Navigating Worker Advances in Haryana: What's Allowed and How to Document It?

Dear All,

We are running a factory in Haryana state. According to the act and state rules, can we give advances to our workers? If yes, what will be the maximum amount, and what type of records are required to keep for the safe side...?

Dear Surinder,

Salary advances or financial loans are out of the purview of the law. That is an internal matter of your company. Earlier, there was a similar query wherein I had provided my response. You can check the following link: https://www.citehr.com/524137-employ...ml#post2223617

Thanks,
Dinesh Divekar

Dear Surinder, please see the Payment of Wages Act 1936 along with Haryana Rules. The relevant section of PWA is given below:

Deductions for recovery of advances

Deductions under clause (f) of sub-section (2) of section 7 shall be subject to the following conditions, namely:

(a) Recovery of an advance of money given before employment began shall be made from the first payment of wages in respect of a complete wage-period, but no recovery shall be made of such advances given for traveling expenses.

(aa) Recovery of an advance of money given after employment began shall be subject to such conditions as [the appropriate Government] may impose.

(b) Recovery of advances of wages not already earned shall be subject to any rules made by [the appropriate Government] regulating the extent to which such advances may be given and the installments by which they may be recovered.

However, care has to be taken so that the total amount of deductions which may be made in any wage-period from the wages of any employed person shall not exceed:

(i) In cases where such deductions are wholly or partly made for payments to co-operative societies under clause (j) of sub-section (2), seventy-five percent of such wages, and

(ii) In any other case, fifty percent of such wages.

So, while granting advances, ensure that the Haryana PW Rules are complied with and the deduction thereof falls within the said limits.

You can extend 8 times of their Basic+DA as an advance.

Kindly refer to Section 79 of the Factories Act.

Thank you.

I appreciate the comments given by Sri Dinesh Ji in the attached link; it's worth reading. I can only add that while processing the loan/advance applications, we need to keep in mind the provision of Sec. 7(3) of the Payment of Wages Act, 1936.

Under 10(3) of The Punjab Payment of wages rule 1937, "Advances of unearned wages can be made at the paymaster's discretion during employment but must not exceed the amount of two month's wages without the permission of an Inspector" But can be recovered by instalment spread over not more than twelve months and the installments must not exceed one-third or if
the wages are not more than twenty rupees one-forth of the wages for
any wages period,
Thanks & Regards,
From,
Sumit Kumar Saxena

Salary Advance Policy

A salary advance may be granted to an employee only to provide relief from extreme personal hardship or to accommodate personal needs during business travel on approved paid leave.

Any permanent employee, after the probationary period, is eligible to apply for a salary advance. The employee should not be overly indebted to the company; their credit rating, based on experience known to the company, should be satisfactory, and there should be no question about the continuation of employment.

A request for a salary advance must be submitted in writing to the HR Manager via the Department Manager. If the request is approved by both the Department Manager and HR Manager, the letter will be arranged with the General Accounting Department to verify the employee's eligibility and to issue a check or cash to fulfill the request.

Normally, a salary advance will be limited to a maximum of one month's pay. However, the request should be limited to no more than what is reasonably necessary.

The advance may be paid in the currency and by cash or check, at the location selected by the employee, provided it is convenient and appropriate for the company to accommodate them.

The entire amount of any advance granted to accommodate personal needs during business travel will be deducted from the employee's salary at the next subsequent pay date(s). No delayed or periodic repayments are authorized. Repayment of any salary advance granted for relief from extreme personal hardship will be deducted from the employee's salary in equal amounts over a period not to exceed six months, beginning at the next subsequent pay date(s).

Basically, the salary advance for the employee is a benefit without interest required. If the time of reimbursement exceeds the stipulated period, the company will charge the salary advance at the interest rate of the current market.

Regards, John