Payment of Wages Act 1936

15/11/2020 0 By indiafreenotes

The Payment of Wages Act, 1936 regulates payment of wages to employees (direct and indirect). The act is intended to be a remedy against unauthorized deductions made by employer and/or unjustified delay in payment of wages. The main objective for the introduction of the Payment of Wages Act, 1936, is to avoid unnecessary delay in the payment of wages and to prevent unauthorized deductions from the wages.

Purpose of the Act

The main objective of the Act is to avoid unnecessary delay in the payment of wages and to prevent unauthorized deductions from the wages. Every person employed in any factory, upon any railway or through sub-contractor in a railway and a person employed in an industrial or other establishment. The State Government may by notification extend the provisions to any class of persons employed in any establishment or class of establishment. The benefit of the Act prescribes for the regular and timely payment of wages (on or before 7th day or 10th day of after wage period is greater than 1000 workers) and Preventing unauthorized deductions being made from wages and arbitrary fines.

Section 2 of the Payment of Wages Act, 1936 offers the definition of wages and many other important terms as follows:

Appropriate Government

According to section 2(i) of the Act, Appropriate Government means:

  • The Central Government in relation to railways, air transport service, mines, and oilfields
  • The State Government in relation to all other cases

Employed Person

According to section 2(ia) of the Act, an employed person also includes the legal representative of the deceased employed person.


According to section 2(ib) of the Act, an employer also includes the legal representative of the deceased employer.


According to section 2(ic) of the Act, a factory means a factory which the clause (m) of Section 2 of the Factories Act, 1948 (63 of 1948) defines. Further, it includes any place to which the provisions of the Act have been applied under sub-section (1) of Section 85 thereof.

Industrial or Other Establishment

According to section 2(ii) of the Act, an Industrial or Other Establishment means any:

  • A motor transport service or tramway service which carries passengers or goods or both by road for hire or reward;
  • Air transport service other than that 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.
  • Jetty or dock wharf
  • A mechanically propelled inland vessel
  • Mine, quarry, or oil-field
  • Plantation
  • Workshop or any other establishment which produces or manufactures articles or adapts them for their use, transport, or sale.
  • An establishment which carries on any work relating to the construction, development, or maintenance of buildings, roads, bridges or canals. Also, establishments having operations connected with navigation, irrigation, or supply of water, or generation, transmission, and distribution of electricity.
  • The Central or State Government might include any other establishment or class of establishments for the protection of the employees under the Act.


According to section 2(ii)(a) of the Act, a Mine has the meaning that clause (j) of sub-section (1) of Section 2 of the Mines Act, 1952 (35 of 1952) assigns to it.


According to section 2(iii) of the Act, a Plantation means ‘Plantation’ defined under clause (f) of Section 2 of the Plantations Labour Act, 1951 (69 of 1951).


According to section 2(iv) of the Act, prescribed means prescribed by the rules made under this Act.

Railway Administration

According to section 2(v) of the Act, Railway Administration has the meaning that clause (32) of Section 2 of the Indian Railways Act, 1889 assigns to it.


According to section 2(vi) of the Act, wages mean all remunerations expressed in terms of money or are capable of being so expressed.

These are either by way of salary allowances or otherwise. Further, the remunerations are payable to the person employed on the fulfillment of the terms of employment, express or implied. These remunerations include:

Inclusions in Wages

  • Any amount which is payable under any award or settlement between the parties or an order of the court.
  • Amounts that the employee is entitled to with respect to working overtime or on holidays or any leave period.
  • Any additional remuneration as per the terms of employment – bonus, incentive, etc.
  • The sum of money that the employee must receive due to the termination of his employment. Further, this sum is either payable under law or contract or instrument which specifies the payment of such a sum. Also, this may or may not include deductions. It also does not specify the time within which the firm needs to make the payment.
  • Any sum to which the employee is entitled under any scheme that is framed under any law in force. However, it does not include:
  1. Any bonus which does not form a part of the remuneration payable under the terms of employment. Or, a bonus which is not payable under any award or settlement between parties or an order of a court.
  2. The value of any house accommodation or the supply of water, light, medical attendance or any service which is excluded from the computation of wages under an order of the Government.
  3. The employer’s contribution to any pension or provident fund and also the interest accrued thereon.
  4. Any traveling allowance or traveling concessions
  5. Any sum that the employee receives to defray special expenses due to the nature of his employment
  6. Gratuity was payable on the termination of employment in cases other than those specified in sub-clause (d).

Salary statics

Wages are averaging less than Rs. 6500.00 per month only are covered or protected by the Act by the amendment in 2005 by {Section 1(6)}.Wages means contractual wages and not overtime wages. They are not to be taken into account for deciding the applicability of the Act in the context of section 1(6) of the Act. Wages must be paid in current coin or currency notes or in both and not in kind. It is, however, permissible for an employer to pay wages by cheque of by crediting them in the bank account if so authorized in writing by an employed person.

Summary of the provisions of the Act

The provisions of the Act regarding the imposition of fines on the employed person are as follows such as, The employer must exhibit on his premises a list of acts or omissions for which fines can be imposed, Before imposing a fine on an employed person he must be given an opportunity of showing cause against the fine, The amount of fine must not exceed 3 percent of the wages, A fine cannot be imposed on an employed person who is under the age of 15 years, A fine cannot be recovered by installments or after 90 days from the day of the act or omission for which it is imposed, The moneys realized from fines must be applied to purposes beneficial to employed persons.

Subsection 8(3), 10(1-A) & Rule 15} deals with Any person desiring to impose a fine on an employed person or to make a deduction for damage or loss shall explain personally or in writing to the said person the act or omission, or damage or loss in respect of which the fine or deduction is proposed to be imposed, and the amount of fine or deduction, which it is proposed to impose, and shall hear his explanation in the presence of at least one other person, or obtain it in writing.

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.

Responsibility for payment of wages [Section 3].

Every employer shall be responsible for the payment to persons employed by him of all wages required to be paid.

  • In the case of the factory, manager of that factory shall be liable to pay the wages to employees employed by him.
  • In the case of industrial or other establishments, persons responsibility of supervision shall be liable for the payment of the wage to employees employed by him.
  • In the case of railways, a person nominated by the railway administration for specified area shall be liable for the payment of the wage to the employees.
  • In the case of contractor, a person designated by such contractor who is directly under his charge shall be liable for the payment of the wage to the employees. If he fails to pay wages to employees, person who employed the employees shall be liable for the payment of the wages.

Deductions which may be made from wages

At the time of payment of the wage to employees, employer should make deductions according to this act only. Employer should not make deductions as he like. Every amount paid by the employee to his employer is called as deductions.

The following are not called as the deduction

  • Stoppage of the increment of employee.
  • Stoppage of the promotion of the employee.
  • Stoppage of the incentive lack of performance by employee.
  • Demotion of the employee
  • Suspension of the employee

The above said actions taken by the employer should have good and sufficient cause.