NATIONAL LAW INSTITUTE UNIVERSITY BHOPAL

LABOUR LAW - II

PROJECT:
PAYMENT OF WAGES AND EMPLOYER’S
OBLIGATION

SUBMITTED TO: SUBMITTED BY:

Mr. Mahendra Soni Nikhil Aradhe

2016BALLB132

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 ACKNOWLEDGMENT

I am using this opportunity to express my gratitude to everyone who supported me through this
project. I am thankful for their aspiring guidance, invaluably constructive criticism and friendly
advice during the project work. I am sincerely grateful to them for sharing their truthful and
illuminating views on a number of issues related to the project.

I express my warm thanks to Mahendra Soni Sir for his support and guidance at National Law
Institute University, Bhopal.

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STATEMENT OF PROBLEM

There is an urgent need to revisit the original intention of labour legislations in the country,
which was to balance the interests of labour and capital, and subsequently recognize labour as
the less powerful party in the equation. The protection of wages was the means to ensure that the
benefits of industrial growth would lead to the economic betterment and social regeneration of
the laboring population, further ensuring social justice. There are many provisions but no
enforcement mechanism.

OBJECTIVES OF STUDY

1. To review the laws with respect to payment of wages.

2. To look at the obligations imposed on the employer by those laws.

HYPOTHESIS
Wage legislations have been the result of historical labour struggles, and have been termed both
comprehensive and progressive. The existing enforcement mechanism, the implementation of
these legislations should be strengthened by enhancing the regulatory authorities’ ability to
understand the informal sector. The rhetoric of inclusivity and simplification being utilized to
legitimize labour cheapening needs to be questioned, and the concept of wages as fulfilling a
socio-economic function, rather than being a mere feature of the market, needs to re-enter the
imagination of wage legislations.

RESEARCH QUESTIONS
1. Whether the wage legislations in India cater to the informal sector?

2. Is there an effective implementation of the provisions (including employer’s obligations)?

3. Has the wage legislations fulfilled its objective of being comprehensive and progressive?

RESEARCH OBJECTIVES: -
1. To analyse the legislations relating to payment of wages.

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 2. To take a look at employer’s obligations under the legislations.
3. To look at glaring loopholes and to suggest solutions to the same.

LITERATURE REVIEW

1. Introduction To Labour And Industrial Law by Avtar Singh (Author)

The Payment of Wages Act, 1936 regulates the payment of wages to certain classes of
employed individuals. Before you delve into understanding the various sections of the
Act, there are some important terms that you must know. In this article, we will look at
the definition of wages and all other important terms from the Act.

2. Practical Guide to Labour Management– A-Z from Selection to Separation by HL

Kumar.
The Payment of Wages Act, 1936 (Act) is essentially meant to benefit industrial
employees who do not have very high salaries. It applies to all employees working in a
factory or working through a sub-contractor or directly with the railway administration or
those employed in the industrial sector as the Act specifies.

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 TABLE OF CONTENT

ACKNOWLEDGMENT...........................................................................................................................2
STATEMENT OF PROBLEM.................................................................................................................3
OBJECTIVES OF STUDY.......................................................................................................................3
HYPOTHESIS.........................................................................................................................................3
RESEARCH QUESTIONS.......................................................................................................................3
RESEARCH OBJECTIVES: -..................................................................................................................3
LITERATURE REVIEW..........................................................................................................................4
INTRODUCTION....................................................................................................................................6
PAYMENT OF WAGES: AN OVERVIEW...............................................................................................8
OBLIGATION OF THE EMPLOYER UNDER THE PAYMENT OF WAGES ACT..............................10
OBLIGATION OF THE EMPLOYER UNDER THE MINIMUM WAGES ACT....................................14
OBLIGATIONS OF THE EMPLOYER UNDER THE EQUAL REMUNERATION ACT.......................................15
OBLIGATION OF THE EMPLOYER UNDER THE PAYMENT OF BONUS ACT...............................17
LABOUR CODE ON WAGES 2019; AN OVERVIEW...........................................................................19
CONCLUSION......................................................................................................................................21
BIBLIOGRAPHY...................................................................................................................................23

