Introduction

The Factories Act of 1948 was enacted to protect the welfare of workers in a
factory by regulating employment conditions, working conditions, the working
environment, and other welfare requirements of specific industries. The Court
held in Ravi Shankar Sharma v. State of Rajasthan (1993) that the Factory Act
is social legislation that covers the health, safety, welfare, and other aspects of
factory workers. The Factories Act lays out guidelines and safety measures for
using machinery, and with its strict compliance, it also provides owners with
instructions. When factory workers were taken advantage of and exploited by
paying them low wages, the Factories Act was passed.

Factory: The definition of a factory is specified in Section 2(m) of the Factories

Act 1948. A factory is any premises, where it has certain limits and boundaries-

• If a manufacturing process is regularly carried out in any portion of the

premises with the use of power and with ten or more workers now
engaged in such activity or were engaged in such work on any day
during the previous twelve months; or
• If any element of a manufacturing process is performed inside the
premises without the use of power and is regularly performed with
twenty or more employees working or having worked there on any
given day within the previous twelve months

Labour and welfare

The word ‘labour welfare’ refers to the services offered to employees within as
well as outside the factory, such as canteens, restrooms, recreation areas,
housing, and any other amenities that support employee well-being. States that
take welfare measures care about the overall well-being and productivity of
their workforce. Early on in the industrialization process, social programmes for
manufacturing workers did not receive enough priority. In the past, industrial
labour conditions in India were terrible. Due to a growth in industrial activity in
the latter part of the twenty-first century, several attempts were made to
improve the working conditions of the workforce through the recommendations
of the Royal Commission.

After gaining knowledge about the deficiencies and limitations of the previous
Act, the Factories Act of 1948 was amended. The definition of ‘factory’ was
expanded to encompass any industrial facility employing 10 or more people that
uses power or any industrial establishment employing more than 20 people that
uses no power, which was a significant development.

Other significant amendments included-

• Raising the minimum age of children who can work from 12 to 14 years
old.
• Reducing the number of hours a child can work from five to four and a
half.
• Preventing the kids from working between the hours of 7 p.m. and 6
a.m.
• The health, safety, and well-being of all types of employees are given
particular attention.

Welfare measures
The three main components of welfare measures are occupational health care,
appropriate working hours, and appropriate remuneration. It speaks of a
person’s complete health, including their physical, mental, moral, and emotional
states. The goal of welfare measures is to integrate the socio-psychological
demands of the workforce, the particular technological requirements, the
organisational structure and procedures, and the current socio-cultural
environment. It fosters a culture of work dedication in enterprises and society at
large, ensuring increased employee happiness and productivity.

Washing facilities (Section 42)

• All factories should supply and maintain enough appropriate washing
facilities for the use of the employees.
• For male and female employees, separate, well-screened facilities must
be provided; these facilities also need to be easily accessible and
maintained clean.
• The standards for appropriate and suitable facilities for washing must
be set by the state government.

Facilities for storing and drying clothing (Section 43)

• The state government has a specific authority. It specifies that the
state government has the authority to give instructions to the
manufacturers regarding where to store the worker’s clothing.
 • They can also provide them with instructions on how to dry the
workers’ clothes. It refers to the circumstance in which workers are not
dressed for work.

Facilities for sitting (Section 44)

• All factories should provide and maintain seating arrangements in
appropriate areas for all workers who are required to work in a
standing position in order to take advantage of any chances for rest
that may arise throughout the course of the job.
• According to the chief inspector, workers in any factory involved in a
certain manufacturing process or working in a specific room are able to
perform their work effectively while seated.

First aid appliance (Section 45)

• All factories must have first aid kits, appliances, or cupboards stocked
with the required supplies during all working hours, and they must be
easily accessible for all manufacturing employees to access.
Accordingly, there must be more first aid boxes or cupboards than the
usual ratio of one for every 150 industrial employees, which must be
fewer than that.
• The first aid box or cupboard should only include the recommended
supplies.
• Throughout the factory’s operating hours, each first aid box or
cupboard should be kept under the supervision of a specific person who
is accountable for it on a separate basis and must be readily available
at all times during the working hours of the factory.

Canteen (Section 46)

• A canteen must be provided and kept up by the occupier for the benefit
of the workers in any specified factory where more than 250 people are
usually employed, according to rules that the state government may
set.
• Food must be served, and prices must be established for it.
Shelters, restrooms and lunch rooms (Section 47)
• Every factory with more than 150 employees must have appropriate
and suitable restrooms or shelters and a lunchroom with drinking water
where employees can eat food they have brought with them and that is
kept for their use. If a lunchroom is available, employees should stop
eating in the work area.
• The shelters or restrooms need to be well-lighted, ventilated, kept
clean, cool, and in good condition.
• The state government sets the standards.

Creches (Section 48)

• Every factory with more than 30 female employees must have
a suitable room for the use of children under the age of six of such
women.
• Such rooms must be well furnished, well-lighted, and ventilated, and
they must be kept clean and hygienic. They must also be under the
care of women who have received training in child and infant care.
• In addition, facilities for washing and changing clothes can be made
available for the care of the children of female workers.
• Any factory may be forced to provide free milk, refreshments, or both
to such children.
• Small children can be fed by their mothers in any industry at necessary
intervals.

