Programme : MBL I, PGDs

Course : Industrial Relations Law

Module : 8. Law of Wages

Module 8:
Law of Wages

First Published : May 2023

Revised : May 2023
Prepared by : Dr. Saurabh Bhattacharjee and Radhika Nair

© National Law School of India University

Published by : Distance Education Department

National Law School of India University
Nagarbhavi, Bengaluru – 560 072,
Karnataka, India.
www.online.nls.ac.in

Page 1 of 31
1. Statutory Definition of Wages 4

1.1 Definition of Wages under the Employees’ Provident Fund & Miscellaneous
Provisions Act, 1952 4
a. Judicial Reliance on Principle of Universality 5

1.2 Definition of Wages under the Employees’ State Insurance Act, 1948 5
1.3 Changes in the Definition of Wages under the Code on Wages 2019 8

Questions for Reflection 1 10

2. Law on Minimum Wages 11

2.1 Minimum Wages Act, 1948 11

2.2 The Constitution on Minimum Wages 11
2.3 Scope of the Legislation 11

a. Scope of the Minimum Wages Act- Dichotomy between Scheduled

Employment and Other Employment to Universalisation 12
2.4 Fixation of Minimum Wages 12
a. Fixation of Floor Wage 13

b. Revision of Wages under the Code on Wages 2019 13

c. Manner of Fixation 13
d. Minimum Rate of Wages 14
e. Procedure for Fixing and Revising Minimum Wages 15
2.5 Advisory Board 16
a. Composition of Committees 16
2.6 Mode of Payment of Wages 16
a. Payment of Minimum Rates of Wages 17
2.7 Fixing Hours for a Normal Working 17
a. Overtime 18
b. Wages of worker who works for less than normal working day 18
2.8 Maintenance of Register and Records 19
2.9 Inspector 19
a. Duties of the Inspector 19
2.10 Claims 20
2.11 Penalties for Certain Offences 20
a. Cognizance of Offences 21

b. Offences by Companies 21
c. Payment of Disbursed Amounts due to Employers 22
Page 2 of 31
 d. Exemption of Employer from Liability in Certain Cases 22
Questions for Reflection 2 22

3. Payment of Wages Act, 1936 23

3.1 Application of the Act 23

a. Additional Extension 24
b. Wage Ceiling 24
3.2 Wages 24
a. Wages and House Rent Allowance (HRA) 26
b. Wages and Bonus 26

c. Wages and Gratuity 26

d. Responsibility for Payment of Wages 27
e. Fixation of wage-periods 28
f. Time of payment of Wages 28
g. Modes of Payment of Wages 29
h. Deductions which may be made from Wages 29
Questions for Reflection 3 30

Page 3 of 31
 1. Statutory Definition of Wages
Indian Labour Laws do not provide for a single definition of wages. Instead, different
approaches to defining wages have been adopted by different statutes. This has resulted
in a absence of a universal definition. Indeed, as a result, definition of wages has been a
major arena of litigation in Indian labour laws. This is particularly so since employers
split the total wage structure into several smaller components to minimse their liability
under various social security laws. Since the quantum of contributions under social
security laws are contingent on the definition of wages, the employers have an incentive
to understate the actual wages that are payable.

In this context, the statutory definition of wages under the Employees’ Provident Funds
and Miscellaneous Provisions Act 1952 and Employees’ State Insurance Act 1948, two
major social security legislations provide for very different definitions.

1.1 Definition of Wages under the Employees’

Provident Funds and Miscellaneous Provisions
Act, 1952

The term ‘Basic Wages’ has been defined under Section 2 of the Employees’ Provident
Funds and Miscellaneous Provisions Act 1952 (EPF Act). ‘Basic wages’ means all
emoluments which are earned by an employee while on duty or on leave or on holidays
with wages in either case in accordance with the terms of employment. These
emoluments must be paid or be payable in cash to the employee. However, it will not
include:

(i) The cash value of any food concession;

(ii) Any dearness allowance (that is, all cash payments called by whatever name
paid to an employee on account of a rise in the cost of living), house-rent
allowance, overtime allowance, bonus, commission or any other similar
allowance payable in respect of the employment;

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 (iii) Any presents made by the employer

Section 2(b) read with Section 6 of the EPF Act provides that contributions are required
to be paid on:

(i) Basic wages

(ii) Dearness allowance (including cash value of any food concession)

(iii) Retaining allowance

a. Judicial Reliance on Principle of Universality

The basic principles for interpreting the definition of wages under the EPF Act were laid
down in Bridge Roof's case1 where the issue was whether production bonus is to be
included as wages for the purpose of computation of PF. It was observed that:

(a) Where the wage is universally, necessarily and ordinarily paid to all across the
board such emoluments are basic wages.

(b) Where the payment is available to be specially paid to those who avail of the
opportunity is not basic wages.

By way of example it was held that overtime allowance, though it is generally in force in
all concerns is not earned by all employees of a concern. Therefore, it is not part of basic
wages.

Similarly, in TI Cycles of India, Ambattur v. M.K. Gurumani and Ors.,2 it was held that
incentive wages paid in respect of extra work done is to be excluded from the basic wage
as they have a direct nexus and linkage with the amount of extra output. Here also the
test adopted to determine if the payment is to be excluded from basic wages is one of
universality.

In Kichha Sugar Company Limited through General Manager vs. Tarai Chini Mill
Majdoor Union, Uttarakhand,3 it was observed as follows:

“In our opinion, those wages which are universally, necessarily and ordinarily
paid to all the employees across the board are basic wage. Where the payment
is available to those who avail the opportunity more than others, the amount
paid for that cannot be included in the basic wage. As for example, the

1
Bridge Roofs Co. Ltd. v. Union of India, 1963 AIR 1474
2
TI Cycles of India, Ambattur v. M.K. Gurumani and Ors., 2001 (7) SCC 204, 2001 Indlaw SC 38
3
Kichha Sugar Company Limited through General Manager vs. Tarai Chini Mill Majdoor Union,
Uttarakhand, (2014) 4 SCC 37 2014 Indlaw SC 8
Page 5 of 31
 overtime allowance, though it is generally enforced across the board but not
earned by all employees equally. Overtime wages or for that matter, leave
encashment may be available to each workman but it may vary from one
workman to other. The extra bonus depends upon the extra hour of work done
by the workman whereas leave encashment shall depend upon the number of
days of leave available to workman. Both are variable.”

