P. 1
Payment of Wages

Payment of Wages

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Published by Abrar Ahmed Qazi
business and labor laws
business and labor laws

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Published by: Abrar Ahmed Qazi on Apr 17, 2011
Copyright:Attribution Non-commercial


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Part 1st


1.1 Wages and Salaries
Wages are paid to employees on an hourly, daily or weekly basis. Examples of jobs that typically pay wages are house painters, substitute teachers and factory employees who work on the assembly line. While Salary is a set amount of money paid to an employee each month or year, no matter how many hours he works. 1.1.1) Pros Salaries • • of Wages and

Wages can be increase (over time) You get salary any how inspite of doing less work

1.1.2). Cons of Wages and Salaries • • Wages can be decrease (doing less work) You can’t earn extra money (more than your salary) inspite of doing more work (overtime)

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1.2 Explanation of Wages
1. "Wages" means all remuneration, earnings, allowances, tips and service charges or compensation received by workers in exchange for their labor 2. Wage is Compensation i.e. monetary benefit given to labor in return for the services provided by them. While Allowances including traveling allowances, attendance allowances, commission and overtime pay are within the definition of wages. However, it does not include: • The value of any accommodation, education, food, fuel, water, light or medical care provided by the employer or government Employer's contribution retirement scheme; to any

• • •

Non-recurrent traveling allowance Any sum payable to the employee to defray special expenses incurred by him by the nature of his employment; Gratuity payable on completion or termination of a contract of employment.


Gratitude payable: a small sum of money given as a reward for good service; a tip.

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Recurrent: Actual traveler Defray: to pay expenses

Part 2nd


2.1 Payment of Wages
Payment for labor or services to a worker, especially remuneration on an hourly, daily, or weekly basis or by the piece

2.2 Payment of Wages Act
The history of labor relations is a long and complicated struggle between employers, labor unions, governments and individual workers. In some cases, laws govern how employers treat their workers and what types of behaviors are illegal. These laws take many forms, including payment of wages acts. 2.2.1) Definition A payment of wages act is a law that is primarily concerned with protecting worker's rights to receive fair pay for performing their jobs. An act may only apply to a specific group of workers, or it may apply to everyone employed within the borders of the government that establishes the act. 2.2.2) Object of the Act • • To avoid unnecessary delay in the payment of wages To prevent unauthorized deductions from wages

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2.2.3) Basic Components • A list of prohibited behaviors for employers like illegal deductions from paychecks, inconsistent payments to workers and payments • It state whether employers must offer paid leave or overtime compensation • Responsibility of payments • Fixation of wage periods • Time of payment of wages • Medium of payments • A list of legal deductions from the wages of employee

2.4) Types of Payment of Wages
2.4.1) Hourly Wage Hourly wage is a fixed earning paid to an employee for services per hour. 2.4.2) Piece-Rate Wage Piece wages are those that are paid according to output. 2.4.3) Overtime Wages Overtime wages are payment made to a worker for services rendered beyond normal working hours. 2.4.4) Minimum Wages A minimum wage is the lowest hourly, daily or monthly remuneration that employers may legally pay to workers.

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Part 3rd


3.1 Payment of wages act 1936
In Pakistan, law concerned with Payment of wages is contained in payment of wages act 1936. It consists of 26 section and 5 appendices. 3.1.1) Authority The authority is given to Provincial government i.e. they have authorization to apply this act 3.1.2) Application The Payment of Wages Act, 1936 extends to whole of Pakistan. According to the Act, it is applicable to the persons employed  in any factory  by railway administration or, either directly or through a sub-contractor  In an industrial or other

3.1.3) Limitation This act will not apply in case of workmen who get monthly wages exceeding Rs.7000 (sec1)

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3.2 Responsibility for payment of wages
Every employer shall be responsible for the payment to persons employed by him of all wages required to be paid under this Act. (sec3) In the case of persons employed (otherwise than by a contractor) 3.2.1) In factories If a person has been named as the manager of the factory 3.2.2) In industrial establishments or other

If there is a person responsible to the employer for the supervision and control of the industrial or other establishments 3.2.3) Upon railways than in factories) (otherwise

The railway administration nominates a person on their behalf for the local area concerned. The person is assigned or allocated according to the area. The person so named, or the person so nominated shall be responsible for such payment.