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 INTRODUCTION

Payment of wage is the primary and the most important factor/feature as the word goes around
the wage legislations in India. Primarily, the wage legislations are meant to create and provide
protection to the workers working in the organized sector of the economy. Due to the advent of
capitalism continuing since the 1990’s, the exploitation of the workers belonging to the middle
and lower classes of the society by the employers who are in a much stronger position be it
economically or socially has come up as a bit of a hotspot. To prevent such exploitation, wage
legislations in India were developed to provide a safe haven to the workers in the industry.
Various calls were made to hold the employer accountable for the working conditions of the
employees. The working conditions include the crucial factor of wage. Wages provide the means
to the workers for a better living standard and to further ensure that there is no parity to poverty
in the industrial sector which is so competitive at times.

To cope up with this problem, the wage legislations have created various obligations on the
employer to provide for the workers. Such obligations ensure that the workers get a fair chance
and a fair living in the society. The obligations make sure that the workers are not unduly
exploited and that the fair working conditions are maintained in the industry throughout the year.

The wage legislations including the Minimum Wages Act, 1948; the Payment of Wages Act,
1936; the Equal Remuneration Act, 1976; and the Payment of Bonus Act, 1965 cast various
obligations on the employer so as to hold some accountability in the top brass of the labour
industry. Various obligations ensure that the worker is not exploited unnecessarily and ensures
level playing field in the industry.

The obligations ensure that the employer pays the full wages of the workers due from time to
time and does not end up being stingy and niggardly so as to devoid the employees of their
working wages. Minimum wages are ensures so that the workers get equal pay for equal work at
all times. Minimum wages ensure that the wages are not thin and are not unreasonably low so as
to deprive the workers of even a decent livelihood.

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Often it is seen that the employers hold sway over the workers and thus employ them forcefully
on starving wages. Starving wages are way below the threshold of the minimum wage prescribed
and it barely helps the workers to even make a living let alone to lead a good standard of living.

Others legislations such as Equal Remuneration Act and the Payment of Bonus Act also ensure
some level of consistency with regard to the obligation of the employer to provide for the good
working conditions of the workers and ensure that adequate wages and bonus are being dispersed
out when due and thus ensure that no discrimination is meted out to the workers who are often in
a disadvantageous position and who often find themselves downtrodden and trammeled upon by
the employer. The workers are often in a position where they have no negotiating power at all,
this dire situation results in workers agreeing to work on conditions that are suitable to the
employer and wages that are employer friendly.

Thus, such legislations were meted out to ensure that there is no discrimination at all and thus it
is an attempt to create a utopian scenario which can be achieved fully in theory but can only be
matched closely in reality.

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 PAYMENT OF WAGES: AN OVERVIEW

The Minimum Wages Act, 19481 (the Minimum Wages Act) accommodates fixing of least rate
of wages in specific industries. The base wages are endorsed by States through announcements
in the State's Gazette under the Minimum Wages Rules of the particular State.

Regarding the arrangements of the Minimum Wages Act, a worker implies: (i) any individual
who is available to accomplish any work, talented or untalented manual or administrative, in
employments scheduled for minimum wages; (ii) an outworker, to whom any articles or
materials are given out by someone else to be made up, cleaned, washed, adjusted, ornamented,
completed, fixed, adjusted or in any case handled available to be purchased; and (iii) a worker
pronounced to be a worker by the Government.

The expression "wages" has been characterized to mean all compensation equipped in terms of
cash which would, if the particulars of the agreement of employment express or implied were
satisfied, be payable to an individual utilized in regard of his work done in such a employment
and incorporates house rent allowance.2

Further, the Minimum Wages Act requires the proprietor to pay to each worker occupied with
scheduled work compensation at a rate as fixed by a notification with no deductions.

The Payment of Wages Act, 1936 (the Payment of Wages Act) is an Act to manage the
installment of wages to specific classes of people. The Payment of Wages Act looks to guarantee
that the employer make a convenient installment of wages to the workers in and to thwart
deductions from the wages.

