President clears ordinance to let companies pay salary via bank transfer, cheque

Industries and businesses will have a free hand to pay employees their salary by cheque or direct bank transfer rather than cash on the next payday.

President Pranab Mukherjee promulgated the ordinance to amend the Payment of Wages Act on Wednesday evening as proposed by the Union cabinet last week. The ordinance comes into force with immediate effect.

The law – which currently covers those earning a monthly salary of Rs 18,000 or less – had mandated that employees be paid in cash only. It was amended during Emergency, in 1976, to give employers the option of crediting the salary into the employees’ bank account or pay by cheque.

But this could be done only if the employer had a written authorisation from each worker. If there were employees who preferred to receive the money in cash, the employer could not, say, pay by cheque.

The ordinance cleared by Rashtrapati Bhavan removes the requirement of obtaining written authorisation from workers.

Labour minister Bandaru Dattatreya had introduced a bill, on the lines of the ordinance, in the Lok Sabha on December 15, a day before the Winter Session came to an end.

A government official said the amendment was conceived to encourage digital transactions and would help reduce the demand for cash by employers for disbursal of salaries. Many had complained earlier this month about the difficulties they faced to pay employees in cash.

Last week, an official statement had claimed that the amendment would ensure that minimum wages were paid to employees and their social security rights could be protected.
“Thus the employers can no longer under-quote the number of employees employed by them in their establishments to avoid becoming a subscriber to the EPFO or ESIC schemes,” the statement said.