What If a Company Does Not Pay Salary on Time? Legal Remedies for Employees in India

Salary Delay — A Common Workplace Violation

Non-payment or delayed payment of salary is one of the most serious and common labor violations faced by employees in India. Whether in startups, private corporations, or even contractual work, employers sometimes take advantage of employees’ lack of awareness about their rights.

But Indian law provides strong legal protection against such exploitation. This blog explains what you can do legally if your employer doesn’t pay your salary on time and what laws and procedures are available to help you recover your rightful earnings.

Legal Framework for Salary Payments in India

Several central and state laws govern salary disbursement and employee rights. These include:

The Payment of Wages Act, 1936

• Ensures timely payment of wages to employees.
• Section 4 mandates that wages must be paid within a fixed time frame—typically the 7th or 10th day of the following month.
• Unjustified delays or deductions are punishable.

The Minimum Wages Act, 1948

• Employers are required to pay at least the state-mandated minimum wage, based on job type and sector.
• No employee can be paid below the notified wage limit.

The Shops and Establishment Act (State-Specific)

• Governs working conditions and salary payment practices in commercial establishments.
• Many states require payment of wages within 7–10 days of the end of the wage period.
• Delayed wages may result in fines or penalties to the employer.

The Contract Labour (Regulation and Abolition) Act, 1970 – Section 21

• Mandates that contractors must pay wages to contract workers timely.
• If not, the principal employer becomes liable for the payment.

Industrial Disputes Act, 1947 – Section 33C

• Provides the right to recover unpaid salary or dues by filing a claim before a labour court.
• Also applicable in case of employee death (heirs can claim dues).
• Time limit: Within 1 year of salary default.

Companies Act, 2013 – Section 447 (Fraud Clause)

• If the non-payment involves fraudulent intent (e.g., showing payment in records but not disbursing), it can lead to imprisonment from 6 months to 10 years and a fine of up to three times the amount defrauded.

Insolvency and Bankruptcy Code (IBC) – NCLT Remedy

• If unpaid salary exceeds ₹1 lakh (for employees) or ₹1 crore (for operational creditors), an employee can initiate insolvency proceedings before the National Company Law Tribunal (NCLT).
• Must provide proof of default.

Step-by-Step Legal Remedies for Salary Recovery

If your salary is delayed or unpaid, follow these steps:

Step 1: Issue a Legal Notice to Employer

• Draft a formal legal notice with the help of a lawyer.
• Include: Employment contract, salary slips, bank statement (to prove non-payment), and the amount due.
• Set a deadline for payment (typically 7–15 days).
• Mention legal consequences for failure to pay.

Step 2: File a Complaint with the Labour Commissioner

• Approach the Labour Department of your jurisdiction.
• Submit evidence like offer letters, payslips, attendance, etc.
• The commissioner will summon the employer for reconciliation.
• If unresolved, the matter may be forwarded to the labour court.

Step 3: File a Case Under Section 33C of Industrial Disputes Act

• The employee can file a salary claim in the labour court within 1 year of default.
• The court must resolve the dispute within 3 months.
• This step is useful if the Labour Commissioner route fails.

Step 4: Go for Arbitration (If Contract Allows)

• Most modern employment contracts include arbitration clauses.
• If so, initiate arbitration proceedings.
• The arbitral tribunal may direct the employer to pay the dues with interest.

Step 5: Approach the NCLT Under IBC (For Large Amounts)

• If unpaid salary is ₹1 lakh or more, an employee can approach NCLT as a creditor.
• File a petition under Section 9 of the IBC.
• If NCLT admits the case, the employer company can be pushed into the corporate insolvency resolution process (CIRP).

Step 6: File a Criminal Case for Fraud (In Extreme Cases)

• If salary is shown as paid in official records but not actually transferred, it can amount to criminal fraud under Section 447 of Companies Act.
• File an FIR for cheating and misrepresentation.

Quantum Meruit & Unjust Enrichment Principle

The principle of quantum meruit ensures that a person who provides services is entitled to receive compensation even in the absence of a formal agreement, if the services have been accepted.

Legal Interpretation:

“If you derive benefit from someone’s service, you must pay for it.”

Employers cannot escape salary liability merely by citing absence of written agreements, especially if services were availed and work was performed.

Real-Life Examples & Case Laws

Municipal Council, Sujanpur vs. Surinder Kumar (AIR 2006 SC 2414)

The Supreme Court upheld salary dues even though the appointment was irregular, as the employee had performed duties.

ONGC vs. Association of Radio Officers (1995 AIR 1491)

The court ruled that delay in payment is an unfair labor practice and violative of constitutional rights.

Penalties on Employer for Non-Payment of Salary

• Under Payment of Wages Act, fines up to ₹10,000–₹25,000 can be levied.
• Under Shops and Establishments Act, multiple states impose fines up to ₹2 lakh for delayed wages.
• Under Companies Act, criminal proceedings and imprisonment can be initiated in fraudulent non-payment cases.

Employee Rights You Must Know

• Right to a timely salary.
• Right to minimum wages as per state law.
• Right to claim interest on delayed salary.
• Right to raise a dispute without fear of termination.
• Right to recover salary legally even after resignation or termination.

Preventive Measures for Employees

• Always maintain written contracts and offer letters.
• Keep records of work hours, emails, payslips, and bank transactions.
• Communicate salary grievances in writing and maintain copies.
• Do not delay legal action—respect time limits.

Conclusion: 

Know Your Rights, Act on Time

Employees are the backbone of any organization. If they are not paid for their hard work, it not only violates legal norms but also undermines workplace ethics. Indian law strongly protects employees from such exploitation.

If you are facing salary issues:

• Do not stay silent.
• Do not delay.
• Seek legal help and claim your right.

The law is on your side—but only if you assert it in time.

One can talk to lawyers from Lead India for any kind of legal support. In India, free legal advice online can be obtained at Lead India. Along with receiving free legal advice online, one can also ask questions to the experts online free through Lead India.

FAQs

1. What can I do if my company does not pay my salary on time?

You can send a legal notice, approach the Labour Commissioner, or file a case under Section 33C of the Industrial Disputes Act.

2. Can I file an NCLT case for unpaid salary?

Yes, if unpaid salary exceeds ₹1 lakh, you can file an insolvency case under the IBC before NCLT.

3. Is delayed salary a criminal offence?

Yes, if the delay involves fraud or deception, criminal charges can be filed under Section 447 of the Companies Act.

4. What is the time limit to claim unpaid salary?

Typically, within 1 year from the date of salary default.

5. Can a contract employee also claim unpaid salary?

Yes, both contract and regular employees can claim their salary through legal remedies.