As per the Payment of Wages Act, all wages will be in current coin or money notes or in both. It
is, nonetheless, given that the proprietor may, in pursuance of getting the authorization of the
worker, pay him the wages either with a cheque or by crediting the wages in his ledger.

The Payment of Bonus Act, 1965 accommodates the installment of reward to people utilized in
India either based on benefits or based on creation or efficiency and is material to each
1
Provides for the ceiling of base wage rates in particular employments.
2
Section 2(h) of the Minimum Wages Act, 1948.

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establishment in which at least 20 people are utilized and to all workers drawing a compensation
of not as much as Rs 10,000. Those workers who have worked for less than thirty days are not
qualified to get reward under the Bonus Act. The Bonus Act accommodates the installment of
reward between 8.33% (least) to 20% (greatest). Nonetheless, for the figuring of reward, max
salary of Rs 3,500 is thought of.

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 OBLIGATION OF THE EMPLOYER UNDER THE PAYMENT OF
WAGES ACT

The Payment of Wages Act, 1936, characterizes a few guidelines to direct the installment of
wages to specific classes of employed people in India.

The rules for payment of wages under the act have been categorized under the heads of section 3,
section 4, section 5, and section 6 of the Payment of Wages Act, 1936.

Section 3 of the Act3 provides for the guarantee of payment of wages undertaken by the
employer to the employees and casts a responsibility on the part of the employer that the
payment of full wages and benefits under the act to the employees is the sole responsibility of the
employer.

Section 4 of the Act4 mandates fixation of the period in which the payment of wages has to be
mandatorily made by the employer.

Section 5 of the Act5 provides for the time of payment of wages. With respect to workers
working in different establishment a specific time period has been identified within which the
employer has to render payment.

Section 6 of the Act6 provides for the mode of payment of wages in either currency notes or
coins or both. Payment in kind has been specifically barred by this section.

Section 7 of the Act7 mandates that the employer has to pay wages of the employed without
deductions except as otherwise provided by the Act itself.

For the perusal of the teacher the above-mentioned sections have been reiterated here as follows:

3
See Section 3 of the Payment of Wages Act, 1936.
4
See Section 4 of the Payment of Wages Act, 1936.
5
See Section 5 of the Payment of Wages Act, 1936.
6
See Section 6 of the Payment of Wages Act, 1936.
7
See Section 7 of the Payment of Wages Act, 1936.

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 “[3. Responsibility for payment of wages.-Every employer shall be responsible for the
payment of all wages required to be paid under this Act to persons employed by him and
in case of persons employed,--(a) in factories, if a person has been named as the manager
of the factory under [clause (f) of sub-section (1) of Section 7 of the Factories Act, 1948
(63 of 1948)];[(b) in industrial or other establishments, if there is a person responsible to
the employer for the supervision and control of the industrial or other establishments;]
(c)upon railways (otherwise than in factories) if the employer is the railway
administration and the railway administration has nominated a person in this behalf for
the local area concerned.(d)in the case of contractor, a person designated by such
contractor who is directly under his charge; and(e)in any other case, a person designated
by the employer, the person so nominated or the person so designated, as the case may
be, shall be responsible for such payment. The person so named, and the person so
responsible to the employer, or the person so nominated, as the case may be, [shall also
be responsible] for such payment. (2) Notwithstanding anything contained in sub-section
(1), it shall be the responsibility of the employer to make payment of all wages required
to be made under this Act in case the contractor or the person designated by the
employer fails to make such payment.]”

 “4. Fixation of wage-periods.-(1) 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. (2) No wage-period shall exceed one month.”

