Chapter VIII · Code on Wages

Offences and Penalties

This chapter sets the punishments for breaking the Code on Wages: fines for underpaying wages, for other breaches and for poor record-keeping, with jail possible only for repeat offenders. It also says who can file a complaint, when the people running a company or firm are personally liable, and how an offence can be settled by paying a fee instead of facing a full prosecution.

5 sections ~6 min read Official text, PDF pp. 24–25

Employers and business ownersHR and payroll managersCompany directors and firm partnersWorkers and trade unions

Key points

1Paying an employee less than what the Code says is due can bring a fine of up to ₹50,000; an employer already convicted who is found guilty of a similar offence within five years faces up to three months' jail, a fine of up to ₹1 lakh, or both. §54
2Breaking any other provision, rule or order under the Code carries a fine of up to ₹20,000 (up to one month's jail, a fine of up to ₹40,000, or both, for a repeat within five years after a conviction), and not keeping records properly carries a fine of up to ₹10,000. §54
3For these other breaches and for record-keeping lapses, the Inspector-cum-Facilitator must first give a written direction with a deadline, and no prosecution follows if the employer complies in time; this chance is not given again if the same kind of violation repeats within five years. §54
4The fines for a first underpayment, a first other breach, record-keeping lapses and ignoring a compounding order can be imposed outside court by a government-appointed officer (not below Under Secretary rank, or the State equivalent) after an enquiry, with power to summon people and documents. §53
5Most offences can be compounded, meaning settled by paying 50% of the maximum fine to a notified Gazetted Officer, either before or after prosecution starts, but not when the person committed a similar offence within the previous five years that was compounded or led to conviction. §56
6When a company, firm, LLP or other association commits an offence, every person who was in charge of and responsible for its business at the time is also treated as guilty, unless they prove it happened without their knowledge or that they took all due care; any director, manager, secretary or officer proved to have consented, connived or been negligent is also liable. §55

At a glance

₹50,000Maximum fine for underpaying wages (first offence)Section 54 Up to 3 months' jail and/or ₹1 lakh fineRepeat underpayment within 5 yearsSection 54 ₹20,000Maximum fine for other breaches (first offence)Section 54 Up to 1 month's jail and/or ₹40,000 fineRepeat other breach within 5 yearsSection 54 ₹10,000Maximum fine for missing or improper recordsSection 54 50% of the maximum fineCompounding feeSection 56 20% of the maximum fineExtra penalty for not complying with a compounding orderSection 56

Earlier law:Payment of Wages Act, 1936Minimum Wages Act, 1948Payment of Bonus Act, 1965Equal Remuneration Act, 1976

Cognizance of offences

In plain words

A court can act on an offence under the Code only on a complaint by or under the authority of the government, an officer it authorises, an employee, a registered trade union or an Inspector-cum-Facilitator, and no court below a Metropolitan Magistrate or Judicial Magistrate of the first class can try the case.

(1)

No court shall take cognizance of any offence punishable under this Code, save on a complaint made by or under the authority of the appropriate Government or an officer authorised in this behalf, or by an employee or a registered Trade Union registered under the Trade Unions Act, 1926 or an Inspector-cum-Facilitator.

(2)

Notwithstanding anything contained in the Code of Criminal Procedure, 1973, no court inferior to that of a Metropolitan Magistrate or Judicial Magistrate of the first class shall try the offences under this Code.

Source: The Code on Wages, 2019, official gazette copy, page 24

Power of officers of appropriate Government to impose penalty in certain cases

In plain words

The government can appoint an officer not below Under Secretary rank (or the State equivalent) to hold an enquiry and impose the fines for a first underpayment, a first other breach, record-keeping lapses and non-compliance with a compounding order, with power to summon people and documents. The repeat offences that can carry jail are not covered.

(1)

Notwithstanding anything contained in section 52, for the purpose of imposing penalty under clauses (a) and (c) of sub-section (1) and sub-section (2) of section 54 and sub-section (7) of section 56, the appropriate Government may appoint any officer not below the rank of Under Secretary to the Government of India or an officer of equivalent rank in the State Government, as the case may be, for holding enquiry in such manner, as may be prescribed by the Central Government.

(2)

While holding the enquiry, the officer referred to in sub-section (1) shall have the power to summon and enforce attendance of any person acquainted with the facts and circumstances of the case to give evidence or to produce any document, which in the opinion of such officer, may be useful for or relevant to the subject matter of the enquiry and if, on such enquiry, he is satisfied that the person has committed any offence under the provisions referred to in sub-section (1), he may impose such penalty as he thinks fit in accordance with such provisions.

Source: The Code on Wages, 2019, official gazette copy, page 24

Penalties for offences

In plain words

Sets the fines and jail terms: up to ₹50,000 for underpaying wages, up to ₹20,000 for other breaches and up to ₹10,000 for record-keeping lapses, with higher fines and possible jail for repeat offenders within five years, and a written chance to comply before prosecution for other breaches and record-keeping lapses (not for underpayment).

