Union Cabinet approves ordinance to amend Payment of Wages Act, 1936

The present law states that all the payment of wages should be made in cash with a provision of taking written permission from the employees to pay them either by cheque, or by crediting the wages to his or her bank account.


Created On: Dec 23, 2016 12:18 ISTModified On: Dec 23, 2016 11:45 IST

The Union Cabinet on 22 December 2016 approved the ordinance amending Payment of Wages Act, 1936 for allowing certain business and industrial establishments to pay salaries and wages through cheques or through the electronic mode.

With the Payment of Wages (Amendment) Bill, 2016, employers will also have the option to pay wages in cash.

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This ordinance is valid for the period of six months only and the government is required to get the bill passed in Parliament within this period only.

The Bill was introduced by the Labour Minister Bandaru Dattatreya amidst the ruckus over the demonetisation issue that has engulfed the whole country with the cash crunch.

Provisions of the Payment of Wages (Amendment) Bill, 2016

•  It seeks to amend Section 6 of Payment of Wages Act, 1936 to enable employers to pay wages to employees through cheques or by crediting the salaries to their bank accounts electronically.
•  It will allow the State Governments to specify industrial or other establishments that adopt cashless way for salary payments.
•  The new procedure will serve the objective of digital and cashless economy.


Currently, wages were given through cheque or transferred to his or her bank account with the written authorisation of an employee as per the Payment of Wages Act, 1936.

The Act had come into force on 23 April 1936 to provide for payment of wages in coin or currency notes, or in both. However, it was in 1975, that the provision for payment of wages by cheque or crediting it into bank account after obtaining the requisite authorisation of employee was inserted into the Act.

At present, the Act covers all those employees in certain categories of establishments whose wage does not exceed Rs 18000 per month.


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