 “5. Time of payment of wages.-(1) The wages of every person employed upon or in -(a)
any railway, factory or 4[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.
(b) 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: [Provided that in the case of persons employed on a dock, wharf or
jetty or in a mine, the balance of wages found due on completion of the final tonnage
account of the ship or wagons loaded or unloaded, as the case may be, shall be paid
before the expiry of the seventh day from the day of such completion.](2) Where the

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 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: [Provided that where the employment of any
person in an establishment is terminated due to the closure of the establishment for any
reason other than a weekly or other recognised holiday, the wages earned by him shall be
paid before the expiry of the second day from the day on which his employment is so
terminated.](3) The [The appropriate Government] may, by general or special order,
exempt, to such extent and subject to such conditions as may be specified in the order,
the person responsible for the payment of wages to persons employed upon any, railway
(otherwise than in a factory) [or to persons employed as daily-daily-rated workers in the
Public Works Department of [the appropriate Government] from the operation of this
section in respect of the wages of any such persons or class of such persons:[Provided
that in the case of persons employed as daily-rated workers as aforesaid, no such order
shall be made except in consultation with the Central Government;](4) [Save as
otherwise provided in sub-section (2), all payments] of wages shall be made on a
working day.”

 “6. Wages to be paid in current coin or currency notes.-All wages shall be paid in current
coin or currency notes or in both:[Provided that the employer may, after obtaining the
written authorisation of the employed person, pay him the wages either by cheque or by
crediting the wages in his bank account.]”

Each employer is answerable for the installment, everything being equal, to all the workers that
he utilizes. In some other case, if the employer names an individual, or in the event that there is
an individual responsible to the employer or is assigned, at that point such an individual is liable
for the installment of wages.

Despite anything contained in sub-section (1), the business is mindful to make the installment of
all wages which the Act expects him to make. Actually, if the contractual worker or the
individual that the employer assigns to make the installment neglects to do as such, at that point
the duty lies with the employer.

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The individual liable for the installment of wages under Section 3 must fix periods in regard of
which he will make the installment of wages. This period is known as the wage time frame. A
compensation period won't surpass one month under any situation.

The employer or the individual answerable for making the installment of wages must pay in
coins or money notes or in both. Further, he can't pay in kind. Likewise, the employer can pay
the wages by means of a check or an immediate store to the ledger of the worker subsequent to
taking an approval from him.

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 OBLIGATION OF THE EMPLOYER UNDER THE MINIMUM
WAGES ACT

Section 12 of the Minimum Wages Act8 mandates that the employer shall pay the minimum
wage prescribed by the act. The wage has to be paid to the class of employees specified in the
act. However, it is further mandated that there shall be no deductions from the wage except as
otherwise provided by the act.

Section 14 of the Minimum Wages Act9 lays down a condition that where the employee who is
employed on the basis of a specified time slot, for example, employed by the hour or by the day,
and the employee exceeds the number of working hours prescribed by the act, then it is the duty
of the employer to ensure that the extra working hours are rightly rewarded by the rate as
prescribed by the Minimum Wages Act.

Section 16 of the Minimum Wages Act10, provides that where a worker does at least two classes
of work to every one of which an alternate rate of wages is appropriate, the employer will offer
to such worker in appreciation of the time separately involved in each such class of work,
compensation at least the minimum rate in regard of each such class.

Section 17 of the Minimum Wages Act11, lays down that where a worker is utilized on piece
work for which least time rate and not a base piece rate has been fixed under this Act, the
employer will pay to such representative wages at least the base time rate.

Section 22 of the Minimum Wages Act12, lays down that Any employer who- - (a) pays to any
worker not exactly the base paces of wages fixed for that representative's class of work, or not
exactly the sum due of him under the arrangements of this Act, or (b) repudiates any standard or
request made under section 13, will be culpable with detainment for a term which may stretch
out to a half year, or with fine which may reach out to 500 rupees, or with both: Provided that in

8
See Section 12 of the Minimum Wages Act, 1948.
9
See Section 14 of the Minimum Wages Act, 1948.
10
See Section 16 of the Minimum Wages Act, 1948.
11
See Section 17 of the Minimum Wages Act, 1948.
12
See Section 22 of the Minimum Wages Act, 1948.

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forcing any fine for an offense under this part, the Court will mull over the measure of any
remuneration previously granted against the charged in any procedures taken under section 20.

OBLIGATIONS OF THE EMPLOYER UNDER THE EQUAL

REMUNERATION ACT

Section 4 of the Equal Remuneration Act 197613, highlights the obligation of the employer that
he/she has to ensure equal pay to a male as well as a female worker working under the same
working conditions, for the same work.

