Ordinances Current Affairs

President gives assent to Payment of Wages (Amendment) Ordinance, 2016

President Pranab Mukherjee has given assent to Payment of Wages (Amendment) Ordinance, 2016, to enable industries to pay wages by cheque or credit into the bank accounts of workers.

The ordinance amends the Payment of Wages Act, 1936 to encourage cashless transactions. With this assent the ordinance becomes law as per article 123 of the Constitution.

Key Provisions of Ordinance
  • Allows industries to pay wages to workers earning up to Rs. 18,000 per month, without taking their explicit consent as required under present Act.
  • Empowers the Union and State governments to specify industries or establishments where wage payments can be made mandatory through banks.
  • However, it is not mandatory for employers to make wage payments through the banking system and they can still pay in cash.
Background

The Union Government had decided to take the ordinance route because after demonetisation of the Rs. 500 and Rs. 1,000 banknotes in November 2016 had led to a cash crunch, and employers were finding it tough to pay workers in cash. The Payment of Wages (Amendment) Bill, 2016, introduced in Parliament was also not able get passed during winter session of the Parliament.

Article 123 of Constitution: It gives legislative power to President. He can issue ordinances when Parliament is not in session (i.e. recess) if there is urgent need to have a law on some urgent public matter. The promulgated ordinance has similar effect to an act of parliament. However, every ordinance must be laid and approved by both houses of the parliament within 6 weeks from the reassembling. If not placed and approved by both houses of the parliament after reassembling it lapses or becomes invalid.

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Union Cabinet approves ordinance to pay salaries by cheques

The Union Cabinet has approved a draft ordinance to empower states and allow industries to pay workers’ wages digitally, through a direct bank transfer to accounts or by cheque in a bid to encourage cashless transactions.

The draft ordinance proposes changes to the Section 6 of the Payment of Wages Act, 1936 to encourage cashless transactions. It will need the President’s assent to become law as per article 123 of the Constitution.

Key Facts
  • It will allow industries to pay wages to workers earning up to Rs. 18,000/ month, without taking their explicitsalary consent as required under present Act.
  • However, wage payment through the banking system will only be optional, until State governments or Union Government come up with a notification for specific industries since Labour is in the concurrent list.
  • The present law (1936 Act) states that all payment of wages should be in cash. Under it has mandatory provision asking employers to obtain written permission of the worker to pay either by cheque or by crediting wages to his or her bank account.
Comment

The payment of wages through cheque or DBT of employed persons has twin motives  i.e. it will reduce complaints regarding non-payment or less payment of minimum wages and serve purpose of digital and less cash economy. The move is significant in view of the Union Government is promoting cashless transactions after its decision to scrap the old high value Rs. 500 and Rs. 1,000 currency notes. Earlier Payment of Wages (Amendment) Bill, 2016 introduced in the Lok Sabha during 2016 winter session but was not cleared owing to the impasse in Parliament.

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