Deductions and Prohibitions on Employee Remuneration

Employee remuneration is a fundamental aspect of the employer-employee relationship, encompassing the compensation, benefits, and deductions provided to workers for their services.?

While compensation packages are designed to reward and incentivize employees, it is essential to navigate the legal and ethical boundaries that govern the deductions and prohibitions on employee remuneration. Employers must be well-versed in the applicable laws, regulations, and industry standards to ensure fair and transparent practices while safeguarding the rights and interests of their workforce.

All employees are required to pay tax as well as contribute to the social security fund or provident fund based on their earned salary. Employers too are obligated to withhold a certain amount for a tax deduction before paying the employees their salary. Additionally, the Labor Act allows for additional deductions from an employee's salary. However, there are certain circumstances where deductions are not permitted.

Deductions that are Allowed:

An employer is allowed to make the following deductions from an employee’s salary. Except in the following circumstance, no amount shall be deducted from the remuneration receivable by the employees:?

• Any tax or fees are leviable under the law.
• Contribution required for provident funds, insurance, or other social security schemes.
• Deduction mandated by any judicial or quasi-judicial body or arbitration.

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