1.2 Definition of Wages under the Employees’ State

Insurance Act, 1948
The definition of wages is provided under Section 2(22) of the Employees’ State
Insurance Act, 1948 (ESI Act). Under the ESI Act, ‘wages’ means all remuneration paid
or payable, in cash to an employee, if the terms of the contract of employment, express
or implied, were fulfilled. It also includes any payment to an employee in respect of any
period of authorised leave, lock-out, strike which is not illegal or lay-off and other
additional remuneration, if any, paid at intervals not exceeding two months. However,
it does not include—

(a) any contribution paid by the employer to any pension fund or provident fund, or
under this Act;

(b) any travelling allowance or the value of any travelling concession;

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

(d) any gratuity payable on discharge

The above definition has four parts:

(i) All remuneration paid or payable, in cash to an employee, if the terms of the
contract of employment, express or implied, were fulfilled

(ii) It includes any payment to an employee in respect of any period of authorised

leave, lock-out, strike which is not illegal or lay-off and

(iii) It also includes other additional remuneration, if any, paid at intervals not
exceeding two months,

(iv) The exceptions to the definition of wages, which are:

(a) any contribution paid by the employer to any pension fund or provident
fund, or under this Act;
(b) any travelling allowance or the value of any travelling concession;
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 (c) any sum paid to the person employed to defray special expenses entailed
on him by the nature of his employment; or
(d) any gratuity payable on discharge

The Apex Court, in M/s Harihar Polyfibres vs. Regional Director, ESI Corporation,4
has held that the definition of "wages" contained in Section 2(22) of the ESI Act is wide
enough to include House Rent Allowance, Night Shift Allowance, Incentive Allowance
and Heat, Gas and Dust Allowance. To come to the aforesaid conclusion, this Court
observed thus:

"The Employees' State Insurance Act is a welfare legislation and the definition
of 'wages' is designedly wide. Any ambiguous expression is, of course, bound to
receive a beneficent construction at our hands too. Now, under the definition,
first, whatever remuneration is paid or payable to an employee under the
terms of the contract of the employment, express or implied is wages; thus if
remuneration is paid in terms of the original contract of employment or in
terms of a settlement arrived at between the employer and the employees
which by necessary implication becomes part of the contract of employment it
is wages; second, whatever payment is made to an employee in respect of any
period of authorised leave, lock-out, strike which is not illegal or lay-off is
wages; and third, other additional remuneration, if any, paid at intervals not
exceeding two months is also wages; this is unqualified by any requirement
that it should be pursuant to any term of the contract of employment, express
or implied. However, 'wages' does not include any contribution paid by the
employer to any pension fund or provident fund, or under the Act, any
travelling allowance or the value of any travelling concession any sum paid to
the person employed to defray special expenses entailed on him by the nature
of his employment and any gratuity payable on discharge. Therefore wages as
defined includes remuneration paid or payable under the terms of the contract
of employment, express or implied but further extends to other additional
remuneration, if any, paid at intervals not exceeding two months, though
outside the terms of employment. Thus remuneration paid under the terms of
the contract of the employment (express or implied) or otherwise if paid at
intervals not exceeding two months is wages. The interposition of the clause
"and includes any payment to an employee in respect of any period of
authorised leave, lock-out, strike which is not illegal or lay-off" between the
first clause, "all remuneration paid or payable in cash to an employee, if the
terms of the contract of employment, express or implied, was fulfilled" and the
third clause, "other additional remuneration, if any, paid at intervals not
exceeding two months," makes it abundantly clear that while 'remuneration'
under the first clause has to be under a contract of employment, express or
implied, 'remuneration' under the third clause need not be under the contract
4
M/s Harihar Polyfibres vs. Regional Director, ESI Corporation, (1984) 4 SCC 324 1984 Indlaw
SC 313
Page 7 of 31
 of employment but may be any 'additional remuneration' outside the contract
of employment. So, there appears to our mind no reason to exclude 'House
Rent Allowance', 'Night Shift Allowance', 'Incentive Allowance' and 'Heat, Gas
and Dust Allowance' from the definition of 'wages'.”

Therefore, it was held that overtime wages is a part of wages.

In Indian Drugs and Pharmaceuticals Ltd. v. ESIC,5 the Court observed that when an
employee does overtime work, there emerges concluded implied contract between the
employer and employee. There is no need to write on each occasion separately on the
letter of appointment. It becomes integral part of original or revised contract of
employment from time to time. The employer is obligated to pay wages when the
employee does work.

In Carborundum Universal Ltd. v. Employees' State Insurance Corporation, Trichur,6

the Court held that where the management introduces a scheme to pay some incentive
to workmen, if it is as a result of a settlement binding on both parties, necessarily the
terms of the settlement become terms of the contract of the employment, between the
parties. If, on the other hand, it is introduced under a scheme under which it is open to
the employer to withdraw it, alter, vary or modify it without reference to the employees
and without their consent or without any binding settlement, it is a payment for which
the assent is unilateral and, therefore, cannot be said to be a payment made in
accordance with the terms of the employment.

In Braithwaite and (India) Limited v Employees' State Insurance Corporation,7 there

was an Inam for Work Scheme introduced at a later stage in December, 1955. The only
offer under the Scheme was to make incentive payments, if certain specified conditions
were fulfilled by the employees. The Court held that even though this offer of incentive
payment was made, the appellant, in clear words, reserved the right to withdraw the
Scheme altogether without assigning any reason or to revise its conditions at its sole
discretion. It was not a part of the contract.

1.3 Changes in the Definition of Wages under the Code

on Wages 2019

The New Codes have made an attempt to streamline and adopt a singular definition of
wages. Section 2(y) of the 2019 Code defines ‘wages’ as all remuneration whether by
way of salaries, allowances or otherwise, expressed in terms of money or capable of
being so expressed, payable to a person employed in respect of his employment or of

5
Indian Drugs and Pharmaceuticals v ESIC, 1997 I CLR 193 SC
6
Carborundum Universal Ltd. v. Employees' State Insurance Corporation, Trichur, 1976 (1) LLJ
177 (Kerala)
7
Braithwaite and (India) Limited v Employees' State Insurance Corporation AIR 1968 SC 413
Page 8 of 31
 work done in such employment. The terms of employment, express or implied, must be
fulfilled. it further includes:-

(i) Basic pay

(ii) Dearness allowance, and
(iii) Retaining allowance, if any

However, it does not include the following:

