Overtime Deductions: Legal and Ethical Considerations
Dear HR professionals, please explain if there is some law or if any company can make its own law to deduct money from employees' overtime. Our HR lady deducts late arrivals from our OT. For example, if someone is late for 20 minutes six times in a month, she will deduct 120 minutes from his/her OT hours and then pay the rest. Is this legal? Is it a correct ethical practice? Is this possible to do?
Please help.
Regards.
From India, New Delhi
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1Dear HR professionals, please explain if there is some law or if any company can make its own law to deduct money from employees' overtime. Our HR lady deducts late arrivals from our OT. For example, if someone is late for 20 minutes six times in a month, she will deduct 120 minutes from his/her OT hours and then pay the rest. Is this legal? Is it a correct ethical practice? Is this possible to do?
Please help.
Regards.
From India, New Delhi
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She doesn't have the right to do so. On coming late, she can give a memo or a show cause, but she can't deduct salary or overtime in the name of a fine. It's an absolutely wrong practice that she is doing. You do not need to pay any fine, and they can't do so. Ask them under which section they are deducting your fines. Tell them to provide the section, clause, or any notification.
From India, Mumbai
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From India, Mumbai
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It's not illegal if you are coming late due to not following the official timing rules; in that case, you will have to pay. However, if you were not informed about the deduction beforehand, then you can request an exemption.
Regards
From India, Delhi
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From India, Delhi
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Deductions from Wages Allowable Under the Act
Deductions from the wages of an employed person shall be made only in accordance with the provisions of this Act and may be of the following kinds only:
- Fines: The total amount of fine which may be imposed in any one wage period on any employed person shall not exceed an amount equal to 3% of the wages payable to him in respect of that wage period. No fine shall be imposed on any employed person who is under the age of fifteen years. Every fine shall be deemed to have been imposed on the day of the act or omission in respect of which it was imposed. No fine imposed on any employed person shall be recovered from him by installments or after the expiry of 90 days from the day on which it was imposed.
- Deductions for Absence from Duty
- Deductions for Damage or Loss: Deductions for damage to or loss of goods expressly entrusted to the employed person for custody, or for loss of money for which he is required to account, where such damage or loss is directly attributable to his neglect or default.
- Deductions for House Accommodation: Deductions for house accommodation supplied by the employer or by government or any housing board set up under any law for the time being in force (whether the government or the board is the employer or not) or any other authority engaged in the business of subsidizing house accommodation which may be specified in this behalf by the State Government by notification in the Official Gazette.
- Deductions for Amenities and Services: Deductions for such amenities and services supplied by the employer as the State Government or any officer specified by it in this behalf may, by general or special order, authorize. Explanation: The word "services" in this clause does not include the supply of tools and raw materials required for the purposes of employment.
- Deductions for Recovery of Advances: Deductions for recovery of advances of whatever nature (including advances for traveling allowance or conveyance allowance), and the interest due in respect thereof, or for adjustment of over-payments of wages. 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.
- Deductions for recovery of loans made from any fund constituted for the welfare of labor in accordance with the rules approved by the State Government, and the interest due in respect thereof.
- Deductions for recovery of loans granted for house-building or other purposes approved by the State Government and the interest due in respect thereof.
- Deductions of Income Tax: Deductions of income tax payable by the employed person.
- Deductions by Court Order: Deductions required to be made by order of a court or other authority competent to make such order.
- Deductions for Provident Fund: Deductions for subscriptions to, and for repayment of advances from any provident fund to which the Provident Funds Act, 1925 (19 of 1925), applies or any recognized provident fund as defined or any provident fund approved in this behalf by the State Government, during the continuance of such approval.
- Deductions for payments to co-operative societies approved by the State Government or any officer specified by it in this behalf or to a scheme of insurance maintained by the Indian Post Office.
- Deductions made with the written authorization of the person employed for payment of any premium on his life insurance policy to the Life Insurance Corporation Act of India established under the Life Insurance Corporation Act, 1956 (31 of 1956), or for the purchase of securities of the Government of India or of any State Government or for being deposited in any Post Office Savings Bank in furtherance of any savings scheme of any such government.