No employer will pay to any employee, utilized by him in an establishment, compensation,

money or in kind at rates less than those at which he pays compensation to the laborers of the
other gender for playing out a similar work or work of a comparable sort.

In regard of any industry, the rate of compensation payable before the beginning of the Act for
people for same or comparable nature work is diverse just on the ground of sex, at that point the
most elevated of the rates will be payable after the initiation of the Act.

Section 5 of the Equal Remuneration Act 197614, makes it clear that there shall be no
discrimination of any sort in employing workers of both the sexes.

As a condition of employing various employees or under any condition which includes

promotion, training, transfer etc. The employer has to make sure that there is no discrimination
whatsoever against female workers except where the same is prohibited by some law in force for
the time being.

The provisions of the act would not affect the reservation prescribed and the preference given to
them respectively.

Section 8 of the Equal Remuneration Act, 197615, mandates the maintenance of a register by the
employer containing the requisite details as provided under the act.

13
See Section 4 of the Equal Remuneration Act, 1976.
14
See Section 5 of the Equal Remuneration Act, 1976.
15
See Section 8 of the Equal Remuneration Act, 1976.

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The employer needs to keep up appropriate registers and pertinent archives of the apparent
multitude of representatives and laborers as endorsed by law in Form D. The Form needs to
have:

 Classification of laborers.

 Depiction of work.

 No., if men utilized.

 Number of women utilized.

 Rate of wage.

 Segments of wage.

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OBLIGATION OF THE EMPLOYER UNDER THE PAYMENT OF
BONUS ACT

Thinking about the Act, there are compliances with respect to the Employer which they should
agree to, if not, they could be exposed to specific offenses or punishments given in the
enactment.

A few compliances that the business needs to follow are:

 The employer will pay the measure of Bonus inside 8 months, from the finish of the
bookkeeping year, in money

The employer will get ready Registers, for example,

 Register having the whole calculation of allocable excess, in FORM A

 Register indicating set-on and set-off, in FORM B

 Register containing subtleties, for example, measure of reward payable, derivations to be

made, the sum dispensed, in FROM C

Employer will transfer subtleties of Annual Returns in FORM D, on the Portal of Ministry of
Labor and Employment, at the very latest first day of Feb; consistently each employer should
document Annual Return in FORM D, to the assessor at the latest first Feb consistently if there
should arise an occurrence of any questions identifying with the installment of bonus, and the

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case is before any authority, at that point in such cases, sum will be paid inside a month from the
date the award passed gets enforceable.

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 LABOUR CODE ON WAGES 2019; AN OVERVIEW

While seeming to adjust the interests of capital and workers, the Wage Code plays out a secretive
role. It eliminates basic arrangements and additionally adds words and expressions to
arrangements in past work laws that are basic for maintaining wage security of laborers.

To start with, it excludes the risk of the main employer to pay wages to laborers if the labour
contractor has neglected to do as such. In India, most of laborers are day wage workers, and the
most defenseless, ruined and traveler laborers are frequently utilized in occupations that have
various layers of subcontracting. They are furthermore inclined to being cheated out of their
wages by businesses who purposefully avoid responsibility and duty through long contracting
chains. The capacity to hold the vital employer at risk for paying wages when contractors vanish
or can't be considered responsible is significant for laborers having the option to get to their pay
installments in full. The Wage Code characterizes the chief employer extensively, to incorporate
contractual workers or any individual who is responsible for the worksite, making it hard to nail
the obligation to the genuine boss.16

Second, the self-assertive deduction of laborers' wages by the employer has been legitimized,
allowing bosses to cut wages dependent on the performance of the worker or to recoup
misfortunes. As it doesn't specify any fair treatment to be continued in these occurrences, it
opens up the chance of abuse, particularly in a circumstance where the force relations among
managers and laborers as of now favor the business.

