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THE PAYMENT OF WAGES ACT, 1936, Part -3: DEDUCTIONS FROM WAGES (Sections: 7- 13),

DEDUCTIONS WHICH MAY BE MADE FROM WAGES (Sec. 7)

Section 7(1): The wages of an employed person shall be paid to him without deductions,

Except- deductions authorized by or under the Payment of Wages Act, 1936.

DEEMED OR NOT TO BE DEEMED DEDUCTIONS [Explanations under section 7(1)]

Deemed deduction (Explanation: 1)

  • Every payment made by the employed person to the employer or his agent,
    • shall be deemed to be deduction from wages for the purpose of this Act.

Not to be deemed deduction (Explanation: 2)

  • Any loss of wages, for good and sufficient cause,
  • resulting from the imposition, upon an employed person of any of the following penalties, namely-
    • the withholding of increment or promotion, (including the stoppage of increment at any efficiency bar), or
    • the reduction to:
      • a lower post or time-scale, or
      • lower post in a time-scale, or
    • suspension,
  • shall not be deemed to be a deduction from wages.
  • CASE: Where the rules, framed by the employer, for the imposition of any such penalty.
    • CONSEQUENCE: The rules are in conformity with the requirements, if any,
      • requirements, which may be specified by the State Government by notification in the Official Gazette.

KINDS OF DEDUCTIONS (authorized as aforesaid) [Section 7(2), 8, 9, 10, 11, 12, 13]

Deductions referred under section 7(1), from wages of an employed person, may be of the following kinds only, namely-

I.DEDUCTIONS FOR FINES (Sec. 7(2)(a) and 8)

Exception to the deduction:

(1)Section 8(1): No fine shall be imposed:

  • with the previous approval of appropriate government or prescribed authority,
  • on an employed person,
  • if, he has not committed such act or omission which may have specified by notice by employer, for fine may be imposed.

No fine shall be imposed on an employed person, until:

  • Sec. 8(3): he has been given an opportunity of showing cause against the fine.
  • Sec, 8(5): he has completed the age of 15 years.

Exhibition of the notice:

Notice (specifying the act or omissions, for which fines may be imposed) shall be exhibited:

  • in prescribed manner,
  • on the premises in which employment is carried on.

(and in case of persons employed upon a railways at prescribed place or places.)

Fine limit:

Sec. 8(4): Total amount of fine, which may be imposed:

  • in any one wage period,
  • on any employed person,
  • shall not exceed 3% of wages payable to him, in respect of that wage-period.

Time barred recovery:

Sec. 8(6): Such imposed fine shall not be recovered from the employed person;

  • by installments or
  • after, expiry of 90 days from the days on which, it was imposed.

Implied imposition of fine:

Sec.8(7): Every fine shall be deemed to have been imposed on the day of act or omission,

  • in respect of which it was imposed,
  • record and purpose of fine:

Record and purpose of fine:

Sec. 8(8):

I.RECORD: All fines and realizations thereof,

  • shall be recorded in a register (in prescribed form),
  • to be kept by the responsible for payment of wage.

II.PURPOSE: All realizations of fines,

  • shall be applied only to the purposes, beneficial to persons employed in the factory.

II.DEDUCTION FOR ABSENCE FROM DUTY (Section 7(2)(b) and 9)

Deduction for being absent.

Sec. 7(2)(b): Deductions may be made:

  • on account of absence of an employed person from duty,
  • from the place or places where he is required to work,
  • by the terms of his employment.

“absence” means :

Sec. 9(1): The absence may be:

  • for the whole or any part of the period,
  • period, during which he is so required to work.

Amount of deduction:

Sec. 9(2): Ratio between amount of such deduction and the wages payable,

  • shall not exceed the ratio between the period of absence and total period within such wage period.

Case: K.S.R.T. Employees’ Association V General manager, K.S.R.T. (1985) Lab. I.C. 552(Ker.)

  • In a strike by workers in a public utility like transport service,
  • if, employees absent for a part of the day without notice,
  • deduction of full day’s wages would not be unjustified or illegal.

