Compliance
Section 17 forces monthly salaries to be paid by the seventh of the next month and exit wages within two working days, raising compliance costs for late payroll and quick final settlements.
Check your DPDP readiness — free More on the blogThe Code on Wages, 2019 introduced a uniform rule for when wages must reach an employee’s bank account. For staff paid on a monthly basis the law now requires payment before the expiry of the seventh day of the following month. This replaces the older ten‑day rule that applied only to very large establishments and creates a single deadline that all employers must track.
Employees on daily contracts must receive their wages at the end of each shift, while weekly workers are entitled to payment on the last working day before the weekly holiday. Those on a fortnightly schedule must be paid before the end of the second day after the fortnight ends. Each of these timings is separate from the monthly deadline and must be observed in the payroll system.
When an employee leaves because of dismissal, retrenchment, resignation or closure of the business, the employer must settle all wages due within two working days. This includes basic salary, overtime and any other earnings, but does not cover gratuity, which has its own thirty‑day limit under a different code. Missing the two‑day window can trigger penalties and interest under the labour law.
Section 17(3) allows the appropriate Government to prescribe a different time limit if it is deemed reasonable. However, any such notification must be formally issued; merely assuming a change without checking the official order does not alter the statutory deadline. Until a valid notification is in place, the seventh‑day rule and the two‑day exit rule remain enforceable. Employers with large workforces often misinterpret the old ten‑day rule from the Payment of Wages Act and continue to use it for monthly payroll. The new code removes that distinction, making the seventh day the universal deadline for all monthly‑paid staff, regardless of the size of the establishment. Updating payroll calendars accordingly avoids unnecessary compliance risk. Gratuity payments are frequently confused with exit wages. The two‑day rule does not apply to gratuity, which is governed by Section 56 of the Code on Social Security and must be paid within thirty days of termination. Keeping these obligations separate in the settlement checklist prevents double counting and ensures each liability is met on time. Failure to meet the prescribed dates can attract monetary penalties, interest on delayed wages and potential legal action by employees. Small businesses may face cash‑flow pressure to meet the tighter schedule, but the cost of non‑compliance—both financial and reputational—often outweighs the operational adjustments needed to align payroll processes. Practical steps include synchronising payroll software with the seventh‑day cutoff, setting automated reminders for exit settlements, and reviewing any state notifications for alternative deadlines. Regular training of HR staff on these specific timelines helps embed compliance into daily operations and reduces the risk of inadvertent breaches.
Monthly wages must be paid before the expiry of the seventh day of the month following the salary period. For example, October salaries are due by 7 November. This deadline applies to all monthly‑paid employees, irrespective of the size of the establishment.
Wages due on termination, dismissal, retrenchment, resignation or closure must be paid within two working days of the employee’s exit. This rule covers basic pay and any accrued earnings, but not gratuity, which has a separate thirty‑day limit.
No. The Code on Wages replaced the ten‑day limit that applied only to establishments with a thousand or more workers under the old Payment of Wages Act. The seventh‑day deadline now applies uniformly to all monthly‑paid staff.
Yes. Section 17(3) permits the appropriate Government to issue a different time limit if it is reasonable. Until such a notification is formally issued, the statutory seventh‑day and two‑day rules remain in force.
Published 27 October 2026. Founder & CEO at VidhiSar. I have watched four companies pay for the same mistake, and it was never the mistake anyone expected. VidhiSar is software, not a law firm: every answer names the section it relies on so you can check it, and anything turning on your specific facts is worth putting to a professional. More about who builds this
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