(i) any bonus payable under any law for the time being in force, which does not
form part of the remuneration payable under the terms of employment;

(ii) the value of any house-accommodation, or of the supply of light, water,

medical attendance or other amenity or of any service excluded from the
computation of wages by a general or special order of the appropriate
Government;

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

(iv) any conveyance allowance or the value of any travelling concession;

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

(vi) house rent allowance;

(vii) remuneration payable under any award or settlement between the parties or
order of a court or Tribunal;

(viii) any overtime allowance;

(ix) any commission payable to the employee;

(x) any gratuity payable on the termination of employment;

(xi) any retrenchment compensation or other retirement benefit payable to the

employee or any ex gratia payment made to him on the termination of
employment:

The provisos to this Section further state that:

(i) Where the total exclusions exceed fifty per cent of the total amount paid, the
amount which exceeds such one-half, shall be deemed as remuneration added
in wages.
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 (ii) For the purpose of equal wages to all genders and for the purpose of payment
of wages, the following emoluments from the abovementioned exceptions
shall be taken into consideration for computation of wages:-

● Any conveyance allowance or the value of any travelling concession

● House rent allowance
● Remuneration payable under any award of settlement between the
parties or order of a Court or Tribunal
● Any overtime allowance

The following table will illustrate how wages will be calculated under the 2019 Code:-

Wage
Case 1 Case 2 Case 3 Case 4
Components
Basic 6000 5000 14000 50000
Dearness Allowance 2000 1000 4000 4000
Production Bonus 1500 1500 - 8000
HRA 2000 4000 2000 12000
EPF Contribution 1000 1000 1400 5000
Travelling 2000 2000 - 8000
Allowance
Health Hazards 1500 1500 - 10000
Allowance
Overtime Allowance 2000 2000 - 4000
Commission 2000 2000 - 3500
Total
20000 20000 21400 1,04,500
Remuneration
Total of clause (a)
10500 12500 3400 40, 500
to (i)
50% of Total
10000 10000 10700 52250
Remuneration
Deemed Wage 500 2500 0 0
6000+2000+ 5000+1000+1
50000+4000+
Statutory Wage 1500[HHA]+ 500 [HHA] + 14000+4000
10000[HHA]
DW500 DW2500

Questions for Reflection 1

1. Why did the Supreme Court in TI Cycles of India, Ambattur v. M.K. Gurumani
hold that incentive wages were not part of basic wages for the purpose of the EPF
Act?

2. Why has overtime been held not to be a part of basic wages for the purpose of

Page 10 of 31
 EPF Act and held to be part of wages?

3. What do we mean by the concept of deemed wages in the Code of Wages 2019?

Page 11 of 31
 2. Law on Minimum Wages

2.1 Minimum Wages Act, 1948

The Minimum Wages Act (hereinafter referred to as the Act) was a legislation passed in
1948 with the primary objective of preserving the interests of the workers who are
employed in the unorganized sector. The Act defines the responsibilities of both the
Central as well as the State Governments in setting up of minimum wage rates, and
ensuring its payment to the workers. This Act draws inspiration from the Constitution
of India which provides that it is a mandate of the state to ensure that the citizens can
maintain a proper standard of living, for which a decent minimum wage is
indispensible.

2.2 The Constitution on Minimum Wages

Article 43 of the Constitution (under the Directive Principles of State Policy), the state
is directed to secure living wages for the workers. Such wages must not only ensure
material subsistence, but also health and decent conditions of work for workers. Hence
the guarantee of minimum wages by the government is an important stepping stone in
the achievement of social justice as enshrined in the preamble. The Supreme Court in U
Unichoi v State of Kerala8 held that the Minimum Wages Act must endeavour to
prevent exploitation of labour and for that purpose empowers the appropriate
Government to take steps to prescribe minimum rates of wages in the scheduled. The
Court further said that the policy of the Act is to prevent the employment of such
sweated labour in the interest of general public and so in prescribing the minimum
rates, the capacity of the employer need not to be considered industries.

2.3 Scope of the Legislation

It is provided in the preamble of the Act that this legislation is for the purpose of
providing for fixing minimum rates of wages in certain employments, referred to as
“scheduled employment” under the Act.

As per Section 2(g), scheduled employment means an employment specified in the

Schedule, or any process or branch of work forming part of such employment. The
Schedule has the employments listed under two parts, wherein part I is a long list of
various types of employments, and part II deals with employments related to
agriculture.

8
U Unichoi v State of Kerala, AIR 1962 SC 12
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 In 1931, the Royal Commission on Labour in India had suggested the introduction of
statutory minimum wages only in a few “sweated industries”, where the wages were
inadequate and collective bargaining was not possible.

This blueprint for extending minimum wages to only a few select occupations was
adopted by the postcolonial state through the Industrial Policy Resolution, 1948, which
called for the fixation of statutory minimum wages in “sweated industries” only.
The newly enacted Minimum Wages Act, 1948 incorporated this policy and limited the
applicability of the Act to only those employments listed in the Schedule.

a. Scope of Coverage of the Minimum Wages Act- Dichotomy between

Scheduled Employment and Other Employment to Universalisation

In the landmark case of PUDR v. Union of India,9 the Supreme Court held that
non-payment of minimum wages or providing remuneration below the minimum rate
amounts to forced labour. It is therefore, a violation of Article 23, which outlaws forced
labour and human trafficking. A violation of this Article is a violation of the workers’
fundamental rights and a writ petition can be filed under Article 32 for the enforcement
of Minimum Wages Act.

In the case of Sanjit Roy v. the State of Rajasthan,10 the state employed a large number
of workers for the construction of a road to provide them relief from drought and
scarcity conditions prevailing in their area. Their employment fell under the Rajasthan
Famine Relief Works Employees (Exemption from Labour Laws) Act, 1964. The people
employed for the work were paid less than the minimum wage, which was allowed in
the Exemption Act. The Supreme Court held that providing labour for less than the
minimum wage amounts to forced labour and as such violates of Article 23 of the
Constitution.

