Salary Day on a Holiday or Sunday: How Should Companies Handle Payment Timing?

Salary Day and Payment Delays

Each organization has its own Salary Day fixed for releasing wages/salaries to its employees. Sometimes, this day differs by a few days due to reasons like computer breakdowns, strikes by banks, or yearly closing work of banks, hartals in the city, etc. Such a delay in the payment of salary by one or two days is willingly accepted by employees too. There are some employee-friendly companies that release salaries earlier as well when they anticipate that the salary day is likely to be disrupted due to some reason.

Payment on Holidays or Sundays

I would like to know, when a Salary Day falls on a holiday or Sunday (which is known to all well in advance), when is the payment supposed to be effected? Is it a day earlier than the fixed salary day or on a later day? Is there any legality? What does the law say?

Direct Debit Concerns

In today's world, many employees have direct debits to their bank accounts on a day disclosed by them to their banks for the monthly deductions of loans, premiums, etc. A delay in crediting salary to their account, even by a single day, may result in the payment of penalties for bouncing EMIs, etc.

Members are requested to express their views.

As long as it does not contravene Section 05 of the Payment of Wages Act, there is no problem. In an employee-friendly culture, salaries can be deposited a day before a holiday or Sunday.

My dear friend, you have already answered your own query!

"There are some employee-friendly companies that release salaries earlier when they anticipate potential disruptions to the salary day. A delay in crediting salary to their accounts, even by a single day, may result in penalties for bouncing EMIs, etc."

This is indeed the practice in all good companies.

Warm regards.

My question is, in case there is a holiday or a Sunday falling on Salary Day, is it not a compulsion on the employer to release the salary on an earlier day?

Practically, I have seen in many companies that credit salaries to the employee's account earlier in case of their leave or an off on the day of salary credit, and it is really a good practice that is employee-friendly too. In many payroll software, the date is defined for the salary transfer that automatically sends instructions to the bank or authority regarding that. Also, it can be customized in case of a holiday or leave so that the salary gets credited on or before the salary day.

Thank you for posting your query. I agree with all senior members who have commented on this post earlier. What they have mentioned is correct.

If you review global standards, payroll processing has transformed to be more employee-friendly. That is why in certain industries payroll processing dates are between the 25th and 30th of every month, irrespective of a scheduled or unscheduled holiday. This enables you to avoid any delays.

If you claim to be an employee-friendly organization, this is the first step in ensuring your organization stands by that repute. After all, salary is the key criterion why an individual employee would associate with you.

Regards

Above all, Prashant is right. The salary for those who are under the purview of the Payment of Wages Act, i.e., salary > Rs 10,000, should be paid before the 7th if the number of employees is less than 1000, irrespective of holidays.

Regards,
Mangesh Wakodkar

I understand your concern. In fact, I often face this dilemma. As HR, I always try to convince management to process the salaries on time, but I have seen that when a salary date falls on a holiday or a weekend, management prefers to process the salary on the next working day and not prior to the holiday. It is ironic. Certainly, it requires an employee-friendly management that considers the sensitivity of the employees during such situations. We as HR should never stop representing what is most appropriate for the employees, though it may require hard selling at times.

- Gia

It is always better to pay salaries on the last working day of the month. Hence, there is no confusion with the dates. For salaries, you may calculate your month from the 21st to the 20th so that the Payroll team has enough time to process salaries.
Regards

I work for a government organization where salaries are typically transferred on the last working day of the month. It is always better to pay salaries the day before a holiday.

Thank you.

I appreciate you for being an HR professional who is concerned about the difficulties and requirements of the workforce. I have seen the emails of most of the members who have given their views, but very few have examined your query from a statutory angle.

Payment of Wages Act, 1936

You may be aware that Section 5 of the Payment of Wages Act, 1936, stipulates that every employer is responsible for the payment of wages to the persons employed by him within the time stipulations. The wages shall be paid before the expiry of the 7th day of the following month if less than 1000 persons are employed, and if he employs more than 1000 workers, before the expiry of the 10th day of the following month.

