Only what the Code on Wages 2019 lists. Section 18(1) says there shall be no deductions from an employee's wages "except those as are authorised under this Code", and section 18(2) sets out the purposes one by one. Section 18(3) then caps the total at fifty per cent of the wages in any wage period. Fines, absence, damage and advances each carry further conditions of their own.
The list in section 18
Fifteen purposes, clauses (a) to (o), and nothing outside them. Three of the fifteen concern losses to a railway administration and will not arise on a factory or warehouse floor. The rest are these:
| Purpose | Clause | Further conditions |
|---|---|---|
| Fines | s.18(2)(a) | s.19: approved list of acts, show cause, 3% cap |
| Absence from duty | s.18(2)(b) | s.20: in proportion to the time absent |
| Damage to or loss of goods entrusted to the employee, or money they must account for, caused by their neglect or default | s.18(2)(c) | s.21: not more than the loss, after show cause |
| House accommodation supplied | s.18(2)(d) | s.22: accepted as a term of employment; not more than its value |
| Amenities and services authorised by the government, excluding tools and raw materials | s.18(2)(e) | s.22: as above |
| Recovery of advances, overpaid wages and welfare-fund loans, with interest | s.18(2)(f) | s.23: timing rules; further conditions as prescribed |
| House-building and other approved loans | s.18(2)(g) | s.24: limits and interest as prescribed |
| Income tax, other statutory levies, and court-ordered deductions | s.18(2)(h) | Set by the law or order concerned |
| Provident fund, pension, health insurance and other social security contributions | s.18(2)(i) | Set by the scheme concerned |
| Co-operative society payments | s.18(2)(j) | Conditions the government imposes |
| Registered trade union fees | s.18(2)(k) | Only with the employee's written authorisation |
| Prime Minister's National Relief Fund or another notified fund | s.18(2)(o) | Only with the employee's written authorisation |
Two lines in the section catch more sites out than the list itself. The Explanation to section 18(1) treats "any payment made by an employee to the employer or his agent" as a deduction from wages, so a charge for a uniform, an ID card or a joining fee, collected in cash rather than cut from the payslip, still has to fit a clause. And the Explanation to clause (e) says "services" does not include "the supply of tools and raw materials required for the purposes of employment", so the equipment the job needs cannot be recovered as an amenity. A worker's signature does not add a purpose to the list: written authorisation matters only where clauses (k) and (o) ask for it.
The fifty per cent ceiling
All the deductions in a wage period together may not exceed half the wages for that period. Section 18(3) applies "notwithstanding anything contained in this Code", and on its face it counts every deduction under section 18(2), statutory contributions included. Where authorised deductions add up to more, section 18(4) says the excess "may be recovered in such manner, as may be prescribed"; it is carried, not taken [VERIFY: the manner prescribed in the rules the establishment follows]. Take a monthly wage of ₹15,600, a round figure chosen to divide cleanly and not a rate this site quotes. The ceiling is ₹7,800.
| Deduction in the month | Amount | Basis |
|---|---|---|
| Provident fund, employee share | ₹1,872 | 12%, assuming the whole ₹15,600 is PF wages [VERIFY: the wage base for the scheme] |
| Two days' absence out of 26 working days | ₹1,200 | 2/26 of the month's wages, the most s.20(2) allows |
| Canteen meals, an authorised amenity | ₹1,200 | s.18(2)(e), not more than the value supplied |
| Recovery of a salary advance | ₹5,000 | s.18(2)(f) |
| Total authorised | ₹9,272 | ₹1,472 over the ₹7,800 ceiling, which is carried to a later period |
This is not the fifty per cent in the Code's definition of wages, under which allowances above half of total pay are added back for PF and gratuity. That rule changes what counts as wages; this one limits what can be taken out of them. Both apply to the same payslip, and they are easy to confuse.
Fines, absence and damage carry extra limits
Each of the three most disputed deductions has a section of its own, and a deduction that meets section 18 but misses one of these conditions is still unauthorised.