While the Wage Code has set additional time rates at twofold the typical rate, it makes extra time
payment doubly hard to guarantee. Despite the fact that it enables governments to set the
quantity of typical working hours, it avoids from its ambit workers occupied with critical work or
in any crisis, which couldn't have been predicted or forestalled; workers occupied with work that
is preliminary or integral in nature and should fundamentally be carried on outside the limit set
down for the overall work in the spot concerned; workers whose business is basically
discontinuous; workers occupied with any work which, for specialized reasons, must be finished

16
Sundar, Shyam and Rahul Sapkal (2018): “The Many Misses of the Wage Code,” Business Line, 14
March, https://www.thehindubusinessline.com/opinion/the-many-misses-of-the-wage-code/article23245863.ece. 

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before the obligation is finished; and workers occupied with work, which couldn't be continued
with the exception of an occasion subject to the sporadic activity of regular powers. This signals
the finish of the current comprehension of additional overtime work as being past nine hours out
of every day and 48 hours of the week, and rather permits employer to introduce extra time in as
obligatory ordinary work hours without additional payment.17

Third, the Wage Code extends the meaning of new establishments that are absolved from paying
bonuses under the past laws to incorporate "preliminary running of any plant" and "prospecting
phase of any mine" (The Code of Wages 2019). This implies existing foundations can likewise
get away from installment of bonuses by being on investigating runs or prospecting stages, as
there is no time limit determined for both of these exercises.

17
Varma, Subodh (2019): “New Starvation-level Wage Announced by Labour Minister,” Newsclick, 13 July,  
https://www.newsclick.in/new-starvation-level-wage-announced-labour-minister. 

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 CONCLUSION

As has been observed throughout the project, it is amply clear that the wage legislations in India,
be it the Payment of Wages Act, the Minimum Wages Act, the Payment of Bonus Act and last
but not the least the Equal Remuneration Act, are meant to protect the workers from the wrath
and whimsical nature of the employer who often finds himself/herself in the best bargaining
position and holds the chip in the negotiations between the workers and the employers.

Various safeguards have been installed to prevent the exploitation of the workers. These
safeguards keep the power of the employer in check whenever required. Several obligations have
been cast on the employer with respect to the payment of wages as has been enunciated clearly
above in the project work.

Despite there being an upside to this, there is a dark and depressing side to the same which needs
to be explored and vanquished as soon as possible. The new labour code on wages of 2019 is
anticipated as the savior of the labour law regime but instead it does more harm than good
already. As has been pointed out already before, the new code has been more employer-friendly
which has put the safeguard and the well-being of the working class in peril.

Various privileges have been bestowed upon the employer which allows him/her to be over
bearing and which allows him/her to wield the newly found freedom to the disadvantage of those
who are weaker in the industry, that is, the workers.

Payment of wages is the single most important feature of the labour law regime in India. It
ensures that the poor and the needy get proper pay and proper justice as they have the potential to
be exploited and are the most vulnerable class in the industry.

The old wage regime offered sufficient protection to the workers of the organized sector. The
new wage regime has been insistent on taking some of the features away and thus render the
wage law in India in a dilapidated condition.

Moreover, the workers in the unorganized sector have not been addressed properly either in the
old wage regime or in the new wage regime. This calls for indignation at the law makers for

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choosing to conveniently ignore the hue and cry of those working in the unorganized sector and
thus getting susceptible to pangs of exploitation by the employers who even do not bother to pay
them minimum wages at a stretch and force them to work at unreasonable work conditions which
border inhumanity at times.

Thus, there is a lot to ponder and there is a lot on the plate to rectify and make things right. These
hiccups may seem small at a microscopic scale but as a macrocosm it has a potential to cause
upheaval in even the most well-oiled machineries of the world.

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 BIBLIOGRAPHY

1. Protection of Workers’ Wages in India: An Analysis of the Labour Code on Wages, 2019
(https://www.epw.in/engage/article/protection-workers-wages-india-labour-wage-code)
2. Payment of Wages Act in India (https://paycheck.in/labour-law-india/work-and-
wages/payment-of-wages-act)
3. Introduction To Labour And Industrial Law by Avtar Singh (Author)
4. Textbook on Labour and Industrial Law by H K Saharay.
5. Practical Guide to Labour Management– A-Z from Selection to Separation by HL
Kumar.

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