Introduction

In any employment relationship, the timely payment of salary is both a fundamental expectation and a legal requirement. When an employee works for a month, they expect their salary to be credited neither late nor arbitrarily withheld. Under Indian statutory law, there are clear rules governing when wages or salary must be paid, and what happens if they are delayed. This article explores the key provisions of the law, the latest updates, practical implications for employers and employees, and steps organisations should take to ensure compliance. Central to this discussion are the provisions of the Payment of Wages Act, 1936 (hereafter “Wages Act”) and the evolving framework under the Code on Wages, 2019.

Our focus will be on the timely payment of salary, covering:

• Key recent developments.
• What the law says about deadlines.
• Which employers and employees are covered?
• Practical steps for compliance.
• What happens if the salary is delayed?

Why does timely payment of salary matter

Timely payment of salary is more than a matter of good HR practice — it is required under Indian law and directly affects employee morale, productivity, financial stability, and the employer’s legal risk.

From the perspective of the employee:

• Waiting for salary creates financial stress, undermines trust, and affects retention.
• A delay may signal disorganisation or cash-flow problems at the employer, raising concerns about job security.

From the employer’s perspective:

• Payment deadlines are mandated under Indian labour legislation, including the Wages Act.
• Failure to comply exposes the organisation to penalties, complaints to labour authorities, reputational risk, and potential legal claims.
• Ensuring timely salary payment is a basic indicator of sound HR and payroll governance.

Therefore, an employer needs to understand what Indian law says about payment of salary, what time limits apply, how the Wages Act defines wage-periods and payment deadlines, and how to align internal payroll processes accordingly.

Legal framework: The Wages Act and beyond

The Wages Act

The Wages Act (1936) is one of the foundational statutes of Indian labour law regarding payment of wages. It was enacted to “regulate the payment of wages to certain classes of persons employed in industry” and to prevent exploitative practices such as unreasonable delays in payment.

Key provisions relevant to salary payment under the Wages Act include:

• Section 3: Fixation of wage-period, the wage‐period shall be such that it does not exceed one month.
• Section 5(1)(a) & (b): Time limit for payment of wages — for establishments employing less than 1,000 persons, wages must be paid before the expiry of the 7th day after the last day of the wage-period; for establishments employing 1,000 or more persons, payment must be before the expiry of the 10th day.
• Section 5(2): On termination of employment, wages earned must be paid before the expiry of the second working day from the date of termination.
• Section 16 (in some interpretations): Mode of payment, wages can be paid by coin or currency note, or by cheque or bank account if authorised.
• Deductions: The Wages Act also specifies what deductions can be made from wages, and limits on aggregate deductions.

In short, the Wages Act sets clear deadlines for payment of wages (which, for practical purposes, include salary in many organisations) and imposes responsibilities on employers under Indian law.

The Code on Wages, 2019

More recently, the Indian Parliament enacted the Code on Wages, 2019, as part of a broader effort to consolidate multiple labour‐law statutes. The Code is intended to cover minimum wages, payment of wages, bonuses, and other related matters.

Key points:

• Chapter III of the Code covers “Payment of Wages,” including mode, fixation of wage period, and time limit for payment.
• The Code’s time limit clause (Section 17 in the introduced Bill) corresponds to the Wages Act’s structure. For example, it refers to the time limit for payment of wages.
• Although the Code is passed, implementation and notified applicability vary; for many practical purposes, the Wages Act continues to apply until full rules under the Code are notified and applied.
• Hence, while the Wages Act remains the operative statute, especially for many establishments, employers must stay alert to the evolving regulatory framework under the Code on Wages. From a compliance perspective, the deadline requirements of the Wages Act remain key operational benchmarks.

Deadline for payment of salary under the Wages Act

What is a “wage-period”?

Under Section 3 of the Wages Act, the employer must fix a wage-period which cannot exceed one month.

In practice, most employers use a calendar month (for instance 1st to last day of the month) as the wage-period. So if the wage-period is 1st to 30th April, wages for that period must be paid by the deadline as per Section 5. From a salary payment view, this means: If salary relates to the month of April, it must be paid by the deadline (7th or 10th depending on size) in May.