3.4 Wage period (Fixation of wage-periods)
• • Payment of wages shall fix. No wage period shall exceed one month.

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• Every person responsible for the payment of wages under section 3 shall fix periods (in this Act referred to as wage periods) in respect of which such wages shall be payable. (Sec4)

3.5 Time of payment of wages
Following are the rules and regulation for the time of payments (sec5) • 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, • 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: • 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 • The provincial Government may exempt persons employed in a railways (otherwise in a factory) from the operation of this law • All payments of wages shall be made on a working day Page no - 7 -

3.6 Medium of payments
• According to section 6 of the Payment of Wages Act, 1936 all wages shall be paid in current coin or currency notes or in both provided that the employer may, after obtaining the written authorization of the employed person, pay him the wages either by cheque or by crediting the wages in his bank account. • This clearly shows that none of the payment other than that of wages of an employee & that is also with the written authorization the employee can be transfer to the bank account.

3.7 Deductions from Wages
Deductions from the wages of an employed person shall be made only in accordance with the provisions of this Act. An employer is prohibited from deducting wages from his employee, except under the following circumstances (sec713) 3.7.1) Fines Following are the condition for imposing the fines according to the act • Fines can be imposed for wrongful acts or omissions under some special circumstances. • A list of fine must be mentioned in the display notice in a prescribed manner

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• An opportunity must be given to employee of showing cause before any fine is imposed • Amount of fine shall not exceed an amount equal to 3% of the wages. • An employed person under the age of fifteen years cannot be fined. • Fine cannot be recovered by installments or after the expiry of 90 days from the day on which it was imposed. • Fine shall be deemed to have been imposed on the day of the act. • All fines and all realizations thereof shall be recorded in a register. • Fine recovered shall be spent on the welfare of the employees.

3.7.2) Deduction for absence of duty • Deductions for absence from work, the sum to be deducted should be proportionate to the period of time the employee is absent from work; • If 10 or more employed persons remains absent then such deduction may not exceed his wages for 8 days.

3.7.3) Deductions for damage to or loss

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• • • •

Deductions for damage to or loss of the employer's goods, equipment, or property by the employee's neglect or default Such deduction shall not exceed the amount of the damage or loss caused to the employer. Employee is given an opportunity of showing cause. All such deduction shall be recorded in a register.

3.7.4) Services rendered • Deductions of the value of food and accommodation, tangible or intangible benefits or other services, the employer supplies to the employee It can be made only when the employer had accepted these benefits of his free will as a term of his employment. Such deduction shall not exceed the value of food and accommodation, tangible or intangible benefits or other services supplied to the employee

3.7.5) Advances and overpayments of wages • • • • Deductions for the recovery of any advanced or over-paid wages to the employee include the following conditions Recovery of advance given before employment began shall be made from the first payment in respect of complete wage period Advance payments for traveling expenses cannot be deducted Recovery of an advance of wages not already earned shall be subject to such conditions as the Provincial Government may impose.

3.7.6) Cooperative societies and insurance scheme

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Deduction may be allowed to employer for the payments to cooperative societies approved by the Provincial government or to scheme of insurance maintained by Pakistan Post office 3.7.7) Income tax Employer is allowed to deduct payable by an employed person 3.7.8) Provident fund Deduction is permitted for the contribution payable by the employed person to the provident fund under Provident Fund Act 1925 3.7.9) Orders of Court Deductions for outstanding maintenance payment owed by the employee pursuant to the Attachment of Income Order issued by the court 3.7.10) Written authorization Deductions, at the written authorization of the employee in case of any war saving scheme approved by Provincial government for the purchase the securities of government of Pakistan or the government of UK income tax

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