Health
Sections 11-20 of Chapter III of the Act deal with the Health of the Factories
Act, 1948.

Cleanliness (Section 11)

Every factory needs to be kept clean and clear of any effluvia from drains,
latrines, or other annoyances. In particular:
 • Dirt must be cleaned daily from floors, benches, staircases, and
passages by sweeping or by another method, and it must be properly
disposed of.
• The floor should be disinfectant-washed at least once a week.
• During the manufacturing process, the floor becomes moist; this must
be drained via drainage.

Disposal of wastes and effluents (Section 12)

Every factory has to have a method in place for treating wastes and
effluents produced by the manufacturing process they use.

Ventilation and temperature (Section 13)

• In order to ensure worker comfort and prevent health problems,
sufficient ventilation must be created for the circulation of air in a
factory, which should be maintained at a specific temperature.
• Walls and roofing should be made of a material that is intended for a
particular temperature that shouldn’t go over as much as possible.
• Certain precautions must be taken to protect the employees in facilities
where the manufacturing process requires extremely high or low
temperatures.

Dust and fume (Section 14)

• Every factory has to have efficient measures to remove or prevent
any dust, fumes, or other impurities that might harm or offend the
employees employed and cause inhalation and buildup in any
workroom.
• No factory may operate an internal combustion engine unless the
exhaust is directed outside, and no other internal combustion engine
may be used. Additionally, precautions must be made to avoid the
buildup of fumes that might endanger the health of any employees
inside the room.

Overcrowding (Section 16)

• There should be no overcrowding in factories that might harm the
health of the workers.
 • All employees must have ample space in a room to work in the
building.

Lighting (Section 17)

• Every area of a factory where employees are employed must have
adequate natural, artificial, or both types of lighting installed and
maintained.
• All glass windows and skylights that provide lighting for the workroom
in factories must be kept clean on the inside and outside.
• The production of shadows should not cause eye strain during any
manufacturing process, and all factories must have preventative
measures that should not cause glare from the source of light or via
reflection from a smooth or polished surface.

Drinking (Section 18)

• All factories must have the appropriate installations in place, and
maintain convenient locations with an adequate supply of
clean drinking water.
• The distance between any drinking water and any washing area, urinal,
latrine, spittoon, open drain carrying sullage or effluent, or another
source of contamination in the factory must be 6 metres unless the
chief inspector approves a shorter distance in writing. The labelling
must be legible and in a language that workers could understand.
• In all factories with more than 250 regular employees, there needs to
be a suitable method for providing cold drinking water during hot
weather.

Latrines and urinals (Section 19)

• All factories should have enough restrooms, and urinal
accommodations of the required types must be offered in a location
that is convenient and always accessible to workers.
• Male and female employees must have separate enclosed rooms.
• These locations must be thoroughly cleaned, kept in a hygienic state,
and have sufficient lighting and ventilation.
• Sweepers must be used to maintain latrines, urinals, and washing
facilities clean.
Spittoons (Section 20)
• All factories must have spittoons in easily accessible locations, and
they must be kept clean and hygienic.
• The state government specifies the number of spittoons that must be
given, their placement in any factory, as well as their maintenance in a
clean and hygienic manner.
• Except for spittoons designed, for this reason, no one should spit within
the premises of a factory. A notice must be posted if any violations
occur, with a fine of five rupees.

Safety
Safety is covered in Chapter IV of the Act and is covered in Sections 21–41 of
the Factories Act, 1948.

• Employment of young persons on dangerous machines (Section

23):
No young person is permitted to operate dangerous machines unless he has
been adequately taught the hazards associated with the machine and the
measures to be taken, and has received suitable training in working at the
machine or adequate supervision by a person who has complete knowledge and
experience of the equipment.

• Prohibition of employment of women and children near cotton

openers (Section 27):
Women and children are not permitted to work in any area of a cotton pressing
facility while a cotton opener is in operation. Women and children may be
employed on the side of the partition where the feed-end is located if the
inspector so specifies.

• Hoists and lifts (Section 28):

o Every hoist and lift must be of strong mechanical structure,
enough strength, and sound material. They also need to be
regularly maintained, completely checked by a qualified
person at least once every six months, and a register kept for
the mandatory exams.
o A cage that is properly designed and installed must enclose all
hoist and lift ways to prevent people from being trapped
between any of the equipment.
 o No larger load should be carried; the maximum safe operating
load must be marked on the hoist or lift.
o Every hoist or lift gate must have interlocking or another
effective system installed to prevent the gate from opening
except during landing.
• Protection of eyes (Section 35):
The state government may require effective screens or appropriate goggles to
be provided for the protection of persons employed or in the vicinity of the
process during any manufacturing process carried out in any factory that
involves risk to the eyes due to exposure to excessive light or injury to the eyes
from particles or fragments thrown off during the process.

• Precautions against dangerous fumes, gases etc (Section 36):

No person shall be required or permitted to enter any chamber, tank, vat, pit,
pipe, flue, or other confined space in any factory where any gas, fume, vapour,
or dust is present to such a degree as to involve risk to persons being
overcome, unless such chamber, tank, vat, pit, pipe, flue, or other confined
space is provided with an adequate manhole or other effective means of egress.