Time limits for payment

• For an establishment employing less than 1,000 persons, wages must be paid before expiry of the 7th day after the last day of the wage-period.
• For an establishment employing 1,000 or more persons, wages must be paid before expiry of the 10th day after the last day of the wage period.
• If the employment of a person is terminated, the wages earned must be paid before the expiry of the second working day from the date of termination.

Application to salary

Although the statute refers to “wages”, in many contexts the term encompasses monthly salary, particularly in establishments covered by the Wages Act. So, from a compliance standpoint:

• If you pay monthly salary, and your wage-period is the calendar month, then for an establishment with fewer than 1,000 employees your salary for the previous month must be cleared and paid by the 7th of the current month.
• For an establishment with 1,000 or more employees, by the 10th of the current month.

Example scenario

Suppose an organisation has 900 employees and uses the calendar month April as the wage period. The salary for April must be credited by 7th May. If there are 1,200 employees, then the salary must be credited by 10th May. If an employee resigns on 15th May, then any outstanding salary for April plus partial May work must be paid by the second working day after termination (i.e., by 19th May or as per applicable working day calendar).

Practical caveats

• The deadline refers to expiry of the 7th/10th day after the last day of the wage period, i.e., payment must be before that day. Paying on that day is safe, but delays beyond expose the employer to risk.
• The law mandates that payment be made on a working day, and not on a holiday.
• If the employer chooses a wage-period that is not a calendar month (e.g., fortnightly or weekly), the same deadlines apply after the last day of the wage-period.
• Mode of payment: Payment in cheque/ bank transfer is permissible only if the employed person authorises it in writing; otherwise payment in cash (currency) is required.

Why the “before 7th” (or “before 10th”) rule is important

For employers

• The deadline serves as a clear compliance requirement under Indian law. Missing it can trigger legal liability under the Wages Act.
• Payroll cycle, approvals, attendance validation, deductions (PF, TDS, advances) must all be aligned so payment can be made by the cutoff. Failure often results in administrative and legal fallout.
• Good payroll governance (paying salary by or before the 7th/10th) helps employee trust, retention, and avoids grievances.

For employees

• The employee has legal entitlement to receive salary by the specified deadline. If payment is delayed, the employer may be in contravention of Indian law.
• Employees can make complaints to labour authorities alleging non-payment or delay of wages.
• Knowing their rights, employees can insist on timely payment and avoid undue hardship.

Enforcement & legal risk

• The Wages Act provides for penalty for contravention of its provisions. While the quantum may vary, the risk of prosecution or direction by labour authorities is real.
• Delay in payment might also lead to claims for interest, damages or cause reputational harm.
• Even where the Code on Wages becomes fully applicable, the core deadline norms are retained, so compliance now is wise.

Common issues and how to address them

Issue 1: Payroll processing delays

Many organisations struggle with timely salary payment because of payroll approvals, fluctuating attendance, overtime reconciliation, statutory deductions etc.
Solution:

• Fix a wage-period (preferably calendar month) and align payroll cut-off well ahead of the 7th/10th.
• Establish internal deadlines for data submission, approvals and fund transfer.
• Automate payroll where possible to reduce manual delays.
• Communicate clearly with employees about when they can expect their salary.

Issue 2: Unclear wage-period definition

If the wage-period is not clearly defined, the employer may inadvertently breach the timeframe under the Wages Act.

Solution:

• Document and communicate the wage-period (e.g., 1st-30th of each month) as part of employment contract or HR policy.
• Ensure payroll aligns with that wage-period consistently.

Issue 3: Large deductions or unauthorised deductions

Under the Wages Act, certain deductions are permitted and the total deduction cannot exceed prescribed limits. Unauthorised deductions or delay due to deduction disputes may cause hold-up.
Solution:

• Maintain transparency of deductions (PF, tax, loans) with employees.
• Ensure loan/advance recovery and other deductions are properly authorised and communicated.
• Avoid holding up payment of salary pending deduction clearance; instead treat deduction issues separately.

Issue 4: Termination and final payment

On termination, wages (including salary) earned must be paid by the second working day from the date of termination. Failure leads to liability.
Solution:

• Build termination-pay process into HR/ payroll workflow so final salary, leave encashment, dues are settled within two working days of exit.
• Ensure funds are available (last-minute terminations often catch employers off guard).