In contrast, in Lingegowd Detective & Security Chamber (P) Limited v Mysore

Kirloskar,11 the Supreme Court held that workers of private security agencies were not
entitled to minimum wages as detective services do not form part of the scheduled
employment as detailed in the Schedule. Therefore there was no liability on the
employer to pay minimum wages under the Minimum Wages Act. The AG has the
power to add to the schedule but only those employments which fall within the
definition of employee, be it skilled or unskilled, manual or clerical.12

2.4 Fixation of Minimum Wages

9
PUDR v. Union of India, AIR 1982 SC 1473
10
Sanjit Roy v. State of Rajasthan (1983) 1 SCC 525 1983 Indlaw SC 62
11
Lingegowd Detective & Security Chamber (P) Limited v Mysore Kirloskar, AIR 2006 SC 1967
12
Haryana Unrecognised School Association v. State of Haryana, AIR 1996 SC 2108
Page 13 of 31
Section 3 of the Act provides that the appropriate Government shall fix the minimum
rates or wages payable to employees employed in an employment specified in Part I or
Part II of the Schedule and in an employment added to either part by notification under
section 27. Additionally, the appropriate Government may, in respect of employees
employed in an unemployment specified in Part II of the Schedule, instead of fixing
minimum rates of wages under this clause for the whole State, fixing such rates for a
part of the State or for any specified class or classes of such employment in the whole
State or any part thereof, review at such intervals as it may think fit, such intervals not
exceeding five years, the minimum rates of wages so fixed and revise the minimum
rates, if necessary.

a. Fixation of Floor Wage

As per section 9(2) of the Code, the Central Government shall fix floor wage taking into
account minimum living standards of a worker in such manner as may be prescribed.
The Section states that different floor wage may be fixed for different geographical
areas. Additionally, the minimum rates of wages fixed by the appropriate Government
under section 6 shall not be less than the floor wage and if the minimum rate of wages
fixed by the appropriate Government earlier is more than the floor wage, then, the
appropriate Government shall not reduce such minimum rates of wages fixed by it
earlier. It is also elucidated in this Section that the Central Government may, before
fixing the floor wage, obtain the advice of the Central Advisory Board constituted under
sub-section (1) of section 42 of the Code and consult State Governments in such
manner as may be prescribed.

If appropriate Government has not reviewed the wages

Section 3 further provides that where for any reason the appropriate Government has
not reviewed the minimum rates of wages fixed by it in respect of any scheduled
employment within any interval of five years, nothing contained in this clause shall be
deemed to prevent it from reviewing the minimum rates after the expiry of the said
period of five years and revising them, if necessary, and until they are so revised the
minimum rates in force immediately before the expiry of the said period of five years
shall continue in force.

b. Revision of Wages under Code on Wages 2019

Section 8(4) of the Code provides that the appropriate Government shall review or
revise minimum rates of wages ordinarily at an interval not exceeding five years.

c. Manner of fixation

Section 3(2) lays down that the appropriate Government may fix –

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 (a) a minimum rate of wages for time work (hereinafter referred to as “a minimum
time rate”);

(b) a minimum rate of wages for piece work (hereinafter referred to as “a minimum
piece rate”);

(c) a minimum rate of remuneration to apply in the case of employees employed on

piece work for the purpose of securing to such employees a minimum rate of
wages on a time work basis (hereinafter referred to as “a guaranteed time rate”).

(d) a minimum rate (whether a time rate or a piece rate) to apply in substitution for
the minimum rate which would otherwise be applicable in respect of overtime
work done by employees (hereinafter referred to as “overtime rate”.

Additionally, section 3(3) lays down that in fixing or revising minimum rates of wages
under this section different minimum rates of wages may be fixed for-

(i) different scheduled employment;

(ii) different classes of work in the same scheduled employments;

(iii) adults, adolescents, children and apprentices;

(iv) different localities. This was further upheld in Basti Ram v. State of AP13.

It is also pertinent that minimum rates of wages may be fixed by any one or more of the
following wage periods, namely,-

(i) by the hour,

(ii) by the day,

(iii) by the month, or

(iv) by such other larger wage period as may be prescribed and where such rates
are fixed by the day or by the month, the manner of calculating wages for a
month or for a day, as the case may be, indicated.

d. Minimum Rate of Wages

Section 4 of the Act provides that any minimum rate of wages fixed or revised by the
appropriate Government in respect of scheduled employments under section 3 may
consist of-

13
Basti Ram v. State of A.P AIR 1969, (A.P.) 227
Page 15 of 31
 (i) a basic rate of wages and a special allowance at a rate to be adjusted, at such
intervals and in such manner as the appropriate Government may direct, to
accord as nearly as practicable with the variation in the cost of living index
number applicable to such workers (hereinafter referred to as the “cost of
living allowance”); or
(ii) a basic rate of wages with or without the cost of living allowance and the cash
value of the concessions in respect of supplies of essential commodities at
concessional rates, where so authorised; or
(iii) an all-inclusive rate allowing for the basic rate, the cost of living allowance
and the cash value of the concessions, if any.

Moreover, the cost of living allowance and the cash value of the concessions in respect
of supplies of essential commodities at concessional rates shall be computed by the
competent authority at such intervals and in accordance with such directions as may be
specified or given by the appropriate Government.

e. Procedure for Fixing and Revising Minimum Wages

The procedure of fixing and revising minimum wages is provided for in Section 5 of the
Act. This section states that in fixing minimum rates of wages in respect of any
scheduled employment for the first time under this Act or in revising minimum rates of
wages so fixed, the appropriate Government can opt for two methods: -

The Appropriate government is required to consider the advice of the committee or

committees, appointed under clause (a) of sub-section (1), or as the case may be all
representations received by it before the date specified in the notification under clause
(b) of that sub-section. After such consideration, the appropriate Government shall, by
notification in the Official Gazette, fix, or, as the case may be, revise the minimum rates
of wages in respect of each scheduled employment, and unless such notification
otherwise provides, it shall come into force on the expiry of three months from the date
of its issue.

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 If the appropriate Government proposes to revise the minimum rates of wages by the
mode specified in clause (b) of section 5(1) the appropriate Government shall consult
the Advisory Board also. It is pertinent to note that the Committee appointed under this
section only serves in the advisory capacity. Therefore the Appropriate Government is
not compelled to accept the recommendations of such advisory committee14.

2.5 Advisory Board

Section 8 of the Act speaks for the establishment of a Central advisory board for
assisting the Appropriate Government. According to this Section, the Central Advisory
Board shall consist of persons to be nominated by the Central Government representing
employers and employees in the scheduled employments, who shall be equal in
number, and independent persons not exceeding one-third of its total number of
members; one of such independent persons shall be appointed the Chairman of the
Board by the Central Government.

