Which of the following deductions from wages can be made under the Payment of Wages Act, 1936 ? 1. Deductions for amenities and services supplied by the employer 2. Deductions for recovery of advances 3. Deductions for payments to co-operative societies Select the answer using the codes given below :

Correct — D, (d) 1, 2 and 3. All three heads are on the statutory list, and the list is section 7(2) of the Payment of Wages Act, 1936.

The governing principle comes first. Section 7(1) provides that the wages of an employed person shall be paid to him without deductions of any kind except those authorised by and made in accordance with the Act. Deduction is therefore prohibited unless it is named, and section 7(2) is the naming provision. Its clauses run:

(a) fines; (b) deductions for absence from duty; (c) deductions for damage to or loss of goods expressly entrusted to the employed person, or for loss of money for which he is required to account, where the damage or loss is directly attributable to his neglect or default; (d) deductions for house-accommodation supplied by the employer or by Government or a housing board; (e) deductions for such AMENITIES AND SERVICES supplied by the employer as the appropriate Government or an officer specified by it may by general or special order authorise; (f) deductions for RECOVERY OF ADVANCES of whatever nature, or for adjustment of over-payments of wages; (ff) deductions for recovery of loans made from any fund constituted for the welfare of labour; (fff) deductions for recovery of loans granted for house-building or other purposes; (g) deductions of income-tax; (h) deductions required to be made by order of a court or other competent authority; (i) deductions for subscriptions to, and for repayment of advances from, any provident fund; (j) deductions for PAYMENTS TO CO-OPERATIVE SOCIETIES approved by the appropriate Government, or to a scheme of insurance maintained by the Indian Post Office; and further clauses covering life-insurance premia, contributions to welfare funds, trade-union subscriptions, fidelity guarantee bonds, and contributions to the Prime Minister's National Relief Fund and to notified insurance schemes.

Entry 1 matches clause (e), entry 2 matches clause (f) and entry 3 matches clause (j). Each is authorised, so the answer is all three.

Two qualifications are worth carrying, because they explain why the drafting of entries 1 and 3 is careful. A deduction for amenities and services is lawful only for amenities and services the appropriate Government has authorised, and a deduction for payments to a co-operative society is lawful only where the society is approved by the appropriate Government. Neither qualification takes the head off the list; both mean the deduction is permitted subject to a condition. The Act also caps the total: under section 7(3) deductions in any wage-period may not exceed seventy-five per cent of wages where they include payments to co-operative societies, and fifty per cent in any other case.

Why the others are wrong

• (a)1 only — This accepts only the amenities-and-services head and rejects the other two, but recovery of advances and payments to co-operative societies are both squarely on the list. Recovery of advances is clause (f) of section 7(2), and it covers advances of whatever nature together with the adjustment of over-payments of wages; sections 12 and 12A go on to regulate it in detail, prescribing when an advance may be recovered and forbidding recovery of an advance of wages not already earned except in accordance with the rules. Payments to approved co-operative societies are clause (j). A candidate choosing this option has treated an employer's right to recover its own money as though it needed no authority, when in fact the Act names it expressly.
• (b)2 and 3 only — This rejects the amenities-and-services head, which is clause (e) of section 7(2): deductions for such amenities and services supplied by the employer as the appropriate Government or any officer specified by it may by general or special order authorise. The likely reasoning is that an employer should not be able to charge a worker for facilities he provides, and the Act shares that suspicion — which is why it does not leave the head open but subjects it to Government authorisation, and why the explanation to section 7(2) states that the word 'services' does not include the supply of tools and raw materials required for the purposes of employment. The head is on the list; it is simply a controlled one.
• (c)1 and 3 only — This rejects the recovery of advances, which is clause (f) of section 7(2) — deductions for recovery of advances of whatever nature, including advances for travelling allowance or conveyance allowance, and for adjustment of over-payments of wages. It is one of the commonest lawful deductions in practice and one of the most closely regulated: section 12 governs the conditions for recovering an advance made before employment began or after it began, and section 12A separately governs the recovery of loans. Rejecting it also produces an internally odd position, because it accepts a deduction paid over to a third party under clause (j) while refusing one that merely returns to the employer money he has already advanced.

