Section 18: Deductions which may be made from wages

Overview

This section of the Code on Wages, 2019, deals with the specific situations where an employer is legally allowed to make deductions from an employee’s wages. It aims to protect workers from unfair or excessive wage cuts while allowing legitimate deductions for things like fines, damages, or taxes.

Scope and Coverage

• This section applies to all employees covered under the Code on Wages, 2019, regardless of their wage level or type of employment (skilled, unskilled, manual, etc.). This includes workers in all establishments – factories, shops, and other organizations.
• There are no specific thresholds for applicability. Even small deductions must comply with the rules outlined in this section.

Key Obligations and Rights

• Employer Obligations: Employers can only make deductions specifically listed in Section 18. They must follow a transparent process and ensure deductions are reasonable and justified. Employers must maintain proper records of all deductions made.
• Employee Rights: Employees have the right to receive their full wages, less only legally permissible deductions. They have the right to question any deduction made from their wages and seek clarification from the employer. Employees are protected from arbitrary or excessive fines or deductions.

Compliance and Penalties

Violating Section 18 can lead to penalties for employers. Labour Inspectors can conduct inspections to verify compliance. Penalties can include fines, and in serious cases, imprisonment. Repeated violations can lead to more severe consequences. The exact penalty amount will be determined by the appropriate authority based on the nature and severity of the violation.

Practical Examples

• Example 1: A factory worker damages a machine due to negligence. The employer can deduct the cost of repair (or a reasonable amount) from the worker’s wages, after giving the worker an opportunity to explain the incident.
• Example 2: An employee takes an advance of ₹5,000 from their employer. The employer can recover this amount in installments from the employee’s wages, but only with the employee’s consent and as per an agreed-upon repayment schedule. The employer cannot deduct the entire amount in one go without consent.