The judicial precedents15 on this matter have laid down that it is not mandatory for the
advisory boards to appoint representatives from all the industries mentioned under the
scheduled employment.

a. Composition of committees

Section 9 lays down that each of the committees, subcommittees, and the Advisory
Board shall consist of persons to be nominated by the appropriate Government
representing employers and employees in the scheduled employments, who shall be
equal in number, and independent persons not exceeding one-third of its total number
of members, one of such independent persons shall be appointed the Chairman by the
appropriate Government.

2.6 Mode of Payment of Wages

Section 11 of the Act expressly mentions that the minimum wages payable under the Act
shall be paid in cash. It is however provided in section 11(2) that in an instance where it
has been the custom to pay wages wholly or partly in kind, the appropriate Government
being of the opinion that it is necessary in the circumstances of the case may, by
notification in the Official Gazette, authorise the payment of minimum wages either
wholly or partly in kind. Additionally, if the appropriate Government is of the opinion
that provisions should be made for the supply of essential commodities at concessional
rates, the appropriate Government may, by notification in the Official Gazette,

14
Edward Mills Co. v. State of Ajmer 1955 SCR (1) 735
15
BY Kashatriya v. SAT Bidi Kamgar Union AIR 1963 SC 806
Page 17 of 31
 authorise the provision of such supplies at concessional rates16. The cash value of wages
in kind and of concessions in respect of supplies of essential commodities at
concessional rates authorised under sub-sections (2) and (3) shall be estimated in the
prescribed manner.

a. Payment of Minimum Rates of Wages

Section 12 of the Act adds a compulsion on the employer to pay to every employee
engaged in a scheduled employment under him, wages at a rate not less than the
minimum rates of wages fixed by such notification for that class of employees in that
employment without any deductions except as may be authorised within such time and
subject to such conditions as may be prescribed.

2.7 Fixing Hours for a Normal Working Day

Section 13 of the Act provides that minimum rates of wages for scheduled employments
in respect of which have been fixed under this Act, the appropriate Government may fix
the number of hours of work which shall constitute a normal working day, inclusive of
one or more specified intervals. The appropriate government may also provide for a day
of rest in every period of seven days which shall be allowed to all employees or to any
specified class of employees and for the payment of remuneration in respect of such
days of rest. The appropriate government may also provide for payment for work on a
day of rest at a rate not less than the overtime rate.
These aforementioned provisions, in relation to the following classes of employees,
apply only to such extent and subject to such conditions as may be prescribed:-

(a) employees engaged on urgent work or in any emergency which could not have
been foreseen or prevented;

(b) employees engaged in work in the nature of preparatory or complementary

work which must necessarily be carried on outside the limits laid down for the
general working in the employment concerned;

(c) employees whose employment is essentially intermittent- employment of such

an employee is essentially intermittent when it is declared to be so by the
appropriate Government on the ground that the daily hours of duty of the
employee, or if there be no daily hours of duty as such for the employee, the
hours of duty, normally include periods of inaction during which the employee
may be on duty but is not called upon to display either physical activity or
sustained attention

16
Section 11(3), Minimum Wages Act
Page 18 of 31
 (d) employees engaged in any work which for technical reasons has to be completed
before the duty is over

(e) employees engaged in a work which could not be carried on except at times
dependent on the irregular action of natural forces.

It has also been held in BB Shah v. West Bengal17 that Minimum wages are to be fixed
on basis of 48 hours a week, which are the standard normal working hours.

a. Overtime

Section 14 lays down that where an employee, whose minimum rates of wages is fixed
under this Act by the hour, by the day or by such a longer wage-period as may be
prescribed, works on any day in excess of the number of hours constituting a normal
working day, the employer shall pay him for every hour or for part of an hour so worked
in excess at the overtime rate fixed under this Act or under any law of the appropriate
Government for the time being in force whichever is higher.
In Hatta v. Bhagat Singh and Ors18 it was held that the payment for overtime work can
be claimed only by the employees who are getting minimum rate of wages under the Act
and not by those getting better wages.

b. Wages of worker who works for less than normal working day

Section 15 provides that if an employee whose minimum rates of wages has been fixed
under this Act by the day, works on any day on which he was employed for a period less
than the requisite number of hours constituting a normal working day, he shall, save as
otherwise hereinafter provided, be entitled to receive wages in respect of work done by
him on that day as if he had worked for a full normal working day. However, Such an
employee shall not be entitled to receive wages for a full normal working day- (i) in any
case where his failure to work is caused by his unwillingness to work and not by the
omission of the employer to provide him with work, and (ii) in such other cases and
circumstances as may be prescribed.

2.8 Maintenance of Register and Records

Section 18 of the Act states that every employer shall maintain such registers and
records giving such particulars of employees employed by him, the work performed by
them, the wages paid to them, the receipts given by them and such other particulars
and in such forms as may be prescribed. Additionally, every employer is required to
keep exhibited, in such manner, as may be prescribed in the factory, workshop or place

17
BB Shah v. West Bengal 1976 Lab I.C. 523 (Cal)
18
Municipal Council Hatta v. Bhagat Singh and Ors 1998 LLJ I SC 815
Page 19 of 31
where the employees in the scheduled employment may be employed, or in the case of
out-workers, in such factory, workshop or place as may be used for giving out work to
them, notices in the prescribed form containing prescribed particulars. Furthermore,
the appropriate Government may, provide for the issue of wage books or wage slips to
employees employed in any scheduled employment in respect of which minimum rates
of wages have been fixed and prescribe the manner in which entries shall be made and
authenticated in such wage books or wage slips by the employer or his agent.

2.9 Inspector

Section 19 talks about the appointment of inspectors by the appropriate government. As

per the provision, the appropriate Government may, by notification in the Official
gazette, appoint such persons as it thinks fit to be Inspectors for the purposes of this
Act, and define the local limits within which they shall exercise their functions.

a. Duties of the Inspector

Subject to any rules made in this behalf, an Inspector may, within the local limits for
which he is appointed:-

(a) enter at all reasonable hours, with such assistant (if any), being persons in the
service of the Government or any local or other public authority, as he thinks fit,
any premises or place where employees are employed or work is given out to
out-workers in any scheduled employment in respect of which minimum rates
of wages have been fixed under this Act, for the purpose of examining any
register, record of wages or notices required to be kept or exhibited by or under
this Act or rules made thereunder, and require the production thereof for
inspection;

(b) examine any person whom he finds in any such premises or place and who, he
has reasonable cause to believe, is an employee employed therein or an
employee to whom work is given out therein;

(c) require any person giving out-work and any out-workers to give any
information, which is in his power to give, with respect to the names and
addresses of the persons, to, for and from whom the work is given out or
received, and with respect to the payment to be made for the work;

(d) seize or take copies of such register, record of wages or notices or portions
thereof as he may consider relevant, in respect of an offence under this Act
which he has reason to believe has been committed by an employer; and

(e) exercise such other powers as may be prescribed.