- Deductions made with the written authorization of the employed person, for the payment of his contribution to any fund constituted by the employer or a trade union registered under the Trade Union Act, 1926 (16 of 1926), for the welfare of the employed persons or the members of their families, or both, and approved by the State Government or any officer specified by it in this behalf, during the continuance of such approval.
- Deductions made with the written authorization of the employed person, for payment of the fees payable by him for the membership of any trade union registered under the Trade Union Act, 1926 (16 of 1926).
- Deductions for Insurance Premium: Deductions for payment of insurance premium on Fidelity Guarantee Bonds.
- Deductions for Railway Administration Losses: Deductions for recovery of losses sustained by a railway administration on account of acceptance by the employed person of counterfeit or base coins or mutilated or forged currency notes. Deductions for recovery of losses sustained by a railway administration on account of the failure of the employed person to invoice, to bill, to collect or to account for the appropriate charges due to that administration whether in respect of fares, freight, demurrage, wharfage, and carnage or in respect of sale of food in catering establishments or in respect of sale of commodities in grain shops or otherwise. Deductions for recovery of losses sustained by a railway administration on account of any rebates or refunds incorrectly granted by the employed person where such loss is directly attributable to his neglect or default.
- Deductions made with the written authorization of the employed person, for contribution to the Prime Minister’s National Relief Fund or to such other Fund as the Central Government may, by notification in the Official Gazette, specify.
- Deductions for contributions to any insurance scheme framed by the Central Government for the benefit of its employees.
The total amount of deductions which may be made above 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) above, 75% of such wages, and
(ii) In any other case, 50% of such wages.
Where the total deductions authorized exceed 75% or, as the case may be, 50% of the wages, the excess may be recovered in such manner as may be prescribed.
Regards.
From India, Mumbai
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Deductions from the wages of an employed person shall be made only in accordance with the provisions of this Act and may be of the following kinds only:
- Fines: The total amount of fine which may be imposed in any one wage period on any employed person shall not exceed an amount equal to 3% of the wages payable to him in respect of that wage period. No fine shall be imposed on any employed person who is under the age of fifteen years. Every fine shall be deemed to have been imposed on the day of the act or omission in respect of which it was imposed. No fine imposed on any employed person shall be recovered from him by installments or after the expiry of 90 days from the day on which it was imposed.
- Deductions for Absence from Duty
- Deductions for Damage or Loss: Deductions for damage to or loss of goods expressly entrusted to the employed person for custody, or for loss of money for which he is required to account, where such damage or loss is directly attributable to his neglect or default.
- Deductions for House Accommodation: Deductions for house accommodation supplied by the employer or by government or any housing board set up under any law for the time being in force (whether the government or the board is the employer or not) or any other authority engaged in the business of subsidizing house accommodation which may be specified in this behalf by the State Government by notification in the Official Gazette.
- Deductions for Amenities and Services: Deductions for such amenities and services supplied by the employer as the State Government or any officer specified by it in this behalf may, by general or special order, authorize. Explanation: The word "services" in this clause does not include the supply of tools and raw materials required for the purposes of employment.
- Deductions for Recovery of Advances: Deductions for recovery of advances of whatever nature (including advances for traveling allowance or conveyance allowance), and the interest due in respect thereof, or for adjustment of over-payments of wages. 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.
- Deductions for recovery of loans made from any fund constituted for the welfare of labor in accordance with the rules approved by the State Government, and the interest due in respect thereof.
- Deductions for recovery of loans granted for house-building or other purposes approved by the State Government and the interest due in respect thereof.
- Deductions of Income Tax: Deductions of income tax payable by the employed person.
- Deductions by Court Order: Deductions required to be made by order of a court or other authority competent to make such order.
- Deductions for Provident Fund: Deductions for subscriptions to, and for repayment of advances from any provident fund to which the Provident Funds Act, 1925 (19 of 1925), applies or any recognized provident fund as defined or any provident fund approved in this behalf by the State Government, during the continuance of such approval.
- Deductions for payments to co-operative societies approved by the State Government or any officer specified by it in this behalf or to a scheme of insurance maintained by the Indian Post Office.
- Deductions made with the written authorization of the person employed for payment of any premium on his life insurance policy to the Life Insurance Corporation Act of India established under the Life Insurance Corporation Act, 1956 (31 of 1956), or for the purchase of securities of the Government of India or of any State Government or for being deposited in any Post Office Savings Bank in furtherance of any savings scheme of any such government.