Salary Day on a Holiday or Sunday

As for your query regarding when a salary day falls on a holiday or Sunday (which is known to all well in advance), when the payment is supposed to be effected - is it a day earlier to the fixed salary day or on a later day? Is there any legality? What does the law say?

I have already explained the statutory requirement in my email above. If you read Section 5 carefully, the wording has been very carefully structured by the legislators. They have used the words "before the expiry of the 7th or the 10th day of the following month," as the case may be. Hence, if you are making the payment a day later, it comes under the category of "Delay in payment of wages," which gives rise to a claim as mentioned under Section 15 of the Payment of Wages Act, 1936. Section 19(6) deals with "Penalty for offences under the Act," which reads as follows:

If any person fails or willfully neglects to pay the wages of any employed person by the date fixed by the authority in this behalf, he shall, without prejudice to any other action that may be taken against him, be punishable with an additional fine which may extend to seven hundred fifty rupees for each day for which such failure or neglect continues.

It is thus always safer and in the interest of the employer as well as employees to make payment of wages a day earlier when the salary/wages day falls on a holiday or Sunday.

Regards,
BS Kalsi
Member since Aug 2011

I agree with Mr. Kalsi that for the payment, we need to refer to the payment of wages as Mr. Kalsi says it should be earlier in the day.

Excellent guidance by Mr. Kalsi, very clear and transparent. Many thanks to Mr. Kalsi, as well as to all participants. Still, one more doubt needs to be cleared.

Payment of Wages on Fixed Dates

As guided by you/law, the last date for payment of wages/salaries is the 7th/10th, and it cannot be extended. Ok, fine. But suppose an organization has fixed its salary day as the 5th of the month by its policy. Is it binding on them lawfully to maintain this date, or can it be extended if the 5th is a Sunday/holiday?

Authority on Fixed Salary Dates

The term “date fixed by authority” – is it referred to which authority – an organizational authority or the lawful authority of section 5?

Already, seniors have posted the same reply as below. In our company, all the salaries are debited into the respective employees' accounts from the 25th of the month to the 30th or 31st of the month, despite there being a holiday in between.

Thanks for the appreciation. My clarification to your queries point-wise is as follows:

1. Suppose an organization has fixed its salary day as the 5th of the month by its policy. Is it binding on them lawfully to maintain this date, or can it be extended if the 5th is a Sunday/holiday? In all labor laws, one should always remember that the legislators have enacted the basic and bare minimum facilities required to be provided to the workers under all the labor laws to stop exploitation by the employers. Everybody is welcome to provide over and above the statutory provisions. The Payment of Wages Act, 1936 requires making payment before the expiry of the 7th or the 10th day of the following month, as the case may be. As long as you make payment before the dates mentioned in the Act, your action is perfectly in order.

In most labor laws, you will find in-built provisions where the appropriate government has been empowered to grant exemption on being satisfied that the establishment is providing facilities or benefits that are more favorable compared to the statutes.

2. The term “date fixed by authority” – is it referred to which authority – an organizational authority or lawful authority of Section 5? If you go through Section 15 of the Payment of Wages Act, 1936, the appropriate government is empowered to appoint the authorities to hear and decide for any specified area all the claims arising out of deductions or delay in payment of wages and impose penalties arising out of malicious & vexatious claims.

Regards,
BS Kalsi
Member since Aug 2011

Dear friends, The regulations regarding the payment of wages are one of the fundamental laws governing labor in any establishment. It's puzzling how there could be such queries among HR personnel. The Act is very clear regarding the due date of wages. The basic four stipulations are:

1. NO WAGE PERIOD SHALL EXCEED ONE MONTH
2. If the employee strength is < 1000, wages should be paid on or before the 7th of the following month.
3. If the employee strength is > 1000, wages should be paid on or before the 10th of the following month.
4. Wages should be paid either in coins or notes, or by check, or by crediting to the employees' bank accounts.

