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Payment of Wages Act

Section:7 to 13 :Deductions From Wages

Obligation : Not to make any deductions from wages except those permitted under the Payment of Wages Act

Type:Preventive Compliance Frequency: Monthly

Action to be taken:
Ensure that any deduction or fine made from wages for employees covered under the Payment of Wages Act are only as specified under Sections 7-13 of the Act. Deductions should not exceed 75% of the wages

Audit Requirement:
Are all deductions made from employee wages only as prescribed under the Payment of Wages Act as per Sections 7-13 of the Act ?

Supporting Documents:
Legal Opinion on validity of all deductions from wages

Related Triggers:
Deduction or Fine From Wages
Payment of Wages
Warning, Censuring or Fining A Workman

Related Keywords:
Advance Wages
Deduction/Fine From Wages
Discipline, Disciplinary Action
Loans
Payment of Wages

Related Sections:
Payment of Wages Act, 1936
7:Deductions which may be made from wages:
(1) Notwithstanding the provisions of sub-section (2) of Section 47 of the Indian Railways Act, 1989 (24 of 1989), the wages of an employed person shall be paid to him without deductions of any kind except those authorised by or under this Act.

Explanation I.- 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.
Explanation II.- Any loss of wages resulting from the imposition, for good and sufficient cause, upon a person employed of any of the following penalties, namely:-
(i) the withholding of increment or promotion (including the stoppage of increment at an efficiency bar) ;
(ii) the reduction to a lower post or time-scale or to a lower stage in a time-scale ; or
(iii) suspension ;

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 conformity with the requirements, if any, which may be specified in this behalf by the Appropriate Government by notification in the Official Gazette.

(2) Deductions from the wages of an employed person shall be made only in accordance with the provisions of this Act, and may be of the following kinds only, namely:-
(a) fines ;
(b) deductions for absence from duty ;
(c) deductions for damage to or loss of goods expressly entrusted to the employed person for custody ; or for loss of money for which he is required to account, where such damage or loss is directly attributable to his neglect or default ;
(d) deductions for house-accommodation supplied by the employer or by Government or any housing board set up under any law for the time being in force (whether the Government or the board is the employer or not) or any other authority engaged in the business of subsiding house-accommodation which may be specified in this behalf by the Appropriate Government by notification in the Official Gazette ;
(e) deductions for such amenities and services supplied by the employer as the Appropriate Government or any officer specified by it in this behalf may, by general or special order, authorise.

Explanation.- The word "services" in this clause does not include the supply of tools and raw materials required for the purposes of employment ;

(f) deductions for recovery of advances of whatever nature (including advances for travelling allowance or conveyance allowance), and the interest due in respect thereof, or for adjustment of over-payments of wages ;
(ff) deductions for recovery of loans made from any fund constituted for the welfare of labour in accordance with the rules approved by the Appropriate Government, and the interest due in respect thereof ;
(fff) deductions for recovery of loans granted for house building or other purposes approved by the Appropriate Government, and the interest due in respect thereof ;
(g) deductions of income tax payable by the employed person ;
(h) deductions required to be made by order of a Court or other authority competent to make such order ;
(i) deductions for subscriptions to, and for repayment of advances from any provident fund to which the Provident Funds Act, 1925 (19 of 1925), applies or any recognised provident fund as defined in Section 58-A of the Indian Income Tax Act, 1922 (11 of 1922), or any provident fund approved in this behalf by the Appropriate Government, during the continuance of such approval ;
(j) deductions for payments to cooperative societies approved by the Appropriate Government or any officer specified by it in this behalf or to a scheme of insurance maintained by the Indian Post Office ; and
(k) deductions, made with the written authorisation of the person employed for payment of any premium of his life insurance policy to the Life Insurance Corporation of India established under the Life Insurance Corporation Act, 1956 (31 of 1956), or for the purchase of securities of the Government of India or of any State Government or for being deposited in any Post Office Savings Bank in furtherance of any savings scheme of any such Government ;
(kk) deductions made, with the written authorisation of the employed person, for the payment of his contribution to any fund constituted by the employer or a trade union registered under the Trade Unions Act, 1926 (16 of 1926) for the welfare of the employed persons or the members of their families, or both, and approved by the Appropriate Government or any officer specified by it in this behalf, during the continuance of such approval ;
(kkk) deductions made, with the written authorisation of the employed person, for payment of the fees payable by him for the membership of any trade union registered under the Trade Unions Act, 1926 (16 of 1926) ;
(l) deductions for payment of insurance premia on Fidelity Guarantee Bonds ;
(m) deductions for recovery of losses sustained by a railway administration on account of acceptance by the employed person of counterfeit or base coins or mutilated or forged currency notes ;
(n) deductions for recovery of losses sustained by a railway administration on account of the failure of the employed person to invoice, to bill, to collect or to account for the appropriate charges due to that administration whether in respect of fares, freight, demurrage, wharfage and cranage or in respect of sale of food in catering establishments or in respect of commodities in grain shops or otherwise ;
(o) deductions for recovery of losses sustained by a railway administration on account of any rebates or refunds incorrectly granted by the employed person where such loss is directly attributable to his neglect or default;
(p) deductions, made with the written authorisation of the employed person, for contribution to the Prime Ministers National Relief Fund or to such other fund as the Central Government may, by notification in the Official Gazette, specify;
(q) deductions for contributions to any insurance scheme framed by the Central Government for the benefit of its employees.

