Payment of Wages Act 1936: Objectives, Provisions & Importance

Published on 26 September 2025 by
Payment of Wages Act 1936

Labour laws in India have always aimed at protecting the interests of workers and ensuring that they are not exploited by employers. These laws deal with wages, working conditions, safety, social security, and industrial relations. One of the earliest and most important wage-related legislations was the Payment of Wages Act, 1936.

This Act was introduced at a time when industrial workers were facing serious problems of irregular wage payments, unauthorized deductions, and lack of legal remedies. The Act provided a framework to regulate how wages are paid, when they are paid, and what deductions are legally permitted.

Background of the Payment of Wages Act, 1936

The Payment of Wages Act was passed by the Central Legislature in 1936 and came into force on 28th March 1937. The main purpose was to address the issues of wage delays and arbitrary deductions that were common in industries, plantations, and railways during the pre-independence period.

Before this Act, there was no uniform law that made it compulsory for employers to pay wages within a fixed time. Many workers had to depend on the mercy of employers and often suffered due to late payments. The British Government, after considering recommendations from various committees, introduced this Act to bring fairness and discipline in wage distribution.

This Act thus became one of the cornerstones of Indian labour laws and laid the foundation for later legislations on wages and social security.

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Objectives of the Act

The Payment of Wages Act had clear objectives aimed at protecting employees from exploitation. The objectives were not only about timely payment but also about creating a fair system of wage regulation.

  • Ensuring Timely Payment of Wages: The main purpose of the Act was to make sure that workers received their wages within a fixed period, without unnecessary delays. This helped workers to manage their daily needs and reduced their financial hardships.
  • Preventing Unauthorized Deductions: The Act restricted employers from making arbitrary or unfair deductions from workers’ wages. Only certain specified deductions such as fines, PF contributions, or cooperative society payments were allowed.
  • Providing a Legal Remedy: The Act also gave workers a legal right to approach an authority if their wages were delayed or if unfair deductions were made. This brought accountability to employers and created a grievance redressal mechanism.

Applicability of the Act

The Payment of Wages Act, 1936 was not meant for all categories of workers initially. It applied only to employees drawing wages up to Rs. 200 per month, but this wage ceiling was later revised multiple times and eventually removed.

Today, the provisions of the Act apply broadly to almost all employees, but in practice, it has been merged into the Code on Wages, 2019. Still, for exam purposes, it is important to understand the original scope of the Act.

  • Industries and Establishments: The Act applied to factories, railways, plantations, and other industrial or commercial establishments as notified by the government.
  • Both Public and Private Sector: It covered employees working in both government establishments as well as private companies.
  • Specified Wage Limit (Later Removed): Initially, it applied only to employees earning below a wage ceiling, but later amendments made it applicable to a much wider group of workers.
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Key Definitions under the Act

To properly understand the Payment of Wages Act, it is important to know some of the terms defined under the law.

  • Wages: Wages include all monetary remuneration payable to a worker for services rendered. It covers salary, allowances, overtime, bonuses, and commissions. However, it does not include PF contributions, gratuity, or traveling allowance.
  • Employer: The employer means the person responsible for supervision, management, or control of the establishment. In the case of a factory, it usually refers to the manager.
  • Employee/Worker: Any person employed in an industry or establishment who is receiving wages under the Act.

These definitions ensured clarity on who is covered and what amounts are considered as wages.

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Important Provisions of the Act

The Payment of Wages Act contains several important provisions that regulate wage payment:

  • Time of Payment of Wages: Wages must be paid within 7 days of the end of the wage period if the number of workers is less than 1000, and within 10 days if workers are 1000 or more. This prevented undue delays.
  • Mode of Payment: Wages were to be paid in current coins or currency notes. Later, payment by cheque or direct bank transfer was also allowed, with the consent of employees.
  • Permissible Deductions: The Act listed specific deductions that employers could make, such as fines, absence from duty, PF or ESI contributions, cooperative society dues, recovery of loans, or damages caused to company property. This protected workers from arbitrary deductions.
  • Limit on Deductions: The total deductions in a month could not exceed 50% of wages. If deductions included payments to cooperative societies, the limit was extended to 75%.
  • Authority for Redressal: The Act empowered certain authorities like Labour Commissioners or tribunals to hear complaints from employees. Workers had to file their claims within 12 months of the incident.
  • Penalties for Employers: Employers who violated the Act by delaying payments or making unauthorized deductions were subject to fines and imprisonment.

Amendments and Modern Relevance

The Payment of Wages Act has undergone several amendments to expand its scope. The wage ceiling was raised multiple times and eventually removed. The mode of payment also evolved with changing times, allowing electronic transfers and direct credit into bank accounts.

Most importantly, in 2019, the Payment of Wages Act was subsumed under the Code on Wages, 2019, along with the Minimum Wages Act, 1948, the Payment of Bonus Act, 1965, and the Equal Remuneration Act, 1976. The Code simplified wage laws into a single framework and made it applicable to all employees, regardless of wage limits.

Thus, while the Payment of Wages Act, 1936 as a separate law is no longer in force, its principles are still relevant and continue under the new labour codes.

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Importance of the Payment of Wages Act, 1936

The Payment of Wages Act was important because it created a basic legal framework for wage protection in India.

  • Protection for Workers: The Act prevented exploitation by ensuring timely payment and restricting unfair deductions.
  • Industrial Peace: By bringing uniformity in wage rules, it reduced disputes and improved employer-employee relations.
  • Foundation for Future Laws: It laid the foundation for other labour welfare legislations and eventually merged into the modern wage code.
  • Financial Security for Workers: Regular and predictable wages allowed workers to plan their expenses and live with dignity.

Relevance for UPSC EPFO and Other Exams

For aspirants of UPSC EPFO, SSC, State PSC, and banking exams, the Payment of Wages Act, 1936 is important for multiple reasons:

  • It is one of the earliest wage-related labour laws in India, showing the evolution of labour welfare.
  • Many exam questions are directly asked from its provisions, such as time of wage payment, permissible deductions, and authorities under the Act.
  • Understanding this Act helps aspirants link it with the Code on Wages, 2019, which is now in effect.
  • It also helps in developing a broader perspective on labour reforms and workers’ rights in India.

FAQs:

Q1. What is the Payment of Wages Act, 1936?
It is a labour law enacted to regulate timely wage payment and prevent unfair deductions from workers’ salaries.

Q2. Why was the Payment of Wages Act introduced?
It was introduced to protect workers from delayed wages, arbitrary deductions, and lack of legal remedies during the pre-independence period.

Q3. Who was covered under the Payment of Wages Act initially?
Initially, it applied to employees earning up to Rs. 200 per month, later extended to all workers after amendments.

Q4. What are the permissible deductions under the Act?
Permissible deductions include PF or ESI contributions, fines, absence from duty, cooperative society dues, and recovery of loans.

Q5. Is the Payment of Wages Act still in force?
No, it was merged into the Code on Wages, 2019, but its principles remain relevant in wage protection.