Page 20 of 31
Moreover, every Inspector shall be deemed to be a public servant within the meaning of
the Indian Penal Code. Any person required to produce any document or thing or to
give any information by an Inspector under sub-section (2) shall be deemed to be
legally bound to do so within the meaning of section 175 and section 176 of the Indian
Penal Code.

2.10 Claims

Under Section 20(1) of the Act, the appropriate Government, may appoint any of the
following as an authority to hear and decide for any specified area any claims arising
out of payment of less than the minimum rate of wages or in respect of the payment of
remuneration for the days of rest or of wages at the rate of overtime work:

(a) any Commissioner for Workmen’s Compensation; or

(b) any officer of the Central Government exercising functions as Labour

Commissioner for any region; or

(c) any officer of the State Government not below the rank of Labour
Commissioner; or

(d) any other officer with experience as a Judge of a Civil Court or as the
Stipendiary Magistrate.

The section elucidates that the authority that is appointed under this section shall have
jurisdiction to hear and decide claim arising out of payment of less than the minimum
rates of wages or in respect of the payment remuneration for days of rest or for work
done on such days or for payment of overtime. The provisions of Section 20(1) are
attracted only if there is an existing and ongoing a dispute between the employer and
the employee as to the rates of wages. In case no such dispute exists between the
employer and employees and the only question is whether a particular payment at the
agreed rate in respect of minimum wages, overtime or work on off days is due to an
employee or not, the remedies as provided under the Payment of Wages Act 1936,
would be more suitable in such an instance.

2.11 Penalties for Certain Offences

Section 22 of the Act lays down the penalty for some offences of the employer. As per
this section, any employer who—

Page 21 of 31
 (a) Pays to any employee less than the minimum rates of wages fixed for that
employee's class of work, or less than the amount due to him under the
provisions of this Act or

(b) Contravenes any rule or order made under section 13 shall be punishable with
imprisonment for a term which may extend to six months or with fine which
may extend to five hundred rupees or with both.

In imposing any fine for an offence under this section the Court shall take into
consideration the amount of any compensation already awarded against the accused in
any proceedings taken under section 20.

a. Cognizance of Offences

Section 22B provides the law for the courts to take cognizance. This section is explained
below:

Section 22B(1) Section 22B(2)

No Court shall take cognizance of No Court shall take cognizance of
a complaint against any person for an offence –
an offence- (a) under clause (a) or clause (b) of
(a) under clause (a) of section 22 unless section 22, unless complaint
an application in respect of the facts thereof is made within one month
constituting such offence has been of the grant of sanction under this
presented under section 20 and has section;
been granted wholly or in part, and (b) under section 22-A, unless the
the appropriate Government or an complaint thereof is made within six
officer authorised by it in this behalf months of the d
has sanctioned the making of the
complaint;
(b) under clause (b) of section 22 or
under section 22-A19, except on a
complaint made by, or with the
sanction of, an Inspector.

b. Offences by companies

Section 22 C states that If the person committing any offence under this Act is a
company, every person who at the time the offence was committed was in charge of,

19
Section 22 A of the Act is the General provision for punishment of other offences and states that
Any employer who contravenes any provision of this Act or of any rule or of order made
thereunder shall if no other penalty is provided for such contravention by this Act, be punishable
with fine which may extend to five hundred rupees.
Page 22 of 31
and was responsible, to the company for the conduct of the business of the company as
well as the company shall be deemed to be guilty of the offence and shall be liable to be
proceeded against and punished accordingly.

c. Payment of undisbursed amounts due to employees

Section 22D states that all amounts payable by an employer to an employee as the
amount of minimum wages of the employee under this Act or otherwise due to the
employee under this Act or any rule or order made thereunder shall, if such amounts
could not or cannot be paid to the employee on account of his death before payment or
on account of his whereabouts not being known, be deposited with the prescribed
authority who shall deal with the money so deposited in such manner as may be
prescribed.

d. Exemption of employer from liability in certain cases.-

Section 23 lays down the cases where the employer is exempted from the liability when
he is charged with an offence with this Act. Such an employer is required to write a
complaint, to have any other person whom he charges as the actual offender, brought
before the Court and if, after the commission of the offence has been proved, the
employer proves to the satisfaction of the Court- (a) that he has used due diligence to
enforce the execution of this act, and (b) that the said other person committed the
offence in question without his knowledge, consent or connivance, that other person
shall be convicted of the offence and shall be liable to the like punishment as if he were
the employer and the employer shall be discharged.

Questions for Reflection 2

1. What do we mean by scheduled employment? How does it define the scope of

Minimum Wages Act?

2. What are the differences between the Committee Method and Notification of
fixing of minimum wage?

3. What are the main changes introduced by the Code on Wages 2019 to the law of
minimum wages?

4.

Page 23 of 31
3. Payment of Wages Act, 1936

The Payment of Wages Act, 1932 (hereinafter referred to as ‘the Act’) is one of the most
pertinent legislations that determine and regulate the rights and obligations of the
various parties with respect to the payment of wages. The Act is a central legislation
with a primary goal to ensure that the workers involved in certain industries receive a
timely payment of their wages, without any unjustified subtractions from their wages or
any unauthorized delays in payment. The types of industries where this Act is
applicable are- factories, industrial or any other establishments, or the railways.

3.1 Application of the Act

It applies in the first instance to the payment of wages in the following cases:-

(i) To persons employed in a factory

(ii) To persons employed upon any railway by a railway administration (otherwise
than in a factory)
(iii) By persons fulfilling a contract with a railway administration
(iv) To persons employed in an industrial establishment, which means any:
(a) tramway service, or motor transport service engaged in carrying passengers
or goods or both by road for hire or reward

(b) air transport service other than such service belonging to, or exclusively
employed in the military, naval or air forces of the Union or the Civil
Aviation Department of the Government of India

(c) dock, wharf or jetty

(d) inland vessel, mechanically propelled

(e) mine, quarry or oil-field

(f) plantation

(g) workshop or other establishment in which articles are produced, adapted or

manufactured, with a view to their use, transport or sale

(h) establishment in which any work relating to the construction, development

or maintenance of buildings, 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

Page 24 of 31
 a. Additional extension

The appropriate Government may, after giving three months' notice of its intention of
so doing, by notification in the Official Gazette, extend the provisions of this Act or any
of them to the payment of wages to any class of persons employed in any establishment
or class of establishments specified by the appropriate Government under sub-clause
(h) of clause (ii) of section 2.

