Salary Not Paid: Legal Notice, Labour Claim or Civil Suit

What can you do if your salary has not been paid?

You have four realistic tools, and they are not mutually exclusive in the early stages. A demand letter or legal notice puts the claim on record and often produces payment. A claim before the wage authority under the Code on Wages is the specialised route for wage disputes, with low cost and the power to award compensation. A civil suit is the general route for money claims, with more procedure but no limit on what you can claim. Insolvency under the IBC is a pressure tool against companies, useful only in narrow cases.

The right choice depends on three things: how much is owed, what kind of money it is (plain salary, or contractual items like bonus, incentives and stock options), and the employer's financial health. A delivery executive owed two months' wages and a vice president owed six months' pay plus a deferred bonus should not take the same route.

A criminal complaint is usually the wrong tool for unpaid salary on its own. Non-payment is a civil wrong unless something more is present, such as a bounced salary cheque or PF deducted from pay and not deposited. Those cases are discussed further down.

The options compared

This table compares the main routes. Time and cost are general ranges, not promises; they vary by forum and by how hard the employer fights.

When is salary legally due?

Under the Code on Wages, monthly wages must be paid before the seventh day of the following month. Weekly wages are due on the last working day of the week, and daily wages at the end of the shift. If an employee resigns, is removed or dismissed, is retrenched or loses the job because the establishment closes, the wages due must be paid within two working days. Once those dates pass, the salary is legally overdue.

The employer can make only authorised deductions: tax, PF, ESI, recovery of advances and loans as permitted, deductions for absence, and a few others, and total deductions in a wage period generally cannot exceed half the wages. Deductions for damage or loss need prior notice and a chance for the employee to explain.

Many employers hold back final salary until the employee completes a handover or submits a no-dues form. The handover is a reasonable request, but the statutory deadline for wages on exit does not wait for it. If the employer says you owe notice pay because you left early, that is a separate claim, discussed below, and does not automatically justify withholding everything.

First step: the demand letter and the legal notice

Before any forum, write to the employer. An email to HR and your manager, followed by a letter to the company's registered office by speed post, should state the months unpaid, the amount for each month, any other dues, and a date for payment. Attach nothing confidential; refer to your salary slips and appointment letter. Many delays are caused by cash-flow trouble or carelessness, and a clear written demand is often enough.

If that does not work, a legal notice from an advocate is the next step. It is not compulsory before a wage claim or an ordinary money suit, but it fixes the amount, starts the argument on interest and shows any later forum that the employer had a fair chance. A good notice is short: who you are, your dates of employment and salary, what is unpaid month by month, the legal basis, the demand and the deadline, usually fifteen days. Our post on sending a legal notice before a suit explains the format.

Do not overstate the claim in the notice. Adding inflated damages, threats of criminal cases or complaints to the media gives the employer an easy reason to dismiss the notice as a pressure tactic, and the same figures will be thrown back at you later.

The wage claim under the Code on Wages

Section 45 of the Code on Wages sets up a dedicated claims process. The appropriate government appoints authorities, officers not below the rank of a Gazetted Officer, usually in the labour department, to hear claims arising from non-payment or delayed payment of wages, unauthorised deductions, non-payment of bonus and shortfalls in minimum wages. The authority has the powers of a civil court for summoning witnesses and documents.

The claim can be filed by the employee, by a registered trade union of which the employee is a member, or by the inspector-cum-facilitator. A single application can cover any number of employees of the same establishment, which is useful when a whole team is unpaid. The application must be filed within three years from the date the claim arises, and a later application can be admitted if there is sufficient cause for the delay.

Besides directing payment of the amount due, the authority can order compensation of up to ten times the amount of the claim, depending on the circumstances. It is expected to decide within three months. If the employer does not pay, the authority sends a recovery certificate to the Collector or District Magistrate, who recovers the amount as arrears of land revenue. An appeal against the authority's order lies within 90 days to an appellate authority one rank higher.

Filing a wage claim, step by step

The format is prescribed by the Central Rules or your state's rules, so ask for the current form. The steps stay the same.

1. Identify the right authority

   Find out whether the Central or the state government is the appropriate government for your establishment. Most private companies in Delhi fall under the Delhi government's labour department; in Noida and Ghaziabad, the UP labour department.

2. Prepare a month-by-month statement

   List each month, the gross salary, deductions, the amount paid and the shortfall. Add final dues, leave encashment and bonus separately. Keep the total accurate to the rupee.

3. Attach the core documents

   Appointment letter, salary slips, bank statements showing what was credited, your demand letter and legal notice with proof of delivery, and any reply.

