Exploring Wage Payments: What Are the Pros and Cons of Direct Bank Transfers for Salaries?

Dear Friends,

Section 6 of The Payment of Wages Act 1936 states that all wages shall be in current coin or currency notes or in both. Provided that the employer may, after obtaining the written authorization of the employed person, pay him the wages either by cheque or by crediting the wages to his bank account.

What should be the contents in the written authorization?

How is the receipt of salary obtained?

What is the applicability of the register of wages?

Kindly suggest the merits and demerits that could arise by directly crediting the salary account. In my view, I feel there are more merits in this procedure.

Kindly comment.

Your question is about direct employees, I presume. You can pay salary through a bank. In such cases, you also have to issue payslips in the prescribed format. A wages register is also required to be maintained, and signatures obtained. This can be a challenging task for HR when the number of employees is high and spread across different departments/units. If salaries are manually distributed, everyone will need to be present in person to collect their salary and sign the register. However, when salaries are processed through the bank, employees often ignore HR's requests to sign the Wages Register. Failure to obtain employees' signatures may lead to the perception that salaries have not been disbursed. While in practice, sending a salary statement to the bank for crediting individual employee accounts is sufficient, legally, the Register is the document supporting salary payments. The primary advantage of payment through the bank is its convenience. It saves time and energy as there is no need to handle fractional amounts or coins; the full amount is credited directly. From a statutory perspective, maintaining records in hard copy is mandatory unless otherwise authorized in writing by the relevant officer.

Regards,

Madhu.T.K

Dear Madhu,

A circular was issued by the Government of Maharashtra against the disbursement of Contract Labour Salary through a bank. I am not receiving that circular. Could anyone please attach the same?

Regards,
Shahu