Payment of Wages — Employer Obligations

Wage period and timing

• A wage period cannot exceed one month.
• Wages must be paid within the period prescribed after the wage period ends, which depends on establishment size.
• On termination, wages are payable within the shorter period prescribed for final settlement.

Permitted deductions

• Statutory deductions — PF, ESI, Professional Tax, income tax
• Deductions for absence from duty
• Deductions for damage or loss, following the prescribed procedure
• Recovery of advances and loans within limits
• Fines, only where the procedure and limits under the law are followed

Total deductions are capped as a proportion of wages. Ad-hoc recoveries outside the permitted list are unlawful even with the employee's written consent.

Records

• Wage register
• Register of deductions and fines
• Wage slips issued to each employee
• Proof of payment — bank transfer records are the safest

Frequently asked questions

Can salary be paid in cash?

Bank transfer is the norm and is required in many cases; where cash payment is permitted, signed acknowledgement in the wage register is essential.

Can an employer deduct for notice period shortfall?

Only in line with the contract and the permitted deduction framework; recoveries beyond the statutory limits can be challenged.

Sources & references

• India Code — Central Acts