4. File the application

   File in the prescribed form, by yourself, through your union or through an advocate. Colleagues with the same problem can join one application.

5. Attend the hearings

   The authority issues notice to the employer, which may admit the dues, offer a payment plan or dispute the claim. Bring originals of your documents to every hearing.

6. Press for compensation where it is deserved

   If the delay was long or the deductions plainly unauthorised, ask for compensation and explain the hardship caused, such as loan defaults or rent arrears.

7. Enforce the order

   If the employer neither pays nor appeals within time, apply for the recovery certificate. Follow up with the Collector's office, because recovery moves faster when someone keeps asking.

Does the Code on Wages stop you from filing a civil suit?

Partly. Section 57 of the Code on Wages bars civil courts from entertaining a suit for recovery of minimum wages, deductions from wages, wage discrimination and bonus, in so far as the sum claimed is already before the section 45 authority, has been directed or decided under the Code, or could have been recovered under the Code. The last limb is the important one: if the authority could have given you the money, a civil court may refuse the suit.

Whether ordinary unpaid salary falls inside the bar is arguable. Non-payment of wages has long been treated in labour law as a kind of deduction, which would bring it in. On the other hand, claims for contractual sums that are not wages under the Code, such as notice pay damages, incentives that are discretionary, reimbursements or stock option value, are not obviously within the bar.

The practical approach is to send plain wage claims to the section 45 authority and use the civil court for claims that are mainly contractual or that go well beyond wages. Where a claim has both parts, take advice on how to split it, because a defendant will raise section 57 at the first hearing of a suit.

The civil suit for unpaid salary

A civil suit is the better route when the claim is large and largely contractual: a senior employee owed several months' pay plus a guaranteed bonus, notice pay, a retention payment or the value of vested stock options. The suit is filed in the court with jurisdiction where the employer carries on business or where the cause of action arose, and in Delhi the High Court takes suits valued above ₹2 crore while district courts take the rest. Court fee in Delhi is ad valorem for money suits, as explained in our post on court fee and suit valuation in Delhi.

If the claim is for a fixed sum under a written contract, such as salary under a signed appointment letter, a summary suit under Order 37 of the CPC is often possible. The employer must get leave to defend, which is granted only if it shows a real defence; otherwise the court passes a decree quickly. Our post on recovering money through a summary suit explains the procedure.

The limitation period for salary is three years from the date each month's salary fell due, so in a long-running non-payment the oldest months expire first. Salary claims are generally not commercial disputes, so the mandatory pre-institution mediation under the Commercial Courts Act does not usually apply. If the employment contract has an arbitration clause, the employer may ask the court to refer the dispute to arbitration. Our civil law practice page describes how money suits run.

Company in financial trouble: does the insolvency route help?

Employees are operational creditors under the Insolvency and Bankruptcy Code, because salary is a debt arising from the provision of services. An operational creditor can send a demand notice under section 8 and, if the dues are not paid or disputed within ten days, apply to the NCLT under section 9. The minimum default for initiating insolvency against a company is ₹1 crore, which rules out most individual employees. A registered trade union can file on behalf of its members, and senior staff with large dues sometimes qualify.

Insolvency is a pressure tool, not a recovery suit. If the application is admitted, a moratorium starts, a resolution professional takes over, and employee dues are paid according to the resolution plan or the liquidation waterfall. Workmen's dues for the 24 months before liquidation rank high in liquidation, and other employees' dues for the 12 months before liquidation rank below secured creditors. Employers often settle when served with a section 8 notice, but if they cannot, you may end up with a fraction.

If the company is already in insolvency, file your claim with the resolution professional in the form and by the date given in the public announcement. Our bankruptcy and insolvency advice page explains the process from the creditor's side.

Is non-payment of salary a criminal offence?

Non-payment by itself is usually a civil wrong, not a crime. A complaint for cheating under section 318 of the BNS needs a dishonest intention at the time the employee was hired, which is rarely provable, and police stations in Delhi and Noida generally treat salary disputes as civil. Filing a criminal complaint to pressure the employer tends to delay settlement and invites a quashing petition.

There are three exceptions worth knowing. If the employer gave a salary cheque that bounced, you have a remedy under section 138 of the Negotiable Instruments Act, starting with a notice within 30 days of the return memo, as explained in our post on the cheque bounce legal notice and its 30-day deadline. If PF was deducted from your salary and not deposited, that is an offence under the PF law and can amount to criminal breach of trust. And the Code on Wages itself makes non-payment and unauthorised deductions punishable, mainly with fines, through the inspector-cum-facilitator.

These are additional levers, not substitutes for the wage claim or the suit. The money usually comes through the civil or labour route.