Absence from concert.

Sec. 9(2): Provided-

  • SITUATION: If 10 or less employed persons acting in concert absent themselves without die notice and reasonable cause.
  • CONSEQUENCE: Deduction may:
    • include, such amount not exceeding his wages for 8 days.
    • be due, to employer in lieu of notice.

Deemed absence.

  • SITUATION: Employed person refuses to carry out his work in pursuance of stay-in –strike, or any other cause (non-reasonable in circumstances).
  • CONSEQUNECES: He shall be deemed to be absent from the place (where he is required to work).

III.DEDUCTIONS FOR DAMAGE OR LOSS (Section 7(2)(c),(m),(n) and (o) and 10)

Amount of deduction.

Sec. 7(2)(c) and 10(1):

  • A deduction for:
    • loss of (or damage to) goods expressly entrusted to employed person for custody,
    • loss of money for which he is required to account,
  • shall not exceed the amount of damage or loss caused to the employer.,
  • for loss, caused by neglect or default of the employed person.

(same is the case regarding losses sustained by railway administration on account of any rebates or refunds incorrectly granted by employed person.)

Opportunity of showing cause.

Sec. 10(1-A): The deduction shall not be made, until:

  • employed person has been given a opportunity of showing cause against deduction.

(similar opportunity, shall also be given to employed person)

In case of deductions for recovery of losses sustained by railway administration on account of:

 Sec. 7(2)(m): Acceptance by employed person of counterfeit, base coins, mutilated, or forged currency notes.

Sec. 7(2)(n): Failure of employed person:

  • To invoice, bill, collect, or account,
    • for appropriate government, due to railway administration.
  • Loss may relate to:
    • Fares, freight, demurrages, wharfage,
    • in respect of-
      • sale of goods, in catering establishments,
      • sale of commodities in grain shops or otherwise.

Sec. 7(2)(o):  Any rebates or refunds incorrectly granted by the employed person,

  • where such loss is directly attributable to his neglect or default.

Register record.

Sec. 10(2): All deductions and realizations regarding damage to or loss of goods,

  • shall be recorded in register to be kept by the person responsible for the payment of wages under section 3.

IV.DEDUCTIONS FOR SERVICES (Section 7(2)(d),(e) and 11)

Conditions to impose deduction.

CASES:

  • Sec. 7(2)(d): deduction for house accommodation,
  • Sec. 7(2)(e): such amenities and services supplied by employer as have been authorized by appropriate government.

CONSEQUENCE: The deduction shall not be made from the wages of employed person,

  • unless, such services have been accepted by him as:
    • a term of employment, or
    • otherwise.

Power to impose conditions.

Sec. 11: In case of deductions regarding services and amenities,

  • the appropriate government may impose conditions.

V.DEDUCTIONS FOR RECOVERY OF ADVANCES (section 7(2)(f) and 12)

Conditions to recover advances as deductions:

Sec. 12:

SITUATION 1: An advance of money given before employment.

CONSEQUENCE: recovery shall be made-

  • from the first payment of wages in respect of complete wages period,
  • except- no recovery can be made of such advance given foe traveling expenses.

SITUATION 2: An advance of money given after employment.

CONSEQUENCES: Recovery shall be subject to-

  • such conditions as the appropriate government may impose.

SITUTION 3: Advances of wages not already earned.

CONSEQUNECES: Recovery shall be subject to :

  • any rules made by the appropriate government in this regard,
  • appropriate government may regulate:
    • the extent to which such advances may be given and
    • the installments by which they may be recovered.

“advance” includes:

Sec. 7(2) (f): The advances may be of any nature including:

  • advances for travelling allowances and conveyance allowances and the interest due in respect thereof, or
  • adjustment of over payment of wages.

Cases: M.G.Koshi V A.D.Cotton Mills (AIR (1959) Ker. 332)

  • Deductions for adjustment of overpayment of wages is authorized under section 7(2)(f) of the Act,
  • But there is no provision in the Act limiting the period within which employer should make deduction for adjustment of over-payment of wages.