Issue 5: Applicability of different statutes (shops & establishments, state laws)

While the Wages Act sets central norms for “scheduled employments”, there may be state‐level statutes (shops & establishments acts) requiring earlier payment or different deadlines.
Solution:

• Review state legislation applicable to your location (for example West Bengal Shops & Establishments Act) for additional obligations.
• Choose the stricter deadline when in doubt (i.e., pay earlier if required).
• Maintain documentation that salary was paid by deadline to show compliance.

What happens if salary is delayed?

From an employee’s vantage, delayed pay is a breach of immediate financial trust. Legally, under the Wages Act:

• Payment beyond the specified deadline (7th/10th) constitutes contravention of Section 5.
• The employer may be liable to prosecution and penalty under the Act.
• The employee may lodge a complaint with the relevant labour authority or inspector under the Act.
• The delay can feed into morale, retention risk, reputational damage for the employer.

From employer’s risk perspective:

• Even if penalty is modest, the disruption in payroll cycles, employee trust, and compliance cost (audits, inspections) can be significant.
• Repeated non-compliance may attract closer scrutiny from labour authorities.
• It may expose the employer to civil claims from employees (though the Wages Act is largely criminal/penal in nature).
• Delays in salary may also trigger union action/industrial dispute.

Therefore, from both sides the message is clear. Paying salary late is something to avoid, and aligning payroll systems to ensure payment before the cutoff is vital.

Latest developments and regulatory outlook

Implementation of the Code on Wages

The Code on Wages, 2019, as already noted, consolidates and rationalises wage-related statutes including the Wages Act. Whilst the Wages Act remains in force for many establishments, over time the Code will become the primary law.

Key implications for the future:

• The Code may expand coverage to unorganised sectors and will streamline compliance.
• The time-limit clauses (for payment of wages) are retained. For example, Section 17 of the introduced Bill refers to the time limit for payment of wages.
• Employers should prepare for transition, updating payroll processes, record-keeping and statutory compliance in anticipation of full implementation.
• Note: Until the Rules under the Code are fully notified, the Wages Act remains operative; but prudent employers treat the future Code deadline as standard practice now.

State-level updates and environment

While there may not be new central amendments specifically shifting the 7th/10th day landmark, labour departments and courts continue to emphasise the obligation of employers to pay salary/wages on time. Compliance and inspection regimes are evolving. For example, recent labour commissioner directives demand employers to pay wages in full and on time.

Practical trend: Best practice = payment by 7th (or earlier)

Even in larger establishments (1,000+ employees) where the legal deadline is 10th, many employers adopt the 7th as a best practice. Doing so helps manage risk, simplifies payroll (same deadline for all), ensures employee goodwill, and anticipates stricter norms under the Code. Some payroll software providers and HR consultants recommend paying by 7th of each month as standard.

What should employers in India do now?

To align with Indian law and good payroll governance in relation to salary, employers should undertake the following steps:

1. Confirm applicability – verify whether the establishment is covered under the Wages Act (or the impending Code) and ascertain whether the number of employees is below or above 1,000 to determine the deadline (7th vs 10th).
2. Fix wage-period – document in policy or employment contracts that wage period is, say, the calendar month, or whichever internal period is used.
3. Align payroll cycle – set internal cut-offs for attendance, overtime approval, statutory deduction inputs so that net salary can be calculated and payment initiated in time.
4. Ensure funds availability – ensure payroll funds are available at least a day or two in advance; treat 7th/10th as non-negotiable.
5. Communicate with employees – announce salary payment dates clearly (e.g., “Salary for the month of April will be cleared by 7th May”). Transparency builds trust.
6. Maintain records – retain evidence of payment (bank credit, salary slip date) showing compliance within deadline. This protects against any future labour-authority query.
7. Prepare for termination scenarios – for any exit, ensure final payment (outstanding salary, leave encashment, etc) is made within two working days of termination.
8. Monitor regulatory changes – keep abreast of notifications under the Code on Wages, 2019 and any state-level statutory changes (shops & establishments, factories rules) that may affect deadline or procedures.
9. Internal audit & compliance checks – periodically review payroll processes to ensure deadlines are consistently met; identify and rectify bottlenecks (e.g., delayed data submission).
10. Adopt best practice – even if your size allows payment by 10th, it is advisable to adopt payment by 7th as standard practice to stay ahead of potential regulatory lead and enhance employee satisfaction.

