Union Fund Deductions: Are Companies Required to Withhold from Employee Salaries?

Union Fund Deductions from Payroll

If the union asks for union funds to be deducted from employee salaries in the company payroll, is it mandatory?

No, it is not mandatory. It is up to an individual's choice for the subscription of such deductions.

No, it is not mandatory. Such requests usually come from Trade Unions whose members do not pay their agreed union funds on time. Besides, I would urge you to go through the Trade Unions Act, which will provide some insights into this body and its responsibilities.

These Union Leaders just want to use your company infrastructure for their own goals. I recommend rejecting such requests promptly but with politeness and firmness.

Wishing you good luck.

PS: Always inform the union leaders that the order came from above and never reveal the source. Be absolutely discreet in union matters. Do not discuss this with anyone and do not trust anyone.

Best regards,
Ukmitra

Only certain deductions are permissible under 'The Payment of Wages Act'.

No authorization is required for statutory deductions like Provident Fund, ESI, Professional Tax, Income Tax, etc.

Any other deductions are to be made only after obtaining express written undertaking/authorization from the concerned employees. The union membership fee could be deducted from the salary/wages of employees provided that management has signed an agreement to that effect with the union and all union members have submitted their written consent to management. Sometimes the union insists the management deduct and remit the membership subscription of their members. However, one should be careful before accepting such demands. Deduction and remittance of membership on behalf of a certain union will prove that the said union is the only recognized union. In case, in the future, if there is a dispute among union members regarding union membership, this will create a problem for management. In a situation where a few members are willing to quit the existing union, the management would not be in a position to discontinue the deduction of the union subscription fee of the present union. Before accepting and implementing such demands from the union, the management should give very careful thought.

Legally speaking, management is not bound to accept such demands of the union. It is always a matter of mutual understanding between the union and management. However, an undertaking once signed could not be discontinued until the agreement period is over.

Regards,
[Name Removed For Privacy Reasons]

Of course, I agree with one and all, but when it comes to a unionized situation, there are certain inherent give-and-take matters that may warrant some mutual agreements. Legally, the employer is not bound, but they are bound by certain bi/tri-partite agreements with the union. When such deductions are mutually agreed upon, there arises a need to yield to pressure. I believe that as long as the monthly deductions are kept within a reasonable amount, say < Rs. 100/-, employees may not make it a big issue. How these unions are utilizing this kitty is a different story.

Regards.

Dear Ksri_nivas,

What you are referring to—i.e., "if a union asked to deduct union funds from employee salaries in company payroll"—is a well-established personnel (HR) practice in large, established business houses with recognized unions.

In fact, the Labor Department considers this an authentic proof of membership in a particular union when there is an issue relating to a recognized union or representative union.

This practice is followed throughout the developed industrial world. Here, unions request management to facilitate such deductions (union membership fees) from employees' salaries. An employee authorizes management for such deductions by applying in a specified format.

This system is called the "Check-Off" system.

This system is relatively unknown to HR professionals in the IT/ITES sector or in small private companies, as they do not have (or do not allow) any employee unions, or such practices are discouraged in their companies.

Here's a link to the website of National Insurance Co. where the circular is displayed. I hope this helps you in understanding and implementing such a system in your company.

[link outdated-removed] (Search on Cite | Search on Google)

Do revert back in case you have any further queries on this.

Warm regards.

Friends,

While it may not be mandatory under the law, in the case of a recognized union, it is a customary condition of recognition that written communication from the union is required to deduct employees' contributions for union members. Ensure that requests come only from recognized unions and that they provide an annual list of their members. No deductions should be made for employees who are not members of the recognized union, and the amount deducted should be given to the union only by a crossed cheque with acknowledgment.

It would also be helpful to post a notice on the notice board regarding such requests and your intention to deduct membership fees from members of the recognized union. This will allow any objections from individual employees to be addressed.

If you refuse to accept such a request, the union may create difficulties for management, and the purpose of recognition may be defeated. Do not view every issue solely through the lens of the law.

Regards,
O. Abdul Hameed
Formerly Additional Commissioner ESIC

Dear Sh Srinivas, My colleague, Sh. Raj Kumar, has rightly mentioned the check-off facilities. The 'Check-Off' is a procedure whereby an employer deducts union contributions directly from an employee's pay and pays the money to the union. I agree with my other colleague, Abdul Hameed, that this facility is normally extended only to the recognized union by the management. Though the Payment of Wages Act, 1936, does not restrict the check-off facility only to the recognized union, any registered trade union can ask for the same. The union has to obtain written consent from their members and submit authorization to the management. The list provided by the union at the beginning of the year is not allowed to alter or change during the year. It is an authorized deduction permissible under Section 7 (kkk) of the Payment of Wages Act, 1936.

Regards,
BS Kalsi Member since Aug 2011

If union-related payments, such as subscriptions or any other matters related to cash, are totally illegal on the part of the management, it is evident that the management is in favor of the union in the company. If this is carried out, the unions will take control of the management's activities, and the HR department will have to submit to the unions. Union leaders will end up running the company. Never! Never! Never! No labor law mandates that union activity payments should be deducted by the management.

We can deduct union fees after receiving written authorization from the concerned employees.

Regards,
Bharat

If it is deducted with the consent of the employee, how is the amount transferred to the union account? Is it with the consent of the auditors, and will it not appear in the balance sheet/trial balance? Please clarify.

In some areas, the check-off system exists. As some of the members explained, in the check-off system, "the deduction of subscription is part of the check-off system." In any case, the deduction of subscriptions for recognized associations in any organization is an ideal situation.

With due respect to @O. Abdul Hameed, @Raj Kumar, @Sh Srinivas, and other members, I wish to add that such cases of deduction from employee salary as "Check off Facility" work well when there is a large employee strength, where the union finds it practically difficult to collect the funds from their members. As rightly pointed out, consent in writing is a must from members and has its own additional HR process for the company to maintain such documents.

Practical problems arise when there is a dispute by the worker with the union or a new union is formed, and other issues that may arise later. If management agrees to deduct such payment on behalf of the union, I am sorry to say, but it’s like asking for trouble for oneself by gaining nothing. So, always the safe legal counsel advice to management is "AVOID." Provided the company has an employee strength like that of National Insurance Company or Indian Railways, etc., who are spread across the country, such things work as it has its own dynamics and benefits to employees as well.

Regards,
Ukmitra

Unauthorized deductions are strictly prohibited under the Payment of Wages Act. However, in exceptional circumstances, registered trade unions can engage with the union and other members, such as workers, who are willing to contribute to the registered trade union by providing funds.

If anybody has a best-case study, please share it with us.

Thanks,

Regards,
Rajesh Kantubhukta
Human Resources
Adani Wilmar Limited

Unauthorized deduction from salary is prohibited, but generally, most organizations are willing to deduct union fees from the salary after receiving consent from the union or employees. In practice, this type of deduction is often carried out during the wage settlement process, and many unions include a clause for the deduction of union fees from arrears salaries.

Regards,
Bharat Patel

I have an interesting case. We do not deduct union fees from the salary, and there is no agreement to that effect. But now we have received a letter from the Union giving consent of all workers through a General Body meeting, requesting us to deduct a specified amount from each employee to support a worker (who is also the President of the Union) who is experiencing prolonged health issues. Views, please.

I know it is not mandatory, and we can reject it.