Payment of Wages: Mode, Period and Time Limit

In one line

Wages must be paid in money or into a bank account, over a wage period that can never be longer than a month, by the end of the shift, the week, the second day after a fortnight or the seventh of the next month as the case may be, and within two working days of a dismissal, retrenchment or resignation.

In exam wording: section 15 of the Code on Wages 2019 requires all wages to be paid in current coin or currency notes, or by cheque, or by crediting the wages in the bank account of the employee, or by electronic mode, with a proviso permitting the appropriate Government to specify establishments whose employers shall pay only by cheque or by bank credit; section 16 requires the employer to fix a wage period as daily, weekly, fortnightly or monthly, subject to the condition that no wage period shall be more than a month; and section 17 fixes the time limits for payment, including payment within two working days where an employee has been removed, dismissed, retrenched or has resigned or become unemployed due to the closure of the establishment.

Why the law has this at all

A minimum wage is a promise about how much. Chapter III is about when and how, and without it the promise is worth much less than it looks.

Consider the abuses this Chapter answers, all of them familiar. Wages paid two months in arrears, so that the worker is permanently lending the employer a month's earnings. Wages paid in kind, in grain or in vouchers redeemable only at the employer's own store. Wages paid over a wage period of three months, so that a worker who leaves after ten weeks has earned nothing. And, worst of all, a dismissed worker's final wages withheld for months, which is the cheapest possible way of making him drop a claim.

Each of those has a section. Section 15 requires money or a bank credit. Section 16 caps the wage period at a month. Section 17(1) fixes when each kind of wage period must be paid out. And section 17(2) gives the departing worker two working days.

And one structural change matters more than any of them. The Payment of Wages Act 1936 applied only to employed persons whose wages were below a notified ceiling, so better-paid employees were outside it entirely and had only their contract. Chapter III has no such ceiling: it applies to every employee as defined in section 2(k), which reaches managerial and administrative work.

Some words this chapter uses

Wage period is the period by reference to which wages are calculated and paid: daily, weekly, fortnightly or monthly under section 16.