Is It Legal to Deduct Canteen Food Costs from Wages Under the Payment of Wages Act?

Deduction from Wages for Canteen Food

Can it be allowed under the Payment of Wages Act to deduct from wages/salary for food taken in the canteen in any establishment, mines, or factory?

Employer Obligations Regarding Canteen Services

The employer is not bound to provide free food under any Act. A canteen may be run by the establishment on a subsidy or a no-profit-no-loss basis. You can either pay directly at a counter or through food coupons or monthly deductions from wages.

Dear Debiprasad,

Please refer to the heading under DEDUCTIONS in the Payment of Wages Act, 1936, which applies to establishments covered by the Factories Act, 1948, and the Mines Act, 1952.

Section 7(2)(e) of the PWA, 1936, authorizes the deduction towards the supply of statutory amenities provided by the employer. Beyond a certain threshold strength of employees, a canteen facility is mandatory under these Acts. Even otherwise, the shift working pattern as well as the continuous nature of work of these employees justify the provision for the supply of food and refreshments through a canteen or some other arrangement by the employer. However, the employer is not bound to provide them free of cost. Therefore, those employees availing these facilities need to pay back. Hence, the deduction in this regard from their wages is an authorized one under the above section.

The cost factor in this regard is to be determined based on the number of employees, the type of food, the financial position of the establishment with regard to indirect commitments, and the like. It can be on a subsidized rate basis in which the employer may bear a portion of the costs as a welfare measure or on a no-profit-no-loss basis.

In many companies, the canteen services of tea, snacks, and meals are available against coupons that are issued by either management or the canteen contractor. Workers have these coupon books whenever they need them, for which they need to submit a written requisition. The cost of the coupons is then deducted from their salary/wages. It is the cost of the coupon book and not what is consumed in the canteen. The coupons remain in balance at the end of the month, which workers can use in the next month.

If a worker is separating from the company, the remaining coupons are returned by the worker, and the cost is refunded to them. Sometimes, workers take coupons and sell them to other workers at a discount. This way, the selling worker gets immediate cash, and the buying worker gets the coupons cheaper.

Regards, Vibhakar Ramtirthkar.

Thank you, Umakanthan.M, Sir, for your valuable inputs. Do these deductions require a special order or permission from authorized officers of the State/Central Government under Section 7(2)(e) of the Payment of Wages Act, 1936?

Not at all necessary. The employer is the final authority for such deductions. However, if you are working in a factory, you can maintain a Register of Deductions in the prescribed format.

Mr. Mishra,

There is no need to take approval for the deduction. However, assuming it is a factory, there must be a canteen committee that approves the prices. The canteen must not be making a profit (the canteen contractor will make a profit, of course, but the factory must not make a profit from canteen operations) unless run by a coop of the workers, in which case, they can make a 5% profit.

I disagree with Mr. Nair; this does not go into the register of deductions, which is for losses and damages, not for canteen deductions. However, ensure that the total deduction from salary (including all deductions) does not exceed 50% of gross wages.

The canteen must keep details of deductions and costs and must maintain canteen books of accounts at the end of each year (but preferably at the end of each month).

Register of Deduction

The Register of Deduction is a register for deductions related to damages and losses. It is not intended for the recovery of canteen charges, as these are neither a recovery for loss nor a recovery for damages caused by the employee.

Section 10: Deductions for Damage or Loss

Section 10 refers to the register of deduction as follows:

10. Deductions for damage or loss - [(1) A deduction under clause (c) or clause (o) of sub-section (2) of section 7 shall not exceed the amount of the damage or loss caused to the employer by the neglect or default of the employed person. (1A) A deduction shall not be made under clause (c) or clause (m) or clause (n) or clause (o) of sub-section (2) of section 7 until the employed person has been given an opportunity of showing cause against the deduction, or otherwise than in accordance with such procedure as may be prescribed for the making of such deductions.] (2) All such deductions and all realizations thereof shall be recorded in a register to be kept by the person responsible for the payment of wages under section 3 in such form as may be prescribed.

Therefore, the register is for the recovery of losses caused by the employee.