- Deductions made with the written authorization of the employed person, for the payment of his contribution to any fund constituted by the employer or a trade union registered under the Trade Union Act, 1926 (16 of 1926), for the welfare of the employed persons or the members of their families, or both, and approved by the State Government or any officer specified by it in this behalf, during the continuance of such approval.
- Deductions made with the written authorization of the employed person, for payment of the fees payable by him for the membership of any trade union registered under the Trade Union Act, 1926 (16 of 1926).
- Deductions for Insurance Premium: Deductions for payment of insurance premium on Fidelity Guarantee Bonds.
- Deductions for Railway Administration Losses: Deductions for recovery of losses sustained by a railway administration on account of acceptance by the employed person of counterfeit or base coins or mutilated or forged currency notes. Deductions for recovery of losses sustained by a railway administration on account of the failure of the employed person to invoice, to bill, to collect or to account for the appropriate charges due to that administration whether in respect of fares, freight, demurrage, wharfage, and carnage or in respect of sale of food in catering establishments or in respect of sale of commodities in grain shops or otherwise. Deductions for recovery of losses sustained by a railway administration on account of any rebates or refunds incorrectly granted by the employed person where such loss is directly attributable to his neglect or default.
- Deductions made with the written authorization of the employed person, for contribution to the Prime Minister’s National Relief Fund or to such other Fund as the Central Government may, by notification in the Official Gazette, specify.
- Deductions for contributions to any insurance scheme framed by the Central Government for the benefit of its employees.
The total amount of deductions which may be made above 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) above, 75% of such wages, and
(ii) In any other case, 50% of such wages.
Where the total deductions authorized exceed 75% or, as the case may be, 50% of the wages, the excess may be recovered in such manner as may be prescribed.
Regards.
From India, Mumbai
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Dear Varun, Suppose Mr. XYZ is late 3 times in March and then he is not late in April & May. In May, he is doing 3 hours of overtime. Then, while making his salary for the month of May, if the late deductions from March are adjusted from his salary, is this a correct action?
I understand that coming late is not following the rules. However, this should be judged based on the following points:
- Is this a regular habit of that person?
- Is it natural to be late 2 or 3 times for 5-10 minutes due to traffic reasons?
- Or is this simply not following the company rules?
I hope this is clear to you now.
Regards,
From India, New Delhi
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I understand that coming late is not following the rules. However, this should be judged based on the following points:
- Is this a regular habit of that person?
- Is it natural to be late 2 or 3 times for 5-10 minutes due to traffic reasons?
- Or is this simply not following the company rules?
I hope this is clear to you now.
Regards,
From India, New Delhi
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As an employer, it is your responsibility to define the working hours. If an employee works more hours than specified, they are eligible for overtime. Similarly, if an employee arrives late, you have the right to deduct their salary. While the reason for being late may be valid from the employee's perspective, as an employer, you must establish general rules that apply universally, without favoring specific employees.
Furthermore, it is inappropriate to adjust late arrivals retrospectively after the end of a particular month. I hope you understand this perspective from the employer's point of view.
From India, Delhi
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Furthermore, it is inappropriate to adjust late arrivals retrospectively after the end of a particular month. I hope you understand this perspective from the employer's point of view.
From India, Delhi
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I believe that adjusting 3-5 instances of tardiness with a half-day leave is a common practice, but deducting from overtime pay is not appropriate. What are your thoughts on this?
From India, New Delhi
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From India, New Delhi
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There are no laws allowing \"late arrival\" to be deducted from Overtime.
From India, Bangalore
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From India, Bangalore
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For these kinds of deductions, it is important for the employer to inform employees at the time of joining or to mention them in the handbook. If any policy is introduced later, it should be circulated among all employees before making any deductions. Every company has its own policies. For example, three late arrivals in one month may be considered as half-day leave in one organization, while the same may be considered as Loss of Pay (LOP) in another organization.
Regards, Radhika
From India, Hyderabad
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Regards, Radhika
From India, Hyderabad
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I do not know much about the law, but I think she is doing the right thing because if she mentioned a half day for your late coming, then this amount is much more than your overtime amount.
