Lok Sabha passes bill to ensure wage payments through e-transfer, cheques

Labour minister Bandaru Dattatreya says Payment of Wages (Amendment) Bill will bring transparency, promote digital economy and timely payments of wages

Labour minister Bandaru Dattatreya. Photo: Ramesh Pathania/Mint
Labour minister Bandaru Dattatreya. Photo: Ramesh Pathania/Mint

New Delhi: Employers will soon be able to pay wages solely via cheque or bank transfer, with the Lok Sabha on Tuesday passing a bill to remove a provision in the law that requires workers’ consent for non-cash wage payments.

The Payment of Wages (Amendment) Bill is part of the National Democratic Alliance (NDA) government’s ongoing drive to create a less-cash economy.

Under the Payment of Wages Act 1936, employers can use cheque or bank transfers to pay wages only with written authorization from the employee. Tuesday’s amendment bill, once it becomes an Act, will replace the old legislation and allow employers to pay in cash, cheque or credit the amount directly to a bank account, even without a worker’s approval.

“The Payment of Wages (Amendment) Bill got Lok Sabha approval today and the ministry shall try to pass this in the Rajya Sabha in the next two days,” said a media officer in the office of labour minister Bandaru Dattatreya. The first leg of the budget session ends on 9 February.

Once the law takes effect, it will also lead to further formalization of the workforce, and provide them social security benefits. Over 90% of India’s 472 million-plus labour market is informal, meaning, workers are deprived of the benefits of formal employment like provident fund and health insurance.

Many workers complain that employers pay them less than the minimum wages mandated by states. Since cashless payments have a trail in the banking system, employers will not be able to shortchange workers.

The Bharatiya Mazdoor Sangh (BMS), an affiliate of the ruling Bharatiya Janata Party (BJP), criticized the move. “Political parties can receive Rs2,000 cash donation but the poor worker cannot. Besides, for withdrawing money, workers will have to spend productive work hours or pay service charge to banks. The central government, though it is saying it is not 100% mandatory, it may do so (implement cashless payments) for central sector workers first and then for others,” said Pawan Kumar, north central zonal secretary of BMS.

Once the bill becomes law, it shall also repeal the Payment of Wages (Amendment) Ordinance 2016, which was promulgated on 28 December to effect cashless transactions as several industries like textiles and apparel said their production had taken a hit due to cash crunch in the country. The ordinance, and now the bill, follow the demonetization of Rs500 and Rs1,000 banknotes on 8 November.

The Lok Sabha also took up for discussion the Specified Bank Notes (Cessation of Liabilities) Bill, 2017 that looks to cease the liability of the Reserve Bank of India on old banknotes of Rs500 and Rs1,000 denominations and specifies punishment for holding such banknotes.

Pretika Khanna contributed to the story.

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