The parliament on 8th August 2019 passed the Code of Wages bill 2019. Unlike the previous act, this Code will also apply to the unorganized sector of labour which constitutes 90% of the labour force. This bill is the first of four bills to be introduced in the Lok Sabha which are related to the welfare of the labour force.
The subject of labour falls in the concurrent list hence it falls in the jurisdiction of both the central and the state government. This bill aims to universalize the provisions of minimum wages and timely payment of wages for all employees in the country irrespective of their profession.
The Code of Wages, 2019
The bill is called a ‘code’ because it consolidates and replaces four previous acts and subsumes into a single code and will determine various issues related to the wages of employees. The bill was first introduced in the Lok Sabha in 2017 but lapsed at the end due to the dissolution of the 16th Lok Sabha and was reintroduced in 2019.
The four laws that the code replaced are the Payment of Wages Act, 1936, the Minimum Wages Act, 1948, the Payment of Bonus Act, 1965, and the Equal Remuneration Act, 1976. These laws had become obsolete and were not serving its purpose hence the Code of Wages was introduced instead to introduce laws related to wages, bonus, minimum wage amount etc.
The code will be applicable all over the country. It contains 9 chapters and 69 sections.
A few features of the bill are:
- New Definitions: Since it is integrating different legislations under one umbrella, it has widened the scope of terms like employer and employee. Forthwith it will include employees of both the organized and unorganized sector.
The term “employee” now includes persons hired to do any kind of work skilled, unskilled manual, operational, managerial, technical or clerical. It also includes government employees but has excluded apprentices and members of the armed forces.
The words “worker” and “employee” have a different meaning as per this act. Workers also include working journalists and sales promotion employees
The term “establishment” has been defined as ‘any place where any industry, trade, business, manufacture or occupation is carried on.’ It also includes government establishments.
Most importantly the term wages have been defined to include “all remuneration whether by way of salaries, allowances or otherwise” via money or other forms of payment with respect to his work. It comprises three types of pay i.e. basic pay, dearness allowance and retaining allowance. Previous labour laws included a total of 12 different definitions for wages thus integrating and forming one precise definition will reduce unnecessary litigation expenses and confusion.
Chapter 1 has also included a list of provisions such as housing accommodation, contributions by the employer to the employee’s retirement fee, bonus payable under law, overtime compensation, sum pay to cover any special work expenses etc. that will not be included in the definition of wages.
Discrimination due to gender: For the first time the code also addressed the issue of gender discrimination. Section 3 prohibits discrimination amongst employees with respect to wages, recruitment for the same work or work of similar nature and in the conditions of employment except for cases where women are prohibited from working by-law under any law for the time being in force.
- Minimum wages: The International Labour Organization defines minimum wage as “the minimum amount of remuneration that an employer is required to pay wage earners for the work performed during a given period, which cannot be reduced by collective agreement or an individual contract”.
Chapter 2 seeks to universalize minimum wages for all employees irrespective of their profession or the wage ceiling. A concept called floor wage has been introduced by the bill. The central government will fix a floor rate of wages for different regions. This will be with respect to the geographical area and minimum living standards of the workers, and a national minimum wage will be prescribed accordingly.
The union government will set minimum wages for certain employees like train and mines and delegates the state government to set minimum wages for all other employments for their respective regions and this wage rate cannot be lesser than floor wage.
The bill asks the appropriate government to fix minimum wage per the employee’s skills and the place of employment but the wage cannot be lesser than the national minimum wage.
Although, if the minimum wage was already higher than the newly prescribed minimum wages, then the previous provision will retain, i.e. the government cannot reduce the minimum wages. These wages will also be revised/ reviewed every five years by the appropriate government. In case an employee works overtime he will be paid by the hour and his overtime charges should not be less than twice the normal wage rate. India is a founding member of the International Labour Organization (ILO) and this provision attempts to adhere to its minimum wage policy.