• Explosive or inflammable dust, gas etc (Section 37):

o Any factory involved in manufacturing processes that produce
dust, gas, fume, or vapour of a nature that could explode on
ignition must take all reasonably practicable precautions to
prevent any explosion through
o The effective enclosure of the plant or machinery.
o The removal or prevention of the accumulation of such dust,
gas, fume, or vapour, etc., or
o Otherwise by the exclusion or effective enclosure of all
potential ignition sources.
• Precautions in case of fire (Section 38):
o In order to protect and maintain safety to allow people to
escape in the case of fire, all factories should have
precautionary measures in place to avoid the breakout and
spread of fire, both internally and externally. The required
tools and facilities for extinguishing the fire must also be
made accessible.
o All factory employees who are familiar with fire escape routes
and have received sufficient training on the procedure to be
followed in such circumstances must have access to
appropriate measures.
AUTHORITIES

. Appointment of Safety officers. (Section 40-B)

It shall be the duty of the of the Occupier to Appoint a Safety officer in
a factory:-

(i) Wherein one thousand or more workers are ordinarily employed, or

(ii) Wherein, in the opinion of the State Government, any

manufacturing process or operation is carried on, which process or
operation involves any risk of bodily injury, poisoning or disease, or any
other hazard to health, to the persons employed in the factory, if so
required by the State Government by notification in the official Gazette.

1.Who is an Occupier?

According to section 2(n) "occupier" of a factory means the person, who has ultimate control over the
affairs of the factory,

Provided that-

(i) in the case of a firm or other association of individuals, any one of the individual partners or members
thereof shall be deemed to be the occupier;

(ii) in the case of a company, any one of the directors, shall be deemed to be the occupier:

(iii) in the case of a factory owned or controlled by the Central Government or any State Government, or
any local authority, the person or persons appointed to manage the affairs of the factory by the Central
Government, the State Government or the local authority, as the case may be, shall be deemed to be the
occupier:

Provided further that in the case of a ship which is being repaired, or on which maintenance work is
being carried out, in a dry dock which is available for hire,

(1) the owner of the dock shall be deemed to be the occupier for the purposes of any matter provided
for by or under-

(a) section 6, section 7, section 7A, section 7B, section 11 or section 12;

(b) section 17, in so far as it relates to the providing and maintenance of sufficient and suitable lighting in
or around the dock;

(e) section 18, section 19, section 42, section 46, section 47 or section 49, in relation to the workers
employed on such repair or maintenance;

(2) the owner of the ship or his agent or master or other officer-in-charge of the ship or any person who
contracts with such owner, agent or master or other officer-in-charge to carry out the repair or
maintenance work shall be deemed to be the occupier for the purposes of any matter provided for by or
under section 13, section 14, section 16 or section 17 (save as otherwise provided in this proviso) or
Chapter IV (except section 27) or section 43, section 44 or section 45, Chapter VI, Chapter VII, Chapter
VIII or Chapter IX or section 108, section 109 or section 110, in relation to-

(a) the workers employed directly by him or by or through any agency; and

(b) the machinery, plant or premises in use for the purpose of carrying out such repair or maintenance
work by such owner, agent, master or other officer-in-charge or person.

ION Exchange India Ltd. V.Deputy Chief Inspector of factories, Salem (1996).It was held that owner can
nominate any person tobe in ultimate control over the affairs of a factory. If no one else has been
nominated to be in ultimate control over the affairs of the company, Director of a company or any
partner of partnership is deemed to be the occupier.

Penalties of the Factories Act, 1948

In Chapter X of the Act, the penalties of the Factories Act of 1948 are covered.
There are 9 Sections, from Section 92 to Section 99, that deal with penalties in
certain situations. Anyone who breaches the Act or the rules established by the
Act or by law is subjected to the penalty.

General Penalty for offences

Section 92 of the Factories Act, 1948 defines the general penalties for offences:

• If there is any infringement of the Act’s laws, the occupier and

manager of the factory will be held responsible and equally liable for
breaching the law. They will both face two years in imprisonment and a
fine of up to Rs.2 lakhs.
• If they continue to commit the same offence, they will be fined
Rs.10,000 every day for continued violations.

Liability of an owner of factory premises

Section 93 of the Factories Act, 1948 defines the liability of an owner of
premises under special circumstances.

• When a factory is leased to several occupiers or lessees or

leaseholders, the factory’s owner is still held liable for supplying and
maintaining certain services such as drainage, approach roads, water
supply, power, lighting, sanitation, and so on.
 • The chief inspector has the authority to issue an order to the owner of
the premises in order to enforce the requirements.

The penalty is enhanced even after a previous

conviction
Section 94 of the Factories Act, 1948 defines a penalty that is enhanced even
after a previous conviction.

• First, a person who commits a general offence in a factory and does it

again faces a penalty of up to three years in jail or a fine of at least Rs.
10,000, or both.
• Second, the managers must count the offences committed during the
previous two years of the most recent offence to determine the
application of this Section.

The penalty for obstructing an inspector

Section 95 of the Factories Act, 1948 defines a penalty for obstructing an
inspector.

