Code on Wages

By the recommendations of the 2nd National Commission on labor, the Ministry of Labour and Employment re-introduced the code of wages bill on 23rd July 2019 as the previous (Code on Wages) one was unable to get sanctioned as the sixteenth Lok Sabha got dissolved. The Code do combines, colligate, and alters four of the Central labor laws relating to wages namely (i) “the Payment of Wages Act,1936” (ii) “the Minimum Wages Act,1948″(iii) “the Payment of Bonus Act,1965” and (iv) “the Equal Remuneration Act.,1976”. This paper does highlights the discussions upon the same and also highlights the features and the shortcomings of the new Code being introduced.


The Indian economy has 90% of its industries in an unorganized sector and only 10% of industries come under the organized sector. Due to this reason, minimum wages or the social benefits introduced by the government are enjoyed only by the organized sector that is only 10% of industries. Unorganized industries are just left with regret. Keeping all these discussions in mind government has introduced the code of wages bill on 8th August 2019. Under which the benefits of minimum wages and other social benefits would be enjoyed by every industry (labor) irrespective of the fact that they are from an organized or unorganized sector.

Code on Wages 2017

As we step back in our past, the government in 2014-17 has also introduced the Code on wages bill in Lok sabha following to this, in 2017[1] only the bill was presented to the standing committee and eventually the report of the standing committee in the same regard was out but as the re-election was done to elect new government therefore the bill got lapse.

The current minimum wages act and the payment of wages act does apply to the employees engaged in certain kind of jobs that is employees working in organized sector whereas the new bill passed on 8th august 2019 do cover both organized and unorganized sectors.

What is the New Code on Wages

The code on wages is the first of four proposed labor bills envisaged to replace 44 bygone labor laws. As India has approximately 44 labor-related laws it does get difficult to deliver benefits to all the laborers through these laws, therefore, to bring a labor reform four bills are said to be proposed by the government namely the “Code on wages”, “industrial revolution bill”, “industrial welfare and safety bill” and “social security bill”. The code on wages is the first of four proposed labor bills long envisaged to replace 44 bygone labor laws. The code on wages bill replaces four existing codes namely-

(i) “The Payment of Wages Act,1936”

 The Payment of wages act do regulates the payment to the employee, employed under the industrial norms. The act does guarantees the wages to the employees on time but certain exceptions are there, which are regulated by the act (government). The act does guarantees wages on time without any deduction. The mode of payment of wages, imposition of fine, etc are the subjects to be decided by the government.

(ii) “The Minimum Wages Act”

 The minimum wage act is a legislative action that was passed in the year 1948 to stipulate the wages of labor in India irrespective of the fact that they are skilled or unskilled. The act does ensure the basic fulfillment of the physical health and financial needs of the labor, moreover, the act ensures that the labor does enjoy the social comfort and does lead to a decent living standard.

(iii) “The Payment of Bonus Act”

 The payment of the bonus act was enacted in the year 1965. The act does provide a bonus to the people employed under certain norms. The bonus depends upon the profit, production, and productivity of the industry. According to section 10 of the act, the minimum bonus payable by every industry is 8.33%.

 (iv) “The Equal Remuneration Act”

 The equal remuneration act was passed in the year 1976 with the object of providing equal pay without any discrimination on the grounds of gender that is equal remuneration to both men and women. The act does not only put a barrier on gender discrimination regarding the pay of the women but does cover the matters in the field of employment such as training programs, promotion, transfers, etc.

Other Provisions

The code lays down the duty of the government to appoint Inspectors, sub-inspectors, and other personnel needed, to ensure the smooth functioning of the industry. Such Inspectors and sub-inspectors do pursue the authority to work with great efforts for the smooth functioning of the industry. The act is done to ensure that there is no arbitrariness and malpractices in the inspection. The penalties being prescribed under the act are not too flexible and not too rigid that is the penalty depends upon the nature of the offense as well as the financial condition of the employee too on whom the penalty is being imposed upon[2]. The maximum penalty or fine which can be awarded to the employee is the imprisonment of 3 months or a fine of Rs. 1,00,000 or both.

The Code prohibits gender discrimination in matters related to wages and recruitment of employees for the same work or work of similar nature.  Work of a similar nature is defined as work for which the skill, effort, experience, and responsibility required are the same. The Code specifies penalties for offenses committed by an employer, such as (i) paying less than the due wages, or (ii) for contravening any provision of the Code.  Penalties vary depending on the nature of the offence, with the maximum penalty being imprisonment for three months along with a fine of up to one lakh rupees. 

Features of New Code on Wages

  • The Union government shall set the minimum wages for employees in certain sectors like in the railway and mining sector whereas the state government shall set the minimum was for the employees of other sectors. The Central government would be having control over setting up the minimum wages at the national level. Secondly, the State government cannot set the minimum wages lower than the national minimum wages.
  • The bill also allows the Central government to set different national minimum wages for different states of the country.
  • Wages must be revised periodically by the Central and the State government.
  • The Central or the state government shall be prescribing the normal working hours for the employees. The overtime rate will be at least twice the normal rate of wages of the employee.
  • Another unique feature of the new code on wages is that the wages shall be deposited in the bank account of the employee. According to “Jandan yojna”  every citizen should have a bank account.
  • The bill also provides for an appellate authority for speedier labor dispute resolution.
  • The limitation period for filing of claims has been increased to 3 years as compared to the existing time which may vary from 6 months to 2 years
  • The Central and the State government will constitute the central advisory board and State, authority board. In the above-mentioned boards, employees and an independent person shall be there whose

work would be to advise the Central or the State government, on issues such as setting and revision of minimum wages, provided that the number of employees and the independent workers elected should be equal.

Shortcomings of the New Code on Wages

  • If the existing minimum wages set by the states are higher than the national minimum wages, then the government would not be given the authority to reduce the wages.
  • Currently, the Central government does revise the wages after every 5years and therefore can reduce or increase them but as per the new code, this provision is being removed.
  • None of the provisions mentioning about the punishment for the person or group of persons encouraging gender discrimination is mentioned in the code.


The clear intentions of balancing the interest of employee and employer can be seen in the code. Moreover, the legislative authority through this code wants to promote a healthy business environment. The purpose of bringing the code on wages is nothing but it’s obsolete provisions. It will be interesting to know how other bills relating to social security, industrial safety, and industrial relations will go with the code on wages once they are passed.

Frequently Asked Questions-

  • What is the reason for the collapse of the “Code on wages bill, 2017”?
  • What is the main objective of the Code on wages bill, 2019?
  • How many acts are replaced by Code on wages bill 2019, Elaborate
  • Which act do bars the discrimination on the grounds of gender, Explain
  • Which section of which act do prescribes the bonus to be payable by an industry?


  3. Labour and Industrial laws by S.N MISRA, Published by Allahabad Law Publications, 28th edition

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