- Payment of wages: The employer may set wages on a daily, weekly, quarterly or monthly basis. Wage period cannot exceed a month. The employer has to stick to one method and have to comply with the deadlines provided in Section 17 for each of the scenarios. For monthly wages, the settlement period has been reduced to the 7th day of the next month instead of the 10th day.
Wages can be paid by various methods such as cash, cheque, depositing in the bank account of the employee or by electronic mode. This provision is a welcome inclusion as the previous Payment of wages act was very vague and insufficient in this area as in this era of gig economy majority labourers are not paid on a monthly basis
The threshold period for applying for minimum wages, bonus and other forms of compensations has also increased to 3 years. Also, the restriction as per the Payment of Wages Act, Notification No. S.O. 2806 (E) which allowed only employees who were paid less than 24000 per month to file applications has also been seemingly removed. Hence Chapter 3 of the code, payment of wages is applicable to all types of employees.
In case the employee is removed, dismissed, retrenched, resigns or becomes unemployed due to closure of an establishment, the wages are required to be paid within two working days. The earlier Act did not provide for any specific timelines for resignation cases.
Thus, through this Chapter, the code wants to ensure that employers are more responsible and more efficient with their payments.
Wages may be deducted only on specific grounds such as fines, absence from duty, recovering advances previously given by the employer etc. but this cannot exceed 50% of his total wage.
- Payment of bonus: Payment of bonus: Chapter 4 of the code is applicable to all establishments who had a minimum of 20 workers employed on any day of the accounting year and they will have to adhere to it in subsequent years even if the number of employees reduces.
Section 26 mentions who is eligible for a bonus as per this act.
All employees who have worked a minimum of 30 working days and their monthly salary does not exceed a specific amount per month will be entitled to an annual bonus. This should be at least 8.33% of his wages or Rs 100 whichever one is higher and can exceed a maximum of 20% of his annual wages. The employer also has to share a part of his gross profits to his employees in proportion to the employees’ annual wages.
However, employees who have been dismissed on sexual harassment charges will not be eligible for receiving a bonus.
- Other provisions: The bill also provides for an appellate authority for speedier dispute resolution. The central and state governments will form central and state advisory boards respectively constituting employers’ employees and a few independent persons. This should address the various issues faced by the sector. Various penalties have also increased in light of the rampant malpractices in the industry. Punishments will be for a maximum of 3 months Rs. 10000 depending on the nature of the offence
The act provides a lot of benefits for around 50 crore workers in the country and increases legal protection from 40% to 100% of the workforce the minimum wage provisions would ensure their Right to Sustenance and also help in the growth of the economy by increasing purchasing power. By covering all employees in the payment of wages section would help resolve a lot of conflict regarding the terms and conditions of payments. Lastly, merging the previous bills into one code will help resolve a lot of confusion regarding interpretations of various terms.
Frequently Asked Questions
Who will determine the minimum wage for employees?
The centre will release a national minimum wage which will act as a floor. States will have to determine the minimum wages of their respective regions after considering various factors. However, it cannot be lesser than the national minimum wage.
What are the provisions for overtime?
An employee will be paid hourly for overtime and the pay will be at least double of the normal wage.
What is the time limit for paying wages?
Wages can be paid daily, weekly, quarterly or monthly. The period cannot exceed a month. There are specific time limits for each type.
- Daily workers have to be paid at the end of the shift.
- Weekly on the last working day
- Fortnight workers have to be paid before the end of the second day after the end of the fortnight;
- For Monthly it has to be the seventh day of the next month
Who is entitled to the bonus provisions mentioned in Chapter 4?
Section 26 mentions who is eligible for the bonus as per this act
All employees who have worked a minimum of 30 working days and their monthly salary does not exceed Rs. 21000 per month are eligible. This should be at least 8.33% of his wages or Rs 100 whichever one is higher
Edited by Shikhar Shrivastava
Approved & Published – Sakshi Raje