• Any person who stops an inspector from using any powers given to him
or under the Act, or if an individual fails to appear when requested by
an inspector, may be made responsible and subject to a punishment of
up to six months imprisonment, a fine of up to ten thousand rupees, or
both.
• This Section is also applicable when anyone stops a worker from
coming before or being inspected by an inspector in a factory.

Penalty for wrongfully disclosing results of

analysis
Section 96 of the Factories Act, 1948 defines a penalty for wrongfully disclosing
the results of analysis under Section 91 of the Factories Act, 1948.
 • Any individual who publishes or discloses to another person the results
of an analysis that is performed using samples is punishable by up to
six months imprisonment. He will be liable for at least an Rs. 10,000
fine.

Penalty for the contravention of certain

provisions
Section 96A of the Factories Act, 1948 defines the penalty for the contravention
of certain provisions, such as Sections 41B, 41C, and 41H.

• Anyone who disobeys or violates any of the rules or the provisions of

Sections 41B, 41C, or 41H will be sentenced to 7 years in prison and a
fine of Rs. 2,00,000. If the offender continues to commit the same
offence, he will also be fined Rs. 5,000 every day after the conviction
of the same offence.
• If the failure or violation persists more than a year after the conviction,
the offender will face a 10-year jail sentence.

Worker’s offences
Section 97 of the Factories Act, 1948 defines worker’s offences.

• If any worker in the factory breaches the Act’s rules or provisions,

causing liabilities for other workers, he or she will be fined at least Rs.
500.
• When a worker is found guilty of a punishable offence, the owner or
manager of the factory is not held responsible for the violation unless it
can be proven that he failed to take reasonable precautions to prevent
it.

False certificate of fitness

Section 98 of the Factories Act, 1948 defines a false certificate of fitness.

• A fitness certificate details a person’s level of fitness for a certain job or

work. This certificate is important in factories. A person who obtains a
 false certificate of fitness faces a minimum fine of Rs. 10,000 or a 2-
month sentence in jail. He may occasionally face fines and jail terms as
punishment.

Double Employment of Child

Section 99 of the Factories Act, 1948 defines the double employment of
children.

• If a child works in a factory on a day when they have already worked in

another factory, their parents, guardians, or anyone else who benefits
from the wages of the child faces a fine of Rs. 1000 unless the court
finds that the child worked without the parents or guardian’s consent.

Annual Leave With Wages

Every employee in the world shall get the leaves when in need along with
the fixed weekly leave and other holidays. In the factory act, 1948 every
working employee who has exceeded the 240 days working in a factory
during a calendar year has the sole right for leaves with wages for a number
of days. The calculation of annual leave with wages is done on the basis of
the following:

• In case of an adult – one day for every twenty days of work, during
the previous calendar year.
• In case of a child- one day for every fifteen days, during the previous
calendar year.
• The leaves shall be exclusive of all the holidays occurring in between
or end of the leave period.
• If a worker has worked for the two third of the total number of days in
the balance of the calendar year.
• If a worker is being dismissed or resigns from the work or if s/he dies
during his service period, the amount shall be paid to the nominee.
• While calculating the leaves the fraction of half day or more would be
considered as a full day.
• If any worker/s hasn’t taken any leave in the previous year calendar,
then his previous leaves will be added to the current year of leaves
calendar.
• The paid leaves shall be granted to the worker who is on sick leave,
under the section 81, the worker should be allowed to have paid leave
to cover the period of illness
 • Introduction(Payment of Wages Act)
• It is a well-known fact that India’s economy depends not just on the
formal sector but also on the informal sector. The significance of the
informal sector in India cannot be ignored. Before independence in 1947,
the informal sector, primarily agriculture, contributed to 95 per cent of
the Gross Domestic Product (GDP). Even today, 70 per cent of the
national income of India consists of income generated through
agriculture (Food and Agriculture Organisation of the United Nations).

• As per the Employment – Unemployment Survey of 2011-12, presented

by the National Sample Survey Office (NSSO), the total workforce of India
is 474.23 million. However, out of this total workforce, only 8 per
cent belong to the formal sector, and the remaining 92 per cent are
working in the informal sector. Additionally, 60 percent of the growth of
GDP is due to the contribution of these informal sector workers.
• According to the Indian Constitution, the Government of India is required
to create employment opportunities and ensure that all workers (formal
and informal sectors) have access to a reasonable standard of living that
includes all socioeconomic and other welfare opportunities.
• Adhering to the Constitution of India, the Indian Government in the year
1948, right after independence, introduced legislation named
the Minimum Wages Act of 1948. The legislative intent behind the Act
was to make sure that workers in the informal sector receive at least a
minimum amount of money as wages to avoid exploitation. However,
before this Act, the Payment of Wages Act of 1936 was introduced. The
Act made efforts so that informal sector workers could be linked with
mainstream development by providing minimum wages, which can be
utilised to increase living standards and benefit social development
schemes.
• The Act has occasionally undergone modifications to ensure that the law
is effectively implemented and that workers receive adequate pay in a
timely manner to maintain themselves and their families. This article
explains numerous significant clauses of the Act and related amendments
and case laws.

Payment of Wages Act, 1936

Historical background of the Payment of Wages
Act
Since labourers and workers constituted the oppressed class, the concern of
arbitrary deductions from wages and payments of wages that were not uniform
was not given much attention. However, in 1925, a private Bill known as the
Weekly Payment of Wages Bill was presented in the Legislative Assembly that
dealt with these issues. However, at that time, the government rejected the Bill
by claiming that the problem was already under assessment.

