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Last updated: December 22, 2016 at 10:47 am

Now, Salary Goes Cashless: Govt Amends 80 Yr Old Law To Allow e-Payment Of Salaries


There are several industries such as manufacturing, transportation, health care etc where salaries below Rs 18,000 are still paid by cash. This even includes contractual jobs in Govt. establishments such as Railways, oil fields, minings etc, which provides low-skill jobs to thousands of employees.

Due to proactive action by Govt. for pushing cashless economy, salaries of these thousands and thousands of employees can now be transferred via electronically, thereby removing the need of cash all together.

A Govt. source said, “The Union Cabinet today approved the ordinance route to amend the Payment of Wages Act, 1936, to allow employers of certain industries to make payment through the electronic mode and cheques,”

80 Year Old Law Amended For Cashless Economy

Payment of Wages Act, 1936 is a 80 year old law which governs payment of salaries under Rs 18,000, all over India.

When it was introduced in April, 1936, the Act ensured that all labors, employees and salaried people do get their salaries and wages via cash or coin. Later, in 1975, a provision was added, which enabled payment of salaries covered under this Act via cheque.

However, with the introduction of cashless economy and NEFT transfers, another amendment was required, which ensured that salary payments can be done via electronic mode.

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Payment of salary via cash would still be valid.

Cashless Effect: Ordinance Passed For Immediate Action

In order to do this, Labour Minister Bandaru Dattatreya introduced The Payment of Wages (Amendment) Bill, 2016, which mainly aims to amend Section 6 of the 1936 version of the Act. Due to this amendment, employers (including Govt. establishments) can now directly transfer salaries into their employee’s bank account via electronic mode.

Note here, that Govt. has passed an ordinance to amend the law. An ordinance is passed when there is a need to immediately implement a new law. Due to the demonetization effect, Govt. has passed an ordinance to quickly allow employers to go cashless.

An ordinance is usually valid for 6 months, and by that time, Govt. has to pass the bill in the Parliament.

Within a span of 12 months, this is the third biggest labor reform announced by Modi Govt. In April, this year, Govt. announced that minimum wage would be soon increased to Rs 10,000 per month; and in August, Govt. introduced a slew of reforms in workplace such as maternity leaves, overtime hours and more.

Note here, that states like Andhra Pradesh, Uttarakhand, Punjab, Kerala and Haryana have already amended state-level rights for this particular Act, which allows employers from their respective states to pay salaries electronically.

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