Demonetisation: Narendra Modi govt makes cashless salary mandatory, amends 80-year-old law

In a further push to cashless economy, the Central cabinet has approved the ordinance for paying wages via electronic means — which means that the government has given its nod for cashless salary. Accordingly, the government approved to amend Section 6 of the Payment Of Wages Act. The new ordinance will be applicable to public sector, with the private sector coming under the purview of the new move later, CNN News 18 reported.

"The Union Cabinet today approved the ordinance route to amend the Payment of Wages Act, 1936, to allow employers of certain industries to make payment through the electronic mode and cheques," a source said. Employers will also have the option to pay wages in cash, the source added.

As per practice, the government introduces ordinance to amend laws for immediate implementation of new rules. An ordinance is valid for six months only. The government is required to get it passed in Parliament within that period.

According to CNN-News18, companies can pay their employees only through cheque or through electronic means. All wage workers, who earn less than Rs 18,000 will be come under the new ordinance. However, the specific sectors where the rule will be applicable will be notified later.

The state government will additionally have the discretion whether to pay employees via cheques or electronic transfer. According to reports, the government aims to check under-reporting of salaries, bring transparency in transactions and end exploitation of wage workers.

However, the Opposition lashed out at the government for the ordinance. "Nothing can distract people from the fact that Prime Minister Narendra Modi and his government have failed. Government should trust people and they cannot move without proper infrastructure", the Congress party said.

"It will create a problem for the employees as withdrawal from the banks is difficult. Cashless society is not possible. We will move amendment in the Parliament," Gurudas Dasgupta, CPM leader told CNN-News 18.

Wages, as opposed to salaries, have traditionally tended to be cash payments. The Payment of Wages Act covers employees whose wage does not exceed Rs 18,000 per month. The new procedure will serve the objective of "digital and less-cash economy", the Bill stated. Introduced by Bandaru Dattatreya in the Winter Session of Parliament, the passage of the Bill was disrupted as the government and opposition clashed over demonetisation.

It will also allow state governments to specify industrial or other establishments that adopt cashless modes for salary payments. The new procedure will serve the objective of "digital and less cash economy", the bill states. Andhra Pradesh, Uttarakhand, Punjab, Kerala and Haryana have already made provisions for payment of wages through cheque and electronic transfers after making state-level amendments to the Act.

The original Act had come into force on 23 April 1936, providing for payment of wages in coin or currency notes, or in both. At present, with the written authorisation of an employee, wages can be given through cheque or transferred to his or her bank account.

With inputs from agencies

Updated Date: Dec 21, 2016 18:35:31 IST