What employees should know

If you’re an employee, here are your key take-aways about your salary rights under Indian law:

• You are legally entitled to receive your salary (or wages) within the deadlines set under the Wages Act (before 7th/10th of next month depending on the employer’s size).
• If the employer has delayed payment, you can raise the issue internally (HR or payroll) and if unresolved you may file a complaint with the labour inspectorate or appropriate authority.
• The employer cannot make arbitrary or unauthorised deductions from your salary beyond what is permitted under the Wages Act; any dispute around deduction should not typically delay net payment.
• If you resign or your employment is terminated, any outstanding salary must be paid within two working days of the date of termination — you should check your final payslip accordingly.
• Maintain your own records (salary slips, bank statements showing credit) to ensure you can demonstrate your employer’s compliance or non-compliance if needed.

Case studies / Illustrative scenarios

Scenario A – Small establishment (< 1,000 employees)

Company X employs 450 staff. The wage-period is 1st-30th April. According to the Wages Act, salary must be paid before the expiry of the 7th day after 30th April, i.e., by 7th May. The company ensures payroll is finalised by 3rd May, funds cleared by 5th May, and salaries credited on 6th May. Compliance achieved.

Scenario B – Large establishment (1,000+ employees)

Company Y employs 2,500 staff. Wage-period is 1st-30th April. Deadline under Wages Act is before expiry of the 10th day, i.e., by 10th May. Company pays on 10th May. However, as best practice it sets internal policy to credit by 8th May for fairness and uniformity.

Scenario C – Employee terminated mid-month

Employee Z resigns on 15th May after working full April. Company has wage-period 1st-30th April; salary paid for April on 6th May. For partial May work and other dues, the employer must pay by the second working day from termination (17th May or next working day). If they fail and pay on 20th May, this is a breach of Section 5(2) of the Wages Act.

Scenario D – Payroll delay due to internal process

Company A (700 employees) delays salary to 10th May because of late attendance submission. This breaches the “before 7th” rule under the Wages Act (since <1,000 employees). Employees could raise complaint; employer must improve process. Best practice would be to maintain buffer time so salary credits by 5th-6th May.

Benefits of compliant salary payment practice

For employers:

• Reduced risk of legal/penalty exposure under Indian law.
• Higher employee morale and trust, which supports retention and productivity.
• Better reputation as employer of choice.
• Smoother payroll operations and fewer grievances or disputes.
• Ahead of regulatory changes (such as full rollout of Code on Wages).

For employees:

• Certainty of income, timely financial planning.
• Legal assurance that employer is meeting obligations under Indian law.
• Reduced stress, improved workplace satisfaction.
• Transparent and predictable employment relationship.

Key statistics and compliance insights

While there is limited publicly available data on exact national compliance levels of salary payment deadlines, the following insights are relevant:

• Payroll consultants and HR forums consistently identify “delayed salary payment” as a common labour complaint in India. For example, communities indicate timely payment (by or before 7th) is best practice.
• The Fact that the Code on Wages explicitly retains time limit provisions for payment of wages (Chapter III) underscores the regulatory importance of this issue.
• Organisations with robust payroll governance tend to adopt “by 7th” payment deadlines even if legally permitted to pay by 10th, reflecting industry best practices rather than purely legal minima.

Conclusion

Timely payment of salary is a cornerstone of employment relations and compliance under Indian law. The Wages Act (1936) clearly mandates payment before the 7th day (for fewer than 1,000 employees) or before the 10th day (for 1,000+ employees) after the wage-period ends. Employers should treat these deadlines seriously and integrate them into payroll governance, while employees should be aware of their rights. As the regulatory framework evolves (notably through the Code on Wages, 2019), organisations that already adopt best practice – paying by the 7th day or earlier – will be well positioned.

References:

• Indian kanoon
• Ministry of labour & Employment
• Indiafilings