Payment of Wages Act

Definition of Wages and other Important Terms

The Payment of Wages Act, 1936 regulates the payment of wages to certain classes of employed individuals. Before you delve into understanding the various sections of the Act, there are some important terms that you must know. In this article, we will look at the definition of wages and all other important terms from the Act.

The Payment of Wages Act, 1936 (Act) is essentially meant to benefit industrial employees who do not have very high salaries. It applies to all employees working in a factory or working through a sub-contractor or directly with the railway administration or those employed in the industrial sector as the Act specifies.

In 2017, the Government of India increased the ceiling limit to Rs. 24,000 per month. This means that employees with wages u to the ceiling limit are covered under the Act.


                                                                                                           Source: Pixabay

Definition of Wages and Other Important Terms

Section 2 of the Payment of Wages Act, 1936 offers the definition of wages and many other important terms as follows:

Appropriate Government

According to section 2(i) of the Act, Appropriate Government means:

  • The Central Government in relation to railways, air transport service, mines, and oilfields
  • The State Government in relation to all other cases

Employed Person

According to section 2(ia) of the Act, an employed person also includes the legal representative of the deceased employed person.


According to section 2(ib) of the Act, an employer also includes the legal representative of the deceased employer.


According to section 2(ic) of the Act, a factory means a factory which the clause (m) of Section 2 of the Factories Act, 1948 (63 of 1948) defines. Further, it includes any place to which the provisions of the Act have been applied under sub-section (1) of Section 85 thereof.

Learn more about Deduction of Wages here in detail

Industrial or Other Establishment

According to section 2(ii) of the Act, an Industrial or Other Establishment means any:

  • A motor transport service or tramway service which carries passengers or goods or both by road for hire or reward;
  • Air transport service other than that belonging to or exclusively employed in the military, naval, or air forces of the Union or the Civil Aviation Department of the Government of India.
  • Jetty or dock wharf
  • A mechanically propelled inland vessel
  • Mine, quarry, or oil-field
  • Plantation
  • Workshop or any other establishment which produces or manufactures articles or adapts them for their use, transport, or sale.
  • An establishment which carries on any work relating to the construction, development, or maintenance of buildings, roads, bridges or canals. Also, establishments having operations connected with navigation, irrigation, or supply of water, or generation, transmission, and distribution of electricity.
  • The Central or State Government might include any other establishment or class of establishments for the protection of the employees under the Act.


According to section 2(ii)(a) of the Act, a Mine has the meaning that clause (j) of sub-section (1) of Section 2 of the Mines Act, 1952 (35 of 1952) assigns to it.


According to section 2(iii) of the Act, a Plantation means ‘Plantation’ defined under clause (f) of Section 2 of the Plantations Labour Act, 1951 (69 of 1951).


According to section 2(iv) of the Act, prescribed means prescribed by the rules made under this Act.

Railway Administration

According to section 2(v) of the Act, Railway Administration has the meaning that clause (32) of Section 2 of the Indian Railways Act, 1889 assigns to it.


According to section 2(vi) of the Act, wages mean all remunerations expressed in terms of money or are capable of being so expressed.

These are either by way of salary allowances or otherwise. Further, the remunerations are payable to the person employed on the fulfillment of the terms of employment, express or implied. These remunerations include:

Inclusions in Wages

  • Any amount which is payable under any award or settlement between the parties or an order of the court.
  • Amounts that the employee is entitled to with respect to working overtime or on holidays or any leave period.
  • Any additional remuneration as per the terms of employment – bonus, incentive, etc.
  • The sum of money that the employee must receive due to the termination of his employment. Further, this sum is either payable under law or contract or instrument which specifies the payment of such a sum. Also, this may or may not include deductions. It also does not specify the time within which the firm needs to make the payment.
  • Any sum to which the employee is entitled under any scheme that is framed under any law in force. However, it does not include:
    • Any bonus which does not form a part of the remuneration payable under the terms of employment. Or, a bonus which is not payable under any award or settlement between parties or an order of a court.
    • The value of any house accommodation or the supply of water, light, medical attendance or any service which is excluded from the computation of wages under an order of the Government.
    • The employer’s contribution to any pension or provident fund and also the interest accrued thereon.
    • Any traveling allowance or traveling concessions
    • Any sum that the employee receives to defray special expenses due to the nature of his employment
    • Gratuity was payable on the termination of employment in cases other than those specified in sub-clause (d).

Solved Question for You

Q1. What is the definition of Wages under the Payment of Wages Act, 1936?

Answer: According to the Act, the definition of Wages is as follows:

Wages include all remunerations which are expressed in terms of money or are capable of being so expressed. Further, these are either by the way of salary allowances or otherwise. Also, the employee receives these remunerations for fulfilling the terms of employment, either express or implied.’

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