Labour laws in India were made for the welfare of the society. But the implementation of the law has turned into myth. Most of the working sector of India consists of the unorganized sector where the laws of payment of wages, minimum wages etc are not followed. The Code on Wages, 2019 is a part of land reform and the first law under the labour reform, which is likely to be implemented by September, 2020. This code tries to universalize the provisions of minimum wages and timely payment of wages to all employees regardless of their wage ceiling and sector. The objective of the code is to amend and consolidate the laws relating to wages and bonus and matters connected therewith or incidental thereto.
India is a federal country where labour is a subject of the concurrent list and therefore, central as well as the state government has jurisdiction in dealing with the matters relating to labour. As compared to the other countries labour laws are rigid and highly regulated. These laws have expanded their ambit after debates in Constituent Assembly and after the recommendations of the International Labour Organization. The Ministry of Law and Justice has recently notified the Code of Wages, 2019 on 8th August 2019, which aims at amending and consolidating the laws relating to wages and bonus and matters connected therewith or incidental thereto. This code is uniformly applicable to the provisions of timely payment of wages and minimum wages to all the workers or employees regardless of the wage ceiling and sector. The code is a historic legislation which aims at transforming the existing labour laws with more accountability and transparency.
With the advent of problems in dealing with labour laws a draft of Labour code was discussed in the first tripartite meeting on 10th March 2015. It was placed in the public domain on 21st March 2015. Further second tripartite meeting was held on 13th April 2015, which subsequently led to the introduction of Code on Wages Bill in Lok Sabha by the Ministry of Labour and Employment on 10th August 2017. The code was then referred to the parliamentary standing committee on 21st August 2017, but Standing Committee submitted its report stating the lapse of bill due to the dissolution of the sixteenth Lok Sabha. Later, the Code on Wages, 2019 was re-introduced in Lok Sabha by the Minister of Labour, Mr Santosh Gangwar on July 23, 2019, which was passed on 30th July 2019. The bill was passed in Rajya Sabha on 2nd August 2019. However, the code received assent and signed by the President of India on 8th August 2019. Different dates may be appointed for different provisions of this Code and any reference in any such provision to the commencement of this Code shall be construed as a reference to the coming into force of that provision and it is expected that the code has wide-ranging implications for a majority of industries.
The Code of Wages, 2019 subsumes four labour acts and consolidation of labour laws will ensure uniformity, transparency and easy implementation. The subsumed acts include:
- The Minimum Wages Act, 1948,
- Payment of Wages Act, 1936,
- Payment of Bonus Act, 1965,
- Equal Remuneration Act, 1976
Salient Features of the Code
Definition of Wages
The code defines a uniform definition of the ‘wages’ which would apply to minimum wages, payment of wages, and payment of bonus. The definition of wages is a fundamental change in the legislation which will help in the computation of wages in various circumstances. ‘Wages’ is defined under section 2(y) which includes salaries, allowances or another component in the form of money, payable to the person employee or worker. It includes basic pay, dearness allowance, and retaining allowance expressed in monetary form. The wage includes the sum total of excluded components (except gratuity and retrenchment compensation) exceeds one-half or 50% or such per cent notified by the central government of total remuneration than that part of amount exceeding such one-half, 50% or per cent notified shall be deemed as remuneration. Also, according to section 3 of the code, there should be no discrimination based on gender in matters relating to wages by employer among employees or an establishment of employees.
Broad Definition of the term ‘employer’ and ‘employee’
The Code broadly defines the term ‘employer’ and ‘employee’. It has provided an expanded definition as well as the broad-based applicability of the regulations in organized and unorganized sectors. The “employer” is defined under section 2(l) of the code and he is the one who employs any person directly or indirectly to work on his behalf or on behalf of any other person. “Employee” is defined under section 2(k) of the code as any person who is employed on wages to do a particular task, but it does not include a member of Armed forces.