For example, if you are 20 minutes late and this happens 6 times in a month, it means your total half days are 6 in a month or 3 leaves in a month, equivalent to 240 hours. According to your words, she will deduct only 120 hours. I am not well-versed in law, but after our discussion, I also studied this topic.
I hope this helps clarify the situation. Let me know if you have any further questions.
Best regards
From India
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For example, if you are 20 minutes late and this happens 6 times in a month, it means your total half days are 6 in a month or 3 leaves in a month, equivalent to 240 hours. According to your words, she will deduct only 120 hours. I am not well-versed in law, but after our discussion, I also studied this topic.
I hope this helps clarify the situation. Let me know if you have any further questions.
Best regards
From India
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Fine should not be collected from overtime. If she wants to punish them, she can issue a memo; otherwise, a show cause. After three memos, she can make a decision legally. The company should be legally strong.
Deducting money for being late is not good. If the employee repeats this, she can warn them, and after that, she can decide to terminate them.
For example, if an employee comes late and knows they will be fined, it will not affect them, and other employees will think the same. It is better to take immediate action (e.g., Termination, Suspension) so that others will follow your company policies.
From India, Mumbai
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Deducting money for being late is not good. If the employee repeats this, she can warn them, and after that, she can decide to terminate them.
For example, if an employee comes late and knows they will be fined, it will not affect them, and other employees will think the same. It is better to take immediate action (e.g., Termination, Suspension) so that others will follow your company policies.
From India, Mumbai
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Your HR is correct. When you work extra hours, they will pay overtime. Likewise, if you arrive late, the amount can be deducted according to the company policy. One should be punctual to duty. You are deviating from the rules.
From India, Hyderabad
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From India, Hyderabad
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Absence and Wage Deductions Under the Payment of Wages Act
If someone is late by 20 minutes or 2 hours on 6 occasions or more, according to the Payment of Wages Act 1936, Section 8b, it is considered an absence from duty. Consequently, this absence can be deducted from the wages. However, it cannot be deducted from overtime pay or adjusted against overtime.
Thank you.
Regards.
From India, Delhi
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If someone is late by 20 minutes or 2 hours on 6 occasions or more, according to the Payment of Wages Act 1936, Section 8b, it is considered an absence from duty. Consequently, this absence can be deducted from the wages. However, it cannot be deducted from overtime pay or adjusted against overtime.
Thank you.
Regards.
From India, Delhi
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Please do not mention Lady HR; it indicates what is going on there. As per what they agreed upon in the standing order, deductions can be made from the salary. In my point of view, if a person, X, is consistently late daily, it is a notable issue. "We are the HR department; we understand the importance of production and, moreover, the workforce. Whatever the situation may be, we should follow the rules."
Regards,
From India, Chennai
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Regards,
From India, Chennai
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I think that if he is not a regular latecomer, HR can address it. In our organization, if you have three late marks (more than one hour and without notice), we deduct a maximum of half a day's salary but only after conducting a personal meeting with the employee. However, in target-oriented job sections, we don't deduct salary if the employee achieves at least their salary.
From India, Kolkata
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From India, Kolkata
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Attendance Policy and Salary Deductions
The management reserves the right to treat the employee as absent with consequent deductions of salary as per the provisions of the Payment of Wages Act 1936 under Section 9. It can be suggested to change the present attendance policy. A grace period of 15 minutes is usually acceptable (this cannot be presumed as a matter of right). After that, for every three late markings, a half-day may be deducted. For further reference, refer to Section 9 of the Wages Act 1936.
From India, Mumbai
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The management reserves the right to treat the employee as absent with consequent deductions of salary as per the provisions of the Payment of Wages Act 1936 under Section 9. It can be suggested to change the present attendance policy. A grace period of 15 minutes is usually acceptable (this cannot be presumed as a matter of right). After that, for every three late markings, a half-day may be deducted. For further reference, refer to Section 9 of the Wages Act 1936.
From India, Mumbai
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Deduction of late marks as a penalization is a right reserved by the company, similar to recognition for good work in terms of ethics.
Secondly, the same amount can be deducted from the salary, not from overtime, provided that employees are informed of this information and agree to it before any deductions are made.
