In India, wage payment is governed primarily by the Minimum Wages Act, 1948 and the Payment of Wages Act, 1936, which mandate timely payment of minimum wages and prevent illegal deductions. Employers who violate these laws can face imprisonment, fines, or compensation to affected employees. Enforcement is carried out by state and central labor authorities who conduct inspections, and non-compliance can lead to legal action, including lawsuits and suspension of licenses.
How These Acts are Used
- Minimum Wages Act, 1948:
Purpose: To ensure employees receive not less than the minimum wages fixed by the government for different types of work and skill levels.
Mechanism: Both state and central governments set minimum wage rates based on the industry, skill, and location.
Enforcement: Labor inspectors from the Central and State governments conduct inspections to check for compliance. - Payment of Wages Act, 1936:
Purpose: To regulate the timely payment of wages and control illegal fines and deductions by employers.
Mechanism: Employers must pay wages within a specified timeframe, typically within seven days of the wage period's close.
Complaint: Employees or their trade unions can file claims with the appropriate authority if they experience delayed payments or unlawful deductions.
Penalties for Non-Compliance
- Imprisonment: For violations like paying less than the minimum wage or making illegal deductions, imprisonment up to six months is a potential penalty under the Minimum Wages Act, 1948.
- Fines: Significant fines can be imposed, with the Minimum Wages Act setting a fine of up to ₹500 in some cases. Under more recent codes, some violations can attract fines up to ₹50 lakhs.
- Compensation: Employers may be ordered to compensate affected employees for the wages they were denied.
- Legal Actions: Employees or their unions can initiate legal proceedings in civil courts for recovery of unpaid wages.
- License Suspension/Closure: For repeated or severe non-compliance, the government can suspend or cancel the employer's operating licenses, potentially leading to business closure.
Regulations for Employers
- Fixation of wage period: Employers must fix a wage period that does not exceed one month.
- Time of payment: Wages must be paid within seven days of the wage period's end for establishments with fewer than 1,000 employees. For larger establishments, the payment is due within ten days.
- Termination of employment: For a terminated employee, all earned wages must be paid within two working days.
- Mode of payment: Wages can be paid in cash, by cheque, or credited directly to an employee's bank account, with their written authorization.
- Authorized deductions: Limited to fines (not exceeding 3% of wages), absence from duty, damage/loss due to negligence, recovery of advances/loans, provident fund subscriptions, or cooperative society payments.
- Record maintenance: Employers must maintain registers and records of payments and deductions for inspection.
Mechanism for Claims
Employees can file a claim for delayed or unlawfully deducted wages with the designated authority, such as a Labour Court or Labour Commissioner. These authorities have the power to hear and decide on the matter, including ordering compensation.
The Future of Wage Law: Code on Wages, 2019
The existing wage-related laws, including the Payment of Wages Act, 1936, are set to be replaced by the Code on Wages, 2019, once implemented by state governments. This new Code consolidates several laws into one, with revised penalties.
Penalties under the Code on Wages, 2019
- Non-payment of wages: Imprisonment for 3 months to 1 year and a fine of ₹10,000 to ₹20,000.
- Unlawful deductions: Imprisonment for 3 months to 1 year and a fine of ₹10,000 to ₹20,000.
- Falsifying records: Imprisonment for 6 months to 1 year and a fine of ₹20,000 to ₹50,000.