The Code fixes wage periods, payment timelines and modes of payment, lists the deductions an employer may make, and caps total deductions at half of the wages for any period.
Every employer must fix a wage period for employees. The wage period can be daily, weekly, fortnightly or monthly, but it cannot exceed one month. The wage period decides when payment falls due, so it is the first decision in any payroll design.
The Code does not force a single wage period on every employer. It allows different periods for different categories of employee, provided each respects the one month limit and the corresponding payment timeline.
The payment timeline follows the wage period:
Where wages are paid on a daily basis, payment is made at the end of the shift. Where the wage period is weekly, wages are paid on the last working day of the week. Where it is a fortnight, wages are paid before the end of the second day after the fortnight closes. Where the wage period is monthly, wages are paid before the expiry of the seventh day of the following month.
When an employee is removed, dismissed, retrenched, resigns or becomes unemployed on closure of the establishment, the wages due are to be paid within two working days. Prompt final settlement is therefore a statutory obligation, not a matter of practice.
The Code recognises four modes of payment: current coin or currency notes, cheque, crediting to a bank account, and electronic transfer. This is a deliberate move away from cash only payment.
The appropriate government may notify establishments or classes of employees who must be paid only by cheque or by bank or electronic transfer. For affected employers, digital and traceable payment is mandatory rather than optional, which also supports accurate records for inspection and for any later claim.
An employer may make only those deductions that the Code authorises. The recognised heads include fines, deductions for absence from duty, deductions for damage to or loss of goods entrusted to the employee where the loss is directly attributable to neglect or default, deductions for house accommodation and amenities supplied by the employer, recovery of advances and loans and the interest due, income tax, deductions required by an order of a court or other competent authority, provident fund contributions, and contributions to any welfare or insurance scheme to which the employee has consented.
The overall limit is the protection that matters most. The total deductions in any wage period must not exceed one half of the wages for that period. The cap can be a little higher where payments to cooperative societies are involved, but the general rule is that no employee may lose more than half of the wages in a period to deductions.
Fines are tightly controlled. A fine can be imposed only for acts and omissions listed in a notice that the appropriate government has approved and that is displayed in the workplace. The employee must be given an opportunity to show cause before a fine is imposed.
The total fine in a wage period cannot exceed the prescribed percentage of the wages payable in that period. Fines cannot be recovered in instalments stretched beyond a set period, cannot be recovered once a period has passed, and cannot be imposed at all on an employee below fifteen years of age. Recovered fines must be applied to purposes that benefit the employees, recorded in a register.
Document wage periods and timelines. Record the wage period for each category and align payroll cut off dates to the statutory payment day.
Move to traceable payment. Where notified, ensure wages are paid by bank or electronic transfer and that records are retained.
Audit deductions against the cap. Confirm that every deduction falls within a permitted head and that total deductions never breach half of wages in a period.
Formalise the fines policy. Maintain an approved and displayed list of finable acts, a show cause step, and a fines register, and exclude minors entirely.
Short, direct, on the record.
The timeline depends on the wage period. For daily wages, payment is at the end of the shift. For weekly wages, on the last working day of the week. For a fortnight, within two days of the end of the fortnight. For monthly wages, before the expiry of the seventh day of the following month. The employer fixes the wage period, which cannot be longer than a month.
Wages can be paid in current coin or currency notes, by cheque, by crediting the employee’s bank account, or by electronic transfer. The appropriate government may notify establishments or classes of employees who must be paid only by cheque or by bank or electronic transfer, which pushes payroll towards traceable, digital payment.
Only the deductions the Code authorises are permitted. These include fines, deductions for absence from duty, deductions for damage or loss where the employee is responsible, deductions for accommodation and amenities provided by the employer, recovery of advances and loans, income tax, deductions ordered by a court, provident fund contributions, and contributions to recognised welfare or insurance schemes with the employee’s consent.
Yes. The total deductions in any wage period must not exceed fifty percent of the wages for that period. Where deductions for payments to cooperative societies are involved the limit can be higher, but the general rule is that an employee cannot lose more than half of the wages in a period to deductions.
A fine can be imposed only for acts and omissions that the employer has specified in a notice approved by the appropriate government, and only after the employee has been given an opportunity to explain. The total fine in a wage period cannot exceed a prescribed percentage of the wages, fines cannot be recovered in instalments beyond a set period, and no fine may be imposed on an employee below fifteen years of age.
Speak with our team about a payroll and deductions audit against the Code on Wages.