While recruiting, the employer has many expectations from the candidates to perform well with the job and achieve what is expected. Similarly, employees also trust their employer to provide them an environment to grow and complete their expectations while avoiding wage violations.
Salary administration can be prone to error when handled manually, and employees don’t appreciate that. Thus, while processing the salary, the HR must have a detailed knowledge of the salary configuration and follow the government’s statutory laws to avoid the threat of wage violations complaint.
If you are using automated software to process the payroll, it is better because they directly pay according to the laws.
What is Wage Violation?
Wage violation is simply a wage theft performed by employers in many ways. It is the denial of accurate wages, overtime, paid time off, and other mandatory elements as per the statutory acts.
According to government laws, the employer must provide the employee with minimum wages on time, do not bifurcate the salaries based on classes, offer them an on-time bonus, and other social security advantages.
The laws that are mandated by the government in protecting employees against salary mismanagement t include:
- The Minimum Wages Act, 1948
- The Payment of Wages Act, 1936
- The Payment of Bonus Act, 1965
- The Payment of Gratuity Act, 1972
- Employee Compensation Act, 1923
- The Employees’ Provident fund and Miscellaneous Provisions Act, 1996
Why is Wage Violation Necessary to Avoid?
As a small business, you’ve stepped into the ups and downs of the business progress. To make such progress steady, it is essential to follow the rules to avoid any charges. Though you recruit fewer employees, they should be offered the minimum wage decided by the government.
When employees work hard for the company, they expect to be paid accordingly. Indeed, if they guarantee full attendance, the employer must ensure accurate payment to save the company from reputation loss, illegal charges, and money to settle it.
What are the Prominent Wage Violations that can Occur, and How to Avoid Them?
Wage violations may happen intentionally or unintentionally, but you can stay safe from the charges if you brush up on the laws and act accordingly. The government formulated labor laws to protect the workers from such ill-treatment.
However, as a small business, you don’t want to ride on the salary infringement to fall into the pool of accusation. Thus here are the most prominent wage violations likely to occur and the remedies for the same.
1. Paying Incorrect Minimum Wages
There are rules for wages that employers pay to their employees. According to the Minimum Wages Act, 1948, the employer needs to pay at least a minimum salary as decided by the central laws.
The Indian government has declared a minimum wage limit as the ‘living wage’ that ensures a basic livelihood standard that includes food, comfort, education, health, and roof. These minimum wage rate changes for every state with which the employer must comply.
The laws include fixed minimum hours, including one or two breaks, at least one day off in a week, and payment of minimum salary on or before the month’s payment date.
According to Wikipedia, 42 % of the employees in India receive wages below the decided minimum rate. (source)
2. Hindering the Equal Pay Rule
As per the Equal Remuneration Act, 1976, there should be no discrimination of salary between men and women. For a similar kind of work nature, which requires the same skills, thoughts, and responsibility, both the genders must be offered equal pay.
Suppose the rule is hindered somehow in the case of paying unequal remuneration or discrimination between men and women. In that case, the employer is liable to pay a minimum of 10,000 ₹ or imprisonment of a minimum of 3 months or both.
Thus hindering the rule can get the employer in a lot of trouble that could cost the company’s reputation.
3. Not Including Overtime Payment
When an employee pays full attention to the work by working overtime along with maintaining accurate attendance, it is the employer’s fundamental duty to consider that overtime in the salary.
When the employer violates overtime laws, they either don’t pay them or pay them below the actual overtime price decided. And the employers who don’t follow such rules are forfeited.
One way to avoid this is to include a policy stating the overtime rules and then analyzing the work hours based on the same to calculate if overtime is to be payable or not.
4. Forget the Paid Time Off Rule
Paid time off is required when your employees don’t feel energetic to work (sick) or they are compensated for the extra worked hours.
As per the rules, employees must be offered a minimum number of sick leaves and paid time off, and if the employers don’t follow, it is considered a wage violation.
Employers can avoid this by formulating policies that include minimum leave balance to be provided to the employees according to the laws.
5. Rounding up Hours
Payroll math is never the favorite thing to execute. The employer may require to round up the minutes or seconds for calculating the salary.
Employees may suffer from the rounding up of minutes for early goings and late comings for their unpunctuality. But do you have a policy of how many minutes to round up? Do you round up every time the employees are late? For hourly paid employees, the employer must develop a round-up policy to have a proper calculation.
For some limited number of minutes, the employer can round up, but not every time. Frequently round-up is a violation of the laws, and the company doesn’t want to be stuck in such complications.
Verify the laws and round up or down according to the minute difference in fulfilling the working hours rule to pay them accordingly. It will help the company stay compliant and beneficial for the employees.
6. Not Calculating Hours Worked
Generally, employers count total working hours for the salary calculation and need to pay actually what is the final amount.
For hourly employees, it is essential to include the total working hours refusal of a wage violation. If your employees satisfy the working hours’ requirements, you cannot neglect to pay for their extra hours and other efforts.
Working hours can include job hours, on-call time, training, meeting, and traveling. To stay compliant, ensure that you pay your exempt and nonexempt employees accordingly.
7. Paycheque After Deadline
When you ensure paying according to working hours, overtime, and paid time off rules, you also guarantee to offer the paycheque before the decided date. The government has also mandated to distribute paycheque on time. To avoid the wage violation, better give the checks on the next day of the salary transfer.
Salary without any wage violation helps employees value their job and company more. According to statistics, the reason why employees give importance to their work is because of their performance(55%), salary(50%), and immediate supervisor(39%). (source)
8. Withholding Gross Payment
While calculating, the employer also deducts the required taxes to ensure employees’ social and medical security from their salary.
The employer is responsible for the exact reduction done and can’t withhold more than the actual amount. Sometimes to equalize the contribution of the company, employers withhold the amount because they want to. It calls for a wage violation.
Also, employers cannot ask employees to cover their contributions to the taxes, which is a kind of violation of laws.
9. Considering Employee Exempted
Some employees can be exempted, and some are not. During recruitment, employers must classify the category of employees.
Employers purposely consider the non-exempt employees as exempt ones and pay them correspondingly. Exempted employees are free from the laws’ applicability, and there are no rules on their wages.
Employers consider this not to pay the extra amounts like overtime and paid time off to such employees. By doing so, wage violations can be triggered.
How to Compensate for the Mistake of Wage Violation?
Though it is a fundamental duty to abide by these wage laws, don’t panic in case of unintentional mistakes. Clear up the errors with the employees as soon as possible and provide them with retro pay quickly.
Retro pay is the money or compensation the employer owes an employee to make for the shortfall of the previous pay period. This time ensure to complete the process without any mistakes with 100% compliance.
It is further essential to record the same payment in the payroll register for future responsibilities. Ensuring benefits satisfaction helps to increase employee loyalty towards the company.
While on the track of achieving the market demands, ensure the company’s reputation is not at risk. Wage violation can create a cause of imbalance in the company’s status and profoundly affect the environment. Better to refer to the laws while calculating the salary to ensure employee satisfaction. The better the reputation is, the more clients and employees will wish to work with the company.