Salary has to be paid before 7th day of the succeeding month under new labour code; Know what else the new labour code says about salary timeline

The new labour code (Code on Wages, 2019) has set clear timelines for salary payments, meaning if you are a salaried employee, you can count on getting your paycheck on time.

Additionally, the new labour code provides employees with access to legal assistance (inspector cum facilitator) in cases where an employer delays or makes unauthorised deductions from the wages, citing reasons such as damages, loss, fines and other duty-related charges.

Prof. Paramjeet Singh, Associate Professor of Practice, BITS Law School said to ET Wealth Online: "The Code on Wages, 2019, protects those employees as well from such malpractice."


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Keep reading to know what the law says:

What does the new labour code say about salary payments?

The Code on Wages, 2019, makes it mandatory for the employer to pay wages within seven days of the end of the month for which the wages are due.

Singh says: "In case of removal, dismissal, retrenchment or resignation, the above period is further reduced to just two days. This is a significant step towards reducing wage-related disputes."

Singh emphasizes that the new labour Code applies universally to all employees, regardless of their wage level. Earlier, wage-related laws did not cover all categories of employees under their ambit, particularly those whose wages were above a specified threshold.

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Gerald (Jerry) Manoharan, Partner - JSA Advocates & Solicitors, explains the details of what the new labour code says:

1. Salary payment timeline: The Code on Wages, 2019 prescribes clear statutory deadlines for all types of typical employee engagements.

While daily-wage workers are required to be paid at the end of the shift, weekly-rated employees must be paid before their weekly holiday.

For employees engaged on a fortnightly basis, this timeline is limited to within 2 days after the end of the fortnight and for those employees engaged on a monthly basis, payment has to be made before the expiry of the 7th day of the succeeding month.

2. Universal coverage: Unlike the regime under the erstwhile Payment of Wages Act, 1936, where protections relating to delayed wages applied only up to specified wage ceilings, the new labour code extends the provisions on timely payment and unauthorised deductions to all employees, irrespective of salary levels. This brings senior management and higher-income earners under the protective umbrella of the law.

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What remedies will employees have under the new labour code if salaries are delayed or withheld by employers?

Singh says that the new labour code introduces, for the first time, the concept of inspector cum facilitator.

Singh says: "In case of any unauthorised deduction from the wages or any delayed payment, the employee may approach the aforementioned authority appointed under the Code."

According to Singh, the primary role of the inspector cum facilitator is to advise the employer and employee regarding wage-related compliance. Further, they encourage payment of the pending wages to the employee before the dispute escalates to the judicial forum.

If the claim of any employee remains unresolved, then either the employee or the inspector cum facilitator can approach the Industrial Tribunal for claim settlement.

Singh says: "Additionally, non-compliance with the provisions of the Code may attract monetary penalties, and in certain cases, even imprisonment."

Manoharan points out that the new labour code significantly extends the time available to initiate claims for unpaid salaries or dues.

According to Manoharan, the limitation period has been extended to 3 years, providing employees greater flexibility compared to the earlier fragmented regime, which prescribed varying timelines under different legislations, typically ranging from 6 months to 2 years.

Manoharan says: "This extended timeframe enables employees to better gather evidence and seek appropriate redressal."

Some other important features of new labour code about salary delay

Manoharan explains some noteworthy aspects in relation to salary delay:

• The central government rules prescribed under the Wage Code require employers to provide physical or electronic wage slips on or before payment of wages, improving transparency and making it easier for employees to establish claims.
• The labour codes continue to regulate authorised deductions, and total deductions from wages generally cannot exceed the statutory ceiling, thereby preventing employers from effectively withholding wages through excessive deductions.
• The mandatory 2-working days' timeline for payment after resignation or termination is a significant improvement for employees waiting for their final dues.
• The adjudication framework has been streamlined to ensure faster resolution of claims through designated authorities. It has also imposed an obligation on such authorities to decide claims within 3 months.
• As an added measure, if an employer fails to pay the claim and compensation determined to be paid by authorities, the authority is entitled to issue a certificate of recovery to the District Magistrate or Collector of the district where the establishment is located. The government will then recover the money as "arrears of land revenue", ensuring faster payment of such dues.