Sections 38 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 38 says that where a worker is suspended pending investigation or inquiry into misconduct, the investigation and inquiry should ordinarily be completed within ninety days, and the employer must pay subsistence allowance at 50 per cent of wages for the first ninety days and 75 per cent after that, if the delay is not the worker's doing. Section 39 lets the appropriate Government exempt establishments from Chapter IV.
Investigation or inquiry into misconduct after suspension must be completed ordinarily within ninety days from suspension (s.38(1)). Standing orders must provide for subsistence allowance (s.38(2)): fifty per cent of the wages immediately before suspension for the first ninety days, and seventy-five per cent for the remaining period if the delay in completing the proceedings is not directly attributable to the worker's conduct (s.38(3)). Section 39 lets the appropriate Government exempt establishments from all or any provisions of Chapter IV.
Section 38: what it says, sub-section by sub-section
| Sub-section | What it says |
|---|---|
| 38(1) | Where a worker is suspended pending investigation or inquiry into complaints or charges of misconduct, the investigation and inquiry (or both, if an investigation is followed by an inquiry) shall be completed ordinarily within ninety days from the date of suspension |
| 38(2) | Certified or modified standing orders shall provide that the employer pays subsistence allowance at the rates in (3), for the period of suspension pending investigation or inquiry |
| 38(3)(a) | 50 per cent of the wages the worker was entitled to immediately preceding the date of suspension, for the first ninety days of suspension |
| 38(3)(b) | 75 per cent of such wages for the remaining period of suspension, if the delay in completing the disciplinary proceedings is not directly attributable to the worker's conduct |
The ninety-day target: s.38(1)
The time limit is for completing "such investigation or inquiry, or where there is an investigation followed by an inquiry, both the investigation and inquiry". Both together fit in ninety days from the date of suspension. The word "ordinarily" makes it a norm, not an absolute bar; the Code does not say that the suspension ends or the charges lapse after ninety days. What the Code does is tie the second rate of allowance to delay, which gives the employer a financial reason to finish on time. Employers designing their disciplinary calendar can ask our employment and labour law advisory team.
The allowance: s.38(2) and (3)
Section 38(2) works through the standing orders: they "shall provide that" the employer pays the allowance. So the duty is written into each establishment's certified orders, and an establishment whose orders are silent has a gap to fix by modification; see sections 33 to 35. The rates in s.38(3) are fixed by the Code.
The base is "the wages which the worker was entitled to immediately preceding the date of such suspension". The definition of wages is in s.2; see our wages article. The Code's words are "wages", so whether a particular allowance forms part of the base depends on that definition.
Two rates, one test.
- First ninety days: 50 per cent of wages. No condition.
- After ninety days: 75 per cent of wages, but only "if the delay in the completion of disciplinary proceedings against such worker is not directly attributable to the conduct of such worker."
If the worker causes the delay, for example by repeatedly failing to attend the inquiry, the Code does not say the rate stays at 50 per cent in so many words; it only provides the 75 per cent rate for a delay not directly attributable to the worker. The natural reading is that the 75 per cent rate is not triggered in that case, but employers should document the worker's conduct and take advice before paying less.
Example (invented). A worker earning wages of Rs 40,000 a month immediately before suspension is suspended on 1 April pending an inquiry. For the first ninety days the allowance is 50 per cent, Rs 20,000 a month. The inquiry is not complete by day ninety, and the delay is due to the employer's late appointment of an inquiry officer. From day ninety-one the allowance is 75 per cent, Rs 30,000 a month, until the suspension ends. Had the worker himself caused the adjournments, the higher rate would not follow from s.38(3)(b). The figures are illustrative only.
Payroll points
- Start the allowance from the date of suspension, at the wage base just before it.
- Move to 75 per cent from day ninety-one unless the delay is directly attributable to the worker, and record the reason either way.
- Keep the suspension order, inquiry dates and adjournment reasons on file together with the payroll workings. Our payroll compliance audit can review these calculations.
Relationship with the First Schedule
Standing orders must cover every matter in the First Schedule (s.30(6)). Check the First Schedule entries against the clause your orders use for suspension and subsistence allowance; the Schedule is covered in the First Schedule article. The Model Standing Orders, 2026 (rule 10 of the Central Rules) are the default for mine, manufacturing and service sectors; we do not summarise their clauses here.
Section 39: exemption from Chapter IV
"The appropriate Government may, by notification, exempt, conditionally or unconditionally, any industrial establishment or class of industrial establishments from all or any of the provisions of this Chapter."
- By notification. An order or letter is not enough.
- Conditionally or unconditionally. The Government can attach conditions.
- Establishment or class. The exemption can be for one establishment or a class.
- All or any provisions. Because this covers "all or any of the provisions of this Chapter", it could reach s.38 too; whether a given notification does so depends on its wording.
The section does not list grounds for exemption. Employers should not assume they are exempt unless a notification says so. For the separate exclusion of workers under civil service and railway rules, see s.28(2) in sections 28 and 29.
The appropriate Government is the Central Government for Central-sphere establishments and the State Government for others; notifications under s.39 would come from that Government. The Industrial Relations (Central) Rules, 2026 (G.S.R. 342(E), 8 May 2026) apply to Central-sphere establishments, and State-sphere establishments follow their State's own rules.
Need help with suspension and disciplinary timelines?
Suspension cases go wrong on dates and on pay. Our employment and labour law advisory team can help you check your standing orders for the subsistence allowance clause, set up a ninety-day inquiry calendar and document causes of delay.
Key takeaways
- Investigation and inquiry after suspension should ordinarily finish within ninety days (s.38(1)).
- Standing orders must provide for subsistence allowance (s.38(2)).
- 50 per cent of wages for the first ninety days; 75 per cent afterwards if the delay is not directly attributable to the worker (s.38(3)).
- The appropriate Government may exempt establishments from all or any provisions of Chapter IV by notification (s.39).
Read next
- Section 36-37: oral evidence and interpretation of standing orders
- Section 40-41: notice of change in conditions of service
- Section 28-29: application and model standing orders
- Industrial disputes under the new labour codes
Disclaimer: Based on the Industrial Relations Code, 2020 (as enacted) and, where noted, the Industrial Relations (Central) Rules, 2026 (G.S.R. 342(E), 8 May 2026), as on 30 September 2026. The Code is in force from 21 November 2025; some provisions may be notified later, and State Governments make their own rules for establishments where the State is the appropriate Government. Verify the current position before acting.