Centre makes cashless salary mandatory

​New Delhi: The Union cabinet o Wednesday cleared an ordinance or executive order to allow businesses to pay salaries through electronic mode and cheques. The order will only be applicable to the Central government-administered institutions.

The amendment to the Payment of Wages Act allows employers to pay salaries by cheque or credit it in employees' bank accounts. The existing option of salary payment by cash also remains.

Currently, to make salary payment by cheque or bank transfer requires an authorization from the employee.

The ordinance will help bring a section of the industrial sector and other establishments under the domain of the government's plan of checking corruption by going cashless.

The move will also ensure that minimum wages are paid to the employees and that their social security rights can be protected, the government said in a notification.

This way, the employers can no longer "under-quote" the number of employees to avoid becoming a subscriber to the provident Fund or ESIC schemes.

Explaining the need for the amendment, the government said the Payment of Wages Act was passed in 1936 and the current scenario has "completely undergone a technological revolution".

These days, most transactions take place through banking channels. The provision for payment through bank or cheque with employee's authorisation was made in 1975 but it did not cover people whose salaries were below 18,000.

The Labour ministry's proposal provides for an additional facility of payment of wages, the government said.

The Centre has encouraged employers to go for digital payment, especially after the notes ban on November 8.

Currently, a huge chunk of the organized sector, especially factories, tea gardens and construction companies, pay the wages of labourers by cash.