The Indian Government maintained a connection with the regional or state-level

administrations in 1926. It encouraged them to look into and gather the
necessary data, materials, etc., about the challenges, as mentioned earlier,
faced by the oppressed classes, specifically workers and labourers.

The information gathered made it clearly evident that the problems, which
included the employers’ arbitrary deduction of large amounts of money from
wages and the inconsistent and delayed distribution of payments, which left
workers in the most precarious of circumstances, were quite real.

The Royal Commission on Labour was established in 1929 under the

chairmanship of John Henry Whitley. The commission was established to
investigate and evaluate the current working conditions in factories and other
production sites in pre-independent India. The Commission provided the data
collected from the provincial governments in British India. It was given the
responsibility to do extensive research on the physical and mental well-being,
productivity, access to health services, and living standards of the workforce, as
well as on the relationships between employers and employees. Also, the
Commission had to offer suggestions for the betterment of the workers. The
Government of India collected information from the provincial governments.

The report by the Royal Commission on Labour (1929) covered a wide range of
problems faced by workers in various manufacturing facilities, including textiles,
leather goods, underground mining, steam engines, and silvicultural factories,
as well as employees engaged in public service departments. It covered nearly
all of the problems that employees experience, from low pay, long working
hours, and no leave considering bad health and well-being, no accommodation,
lack or absence of trade unions, the establishment of workmen’s compensation
fund, industrial disputes, etc.

The report is so thorough that almost all worker welfare legislation and
economic laws currently in existence, such as the Trade Union Act of 1926,
the Industrial Disputes Act of 1947, the Payment of Wages Act of 1936, and the
Minimum Wages Act of 1948, etc., can be linked directly in some capacity to
this document.

Objective and purpose of the Payment of

Wages Act, 1936
Considering the efforts of the public at large, the Payment of Wages Act of 1936
was passed by the British Government on April 23, 1936. As previously stated,
this Act was enacted to regulate the payment of wages for a specific group of
workers. In accordance with the Payment of Wages Act, “wages” refers to any
compensation given to employees, with some exceptions listed in the specific
exclusions mentioned under the Act. These exclusions include any monetary
value for housing accommodations or incentives, as well as gratuities, travel
expenses, and the amount offered for the delivery of electricity or water.

The Payment of Wages Act 1936 is a useful piece of legislation that governs
how specific kinds of people employed in industries get paid.

The primary goals of the Act are-

• To guarantee consistent and fast wage payments,

• To prevent wage employees from being exploited by eliminating
arbitrary penalties and wage deductions, and
• It outlines the obligations of businesses to pay wages; fix wage
periods; compensation schedules and methods; allowable deductions;
and other related issues

Application of the Payment of Wages Act,

1936
The Payment of Wages Act, 1936 applies to the entirety of India and is
implemented by the competent government in each jurisdiction on a state and
national level. The Central Government is the competent authority in cases
involving railroads, air transportation, mining, and oil and gas fields. In all other
situations, the State Government is the competent authority to take decisions.
Wages’ as defined by the Payment of
Wages Act, 1936
The financial reimbursement or remuneration that a company gives to workers
in return for work completed is known as a wage. It is also referred to as
‘personnel expenses’. The calculation of wages can be done either as a fixed
sum for each project executed or as an hourly, daily, or weekly price based on a
quantifiable number of tasks performed.

All financial compensation, ‘including’ the following, is considered to be waged.

• The sum payable under the conditions of employment;

• Amount due in accordance with any judgement, settlement, or award;
• Amount paid as overtime compensation or for time off during the
holidays, and
• Amount payable due to employment termination.
Wages have been defined under Section 2(iv) of the Payment of Wages Act,
1936. “Wages” refers to all remuneration (whether paid in the category of wage
entitlements or otherwise) represented in cash or qualified to be presented in
finances that would be due for payment to a worker in respect of his occupation
or work performed in such employment. Also, wages include payments if the
express or implied terms of employment are satisfied, and include:

1. Any earnings resulting from a judgement, award, or agreement

reached between the parties;
2. Any extra payment required by the terms of employment, regardless of
whether it is referred to as a bonus or by another name;
3. Any compensation to which the employee is entitled in relation to
overtime pay, holidays, or any other leave period;
4. Any amount due as a result of the worker’s termination of employment
under any law, agreement, or other documents that permits payment
of the amount, regardless of any deductions from the wages, but does
not establish a deadline for payment;
5. Any remuneration to which the employee has a right under any system
established by any law in effect at the time, with the following
exceptions:
 • Any benefit (whether through a profit-sharing agreement or elsewhere)
that is not paid under a prize, settlement, or court ruling and is not
part of the payment due under the conditions of employment;
• Any housing accommodations, access to electricity and water, basic
healthcare, or other perks, as well as any services not included in the
calculation of wages under a general or specific decree of the State
Government;
• Any employer contributions to pensions or provident funds, as well as
any interest that has accrued;
• Any travel reimbursement or travel concessions value;
• Whatever amount is paid to the employee to cover specific costs that
his work requires of him; or
• Any gratuity due upon dismissal from work under conditions other than
those mentioned in subclause (d).