- Fines (s.19). Only for acts and omissions on a list the employer has specified with the government's previous approval and displayed on the premises. Show cause first. The total in a wage period cannot exceed 3% of the wages for it. No fine on anyone under fifteen, no recovery by instalments, nothing recovered more than ninety days after it was imposed. Every fine goes into a register, and the money may be spent only on purposes that benefit the workforce.
- Absence (s.20). In proportion to the time absent, and no more. The one exception: where ten or more employees absent themselves together without notice and without reasonable cause, the deduction may include up to eight days' wages in lieu of notice, subject to any rules. A worker who is present but refuses to work, in a stay-in strike or without reasonable cause, is treated as absent.
- Damage or loss (s.21). Never more than the loss the employee's negligence or default caused, and only after the employee has had an opportunity to show cause. Every such deduction goes into a register.
- Advances (s.23). An advance paid before employment began is recovered from the first full wage period's payment, but an advance given for travelling expenses is not recovered at all. Advances made after employment began, and advances of wages not yet earned, follow the conditions the rules prescribe.
What an unauthorised deduction costs
The deduction back, possibly many times over, plus a fine. A worker, a union or an inspector can bring a claim under section 45 within three years, and the authority deciding it may add compensation of up to ten times the amount determined. Section 59 puts the burden of proving that dues were paid on the employer where a claim alleges deductions not authorised by the Code. Section 60 voids any agreement by which an employee gives up an amount due under the Code.
Section 18(5) covers the reverse case. Where an employer deducts money for a trust, a government fund or any other account and does not deposit it, the employee "shall not be held responsible for such default". A PF contribution cut from the payslip and never remitted is the employer's problem, not the worker's.
When the crew is a contractor's
The contractor makes the deductions, but the site carries the fallback. Section 2(l) of the Code on Wages includes the contractor in the definition of employer, so section 18 binds the contractor directly, and the contractor records deductions in the register of wages, overtime and deductions, Form XV under rule 72 of the OSH (Central) Rules 2026. Under section 55(3) of the OSH Code, a principal employer is liable for wages a contractor fails to pay, and recovers them from the contractor. Whether an unauthorised deduction counts as wages unpaid for that purpose is a question for the site's own counsel.
- Read the deductions column every month. Each line in Form XV should map to a clause in section 18(2). A line headed "recruitment", "deposit" or "uniform" needs an answer.
- Add up the column against the ceiling. Any worker whose deductions exceed half the month's wages is a sign that something has been taken rather than carried.
- Match deductions to challans. The PF and ESI amounts deducted should agree with the amounts deposited for the same workers in the same month.
- Ask for the fines list. A contractor that fines workers should be able to show the approved list, the displayed notice and the fines register. If it cannot, the fines are not authorised.
How Velura Services helps
Velura makes only the deductions the Code on Wages allows, records each one in the deduction register, and shows it on the wage slip. We never charge workers for PPE or the employer's share of contributions, and the monthly payroll report lets you check that.
Sources
- The Code on Wages, 2019 (Act 29 of 2019), Gazette text hosted by the Ministry of Labour and Employment — s.2(l) (employer includes contractor), s.18 (deductions which may be made; the fifty per cent ceiling; recovery of the excess; deductions not deposited), s.19 (fines), s.20 (absence), s.21 (damage or loss), s.22 (housing, amenities and services), s.23 (advances), s.24 (loans), s.45 (claims; compensation up to ten times; three-year limit), s.54 (penalties), s.59 (burden of proof), s.60 (contracting out). Opened and read.
- Occupational Safety, Health and Working Conditions Code, 2020 (Act 37 of 2020), Gazette text hosted by DGFASLI — s.55(3) (principal employer's liability where the contractor fails to pay wages). Opened and read.
- Occupational Safety, Health and Working Conditions (Central) Rules, 2026, G.S.R. 345(E) dated 8 May 2026 — r.72(1)(iii) (register of wages, overtime and deductions, Form XV). Opened and read from a mirrored copy of the Gazette [VERIFY: against the e-Gazette original].