'Authorized Deductions' under the Payment of Wages Act, 1936 | Labor Law

Introduction -

             The Payment of Wages Act 1936 is one of the most important labor welfare legislation which helps to prevent exploitation of the labors. The Act allows deductions which can be made from the wages payable to a worker.  Section 7(3) of the Act lays down that the total amount of deduction which may be made under subsection (2) in any wage period from the wages of any employed person shall not exceed - (1) In case where such deductions are wholly or partly made for payment to the co-operative societies, 75% of such a wages, and (2) In other cases, 50% of such wages. But any loss of wages the resulting from the following imposition shall not be deemed to be deductions, namely -
(i) the withholding of increment or promotion (including stoppage of increment at efficiency bar);
(ii) the reduction to lower post or time scale or to a lower stage in scale; or
(iii) suspension, provided by the rules framed by the employer for the imposition of such penalty are in conformity with the rules framed by the State Government in this behalf.

Authorized deductions :

               The list is exhaustive and no other deduction from wages is permissible. The act allows the following deductions -

 (a) Fines - 

         Section 7(2) (a) of the said Act authorizes deduction by way of fines. Section 8 Lays down the rules for the imposition of such fines. Section 8 says that "no fine shall be imposed on any employed person save in respect of such acts and omissions on his part, as the employee has specified by notice.

(b) Deductions for absence from duty -

           Section 7(2) (b) of the Act permits deductions for absence from duty.  The Authorizes the employer to make deduction for absence from duty. Such a deduction can be made only on account of the absence of an employed person from the place or places, where according to the terms of employment he is required to work, if he, though present in person refused to carry out his work in pursuance of a stay in strike or any other cause which is not reasonable in the circumstances. Similarly, tool down strike without any Just Cause amounts to absence from duty.
       

(c) Deductions for damage to or loss of goods -

            The act also authorizes the employer to effect deductions for damage to or loss of goods. According to Section 7(2) (c) If any money or goods entrusted to the employee is lost by his negligence or default, the employer is entitled to deduct such loss.

See also...Methods of settlement of Industrial Disputes

(d) Deductions for services rendered  -

            According to Section (2) (d) The Act authorizes the employer to make deductions for house accommodation supplied by the 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 subsidising house-accommodation which may be specified in this behalf by the State Government by notification in the Official Gazette.

(e) Deductions for amenities services -

      Section 7(2)(e) The deductions may also be made for such amenities and services supplied by the employer as the State Government or the authorized person in this behalf authorities the employer to provide amenities or services.  The word services for the above purpose does not include the supply of tools and raw material required for the purpose of employment.

(f) Deductions for recovery of advances -  

         Section 7(2)(f) The Act authorizes the employer to make deductions for the advances made by him. (including advances for traveling allowance or conveyance allowance)

(ff) Deductions for recovery of loans -

          Section 7(2)(ff) The employer may make deduction for the recovery of loans together with interest made from any fund constituted for the welfare of labor in accordance with the rules approved by the State Government in this regard.

(fff) Deductions for recovery of loans granted for house-building - 

           Section 7(2)(fff) the deductions are also permitted to be made for the recovery of loans and interest granted for house-building or other purposes in accordance with the rules approved by the State Government.

(g) Deductions of income-tax payable by the employed person -

            Section 7(2)(g) of the said Act permits an employer to make this deduction subject to the provisions of the Income Tax Act.

See also... Consequences of Illegal Strike and Lockouts, Punishment and Penalty for Illegal Strike or Lockout

(h) Deductions by the order of a court - 

            Section 7(2)(h) of the Act permits an employer to effect any deduction by the order of a Court.

(i) Deductions for provident fund - 

             Section 7(2)(i)  The employer should deduct provident fund contributions from his employee's  salary and shall also make contributions from his share, which is mandatory.


(j) Deductions for payments to co-operative societies -

              Section 7(2)(j) authorizes the deductions for payments to Co-operative societies.

(k) Deductions with the consent of the employed Person -

              Section 7(2)(k) Such deductions may be made with the written authorization of the person employed for payment of any premium on his life insurance policy to the Life Insurance Corporation Act of India established under the Life Insurance Corporation 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 Saving Bank in furtherance of any savings scheme of any such government.

(kk)   Deduction for the Welfare Fund - 

               Section 7 (2) (kk) Deductions made with the written authorization 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 Union act 1926 (16 of 1926) for the welfare of the employed persons or the members of their families or both and approved by the State Government or any officer specified by it in this behalf during the continuance of such approval.

(kkk)  Trade Union Membership Fees : 

              Section 7(2) (kkk) Deductions made with the written authorization of the employed person for payment of the fees payable by him for the membership of any trade union registered under the Trade Union Act 1926 (16 of 1926).

(l) Deductions for Fidelity Guarantee Bonds :  

            Section 7(2)(l)  permits deduction for payment of insurance premia on Fidelity Guarantee Bonds.

(m) deductions for recovery of losses sustained by a railway administration  -

    Section 7(2)(m) permits this deduction on account of acceptance by the employed person of counterfeit or base coins or mutilated or forged currency notes.

(p) Deduction for Prime Minister's National Relief Fund -

                      The employee by written undertaking may authorize the employer to deduct some amount from his wages towards the contribution to the Prime Minister's National Relief Fund or to such other Fund as the Central Government may by notification in the Official Gazette specify.


See also 

Illegal Strike and Lockout | Labor Law