Sections 23, 24 and 25 of the Code on Wages, 2019: Recovery of Advances and Loans
Sections 23, 24 and 25 of the Code on Wages, 2019 deal with deductions from wages for recovery of advances and loans and the application of the relevant Chapter to Government establishments. These provisions form part of Chapter III of the Code dealing with payment of wages.
These provisions should be read together with Section 18 of the Code on Wages, 2019, which specifies the deductions that may lawfully be made from an employee's wages.
Section 23 - Deductions for Recovery of Advances
Section 23 regulates deductions made from an employee's wages for recovery of advances falling under Section 18(2)(f). It distinguishes between advances given before employment begins, advances made after employment begins, and advances of wages that have not yet been earned.
23. Deductions under clause (f) of sub-section (2) of section 18 for recovery of advances given to an employee shall be subject to the following conditions, namely:--
(a) recovery of advance of money given to an employee before the employment began shall be made from the first payment of wages to him in respect of a complete wage-period but no recovery shall be made of such advances given for travelling expenses;
(b) recovery of advance of money given to an employee after the employment began shall be subject to such conditions as may be prescribed;
(c) recovery of advances of wages to an employee not already earned shall be subject to such conditions as may be prescribed.
Meaning and effect of Section 23
Section 23 does not give an unrestricted right to an employer to deduct any amount described as an advance. The deduction must fall within the deductions authorised by Section 18 and must comply with the conditions prescribed under the Code and the applicable rules.
An advance made before employment begins may generally be recovered from the employee's first payment for a complete wage period. However, Section 23(a) expressly protects an advance given for travelling expenses from such recovery.
Recovery under the Central Rules
In cases governed by the Central Government rules, the prescribed conditions further regulate recovery of advances covered by Section 23(b) and Section 23(c).
The applicable rules should always be checked because the Code uses the expression "appropriate Government", and the relevant Central or State rules may therefore be material depending upon the establishment concerned.
Section 24 - Deductions for Recovery of Loans
Section 24 concerns deductions under Section 18(2)(g) for recovery of loans granted to an employee. The provision allows the prescribed rules to regulate both the extent to which such loans may be granted and the interest payable on them.
24. Deductions under clause (g) of sub-section (2) of section 18 for recovery of loans granted to an employee, regulating the extent to which such loans may be granted and the rate of interest payable thereon, shall be such as may be prescribed.
How Section 24 operates
Section 18(2)(g) permits deductions for recovery of loans granted for house-building or other purposes approved by the appropriate Government, together with the interest due on those loans.
For establishments governed by the Central Government rules, deductions for recovery of loans for house-building or other purposes approved by the Central Government, including interest, are governed by the extant Central Government instructions or guidelines regulating the extent of the loan and the applicable rate of interest.
Section 25 - Chapter Not to Apply to Government Establishments
25. The provisions of this Chapter shall not apply to the Government establishments unless the appropriate Government, by notification, applies such provisions to the Government establishments specified in the said notification.
Meaning of Section 25
Section 25 creates a specific rule for Government establishments in relation to Chapter III of the Code. The Chapter does not automatically apply to Government establishments merely because the Code itself is in force.
Instead, the appropriate Government may issue a notification applying the provisions of the Chapter to the Government establishments specified in that notification. Consequently, where a Government establishment is involved, the relevant notification should also be checked before determining the application of Chapter III.
Sections 23, 24 and 25 at a Glance
| Section | Subject | Key Rule |
|---|---|---|
| 23 | Recovery of advances | Regulates deductions for recovery of advances from wages and imposes specific conditions on different types of advances. |
| 24 | Recovery of loans | Recovery of qualifying loans and interest is subject to prescribed rules and conditions. |
| 25 | Government establishments | Chapter III does not apply to Government establishments unless applied by notification of the appropriate Government. |
Important Points for Employers and Employees
- Deductions from wages cannot be made merely because an employer describes a payment as an advance or loan.
- The deduction must be authorised under Section 18 of the Code and comply with Sections 23 or 24, as applicable.
- An advance made before employment begins is dealt with differently from an advance made after employment has commenced.
- An advance for travelling expenses is specifically protected from recovery in the manner described in Section 23(a).
- Applicable Central or State rules should be checked for prescribed conditions governing recovery.
- For a Government establishment, Section 25 and any notification issued by the appropriate Government should be examined before applying Chapter III.
Related Provisions
The provisions on advances and loans form part of the wider statutory framework regulating deductions from wages. Readers may also refer to Section 18 - Deductions which may be made from wages, Section 20 - Deductions for absence from duty, and Sections 21 and 22 - Deductions for damage, loss and services rendered.
The next part of the Code begins with Section 26 dealing with eligibility for bonus.