Salary is strictly an agreed compensation for service payable at regular intervals; but a more liberal meaning is frequently given to the word, and its synonyms are ‘Stipend’, ‘Hire’, ‘Wages’, ‘pay’ and ‘Allowance’. This submission recognizes the various modes of recovery of salary due by an employer to an employee.
The Concept of Salary:
The terms salary and wages are emoluments paid to employees by way of recompense for their labor. Salary as distinguished from wages is remuneration paid to an employee whose period of engagement is more or less permanent in character. Both may be paid weekly, fortnightly or monthly, though remuneration for the day’s work is not ordinarily termed as ‘salary’.[i]
(ii) Any annuity or pension;
(iii) Any gratuity;
(iv) Any fees, commissions, perquisites or profits in lieu of or in addition to any salary or wages;
(v) Any advance of salary;
(vi) The annual accretion to the balance at the credit of an employee participating in a recognised provident fund, to the extent to which it is chargeable to tax under Rule 6 of Part A of the Fourth Schedule; and
(vii) The aggregate of all sums that are comprised in the transferred balance as referred to in sub-rule (2) of Rule 11 of Part A of the Fourth Schedule of an employee participating in a recognised provident fund, to the extent to which it is chargeable to tax under sub-rule (4) thereof.[ii]
The above definition of Salary for the purpose of taxation is very wide and covers a range of items within its ambit. This submission being predominantly related to labor laws and practices does not rely on the Income Tax definition.
The definition of ‘wages’ as per S.2(vi) of the Payment of Wages Act, 1936 recognizes all kinds of remuneration whether by way of salary, allowance or otherwise. The object of the Act is to ensure regular and timely payment of wages and to prevent unauthorized deductions being made from wages.[iii] It is pertinent to note the applicability of the Act before ascertaining the mode of recovery.
In normal parlance, the term salary is a monthly remuneration paid by the employer to the employee for the services rendered.
Recovery of Wages under the Payment of Wages Act, 1936:
If the establishment is covered by the Payment of Wages Act, 1936 it is pertinent to note the following steps –
- Wage period may be daily, weekly, fortnightly or monthly. However the wage period shall not exceed one month.[iv]
- A person is working in an establishment with not more than one thousand persons employed; the wage to the particular person shall be paid before the expiry of the seventh day.[v]
- A person with more than one thousand persons employed shall be paid before the expiry of the tenth day.[vi]
- If the employee is terminated by the employer the wages earned by him shall be paid before the expiry of the second working day from the day his employment is terminated.[vii]
- All payment of wages shall be made on a working day.[viii]
S.15 of the Act deals with presentation of application in case of wages being unpaid. The Labor Court or Industrial Tribunal or Labor Commissioner or other officer as with experience as a Judge of a Civil Court or as a stipendiary magistrate may be designated as the authority to whom applications are to be submitted depending upon the State Government’s notification in the Official Gazette.[ix] The limitation period to make an application is 12 months from the date of due of payment of wages.[x] After providing for an opportunity of being heard and after further inquiry, if necessary, the authority may direct the payment of delayed wages.[xi] S.16 permits group applications being made. S.17A prescribes that the property of employer responsible for payment of wages may be conditionally attached. S.20 provides for penalty for offences committed under the Act.
Recovery of money due from an employer under the Industrial Disputes Act, 1947:
S.33C of the Industrial Disputes Act, 1947 provides for recovery of money dues from an employer.
The workman, or any person authorized by him or his assignee or his heirs may make an application to the appropriate Government for the recovery of money due to him.
An application has to be made within one year from the date on which the money became due to the workman from the employer. However, if the Appropriate Government feels that there was sufficient cause, in such a case it may allow the application even after one year.
If the Appropriate Government is so satisfied that any money is so due, it shall issue certificate for that amount to the Collector who shall proceed to recover the same in the manner as an arrear of land revenue.
Other Modes of Recovery of Money:
For establishments that do not fall within the ambit of the above said legislations, the following modes of recovery may be adopted.
Sending a Legal Notice:
It is always important to hire a lawyer, provide all your details including the employment contract and bank account statement as proof to show that salary was not credited, draft a legal notice and issue it to the employer. Clearly mentioning all the consequences is of prime importance. Many entities, to avoid undue litigation may pay and settle the dues.
Resort to Arbitration:
The employment contract usually contains a clause that provides for referring the matter to arbitration in respect of any dispute arising out of the contract. If such an arbitration clause is present, the employee can refer the matter to arbitration and proceed as provided in the contract or as per the provisions of the Arbitration and Conciliation Act, 1996. Arbitration is an alternate dispute resolution and is an out of the court settlement. It is a lot faster than litigating in court and saves time for both the litigant and the court.
Filing a Civil Suit:
A civil suit may be filed for recovery of money due from employer. However, the employee should be caveat enough since the civil suit is a prolonging process. It is recommended that civil suit be kept as the last resort. A summary suit may also be filed under S.37, CPC.
If the employee will be able to establish the fraudulent intent of the employer in not paying the salary, rigorous punitive measures may be resorted to. Complaint may be given to the concerned authority under S.447 of the Companies Act, 2013 or provisions under the Indian Penal Code pertaining to cheating.
Employees ought to be aware of the various remedies in such cases as non-payment or delayed payment of salary. Legal Notice is always considered the best psychological tool to steer forward your claims. Hence, it is important to draft the notice with acumen and precision and it is for this purpose that a skilled lawyer is required.
Edited by Pragash Boopal
Approved & Published – Sakshi Raje
[i] Mohamedalli v. Union of India, AIR 1964 SC 980.
[ii] S.17(1), Income Tax Act, 1961.
[iii] Arvind Mills Ltd. v. Gadgil, AIR 1941 Bom 26.
[iv] S.4, Payment of Wages Act, 1936.
[v] S.5(1)(a), Payment of Wages Act, 1936.
[vi] S.5(1)(b), Payment of Wages Act, 1936.
[vii] S.5(2), Payment of Wages Act, 1936.
[viii] S.5(4), Payment of Wages Act, 1936.
[ix] S.15(1), Payment of Wages Act, 1936.
[x] Proviso to S.15(2), Payment of Wages Act, 1936.
[xi] S.15(3), Payment of Wages Act, 1936.