Thank you.
Regards.
From India, Mumbai
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Secondly, the same amount can be deducted from the salary, not from overtime, provided that employees are informed of this information and agree to it before any deductions are made.
Thank you.
Regards.
From India, Mumbai
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Accepted the fact that it is not only inappropriate on ethics but also illegal to deduct Late Coming from Over Time.
Here, two points need to be clarified.
1. Payment of Wages Act 1936
As per the Payment of Wages Act 1936, the company reserves the right for deductions in case an absence is marked for employees being absent. I firmly believe that there might be a so-called leniency for some duration for late coming on certain occasions as per HR Policy. The question then is why the employee is not informed of such policies? If he is informed, then why is he not taking precautions? If the example mentioned is true, then 6 Days of Late Coming is not acceptable.
2. Completion of Working Hours
Is the employee, even after coming late, completing his total working hours for that day? If it is true, then the deduction should not be there. He has already completed his quota of work. As such, again the conflicting policy of 48 hours of work in a week gets applied. 10 hours a day or 7 hours a day. The total should not exceed 48 hours.
The final verdict is that this all depends again on the policies of the organization. While it is incorrect to deduct late coming from overtime wages, it is also not ethical to take leverage and come late more frequently.
Regards,
Dr. Urjit Kavi
From India, Delhi
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Here, two points need to be clarified.
1. Payment of Wages Act 1936
As per the Payment of Wages Act 1936, the company reserves the right for deductions in case an absence is marked for employees being absent. I firmly believe that there might be a so-called leniency for some duration for late coming on certain occasions as per HR Policy. The question then is why the employee is not informed of such policies? If he is informed, then why is he not taking precautions? If the example mentioned is true, then 6 Days of Late Coming is not acceptable.
2. Completion of Working Hours
Is the employee, even after coming late, completing his total working hours for that day? If it is true, then the deduction should not be there. He has already completed his quota of work. As such, again the conflicting policy of 48 hours of work in a week gets applied. 10 hours a day or 7 hours a day. The total should not exceed 48 hours.
The final verdict is that this all depends again on the policies of the organization. While it is incorrect to deduct late coming from overtime wages, it is also not ethical to take leverage and come late more frequently.
Regards,
Dr. Urjit Kavi
From India, Delhi
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Employee Deductions and Legal Compliance
As per laws, no such kind of deduction is permissible. Instead, the HR Executive and HR Department plan the manpower required in the company well in advance. If any employee arrives late at the factory, there is a loss of manpower and a decrease in production levels. Any loss incurred by the company due to such circumstances falls under deductions.
It is a principle of natural justice that if an employee is absent from their duties without any prior intimation, it indicates a lack of regard for the rules and regulations outlined in the company's standing orders. In such a scenario, the deduction of time is deemed fair in my opinion.
Regards
From India, Delhi
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As per laws, no such kind of deduction is permissible. Instead, the HR Executive and HR Department plan the manpower required in the company well in advance. If any employee arrives late at the factory, there is a loss of manpower and a decrease in production levels. Any loss incurred by the company due to such circumstances falls under deductions.
It is a principle of natural justice that if an employee is absent from their duties without any prior intimation, it indicates a lack of regard for the rules and regulations outlined in the company's standing orders. In such a scenario, the deduction of time is deemed fair in my opinion.
Regards
From India, Delhi
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As per laws, no such kind of deduction is permissible. Instead, the HR Executive and HR Department should plan the required manpower in the company well in advance. If any employee arrives late at the factory, there is a loss of manpower and a decrease in production levels. Any kind of loss to the company falls under deduction. As a principle of natural justice, if an employee is absent from their duties without any intimation, it indicates non-compliance with the rules and regulations outlined in the company's standing orders. In this situation, the deduction of time is fair in my opinion.
Dear, you may need to first check what is mentioned in the HR Manual of the Company. Late arrival deductions are common, but adjusting them in overtime is new for us. Kindly review your Manual first concerning Timekeeping Rules.
Thanks
From India, Pune
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Dear, you may need to first check what is mentioned in the HR Manual of the Company. Late arrival deductions are common, but adjusting them in overtime is new for us. Kindly review your Manual first concerning Timekeeping Rules.
Thanks
From India, Pune
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