(3) Notwithstanding anything contained in this Act, the total amount of deductions which may be made under sub-section (2) in any wage-period from the wages of any employed person shall not exceed-
(i) in cases where such deductions are wholly or partly made for payments to cooperative societies under clause (j) of sub-section (2), seventy-five per cent of such wages, and
(ii) in any other case, fifty per cent of such wages :

Provided that where the total deductions authorised under sub-section (2) exceed seventy-five per cent or, as the case may be, fifty per cent of the wages, the excess may be recovered in such manner as may be prescribed.

(4) Nothing contained in this section shall be 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 Indian Railways Act, 1890 (9 of 1890). Payment of Wages Act, 1936
8:Fines:
(1) No fine shall be imposed on any employed person save in respect of such acts and omissions on his part as the employer, with the previous approval of the Appropriate Government or of the prescribed authority, may have specified by notice under sub-section (2).

(2) A notice specifying such acts and omissions shall be exhibited in the prescribed manner on the premises in which the employment is carried on or in the case of persons employed upon a railway (otherwise than in a factory), at the prescribed place or places.

(3) No fine shall be imposed on any employed person until he has been given an opportunity of showing cause against the fine, or otherwise than in accordance with such procedure as may be prescribed for the imposition of fines.

(4) The total amount of fine which may be imposed in any one wage-period on any employed person shall not exceed an amount equal to three per cent of the wages payable to him in respect of that wage-period.

(5) No fine shall be imposed on any employed person who is under the age of fifteen years.

(6) No fine imposed on any employed person shall be recovered from him by installments or after the expiry of nienty days from the day on which it was imposed.

(7) Every fine shall be deemed to have been imposed on the day of the act or omission in respect of which it was imposed.

(8) All fines and all realisations thereof shall be recorded in a register to be kept by the person responsible for the payment of wages under Section 3 in such form as may be prescribed; and all such realisations shall be applied only to such purposes beneficial to the persons employed in the factory or establishment as are approved by the prescribed authority.

Explanation.- When the persons employed upon or in any railway, factory or industrial or other establishment are part only of a staff employed under the same management, all such realisations may be credited to a common fund maintained for the staff as a whole, provided that the fund shall be applied only to such purposes as are approved by the prescribed authority. Payment of Wages Act, 1936
9:Deductions for absence from duty:
(1) Deductions may be made under clause (b) of sub-section (2) of Section 7 only on account of the absence of an employed person from the place or places where by the terms of his employment, he is required to work, such absence being for the whole or any part of the period during which he is so required to work.

(2) The amount of such deduction shall in no case bear to the wages payable to the employed person in respect of the wage-period for which the deduction is made a large proportion than the period for which he was absent bears to the total period, within such wage-period, during which by the terms of his employment, he was required to work :

Provided that, subject to any rules made in this behalf by the Appropriate Government, if ten or more employed persons acting in concert absent themselves without due notice (that is to say without giving the notice which is required under the terms of their contracts of employment) and without reasonable cause, such deduction from any such person may include such amount not exceeding his wages for eight days as may by any such terms be due to the employer in lieu of due notice.

Explanation.- For the purposes of this section, an employed person shall be deemed to be absent from the place where he is required to work if, although present in such place, he refuses, in pursuance of a stay-in strike or for any other cause which is not reasonable in the circumstances, to carry out his work. Payment of Wages Act, 1936
10:Deductions for damage or loss:
(1) A deduction under clause (c) or clause (o) of sub-section (2) of Section 7 shall not exceed the amount of the damage or loss caused to the employer by the neglect or default of the employed person.

(1-A) A deduction shall not be made under clause (c) or clause (m) or clause (n) or clause (o) of sub-section (2) of Section 7 until the employed person has been given an opportunity of showing cause against the deduction, or otherwise than in accordance with such procedure as may be prescribed for the making of such deductions.

(2) All such deductions and all realisations thereof shall be recorded in a register to be kept by the person responsible for the payment of wages under Section 3 in such form as may be prescribed. Payment of Wages Act, 1936
11:Deductions for services rendered:
A deduction under clause (d) or clause (e) of sub-section (2) of Section 7 shall not be made from the wages of an employed person, unless the house-accommodation amenity or service has been accepted by him, as a term of employment or otherwise, and such deduction shall not exceed an amount equivalent to the value of the house-accomodation amenity or service supplied and, in the case of a deduction under the said clause (e), shall be subject to such conditions as the Appropriate Government may impose. Payment of Wages Act, 1936
12:Deductions for recovery of advances:
Deductions under clause (f) of sub-section (2) of Section 7 shall be subject to the following conditions, namely:-
(a) recovery of an advance of money given before employment began shall be made from the first payment of wages in respect of a complete wage-period, but no recovery shall be made of such advances given for travelling expresses ;
(aa) recovery of an advance of money given after employment began shall be subject to such conditions as the Appropriate Government may impose ;
(b) recovery of advances of wages not already earned shall be subject to any rules made by the Appropriate Government regulating the extent to which such advances may be given and the installments by which they may be recovered. Payment of Wages Act, 1936
12-A:Deductions for recovery of loans:
Deductions for recovery of loans granted under clause (fff) of sub-section (2) of Section 7 shall be subject to any rules made by the Appropriate Government regulating the extent to which such loans may be granted and the rate of interest payable thereon. Payment of Wages Act, 1936
13:Deductions for payments to cooperative societies and insurance schemes:
Deductions under clause (j) and clause (k) of sub-section (2) of Section 7 shall be subject to such conditions as the Appropriate Government may impose.