Wage payment and deduction from wages

The obligation of the employer to pay wages

In Section 3 of the Payment of Wages Act, it is stated who is accountable for
paying wages to the workers. Each and every worker that an employer engages
or employs for labour purposes is entitled to receive payment of all wages due
to them.

In other circumstances, if the employer identifies a person or, on the rare

chance, realises that there is a person qualified for the job or is authorised for
the same task, at that point, such a person is responsible for the payment of
wages.

These points must be noted concerning the obligation of the employer to pay
wages –

• Regardless of what is said in sub-section (1), the company is

competent to pay any wages that are required under the Act.
• Also, if the contractual employee or any person to whom the employer
designates to make the payment in favour of the workers forgets to do
so, then the employer is the one to be held responsible.
 • Each employer shall be held responsible for paying all necessary wages
and benefits to the individuals they employ.
• The manager of that production facility will be responsible for paying
the wages of the employees he employs as a result of the industrial
setting.
• The obligation to supervise will be conditioned on the payment of
remuneration to any staff they use or employ due to mechanical or
other grounds.
• Concerning the payment of wages to the workers in the railway line
department, an individual is appointed by the department for a specific
region, and such a person is under the obligation to pay wages to the
workers.
• A person appointed by a contractual worker who is directly under his
supervision will be held responsible for the payment of the
representatives’ wages on account of the contractual worker.
• In the event that he fails to pay wages to the representatives, the
people who hired the workers could be held liable for the payment of
their wages.

Fixing a specific period for the payment of wages

Each person responsible for the payment of wages under Section 3 will establish
the time frames for which those earnings are due. No pay term shall be longer
than one month. The Payment of Wages Act, 1936 clearly indicates that wages
can be paid to workers in the following way –

• Payment on a day-to-day basis.

• Payment on a week-by-week basis.
• Payment to be paid fortnightly.
• Payment on a monthly basis.
Also, the Act clearly mentions that under no circumstances shall the payment of
wages to the representatives by the manager go beyond the intervals of 1
month, i.e., 30 days.

Moreover, considering the then-prevalent situation where the workers were paid
wages –

• Annually,
• Bi-annually, or
 • Quarterly
The Act mentioned that wages could not be paid following this system as it
leads to increased indebtedness of the workers.

Day on which wages shall be paid

According to Section 5(1) –

“(1) Every person employed upon or in:

1. Any railway, factory or industrial or other establishments upon or in

which the total number of employed persons is less than one thousand,
must receive his wages before the expiry of the seventh day from the
last day of the wage period for which the wages are payable.
2. Any other railway, factory or industrial or other establishments, must
receive his wages before the expiry of the tenth day from the last day
of the wage period for which the wages are payable.”
These points must be noted with regard to the payment of wages. The points
are as follows –

• When a worker’s engagement with an employer is terminated, the

employer is then responsible for ensuring that the terminated worker
receives their pay by the end of the second working day following the
date of termination.
• The company or the individual accountable for the payment of wages
must ensure that the wages are paid on a working day.
• The competent authorities may ask the person responsible for making
wage payments to recruit or appoint persons, but only to a certain
extent and according to the restrictions set out in the order.

Payment of wages in current cash, either coins or notes

The employer or person in charge of paying wages must pay the wages to the
workers in the currently prevalent currency, either coins, cash notes, or a
combination of both. Furthermore, the employer is also not allowed to make a
kind payment. Moreover, after receiving written authorisation from the
employee, the employer may pay the employee’s earnings via cheque or bank
transfer into his bank. The employer of each employee working in such
commercial or other facilities shall pay the employee’s wages only by issuing a
cheque or by depositing the money to his bank account, as specified by the
competent government by notification in the Official Gazette.
Payroll deductions that are permitted under the
Act
Manufacturing or production firms should deduct money in accordance with this
Act as simply as possible at the time that employees are paid their wages. The
employer would no longer be permitted to deduct what he deems fit.
Deductions relating to all payments made by an employee to his employer must
be stated beforehand.

The following are not included in the definition of a deduction:

• Restriction of the employee’s raise

• Cancellation of the employee’s promotion
• Stopping the incentive for poor productivity by using the worker
• Demotion of the employee by the employer
• Termination of the employee
The aforementioned actions taken by the organisation must have a good and
appropriate justification before initiation.

Amounts that can be deducted under this Act

Fines
Employers should impose a fine on employees only with prior approval from the
state government or other authorised institutions. Before imposing a fine on the
employee, the employer must go by the rules listed below.

• In the workplace, a notice listing all fines imposed on employees

should be posted. This notice should also list any actions that the
representative should not take.
• The worker shouldn’t be forced to pay a fine before explaining his
actions and providing justification for them.
• The total amount of the fines shouldn’t be more than 3% of his salary.
• Any person under the age of fifteen should not be required to pay a
fine.
 • In order to punish the worker for his acts or omissions, a fine should be
imposed only once on his wages.
• The mechanism for shareholdings or reimbursements from the
representatives should not be used to collect penalties.
• Within 60 days of the date the penalty was imposed, it must be
deducted or recovered.
• On the day that the worker or employee commits the act of exclusion,
a fine should be imposed.
• All fines collected from workers should be added to the general reserve
and used to assist the workers.
• A record of all penalties and payments made must be kept by the
individual in charge of the payment of wages to the workers under
Section 3 of the Payment of Wages Act of 1936.
• All funds received in relation to penalties imposed must be used strictly
for the goals determined by the competent authorities. Such goals
should be in the long-term interests of the workforce at the production
line or mines.
• After 90 days have passed since the day the fines were imposed, no
fines imposed on an employee or worker may be recovered from them.

