Wage payment deadlines and deductions under the Code on Wages

Under the Code on Wages, 2019, in force since 21 November 2025, no wage period can exceed a month, and monthly wages must be paid before the end of the 7th day of the next month. On resignation, dismissal, removal, retrenchment or closure, wages are due within two working days. Deductions are allowed only for purposes the Code lists, capped at 50% of wages in a wage period.

This guide covers the payment and deduction rules in Chapter III of the Code. For how these dates fit into a payroll cycle, see our monthly payroll process.

Who these rules apply to

The payment of wages chapter applies to every "employee", which the Code defines to include managerial, supervisory and administrative staff as well as workers, but not apprentices. Unlike the old Payment of Wages Act, there is no salary ceiling, so the rules apply to a ₹3,00,000-a-month manager as much as to a ₹15,000-a-month operator. Government establishments are excluded unless notified.

Wage periods under the Code on Wages

The employer fixes the wage period as daily, weekly, fortnightly or monthly. No wage period can be longer than a month, and different wage periods can be fixed for different establishments.

Wages can be paid in cash, by cheque, by bank credit or electronically, and the government can require some establishments to pay only by cheque or bank credit.

Wage payment deadlines: section 17

Wage period	Pay wages
Daily	At the end of the shift
Weekly	On the last working day of the week, before the weekly holiday
Fortnightly	Before the end of the second day after the fortnight ends
Monthly	Before the expiry of the 7th day of the following month
On removal, dismissal, retrenchment, resignation or closure	Within two working days

The appropriate Government may set a different time limit, and the Code does not affect time limits in other laws. Some state Shops and Establishments Acts set their own deadline, for example before the fifth day after the wage period in Telangana, so pay by whichever date is earlier.

Payroll calendar cut-offs that meet the deadline

The 7th is the last legal day, not the target. A practical monthly calendar looks like this:

Step	Typical timing for a month-end pay date
Attendance and LOP cut-off	20th to 25th of the month
Inputs frozen (joiners, exits, variable pay, loans)	1 to 2 days after cut-off
Payroll run, checks and approval	Following 3 to 4 working days
Bank file released	1 to 2 working days before the pay date
Pay date	Last working day, or no later than the 7th of next month

Absence after the cut-off is adjusted in the next month's payroll. If the 7th is a bank holiday, the transfer must land before it, not after.

Permitted deductions from wages: section 18

The Code says there shall be no deductions from wages except those it authorises. Any payment an employee makes to the employer is treated as a deduction too. The permitted purposes are:

Deduction	Conditions in the Code
Fines	Only for notified acts and omissions, with conditions (see below)
Absence from duty	In proportion to the period of absence
Damage to or loss of goods entrusted to the employee, or loss of money they must account for	Only where directly due to the employee's neglect or default; not more than the loss; after a chance to show cause
House accommodation supplied by the employer, government or a housing board	Only if accepted by the employee; not more than its value
Amenities and services authorised by the government	Not more than their value; tools and raw materials are not "services"
Advances, including adjustment of overpaid wages, and interest	Subject to conditions on timing (see below)
Loans from a labour welfare fund, and loans for house-building or other approved purposes	As prescribed by the government
Income tax, other statutory levies and court or authority orders	For example TDS, professional tax and attachment orders
Social security contributions	PF, pension, health insurance such as ESI, and repayment of advances from those funds
Co-operative society payments	On conditions the government imposes
Trade union membership fees	Only with the employee's written authorisation
Contributions to the PM's National Relief Fund or a notified fund	Only with the employee's written authorisation

The list also has railway-specific items. Anything outside it, such as a deduction for a uniform deposit or a training bond without a legal basis, is a risk.

If the employer deducts an amount and does not deposit it where the law requires, such as PF, the employee is not responsible for that default.

Fines

A fine can be imposed only for acts and omissions listed in a notice approved by the government and displayed at the workplace, and only after the employee has had a chance to show cause. The total fines in a wage period cannot exceed 3% of the wages for that period. No fine can be imposed on an employee under 15. Fines cannot be recovered in instalments, or more than 90 days after they were imposed, and must be recorded in a register. Realisations can be used only for approved purposes that benefit employees; some state laws route them to the labour welfare fund.

Deductions for absence

The deduction cannot be a larger share of the period's wages than the absence is of the working period. Four days of absence in a 26-working-day month can reduce wages by at most 4/26. There is one exception: if 10 or more employees acting together are absent without due notice and without reasonable cause, the deduction can include up to 8 days' wages in lieu of notice, subject to state rules.

Advances and loans

An advance given before employment began is recovered from the first full wage period, but travel advances given before joining cannot be recovered. Recovery of advances given after joining, and of advances of wages not yet earned, follows conditions the government prescribes. Loan amounts and interest rates also follow prescribed rules. Our guide to salary advance and employee loan policy covers policy design.

The 50% cap on total deductions

Total deductions under section 18 in any wage period cannot exceed 50% of the employee's wages for that period. Where authorised deductions add up to more, the excess may be recovered in the manner the government prescribes, so check your state's rules before carrying a balance forward.