VI.DEDUCTIONS FOR RECOVERY OF LOANS (Section 7(2) (fff) and 12-A)

Deduction regarding granted loans:

Sec. 7(2)(fff): Deduction for loan granted for;

  • house building or other purposes and
  • the interest due I respect thereof.

Regulating authorities:

Sec. 12-A: Deduction for recovery of loans, approved by the appropriate government, which shall be subject, to the rules made by it, regulating-

  • the extent to which such loans may be granted and
  • the rate of interest payable thereon.

VII.DEDUCTIONS FOR PAYMENTS TO CO-OPERATIVE SOCIETIES AND INSURANCE SCHEME (Section 7 (2)(j) and (k) and 13)

These deductions include:

Sec. 7(2)(j): Deductions for payments to:

  • co-operative societies appropriate by the appropriate government or
  • a scheme of insurance maintained by the INDIAN POST Office.

Sec. 7(2)(k): Deductions made with written authorization of the person employed for-

  • payment of any premium on his life insurance policy to Life insurance Corporation, India, or
  • purchase of securities of:
    • the Government of India , or
    • any State Government, or
  • depositions in any Post office saving Bank furtherance of any savings scheme of any such government.

Power to impose conditions:

Sec. 13: These deductions shall be subject to such conditions,

  • as the appropriate government may impose.

OTHER DEDUCTIONS

Deductions not got covered under the headings of section 8, 9, 10, 11, 12, and 13 are;

I.Section 7(2)(g): Deduction of Income tax payable by the employed person.

II. Section 7(2)(h): Deduction required to be made by order of a court or other authority competent to make such order.

III.Section 7 (2)(i): Deduction for subscription to or payment of advances from any provident fund:

  • to which the Provident Funds Act, 1925 (19 of 1925) applies, or
  • ‘as defined in clause (38) of section 2 of , the Income Tax Act, 1961 (43 of 1961), or
  • approved in this behalf, by the appropriate government.

IV.Section 7(2)(l): Deduction for payment of insurance premia on Fidelity Guarantee Bonds.

V.Sec. 7(2)(m): Deduction for payment of losses sustained by a  railway administration:

  • recovery on a account of acceptance by the employed person and
  • losses on account of counterfeit or base coins or mutilated or forged currency notes.

VI.Section 7(2)(p): Deductions made with written authorization of the employed person,

  • for contribution to funds as:
    • Prime Minister’s National Relief Fund, or
    • such other fund, as may be specified by the appropriate government.

(this clause was added by the Payment of wages (Amendment) Act, 1976)

VII.Section 7(2)(q): Deductions for contributions to any insurance scheme:

  • framed by the appropriate government,
  • for the benefit of it’s employees.

(this clause was added by the payment of Wages (Amendment) Act, 1977)

LIMIT ON DEDUCTIONS (Section 7(3))

The total amount of deductions which may be made under section 7(2), in wage-period from the wages of any employed person, shall not exceed:

  • 75% of such wages:
    • in case where, such deductions are wholly or partly made for payments to co-operative societies under section 7(2)(j),
  • 50% of such wages:
    • in any other case.

PROVIDED:

SITUATION: Where the total deductions authorized under section 7(2) exceed 75% or as the case may be, 50% of the wages.

CONSEQUENCE: The excess may be recovered in such manner as may be prescribed.

CRUX (Section 7(4))

  • This section shall be understood as preventing (construed as precluding) the employer from:
    • recovering from the wages of the employed person, or
    • otherwise, any amount payable by such person under any law for the time being in force (other than the Railways Act, 1989 (24 of 1989).

THIRD PART CONSISTS OF DEDUCTS FROM WAGES (Section 7-13) as FIRST PART CONSISTS OF NEED, OBJECTIVE AND DEFINITIONS, and SECOND PART CONSISTS OF RULES FOR PAYMENT OF WAGES (section 3-6), and FOURTH (and the last part) PART CONSISTS OF AUTHORITIES.