Deductions due to exclusion from duties

The worker’s absence from work for either a single day or for any other duration
of time may result in deductions from wages by the employer.

The worker’s absence from work for either a single day or for any other duration
of time may result in deductions from wages by the employer.

The amount deducted for the absence during working hours must not be greater
than a total that has a comparable connection to the pay. This pay is due in
reference to the payment period as this absence does to that wage period.

For instance, if a worker’s monthly salary is INR 15,000 and he misses one
month of work due to another obligation, the penalty for failure to fulfil an
obligation should not exceed INR 15,000.

Employees who show up for work and refuse to participate in the business
operation without a valid excuse will be seen as being absent from their duties.
The employer may withdraw eight days’ worth of wages from the pay of the
workers if at least ten persons collectively fail to report for duty without being
given a cause and without prior notice.

Amount deducted for losses or damages

A register is to be maintained by the person responsible for the payment of the
wages in such a framework as might be recommended. Also, it will contain all
such observations and all confirmations thereof.

According to Section 10(2) of the Payment of Wages Act, 1936, the employer
should give the worker an opportunity to provide justification and reason for the
damage that took place. The deductions made by the employer from the wages
of the worker should not exceed the value or measure of the damage done by
the worker.

Amount deducted for services provided

If a worker does not consider or admit the house-convenience service or
administrative structure provided by the employer, in this case, only the
employer is authorised to deduct the cost from the employee or worker’s pay.

The amount of the deduction should not be greater than the estimated value of
the house-convenience services or administrative structure.

Recovering advances from deductions

If an advance was given to employees by the employer prior to the start of
business, the company should be able to recover or recuperate that advance
from the worker’s primary payment of wages or salary. On the other hand, the
employer shouldn’t be allowed to recoup or recover the loans made for the
employee’s travel expenses.

Deductions in relation to the recovery of the advances

Resolutions for the recovery of loans granted for home construction or other
objectives will be based on any rules established by the State Government that
control the amount of flexibility with which such loans may be permitted and the
rate of interest payable afterwards.
Payments to cooperative organisations and insurance systems – subject to
deductions.

The conditions that the State Government may impose will determine the
justification for pension contributions to cooperative organisations, deductions
for payments to insurance coverage maintained by the Indian Postal Service, or
for worker recognition deductions made for compensation of any premium on
their additional security strategic plan to the Life Insurance Corporation.

Theories of Wages

Subsistence Theory of Wages

This theory is also known as the Iron Law of Wages or the Brazen law of Wages.
First, formulated by the Physiocrats, it was later developed by a German
economist Lasalle. The father of Economics Adam Smith has also mentioned
such theory in his book ‘The Wealth of Nations’, where he states that wages
which are to be paid to workers should be enough so that they can live and
support their family. David Ricardo is considered as one of the best exponents
of this theory and his contributions helped in developing this theory. Under
the Theory of Exploitation, Karl Marx also made it as a basis. The theory states
that wages that are provided to a labourer should be a payment that is just
sufficient to satisfy the necessities of life. It determines that there is a
subsistence level of payment which should be followed and the wages should be
given according to the same, without exceeding such limit. It was held by its
proponents that in a case where the wages are lower than the given subsistence
level, there will be a fall in labour supply due to decline in population and it will
lead to a rise in wages which will also lead to a decline in supply. Moreover, if
the wages are higher than the subsistence level, the labour supply will increase
which eventually will lead to lower wages. Thus, this theory stressed upon the
maintenance of a subsistence level so that wages remain fixed at such a level
and there is no eventual situation of higher or lower wages. David Ricardo
explains two assumptions which have been taken in this theory- fist is that the
food production is subject to the Law of Diminishing Returns and second that
population increases at a faster rate.

However, this theory could not hold any stand in a practical sense. There were
many loopholes in this theory which made it nearly impossible to acknowledge
for a longer period of time. In the industrial sector of a country, there are not
just one but many types of employment and thus even the wages deem to be
different for such different employments. This theory does not consider the
same and is based on uniformity of wages all over the industry which is not
practical. Criticism has also been laid down that this theory only takes into
consideration the supply of the market and ignores the demand which is crucial
because supply depends on demand in a market and even in case of wages, the
demand can make a huge difference in the supply. This theory is also criticised
because it is based purely on the Malthusian Theory of Population which does
not really apply every time. An assumption has been taken that the increase in
wages will result in an increase in the population of the country, which might
not be true for many developed countries. In developed countries such a rise in
wages results in an increase in the standard of living and thus this theory does
not apply in every situation. Furthermore, it is also criticised that this theory
only holds true for a long period of time, but does not give any particulars or
results in a short time or in a year. This makes it difficult to analyse the theory
especially on an industrial level, where such calculations become very
important.