The base is "wages" as defined in the Code. For payment of wages, the Code counts conveyance allowance, HRA, overtime and amounts payable under an award or settlement as wages, while items such as statutory bonus, commission, gratuity and the employer's PF contribution are excluded. Our guide to the Labour Codes wage definition explains the definition, which also has a separate 50% rule for allowances.

Worked example: a deduction stack that hits the 50% cap

An employee in Maharashtra earns ₹30,000 a month: Basic + DA ₹15,000, HRA ₹7,500 and special allowance ₹7,500. All three count as wages for this purpose, so the cap is 50% of ₹30,000 = ₹15,000. Gross is above ₹21,000, so ESI does not apply.

In October the employee is absent for 3 of 30 days without leave. Payroll usually shows this as reduced earnings rather than a deduction, but the Code lists absence as a deduction, so the cautious approach is to count it.

Deduction	Calculation	Amount
Absence	₹30,000 × 3 ÷ 30	₹3,000
PF (employee)	12% of Basic + DA earned: ₹15,000 × 27 ÷ 30 = ₹13,500	₹1,620
Professional tax	Maharashtra monthly amount	₹200
TDS	As projected for the month	₹1,200
Salary advance instalment	As agreed	₹8,000
Laptop damage	After show cause, not more than the loss	₹3,000
Canteen	Authorised amenity	₹1,000
Total		₹18,020

The total is ₹18,020 against a cap of ₹15,000, an excess of ₹3,020. Statutory deductions (PF, PT and TDS) cannot sensibly be deferred, so the employer reduces the advance instalment from ₹8,000 to ₹4,980 and recovers the ₹3,020 later as the rules allow.

Revised total: ₹3,000 + ₹1,620 + ₹200 + ₹1,200 + ₹4,980 + ₹3,000 + ₹1,000 = ₹15,000. Net pay is ₹30,000 less ₹15,000 = ₹15,000. If a fine were also imposed that month, it could not exceed 3% of ₹30,000 = ₹900, and it would still have to fit within the ₹15,000 cap.

Final settlement: the two-working-day rule vs the 45-day practice

Many employers settle F&F 30 to 45 days after the last working day, waiting for clearances and approvals. That practice predates the Code. Section 17(2) now requires wages payable to an employee who resigns, is removed, dismissed or retrenched, or loses employment on closure, to be paid within two working days.

To apply it fairly and precisely:

• The rule covers wages. Salary up to the last working day and other amounts that are wages under the Code fall within it. Gratuity is excluded from wages and has its own deadline: within 30 days of becoming payable.
• The trigger date needs care. The text says within two working days of the resignation. Most employers read it as two working days from the date the employment ends, not from the date notice is given. Take advice on your reading and apply it consistently.
• States may set other limits. Section 17(3) lets the appropriate Government provide a different time limit, so check your state's rules.
• Do not hold wages for clearance. Recover assets and loans through permitted deductions within the cap, and pursue any balance separately. Notice-pay shortfall is usually a contractual recovery; whether it can be deducted from final wages is not settled, so document the employee's agreement and take advice.

A practical model: pay final salary within two working days of the last working day, then close the rest of the settlement as quickly as clearances allow and within any statutory deadline. Our full and final settlement guide covers the components.

Salary delays and their consequences

Late or short payment exposes the employer to:

• Claims by the employee, a registered trade union or the Inspector-cum-Facilitator before the authority appointed under the Code, usually within three years. The authority can award compensation of up to ten times the claim in addition to the amount due.
• Penalties of a fine of up to ₹50,000 for paying less than the amount due, and up to ₹20,000 for other contraventions, with imprisonment or higher fines for repeat offences within five years. For some offences the Inspector-cum-Facilitator must first give a written direction to comply.

The Code and rules are published by the Ministry of Labour and Employment.

Common mistakes

• Treating the 7th as a soft target and paying on the 10th when approvals run late.
• Deductions with no basis in the Code, such as uniform deposits.
• Recovering a large advance in one month and breaching the 50% cap.
• Holding final salary for 45 days pending clearances.
• Ignoring stricter state deadlines in Shops and Establishments Acts.

FAQs

What is the last date for salary payment in India? For a monthly wage period, before the expiry of the 7th day of the following month, unless a state law sets an earlier date.

How many days does an employer have to pay salary after resignation? The Code on Wages requires wages to be paid within two working days. Gratuity has a separate 30-day deadline.

What is the maximum deduction from salary under the Code on Wages? Total deductions in a wage period cannot exceed 50% of wages. Any excess is recovered as the rules prescribe.

Can an employer deduct salary for damage to company property? Yes, if the loss is directly due to the employee's neglect or default, the deduction does not exceed the loss and the employee was given a chance to show cause.

How NeevHR helps

NeevHR's payroll runs on a pay frequency and period lock you configure, with loss of pay, arrears and loan EMIs flowing into the run, and loan recovery on schedules you set. The full and final settlement worksheet has a configurable number of due days after the last working day, so you can align it with the two-working-day rule.

This article provides general information for educational purposes. Statutory rules, thresholds, rates and filing requirements may change; verify with the relevant authority or a qualified professional. Last reviewed: 06 Oct 2026.