Section 22: Deductions for services rendered

Overview

This section of the Code on Wages, 2019, deals with the deductions an employer can legally make from an employee’s wages. It specifically covers deductions for services the employer provides to the employee, like housing or other amenities. It’s important to understand this section to ensure fair wage practices and protect workers’ rights.

Scope and Coverage

• Which employees and establishments are covered: This section applies to all employees covered under the Code on Wages, 2019, regardless of the type of work (skilled, unskilled, manual, etc.) and to all establishments.
• Any thresholds or exclusions: There are no specific thresholds regarding the amount of wage or the size of the establishment for this section to apply. However, any deduction must be explicitly allowed under this Code or other relevant laws. Deductions cannot reduce the wage below the minimum wage fixed by the appropriate government.

Key Obligations and Rights

• Main duties of employers: Employers can only deduct from wages for services actually rendered to the employee. This includes things like providing housing, medical facilities, canteen services, or any other amenity. The employer must have a clear agreement or policy outlining the cost of these services. The deduction amount must be reasonable and reflect the actual cost of the service.
• Important rights or protections for employees: Employees have the right to receive wages without unauthorized deductions. Deductions are only permissible for services the employee voluntarily avails of. Employees have the right to question any deduction made from their wages and seek clarification from the employer. The deduction cannot bring the wage below the statutory minimum wage.

Compliance and Penalties

If an employer makes illegal or excessive deductions from an employee’s wages, they can face penalties. This could include fines, prosecution, and being required to reinstate the deducted amount. Labour inspectors can conduct inspections to verify wage records and ensure compliance with the Code. Repeated violations can lead to more severe consequences.

Practical Examples

• Example 1 from a typical workplace: An employee lives in company-provided housing. The employer deducts ₹2,000 per month from their salary towards rent, based on a pre-agreed rate reflecting the fair market value of similar housing. This is a permissible deduction.
• Example 2 for a borderline scenario: An employer deducts ₹500 per month from all employees’ salaries for a “company welfare fund” even if some employees don’t use the welfare facilities. This is likely an illegal deduction as it’s not tied to a service rendered to each individual employee.