Standard of living Theory of Wages

It came in the late 19th century and refined the Subsistence Theory of Wages.
It related the wages of the workers to the standard of living and stated that
wages should be determined by the standard of living of the workers and not by
the subsistence margin. This theory seemed to have refined the previous
theory, but it holds no good, as the dependency on the standard of living could
vary from person to person and it could not be regarded as a strong grid to
measure wages. It also focussed only on the supply part and did not consider
the demand in the market. The Standard of living of a worker could change
from time to time and moreover, this theory was impractical and very indirect
because the workers could not get high wages just because they had a high
standard of living. The output in productivity should also be there to increase
such wages.

Wage Fund Theory of Wages

This theory’s biggest criticism came from the Trade Unions in the industries.
Alongside the theories of Adam Smith and David Ricardo, J.S. Mill propounded
this theory. This theory stated that Wages are depended upon the proportion
between the population and the capital. A part of the capital is kept aside for
the sole purpose of wages and the determinant is the population to calculate the
wages. Population under this theory means the labourers or working class and
the theorists asserted that competition in the market is affected by these two
factors- capital and population. Under this theory, the capital which was called
the wage-fund was kept constant as it was stated that if the wage fund is used
for wages given to workers it would affect the decrease in the capital of
production equipment or goods and ultimately decrease in wages as well. Thus,
wages-fund is kept constant, and so, if the wages are to be increased it results
in a decline in population and if the population is increased, then the wages will
decrease. There is an inverse relationship between the two. The theory is given
a mathematical dimension- “Wages= Wage fund/ population”.

This theory was seen as an attack and dysfunctioning of the trade union in the
industries. As trade unions do not have any control over the population in the
industry, it is impossible for them to raise wages without reducing the number
of workers. Thus, it binds them under the decision of the Industry which was a
huge blow to the whole purpose of a trade union. This is not the only issue with
this theory. The wages-fund, which is supposed to remain constant, is not
defined under this theory. And thus, what constitutes the whole capital is not
defined. Further, the quality of workers has been compromised, as it takes a
relation between wages and population without realising that the quality of
workers as well the quality of work can get affected if wages are raised. It also
assumed that wages can only increase if there are profits, however, in the case
of increasing returns, both wages and profits will increase. This theory took
supply and demand in its ambit but it has failed in determining the wage rate
and thus compromising the freedom and bargaining power of trade
unions.

Surplus- Value Theory of Wages

Karl Marx propounded this theory. He deviated from the Subsistence Theory of
Wages and stated that the wages are drawn to a subsistence level not because
of the population but because of the unemployed labourers. He stated that for
capitalists, the workers are a mere instrument in gaining capital, and in case,
where a labourer is working for extra productivity, there is a surplus-value that
is generated and it adds to the capital of the industry which goes back to the
owner. Marx in his theory has attacked the capitalists and he has drawn the
negative aspects of industries which derives the workers to work more than
they are paid for. It states a situation where even overtime is not paid to the
workers and the extra productivity is used by the owners of such industry to
increase their capital.

Bargaining Theory of Wages

This theory explains that wages depend upon the bargaining power of the
workers. John Davidson in his book ‘The Bargain Theory of Wages’ propounded
this theory and stated that there are various factors which influence the wages
in a bargain of the workers and producers. Under this theory, the more the
worker is able to work, the more he gets paid. This works in small industries
like labour for carrying goods through lorry or other transport or daily wage
workers or workers employed for a specific period of time.

Residual Claimant Theory of Wages

Propounded by Prof. Walker, this theory states that the wages of a worker are
equal to the product minus rent, profit and interest. Thus, rent, interest and
profits are understood as not a part of wages and after subtracting such
determinants from the capital of productivity given the wages should be given
to the workers. This theory came with a lot of flaws as there was no way that
the wages could be fixed after the production has started as they are fixed
before starting the production in an industry. Therefore, in such a case the
residual claimant will be the entrepreneur and not the labourer. Furthermore,
subtracting profits and rent will not change the fact that the capital of landlords
and entrepreneurs are not fixed and thus it is futile to do so. Criticism has been
made that this theory ignores the aspect of supply of workers as well as the
trade unions.

Marginal Productivity Theory of Wages

It is regarded as the most satisfactory theory among all others. Von
Thunen first stated this theory and then it was developed by J.B. Clark,
Wicksteed and Walrus. The theory states that the wages of a worker are
dependent upon the productivity of the worker. It states that as an employer
goes on employing labour, according to the Law of Diminishing Marginal Utility,
the marginal product will fall and thus the labour is employed up to a level
where wages is equal to a marginal level. Prof. S.E. Thomas states that due to
the competition that prevails among the labour force, a wage rate is determined
which is equal to the marginal product so that the wages provided are up to
mark with the employed workers. This theory is most practical and provides
that an employer can only employ workers up to a mark where he is able to pay
the wages for productivity. Thus, productivity is given importance. Moreover, it
is in compliance with the other factors of the market like supply and demand.

This theory is applied with an assumption that all factors such as the mobility of
workers, Perfect Competition, technology are constant. This is one of the factors
which derives criticism in this theory.it is not homogenous in nature and with
the change in circumstances it might not work at all, which makes it practically
insufficient. It deals with the marginal productivity which may be affected
because of the low wages that are being given.