Can the employer withhold salary because you owe notice pay or a bond amount?

Not as a blanket measure. If you left without serving the notice period, the employer may have a contractual claim for notice pay, and if the appointment letter clearly allows notice pay to be recovered from final dues, a deduction to that extent may be defended. What the employer cannot do is hold back the entire final settlement, including earned salary and leave encashment, as a bargaining chip.

Training bonds and similar clauses are enforceable only to the extent of a reasonable, proved loss, not a penalty figure written into the contract. An employer that withholds salary against a bond amount is setting off a disputed claim against an undisputed one, which the wage authority is unlikely to accept. Our post on employment bonds and recovery of training costs deals with this in detail.

Relieving letters and experience certificates are a related pressure point. There is no single statute that compels an experience letter in every case, but withholding it to extract a waiver of dues is unreasonable, and a court or authority deciding the dispute will take note. Ask for it in writing, and mention it in your legal notice.

Evidence checklist before you file

A wage claim is won on documents. Collect these first.

• Offer letter and appointment letter showing your salary
• Salary slips for the months paid, and the last increment letter
• Bank statements showing salary credits and the months with no credit
• Form 16 or Form 26AS showing the salary reported
• Attendance records, timesheets or login data for the unpaid months, where available
• Your resignation or termination letter and the employer's acceptance
• Emails or messages in which the employer admits the dues or promises payment
• Your demand letter and legal notice with proof of delivery
• Any full and final statement the employer has sent

Which route should you choose?

For most employees owed salary of a few months, the wage claim under the Code on Wages is the right forum after a legal notice. It costs little, it can award compensation and it has a recovery mechanism that does not need a separate execution case. For a group of workers in the same establishment, a joint claim is efficient.

For senior employees with large claims, especially where much of the money is contractual rather than wages, a civil suit, often a summary suit, is usually better. For dues of ₹1 crore or more against a company that can pay but will not, a section 8 demand notice under the IBC may bring a quick settlement, but only if you are prepared for the possibility of insolvency.

A point Advocate B.K. Singh often makes to clients who come in with unpaid salary is that the first question is not which forum is fastest, but whether the employer can pay. A cash-strapped employer facing a decree it cannot satisfy may agree to a payment schedule secured by post-dated cheques, which can be worth more than an order that cannot be executed.

Where to file in Delhi, Noida and Ghaziabad

In Delhi, wage claims against most private employers go to the authority designated by the Delhi government, usually within the district offices of the labour department that cover the area where the establishment is located. In Noida and Ghaziabad, the UP labour department's officers in Gautam Buddh Nagar and Ghaziabad handle them. Establishments under the Central Government, such as banks, central PSUs and some others, go to the central labour machinery.

Civil suits are filed in the district court with territorial jurisdiction: in Delhi, the district complexes at Tis Hazari, Saket, Patiala House, Karkardooma, Rohini, Dwarka and Rouse Avenue each cover their districts; in UP, the Gautam Buddh Nagar court at Surajpur and the Ghaziabad district court. Suits valued above ₹2 crore in Delhi go to the Delhi High Court on its original side.

If you worked remotely for a company registered in another state, jurisdiction can be argued in more than one place. The registered office, the office you reported to and the place where salary was payable are all relevant. Choose a forum where the employer clearly carries on business, to avoid a preliminary objection that wastes months.

Mistakes that weaken a salary claim

The first is waiting. Every month that passes takes the oldest unpaid month closer to the three-year limit, and employers that are short of money today may be insolvent next year. The second is resigning in anger without a written record of the dues. Send the demand before or with your resignation, not months after.

The third is signing a full and final statement or a release that says all dues are settled when they are not. If you must sign to receive part payment, write "received in part, balance claimed" next to your signature and keep a photograph. The fourth is filing in the wrong forum, which section 57 of the Code on Wages makes a real risk for plain wage claims taken to a civil court.

The fifth is mixing the salary claim with other grievances. A notice that combines unpaid salary, harassment, defamation and threats of a police complaint is harder to settle than one that asks for a clear sum. Keep other disputes separate unless they are genuinely linked.

What to do this week

Write down, month by month, what you were owed and what you received, and check it against your bank statements. Send a written demand by email and speed post with a fifteen-day deadline. Collect the documents in the checklist. If the deadline passes, decide between the wage claim and a suit based on the size and nature of the claim.

If you want an advocate to read your papers and suggest the right forum, the team of Advocate B.K. Singh at B.K. Singh & Associates can look at them; send the details through our online legal enquiry form. The wider employment practice is on our labour and industrial laws page.