example You earn ₹20,000 for the month. The most that can be deducted in total that month is ₹10,000, and the most you can be fined is ₹600.

Numbers at a glance

What	Figure	Where
Monthly pay due by	the seventh day of the next month	s. 17(1)(iv)
Final pay when you leave	within two working days	s. 17(2)
Total deductions	at most fifty per cent	s. 18(3)
Fines	at most three per cent	s. 19(4)

What to do if it isn’t followed

• You, a registered trade union you belong to, or an Inspector-cum-Facilitator can file a claim with the authority appointed under the Code s. 45(4).
• File within three years; the authority can accept a later claim if there is good reason s. 45(6).
• The authority can order payment of what you are owed plus compensation of up to ten times that amount s. 45(2).
• A single application can cover many employees of the same establishment s. 45(5).

Not covered here

• How advances and loans may be recovered in detail s. 23 s. 24.
• State rules, where your State Government is the appropriate Government.