Calcutta High Court Rules pension under employer’s scheme is recoverable as ‘wages’ before payment of wages authority

On August 5, 2025, the Calcutta High Court in M/s. Heinen and Hopman Engineering (I) Pvt. Ltd. v. The State of West Bengal & Ors. has settled an important question whether pension benefits under an employer-administered scheme can be claimed before the authority under the Payment of Wages Act, 1936 (“PWA”). The Court held that such claims are maintainable, as pension payable upon cessation of employment forms part of “wages” under Section 2(vi) of the PWA.

The case arose from a dispute where a former employee, having resigned and received full and final settlement (including gratuity), later sought pension benefits under a non-contributory pension scheme established by the company. The employer rejected the claim, relying on amended eligibility rules, and contested the jurisdiction of the authority under the West Bengal Shops and Establishments Act, 1963. The authority, however, ruled in favour of the employee, holding that pension constituted “wages,” and the High Court upheld this finding.

In its reasoning, the Court distinguished between employer contributions to a pension fund which are excluded from the definition of wages and actual pension payments, which are contractual entitlements flowing from the terms of employment. Since the pension scheme was expressly incorporated into employment terms and communicated through appointment and increment letters, it formed a wage liability payable on termination, regardless of whether the separation was by resignation or retirement, unless the scheme clearly provided otherwise.

This ruling confirms that employees covered under in-house, non-statutory pension schemes can seek recovery of unpaid pension before the payment of wages authority, providing a faster remedy than civil proceedings. For employers, it highlights the need for precise drafting of pension schemes and careful communication of eligibility terms, as withholding or delaying such payments may trigger proceedings under wage laws. While the principle applies to contractually linked, company-administered pensions, it does not automatically extend to statutory or government pension schemes lacking such a contractual basis.