Section 7 of the Payment of Wages Act, 1936 is built on a prohibition with a closed list of exceptions. Sub-section (1) says wages shall be paid without deductions of any kind except those authorised by and made in accordance with the Act, and the explanations to it settle two boundary cases — a withholding of increment or promotion, a reduction in rank, and a suspension are not deductions where they follow from the rules and are imposed in good faith, while any loss of wages resulting from an order imposing a penalty is a deduction. Sub-section (2) then lists the authorised heads, and sections 8 to 13 spell out the conditions attaching to the most abused of them: section 8 governs fines, requiring the acts and omissions in respect of which a fine may be imposed to be approved and displayed, forbidding fines on a person under fifteen, capping fines at three per cent of wages in a wage-period, forbidding recovery after ninety days or by instalments, and requiring the proceeds to be credited to a fund used for the benefit of the employed persons; section 9 governs deductions for absence from duty; section 10 those for damage or loss, which require the employed person to be given an opportunity of showing cause; section 11 house-accommodation, amenities and services; sections 12 and 12A the recovery of advances and loans. Sub-section (3) caps the total, at seventy-five per cent of wages where payments to co-operative societies are involved and fifty per cent otherwise, and sub-section (4) requires any excess to be recovered in the prescribed manner. The design is consistent: a head is permitted, a condition is attached, and a ceiling caps the aggregate.

Key facts

• Payment of Wages Act, 1936, section 7(1) — wages shall be paid without deductions of any kind except those authorised by and made in accordance with the Act.
• Section 7(2)(e) — deductions for such amenities and services supplied by the employer as the appropriate Government or a specified officer may authorise by general or special order.
• Explanation to section 7(2) — the word 'services' does not include the supply of tools and raw materials required for the purposes of employment.
• Section 7(2)(f) — deductions for recovery of advances of whatever nature and for adjustment of over-payments of wages.
• Section 7(2)(j) — deductions for payments to co-operative societies approved by the appropriate Government, or to a scheme of insurance maintained by the Indian Post Office.
• Other authorised heads include fines, absence from duty, damage or loss, house-accommodation, income-tax, court orders, provident-fund subscriptions, life-insurance premia, trade-union subscriptions and fidelity guarantee bonds.
• Section 7(3) — total deductions in a wage-period may not exceed seventy-five per cent of wages where they include payments to co-operative societies, and fifty per cent otherwise.
• Section 8 — fines may not exceed three per cent of the wages payable in a wage-period, may not be imposed on a person under fifteen, may not be recovered after ninety days, and their proceeds must be credited to a fund applied for the benefit of the employed persons.

Common traps

• Assuming one entry in a three-entry list must be false. Here all three are authorised heads.
• Treating a conditional head as an unauthorised one. Amenities and services need Government authorisation and co-operative societies need approval, but both are on the list.
• Forgetting the aggregate caps in section 7(3) — fifty per cent, or seventy-five where co-operative-society payments are included.
• Reading the fine as an ordinary deduction. Section 8 attaches its own set of conditions and a three-per-cent ceiling.

• practice — not a real PYQ

  Under section 7(3) of the Payment of Wages Act, 1936, the total amount of deductions in any wage-period shall not exceed :

  • (a)Twenty-five per cent of wages in every case
  • (b)Fifty per cent of wages in every case
  • (c)Seventy-five per cent where the deductions include payments to co-operative societies, and fifty per cent in other cases
  • (d)Fifty per cent where the deductions include payments to co-operative societies, and twenty-five per cent in other cases

  Answer(c) Seventy-five per cent where the deductions include payments to co-operative societies, and fifty per cent in other cases

• practice — not a real PYQ

  Under the Payment of Wages Act, 1936, a fine imposed on an employed person shall not exceed, in any one wage-period :

  • (a)One per cent of the wages payable to him
  • (b)Three per cent of the wages payable to him
  • (c)Five per cent of the wages payable to him
  • (d)Ten per cent of the wages payable to him

  Answer(b) Three per cent of the wages payable to him