Ordinance empowers Centre or State governments to specify industries or establishments where wage payments can be made mandatory through the banking system.

President Pranab Mukherjee has approved the Payment of Wages (Amendment) Ordinance, 2016, to enable industries to pay wages through cheque or by direct credit into bank accounts of workers earning up to Rs. 18,000 a month without their permission.

The ordinance, promulgated on December 28, however, doesn’t make payment of wages mandatory through the banking system and employers can still pay salaries through cash. The Payment of Wages Act of 1936 required employers to take permission from employees before paying salaries through cheque or bank credit.

The ordinance empowers the Centre or State governments to specify industries or establishments where wage payment can be made mandatory through the banking system.

Labour Minister Bandaru Dattatreya introduced the Payment of Wages (Amendment) Bill, 2016 in the Lok Sabha on December 15, but it couldn’t be cleared, owing to the impasse in Parliament.

The Payment of Wages Act states that all payment of wages should be in cash, with a provision asking employers to obtain written permission of the worker to pay either by cheque, or by crediting the wages to his or her bank account.

The Centre decided to take the ordinance route as its decision to scrap the old Rs. 500 and Rs. 1,000 currency in November led to a cash crunch and employers were encountering problems in paying workers through cash.

An ordinance is valid for six months and the Centre needs to get it passed in Parliament within that period.