Sub-clause (h) of clause (ii) of section 2 provides that a factory includes any other
establishment or class of establishments which the appropriate Government may,
having regard to the nature thereof, the need for protection of persons employed
therein and other relevant circumstances, specify by notification in the Official Gazette,
provided that in relation to any such establishment owned by the Central Government
no such notification shall be issued except with the concurrence of that Government.

b. Wage Ceiling

This Act applies to wages payable to an employed person in respect of a wage period if
such wages for that wage period do not exceed eighteen thousand rupees per month or
such other higher sum which, on the basis of figures of the Consumer Expenditure
Survey published by the National Sample Survey Organisation, the Central Government
may, after every five years, by notification in the Official Gazette, specify.

In Indian Statistical Institute v State of West Bengal20, it was held that if a part of the
Institute is engaged in activities covered by the Payment of Wages Act, then the
Institution would be covered under the Act. Further, in LIC of India v Anwar Khan21,
the court held that if section 122 of the Act applies, then the nature of the job is
irrelevant.

3.2 Wages

“Wages” are defined under section 2(vi) of the Act as all remuneration (whether by way
of salary, 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,
be payable to a person employed in respect of his employment or work done in such
employment, and includes –

(a) any remuneration payable under any award or settlement between the parties

20
Indian Statistical Institute v State of West Bengal 1994 I LLJ 75 (Cal)
21
LIC of India v Anwar Khan (2007) 11 SCC 25
22
Section 1 of the Payment of Wages Act covers the “Short title, extent, commencement and
application” of the Act
Page 25 of 31
 or order of the 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 of employment

(whether called a bonus or by any other name);

(d) any sum which by reason of the termination of employment of the person
employed is payable under any law, contact 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;

(e) any sum to which the person employed is entitled under any scheme frame
under any law for the time being in force;

However, wages do not include –

(i) any bonus (whether under a scheme of profit sharing or otherwise) which
does not form part of the remuneration payable under the terms of
employment or which is not payable under any award or settlement between
the parties or order of a court;

(ii) the value of any house-accommodation, or of the supply of light, water,

medical attendance or other amenity or of any service excluded from the
computation of wages by a general or special order of the appropriate
Government;

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

(iv) any travelling allowance or the value of any travelling concession;

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

(vi) any gratuity payable on the termination of employment in cases other than
those specified in sub-clause (d).

In India Leaf Spring Manufacturing Co. v Appellate Authority,23 it was held that the
subsistence allowance payable in terms of S.10-A of Industrial Employment (standing
Orders) Act24 is covered within the definition of wages. The Court, in Mehra Co. v

23
India Leaf Spring Manufacturing Co. v Appellate Authority 1993 I LLN 105
24
The Industrial Employment (standing Orders) Act, 1946
Page 26 of 31
 Kanhaiya Lal,25 held that the language of the Section is wide enough to cover the
emoluments payable as per terms of the contract and also a sum payable to an
employee under the provisions of a statute. Hence, a claim payable to an employee by
reason of termination must also be deemed to be wages.

a. Wages and House Rent Allowance (HRA)

Whether HRA is wages was answered in Div. Engineer. GIP Rly v Mahadeo26 wherein
the Court held that the may be in the affirmative if the rules framed by the department
relating to the grant of house rent allowance make it compulsory for the employer to
grant house rent allowance without anything more. That is, if the house rent allowed
had been granted without any conditions or with conditions, if any, which were
unenforceable in law, it is wages. Where the house rent allowance is not admissible to
all the employees of a particular class, it is not part of wages.

b. Wages and Bonus

Whether bonus is wages was answered in Bala Subrahmanya Rajaram v B. C. Patil27.

The court held that the bonus payable under an award of an Industrial Court has
nothing to do with the fulfillment or otherwise of the terms of the contract of
employment, and therefore, it is not a part of wages. However, the amendment of 1957
of this act – notified in 1958, expressly states that bonus does not include 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;” therefore, such
a bonus would be a part of the wages.

Additionally, in Junior Labour inspector v Appellate Authority28 it was held that the
amount of bonus payable under the Payment of Bonus Act 1965 would be covered
within the definition of wages.

c. Wages and Gratuity

It was held in Purshottam H Judye v VB Potdar29 that Gratuity payable to an employee

under an award by reason of termination of his employment would fall under
sub-clause (d) of s. 2 (vi). Furthermore, the judgment in Madras Fertilisers Limited,
rep. by its General Manager, Mr. R.R. Pandalai vs. The Controlling Authority,

25
Mehra Co. v Kanhaiya Lal AIR 1956 Punj 80
26
Div. Engineer. GIP Rly v Mahadeo AIR 1955 SC
27
Bala Subrahmanya Rajaram v B. C. Patil and Others AIR 1958 SC 518
28
Junior Labour inspector v Appellate Authority (1976) I LLJ 511
29
Purshottam H Judye v VB Potdar AIR 1966 SC 856
Page 27 of 31
 Assistant Commissioner30 provided that the very language of sub-clause (6)31 suggests
that any gratuity which is not covered by clause (d) is excluded from the term "wages".
This would presuppose that clause (d) covers some gratuity. The answer is to be found
in the plain language of clause (d) which opens with the words "any sum which by
reason of the termination of employment of the person employed is payable under any
law. There can be no dispute that the termination of employment of respondents 4 to 41
entitled them to receive the payment of gratuity under the law called Payment of
Gratuity Act. Therefore it can be concluded that this clause is complete in itself and,
therefore, it can be safely held that the gratuity which is payable under the Payment of
Gratuity Act is well covered under clause (d). Furthermore, the court also pointed out
that the plain meaning of the clause would be that where any sum is payable on
termination of employment of the person under any law (in this case Payment of
Gratuity Act), it would be covered under clause (d) and, therefore, it excluded from the
operation of sub-clause (6) and therefore will amount to "wages"32.