(1)

Any employer who—

(a)

pays to any employee less than the amount due to such employee under the provisions of this Code shall be punishable with fine which may extend to fifty thousand rupees;

(b)

having been convicted of an offence under clause (a) is again found guilty of similar offence under this clause, within five years from the date of the commission of the first or subsequent offence, he shall, on the second and the subsequent commission of the offence, be punishable with imprisonment for a term which may extend to three months or with fine which may extend to one lakh rupees, or with both;

(c)

contravenes any other provision of this Code or any rule made or order made or issued thereunder shall be punishable with fine which may extend to twenty thousand rupees;

(d)

having been convicted of an offence under clause (c) is again found guilty of similar offence under this clause, within five years from the date of the commission of the first or subsequent offence, he shall, on the second and the subsequent commission of the offence under this clause, be punishable with imprisonment for a term which may extend to one month or with fine which may extend to forty thousand rupees, or with both.

(2)

Notwithstanding anything contained in sub-section (1), for the offences of non-maintenance or improper maintenance of records in the establishment, the employer shall be punishable with fine which may extend to ten thousand rupees.

(3)

Notwithstanding anything contained in clause (c) of sub-section (1) or sub-section (2), the Inspector-cum-Facilitator shall, before initiation of prosecution proceeding for the offences under the said clause or sub-section, give an opportunity to the employer to comply with the provisions of this Code by way of a written direction, which shall lay down a time period for such compliance, and, if the employer complies with the direction within such period, the Inspector-cum-Facilitator shall not initiate such prosecution proceeding and, no such opportunity shall be accorded to an employer, if the violation of the same nature of the provisions under this Code is repeated within a period of five years from the date on which such first violation was committed and in such case the prosecution shall be initiated in accordance with the provisions of this Code.

Source: The Code on Wages, 2019, official gazette copy, page 24

In plain words

For employers

A written direction from the Inspector-cum-Facilitator comes with a deadline; complying within it stops prosecution, but only once in five years for the same kind of violation.

Did you know?

A first-time underpayment of wages is punishable with a fine only. Jail becomes possible only after a conviction followed by a similar offence within five years.

Did you know?

The 'comply first, then prosecute' written direction applies to other breaches and record-keeping lapses, not to underpaying wages. The Code does not require this step before an underpayment is prosecuted.

Offences by companies

In plain words

If a company, firm, LLP or other association commits an offence, the company and every person who was in charge of and responsible for its business at the time are treated as guilty, unless that person proves the offence happened without their knowledge or that they took all due care to prevent it; directors, partners, managers, secretaries or officers proved to have consented, connived or been negligent are also liable.

(1)

If the person committing an offence under this Code is a company, every person who, at the time the offence was committed was in charge of, and was responsible to the company for the conduct of business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly:

Proviso

Provided that nothing contained in this sub-section shall render any such person liable to any punishment if he proves that the offence was committed without his knowledge or that he exercised all due diligence to prevent the commission of such offence.

(2)

Notwithstanding anything contained in sub-section (1), where an offence under this Code has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.

Explanation

Explanation.––For the purposes of this section,––

(a)

"company" means anybody corporate and includes—

(i)

a firm; or

(ii)

a limited liability partnership registered under the Limited Liability Partnership Act, 2008; or

(iii)

other association of individuals; and

(b)

"director" in relation to a firm means a partner in the firm.

Source: The Code on Wages, 2019, official gazette copy, page 25

Composition of offences

In plain words

An accused person can apply to have an offence (other than one punishable with jail only, or jail plus fine) compounded by a notified Gazetted Officer for 50% of the maximum fine, which ends or prevents prosecution; a similar offence repeated within five years of one earlier compounded or convicted cannot be compounded, and ignoring the officer's order adds a penalty of 20% of the maximum fine.

(1)

Notwithstanding anything contained in the Code of Criminal Procedure, 1973, any offence punishable under this Code, not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, on an application of the accused person, either before or after the institution of any prosecution, be compounded by a Gazetted Officer, as the appropriate Government may, by notification, specify, for a sum of fifty per cent. of the maximum fine provided for such offence, in the manner as may be prescribed.

(2)

Nothing contained in sub-section (1) shall apply to an offence committed by a person for the second time or thereafter within a period of five years from the date—

(i)

of commission of a similar offence which was earlier compounded;

(ii)

of commission of similar offence for which such person was earlier convicted.

(3)

Every officer referred to in sub-section (1) shall exercise the powers to compound an offence, subject to the direction, control and supervision of the appropriate Government.

(4)

Every application for the compounding of an offence shall be made in such manner as may be prescribed.

(5)

Where any offence is compounded before the institution of any prosecution, no prosecution shall be instituted in relation to such offence, against the offender in relation to whom the offence is so compounded.

(6)

Where the composition of any offence is made after the institution of any prosecution, such composition shall be brought by the officer referred to in sub-section (1) in writing, to the notice of the court in which the prosecution is pending and on such notice of the composition of the offence being given, the person against whom the offence is so compounded shall be discharged.

(7)

Any person who fails to comply with an order made by the officer referred to in sub-section (1), shall be punishable with a sum equivalent to twenty per cent. of the maximum fine provided for the offence, in addition to such fine.

(8)

No offence punishable under the provisions of this Code shall be compounded except under and in accordance with the provisions of this section.

Source: The Code on Wages, 2019, official gazette copy, page 25

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