When Must Salary Be Paid? The 7th-Day Rule and the 50% Deduction Limit Under the Code on Wages
Under Section 17 of the Code on Wages, monthly wages must be paid before the 7th of the following month, and wages of an employee who resigns or is dismissed within two working days. Total deductions in a wage period cannot exceed 50% of wages. Late payment of wages is an offence.
Many small businesses pay salaries "around the 10th", depending on cash flow. Under the Code on Wages, in force since 21 November 2025, the deadlines are fixed in law and apply to every employee.
The deadlines
| Wage period | Pay by |
|---|---|
| Daily | End of the shift |
| Weekly | Last working day of the week, before the weekly holiday |
| Fortnightly | Before the end of the second day after the fortnight |
| Monthly | Before the 7th day of the following month expires |
| On resignation, dismissal, removal, retrenchment or closure | Within two working days |
A wage period cannot be longer than a month.
What you can deduct
Deductions are allowed only for permitted reasons, such as:
- ✓fines and deductions for absence, under the Code's conditions;
- ✓recovery of advances and loans;
- ✓PF, ESI, income tax and other statutory amounts;
- ✓housing, amenities and services provided by the employer, as permitted;
- ✓deductions authorised by the employee, such as contributions to a cooperative society.
Total deductions in a wage period must not exceed 50% of wages.
The two-day rule on exit
Wages up to the last day must be paid within two working days of an employee leaving, whatever the reason. That is wages, not necessarily gratuity, leave encashment or bonus, which have their own timelines. Many companies still take 30 to 45 days for full and final settlement, so separate the wage payment from the rest of the settlement.
A payroll calendar that meets the deadline
| Date | Task |
|---|---|
| Last working day of the month | Freeze attendance and overtime |
| 1st to 2nd | Process payroll, approve variances |
| 3rd to 4th | Release bank file; pay salaries |
| By the 6th | All salaries credited |
| 7th | TDS deposit for the previous month |
| 15th | PF and ESI deposits |
A worked example
A Vadodara logistics firm used to pay on the 10th. It moved its attendance cut-off to the 25th, paid the last five days' estimated attendance with an adjustment next month, and now pays on the 5th. For exits, it pays wages up to the last day within two working days, and the rest of the settlement within 30 days.
Frequently asked questions
Does the 7th-day rule apply to managers?
The Code applies to all employees for timely payment, though some parts of it have wage limits.
What if the 7th is a bank holiday?
Pay before it. The deadline is "before the expiry of the seventh day".
Can we pay part of the salary late if cash is short?
No. Late payment of wages is an offence under the Code.
Sources
- ✓Code on Wages Section 17: time limit for payment of wages, Advocate Khoj
- ✓New labour code says employers should pay salaries by the 7th, People Matters
- ✓Code on Wages: payment of wages, Lawrbit
This is a summary, not legal advice. Confirm with a labour-law professional.
Written by
HR Manager, Airwix Technologies (Sleet)
Nihit Dobariya is the HR Manager at Airwix Technologies in Ahmedabad, where he runs HR and payroll for the team behind Sleet. He writes about payroll, PF and ESIC, professional tax, the labour codes and everyday HR practice for Indian employers, and checks each rule against the official notification before it is published.
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