The query is, if the due date falls on a holiday, whether to pay before or after the due date. Isn't it difficult to find the answer based on these four stipulations? Surprising. You know the answer.

Regards

Sincerely appreciate the above comments by 'loginmiraclelogistics', which point out that when the law is very clear, how can we, talented HRs, discuss such a simple query that a 7th-grade student can answer.

Here, I would like to bring to the attention of my learned friend 'loginmiraclelogistics' a point that might have escaped his attention and which is a very, very serious issue, if at all he respects an employee's concern.

Main Point of Discussion

The discussion started on 2nd September with my original post, and the main point on which I expected members' views is not about the final dates for releasing wages under any act. It is to know if any organization makes a policy of its own, fixing a date of salary, say the 1st of every month, and if this date falls on a holiday/Sunday, is it binding on the company to release payment on the earlier day or not.

The above question was raised because...

(please refer to the original post, and a few lines are reproduced below for ready reference...)

"In today's world, many employees get direct debit to their bank account on a day disclosed by them to their banks for the monthly deductions of loans, premiums, etc. A delay in crediting salary to their account, even by a single day, may result in the payment of penalties for bouncing EMIs, etc."

Am I not justified in putting this issue to members' discussion?

Addressing Salary Payment Issues

Regarding your specific issues, I would appreciate it if you could review the pertinent stipulations, namely:

1. The wage period cannot exceed one month.

2. Even in the case of a default, it shouldn't be considered "willful." The onus lies with the employer to prove that it's not "willful."

You may have encountered situations where employers postpone salary payments (either temporarily or permanently) due to reasons such as a lack of funds, sickness, strikes/lockouts, closures, mergers, demergers, and so on (recollect the recent KFA case). In such instances, it is the employer's responsibility to notify employees properly and obtain permission in advance from relevant authorized labor law enforcement authorities such as ALC, etc. This proactive approach will help the employer avoid punitive actions.

In your situation, it is essential that you do not make the mistake of delaying salary payments past the due date (which may have been set by you with the necessary approval of designated authorities) due to intervening holidays. Bringing forward the payment is always the safest and most commendable option.

With regards,

As per Section 4 of the Payment of Wages Act, your company should have a fixed wage period within which the wages should be paid. According to Section 5 of the same act:

(a) Any railway, factory, or *[industrial or other establishment] upon or in which less than one thousand persons are employed shall be paid before the expiry of the seventh day.

(b) Any other railway, factory, or *[industrial or other establishment] shall be paid before the expiry of the tenth day after the last day of the wage period in respect of which the wages are payable.

In other words, suppose you calculate the wage period as the 1st of every month to the 30th or 31st of that month, then the wages should be paid on or before the 7th or 10th day of the subsequent month, as the case may be. Therefore, it should not be a concern whether the salary day falls on a holiday or not. The only thing you have to ensure is whether the above-stipulated period of the 7th or 10th day, as the case may be, is followed.

With regards to your concerns about the EMIs of employees, I would like to inform you that it is not mandatory for the employer to release the salary prior to the date of salary if it falls on a holiday, but only to ensure that it is paid within the stipulated time as per Section 5(a)/(b) of the Payment of Wages Act.

However, if the last day of the payment of wages falls on a holiday, then yes, definitely the employer has to make the payment on the last working day prior to the holiday.

As per the Payment of Wages Act, 1936, the wages of every person employed should be paid as follows:

1. When fewer than 1,000 persons are employed, the wages shall be paid before the expiry of the 7th day of the following month.
2. When more than 1,000 workers are employed, the wages should be paid before the expiry of the 10th day of the following month.

Applicability of the Act:

1. Factories, industrial establishments, tramway service or motor transport service, air transport service, dock, wharf or jetty, inland vessel, mine, quarry or oil-field plantation, workshop, construction activities, or other establishments, etc.
2. In the state of Maharashtra, the Act is extended to shops, commercial establishments, and other related entities.