Separate Definition of ‘worker’ and ‘employee’
The code has also distinguished between the terms ‘worker’ and ‘employee’; wherein the definition of ‘employee’ is broader than the definition of the term ‘worker’. According to the code the employee is the one who does any supervisory, managerial, administrative, technical or clerical work, whereas “worker” is defined under section 2(z) of the act as the one who is employed in any industry to perform the task. The code included journalists, sales promotion employees in the ambit of workers.
Floor wages and Minimum Wages
The provisions relating to minimum wages is explained under chapter II of the code. However, the process of determining the minimum wages is similar to that of provisions of the Minimum Wages Act. Every worker and employee should be paid minimum wages and should not be paid less than minimum wages.The government has come up with a new concept of floor wage according to which a floor wage will be fixed by the government taking into account minimum living standards of workers. The rate of minimum wages fixed by the state government should not exceed the rate fixed by the central government.
According to the code, if an employee or worker works on a day, in excess of the number of working hours on a normal working day, then that person should be paid for every hour so worked in excess, at the overtime rate which shall not be less than twice the normal rate of wages. However, the government may fix the number of hours that constitute a normal working day.
Payment of Wages
Every worker or employee should be provided with basic living wages. The code mandates that the employee or worker shall be paid within 7 days from the expiry of wage period without keeping the size of the establishment in mind. Whereas the Payment of Wages Act, 1936 implies that the employer should pay the wage within 10 days of the expiry of wage period if in the case the establishment has more than 1000 employees. This provision will now be changed. The code refuses that the wage period in respect of an employee should be more than one month and the wages shall be paid in current coin or currency notes or by cheque or by crediting the wages in the bank account of the employee or by the electronic mode. The Payment of Wages Act is applicable to the persons employed in industries whereas the code is applicable to employees employed in various sector. It also deals with deductions in wages for absence from duty, damage or loss, services rendered etc.
Payment of Bonus
The provisions relating to the computation of payment of bonus is consistent with the Payment of Bonus Act, 1965 and maximally, an employee can receive a bonus of 20% of his annual wages. However, the code provides provisions for disqualifying an employee from receiving a bonus on certain grounds like fraud, violent behaviour, theft or for sexual harassment etc.
The objective of the Equal Remuneration Act, 1976 is to provide equal remuneration, without any discrimination between men and women. Whereas the code prohibits discrimination on the ground of gender. The Equal Remuneration Act, 1976 dealt only with men and women, which subsequently excluded transgender but the recent code prohibited the discrimination on the basis of gender.
Appointment for Inspector-cum-facilitators
Inspector-cum-facilitators are considered to be a public servant who may advise employers and workers, inspect the establishments, examine and require any person in premises of establishment, search, seize or may take a copy of such register and he may also exercise powers prescribed in the code.
Code on Wages, 2019 is a significant approach by the Central government toward ensuring the equal opportunities, remuneration or wages to the employees and workers. It is a hope or a decent attempt to build confidence in the business community as it deals with the interest of both employer and employee or worker. The code will play a meaningful role in the business as well as it will promote sustainable growth. This code has consolidated four acts dealing with labour laws. After the enforcement of the code, the Minimum Wages Act, 1948, Payment of Wages Act, 1936, Payment of Bonus Act, 1965, Equal Remuneration Act, 1976 will stand repealed.
Frequently Asked Questions
- What is the objective of Code on Wages, 2019?
- What are the salient features of the code?
- Name the labour laws consolidated by the Code of Wages, 2019?
- What is the history of Code on Wages, 2019?
- Code on Wages, 2019
- The Minimum Wages Act, 1948
- Payment of Wages Act, 1936
- Payment of Bonus Act, 1965
- Equal Remuneration Act, 1976
- Dr Ashok K. Jain, Labour Law-I (Ascent’s Publications)
 Sanjit Roy v. State of Rajasthan (1983 AIR 328)
 Workmen Represented By Secretary v. Management of Reptakos Brett. And others (1992 AIR 504)