Section 20 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 20 of the Code on Wages, 2019 explains how much an employer may cut from wages when an employee is absent. The cut is proportionate to the time absent during the wage period, and a special rule lets an employer deduct up to eight days' wages when ten or more employees absent themselves together without notice and without reasonable cause.
A deduction for absence is one of the permitted heads under s.18(2)(b). It can be made only for absence from the place where the employee must work under his terms of employment (s.20(1)). The amount cannot be a larger proportion of the wages than the absent period is of the required working period in that wage period (s.20(2)). If ten or more employees act in concert and absent themselves without due notice and without reasonable cause, the deduction may include up to eight days' wages due to the employer in lieu of notice under the terms of the contract (proviso to s.20(2)).
Sub-section (1): when absence can be deducted
A deduction under clause (b) of section 18(2) may be made only on account of the absence of an employee from the place or places where, by the terms of his employment, he is required to work. The absence may be for the whole or any part of the period during which he is required to work there.
The key words are "by the terms of his employment". The employer must be able to show where and when the employee was required to work. Absence from a place the employee was not required to be at, such as an unplanned site visit, does not justify a deduction.
An Explanation treats an employee as absent from the place where he is required to work if, although present there, he refuses, in pursuance of a stay-in strike or for any other cause which is not reasonable in the circumstances, to carry out his work. Physical presence is therefore not a defence where there is a refusal to work for an unreasonable cause. The text does not define a "stay-in strike" and does not say who decides whether a cause is reasonable.
Payroll teams that deduct for absence should keep the attendance record that proves the place and hours of work. Our payroll compliance audit service reviews attendance data against payroll and recomputes the permitted cut.
Sub-section (2): the proportion test
The amount deducted "shall in no case bear to the wages payable ... in respect of the wage-period for which the deduction is made in a larger proportion than the period for which he was absent bears to the total period within such wage-period during which by the terms of his employment he was required to work."
In plain terms:
Maximum deduction = wages for the wage period x (period absent / total period required to work in the wage period)
| Item | Hypothetical figure |
|---|---|
| Wages for the wage period (month) | Rs 26,000 |
| Days the employee was required to work in the month | 26 |
| Days absent | 2 |
| Maximum deduction under s.20(2) | Rs 26,000 x 2/26 = Rs 2,000 |
For absence of part of a day the same proportion is applied to the period. The figures are invented only to show the arithmetic. Which wage figure counts as the base is a question under section 2(y); use the wages definition of the Code, not a gross figure from the offer letter.
The section prevents penalty-style cuts: an employer cannot deduct two days' pay for one hour's absence. The deduction also stays within the fifty per cent ceiling of s.18(3).
The proviso: ten or more acting in concert
Subject to any rules made by the appropriate Government, if ten or more employed persons acting in concert absent themselves without due notice (the notice required by their contracts of employment) and without reasonable cause, the deduction from any such person may include an amount not exceeding his wages for eight days that is due to the employer by the terms of the contract in lieu of due notice.
Points to read carefully:
- All three conditions must be present: ten or more persons, acting in concert, absent without due notice and without reasonable cause.
- The extra amount is capped at eight days' wages and must be due under the contract in lieu of notice. If the contract provides for shorter notice pay, the lower amount applies.
- It is an addition to the proportionate deduction ("may include"), and the proviso is "subject to any rules made in this behalf by the appropriate Government".
The text does not define "acting in concert" or "reasonable cause". Document the facts before relying on the proviso.
What the Central Rules add
The Code on Wages (Central) Rules, 2026 (G.S.R. 343(E), 8 May 2026) apply only where the Central Government is the appropriate Government. Where the State Government is the appropriate Government, the State's own wage rules apply.
Rule 17 deals with the proviso to s.20(2). When an employer intends to deduct under that proviso, the employer must intimate the employee, electronically or in writing, of the intention, seeking a reply within seven days. On establishment of charges, the deduction is made in accordance with s.18(3). If no reply comes within seven days, the employer makes the deduction and intimates the employee within fifteen days of the date of the deduction. Rule 17 does not extend to the ordinary proportionate deduction under s.20(2); it speaks only of the proviso.
See Rules 17 and 18. The register of wages kept under rule 51 is Form IV; the rules text read does not say in terms that absence deductions are entered there, so check the form's columns against your practice.
Need help with attendance and pay cuts?
Many pay cuts for absence are larger than the proportion allows because they use a different divisor. Our payroll compliance audit team can compare your attendance rules, divisor and show-cause practice with s.20 and rule 17.
Key takeaways
- A deduction for absence is allowed only for absence from the place where the employee is required to work.
- The deduction cannot be a larger proportion of wages than the time absent is of the time required to work in the wage period.
- Refusing to work in a stay-in strike or for an unreasonable cause counts as absence even if the employee is present.
- Ten or more acting in concert, absent without notice and without reasonable cause, may lose up to eight days' wages in lieu of notice.
- In the Central sphere, rule 17 requires intimation, a seven-day reply period and notice within fifteen days of the deduction.
Read next
- Section 19: fines
- Sections 21 and 22: deductions for damage, loss and services rendered
- Rules 17 and 18 of the Central Rules: deductions for absence and for damage or loss
- Payment of Wages Act, 1936: applicability, deductions and compliance
Disclaimer: Based on the Code on Wages, 2019 (as enacted) and, where noted, the Code on Wages (Central) Rules, 2026 (G.S.R. 343(E), 8 May 2026), as on 1 October 2026. The Code is in force from 21 November 2025; State Governments make their own rules for establishments where the State is the appropriate Government, and wage rates are notified separately. Verify the current position before acting.