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Govt Amends 80 Year-Old Law to Allow Electronic Wage Payment

The Union Government has passed an ordinance that enables employers to pay salaries by cheque or credit them directly to employee’s bank accounts.

Tushar Dhara | News18.com

Updated:December 21, 2016, 12:46 PM IST
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Govt Amends 80 Year-Old Law to Allow Electronic Wage Payment
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The Union Government has passed The Payment of Wages (Amendment) Bill, 2016 to enable employers to pay salaries by cheque or credit them directly to employee’s bank accounts without requiring their permission.

The Ordinance amends section 6 of The Payment of Wages Act, 1936 that states that employers can pay by cheque or credit it to the bank account only after written authorization is given by the employee.

The ordinance is meant to remove the written authorization part to enable payment of “wages only by cheque or by crediting in his bank account” a note by Labour Minister Bandaru Dattatreya dated December 8 said.

However, sources told CNBC TV18 that cash payment of wages have not stopped even though the government ordinance approves payment of wages electronically.

Wages, as opposed to salaries, have traditionally tended to be cash payments. The Payment of Wages Act covers employees whose wage does not exceed Rs 18,000 per month.

The Bill was introduced by Bandaru Dattatreya in the winter session of Parliament, which was disrupted as the government and opposition clashed over Demonetisation.

It will also allow state governments to specify industrial or other establishments that adopt cashless modes for salary payments. The new procedure will serve the objective of "digital and less cash economy", the bill states.

Andhra Pradesh, Uttarakhand, Punjab, Kerala and Haryana have already made provisions for payment of wages through cheque and electronic transfers after making state-level amendments to the Act.

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| Edited by: Puja Menon
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