This aforementioned precedent was also referred to by the Bombay High Court in 2017
in Cummins (I) Limited v Industrial Cleaning Services33 where the Court elucidated
that even these later cases do not consider the further question as to whether the
authority under the Gratuity Act can determine the liability of the principal employer
within the meaning of Section 21(4) of the Contract Labour Act read with definition of
“wages” in clause (vi) of Section 2 of the Payment of Wages Act, and the bench
respectfully disagreed with that implicit conclusion.

d. Responsibility for Payment of Wages

Clause (1) of the Section 3 of the act provides that every employer shall be responsible
for the payment of all wages required to be paid under this Act to persons employed by
him and in case of persons employed,-

(a) in factories, if a person has been named as the manager of the factory34

(b) in industrial or other establishments, if there is a person responsible to the

employer for the supervision and control of the industrial or other
establishments

30
Madras Fertilisers Limited, rep. by its General Manager, Mr. R.R. Pandalai vs. The Controlling
Authority, Assistant Commissioner of Labour (Gratuity), (MADHC) 2003 (1) LLJ 854
31
Clause (vi) of Section 2 of Payment of Wages Act defines the term “wages”
32
This judgment from Supra Note 11 was also followed by Superintending Engineer, Mettur
Thermal Power Station, Mettur v Appellate Authority Joint Commissioner of Labour, Coimbatore
2012 (3) CLR 242 and The Management of Cruickshank and Company Ltd. v. The Appellate
Authority under Payment of Gratuity Act 2003-I-LLJ Madras - 325
33
Cummins (I) Limited v Industrial Cleaning Services 2017 SCC OnLine Bom 5
34
Under clause (f) of sub-section (1) of section 7 of the Factories Act, 1948
Page 28 of 31
 (c) upon railways (other than in factories), if the employer is the railway
administration and the railway administration has nominated a person in this
behalf for the local area concerned

(d) in the case of contractor, a person designated by such contractor who is directly
under his charge; and

(e) in any other case, a person designated by the employer as a person responsible
for complying with the provisions of the Act;

the person so named, the person responsible to the employer, the person so nominated
or the person so designated, as the case may be, shall be responsible for such payment.

In PC Agarwala v Payment of Wages Inspector35 it was held that the liability for
payment of the wages is cast on a person who has been named as manager of the factory
and the employer jointly. Therefore, in order to find out whether the director had a
responsibility for making payment, two different things have to be established; (i) he
was the employer, or (ii) he was a person who has been named as manager of the
factory.

e. Fixation of wage-periods

Section 4 of the Act elucidates that Every person responsible for the payment of wages
under section 3 shall fix periods in respect of which such wages shall be payable.
Additionally, no wage-period shall exceed one month.

f. Time of payment of wages

The wages of every person employed upon or in-(a) any railway, factory or [industrial
or other establishment upon or in which less than one thousand persons are employed,
shall be paid before the expiry of the seventh day, and any other railway, factory or
industrial or other establishment, shall be paid before the expiry of the tenth day, after
the last day of the wage-period in respect of which the wages are payable. In the case of
persons employed on a dock, wharf or jetty or in a mine, the balance of wages found
due on completion of the final tonnage account of the ship or wagons loaded or
unloaded, as the case may be, shall be paid before the expiry of the seventh day from
the day of such completion.

In addition to this, where the employment of any person is terminated by or on behalf

of the employer, the wages earned by him shall be paid before the expiry of the second
working day from the day on which his employment is terminated. Also, where the
employment of any person in an establishment in terminated due to the closure of the
establishment for any reason other than a weekly or other recognised holiday, the
35
PC Agarwala v Payment of Wages Inspector (2005) 8 SCC 104
Page 29 of 31
 wages earned by him shall be paid before the expiry of the second day from the day on
which is employment is so terminated

It is also provided under Section 536 of this Act that the appropriate Government may,
by general or special order, exempt, to such extent and subject to such conditions as
may be specified in the order, the person responsible for the payment of wages to
persons employed upon any railway (otherwise than in a factory) or to persons
employed as daily-rated workers in the Public Works Department of the appropriate
Government from the operation of this section in respect of the wages of any such
persons or class of such persons. In the case of persons employed as daily-rated
workers as aforesaid, no such order shall be made except in consultation with the
Central Government

g. Modes of Payment of Wages

The Act provides that all wages shall be paid in

i. current coin or
ii. currency notes or
iii. by cheque or
iv. by crediting the wages in the bank account of the employee:

Additionally, the appropriate Government may, specify the industrial or other

establishment, the employer of which shall pay to every person employed in such
industrial or other establishment, the wages only by cheque or by crediting the wages in
his bank account.

In National Federation of Telecom Employees v BSNL37, the Court held that without
written authorisation from employees, employer cannot of its make payment of wages
by cheque. This position changed after the 2017 amendment. Employer has no
authority to collect bank transaction tax from their employees in case of payment of
salary through cheque.

h. Deductions which may be made from wages

Clause (1)38 of Section 7 of the Act states that the wages of an employed person shall be
paid to him without deductions of any kind except those authorized by or under this
Act. For the purpose of this section, the explanations provided in the act clarify that
every payment made by the employed person to the employer or his agent shall, for the
purposes of this Act, be deemed to be a deduction from wages. Additionally, any loss of

36
Clause (3), Section 5, Payment of Wages Act
37
National Federation of Telecom Employees v BSNL 2007 3 CHN 216,
38
The provisions under this clause are made applicable notwithstanding the provisions of the
Railways Act, 1989
Page 30 of 31
 wages resulting from the imposition, for good and sufficient cause, upon a person
employed of any of the penalties mentioned below shall not be deemed to be a
deduction from wages in any case where the rules framed by the employer for the
imposition of any such penalty are in the conformity with the requirements, if any,
which may be specified in this behalf by the appropriate Government by notification in
the Official Gazette. These penalties are:-

(i) Withholding of increment or promotion (including the stoppage or increment at

an efficiency bar);

(ii) Reduction to a lower post or time scale or to a lower stage in a time scale; or

(iii) Suspension;

Moreover, in Armugham v Jawahar Mills,39 it was held that any agreement or contract
by which an employee agrees to any deduction other than those authorised under the
Act would be null and void by virtue of Section 23.

Questions for Reflection 3

1. What is the maximum wage period contemplated by the Payment of Wages Act?
How does the Code on Wages 2019 change that?

2. What are is the stipulated time period for payment of wages under the Payment
of Wages Ct?

3. What are the restrictions on deduction from wages under the Payment of Wages
Act 1936?

*****

39
Armugham v Jawahar Mills AIR 1956 Mad 79
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