The Code on Wages, 2019

The Code on Wages, 2019 has been passed by both Houses of the Parliament and received Presidential assent on 8th August 2019. The Code on Wage 2019 is an Act to amend and consolidate the laws relating to wages and bonus and connected matters. However the Code on Wage, 2019 shall come into force only after commencement of effective date by the Ministry of labour and Employment. The key feature of the Code is universalization of the provision of minimum wages to all workers, both in organized and unorganized sector. The Code on Wages 2019 aims at regulating wage and bonus payments in all employments; and providing equal remuneration to employees performing work of a similar nature in every industry, trade, business, or manufacture. Once the effective date of the Code on Wages is notified, it shall repeal the following important Labour laws:
The Payment of Wages Act, 1936
The Minimum Wages Act, 1948
The Payment of Bonus Act, 1965
The Equal Remuneration Act, 1976

The Wage Code Bill seeks to empower the Centre to set a minimum wage across all sectors in the country and states will have to maintain that. However, states will be able to provide for the higher minimum wage in their jurisdiction than fixed by the Centre. Main provisions of this Code are:
Appropriate government may fix minimum wages for time work and piece work. The minimum rate of wages on time work basis may be fixed in accordance with:
  •        Hour
  •        Day
  •        Month

The Central Government shall fix a mandatory national wage floor (minimum wage) which is to be followed by the state governments. The minimum wages fixed by state government shall not be less than floor minimum wage.
While fixing minimum wages, Government shall take into account the skill of workers required for working under the categories of unskilled, skilled, semi-skilled and highly-skilled or geographical area or both and their difficulties in work in temperature or humidity normally difficult to bear, hazardous occupations or processes or underground work.
The Wage Code has now made the provisions on equal remuneration gender neutral. The Wage Code proposes a neutral approach and disallows “any discrimination on the grounds of sex” in matters of recruitment for same or similar work or in the conditions of employment.
As per the Code, ‘Wages’ includes salary, allowances and other components expressed in monetary terms including basic wage, DA and retaining allowance. But wage does not include bonus, the value of any house-accommodation, or of the supply of light, water, medical attendance or other amenity or of any service, PF Contribution paid by employer, TA, House rent allowance, amount to defray special expenses, overtime allowance, Commission, Gratuity or retrenchment compensation.
However, the excluded components cannot exceed one half or such other percent as notified by the Central Government of all the remuneration payable to the employee. If it exceeds, then the amount exceeding the one half or such percent as specified by the Central Government shall be considered as ‘Wages.
Where an employee works on any day in excess of the number of hours constituting a normal working day, the employer shall pay him for every hour or for part of an hour so worked in excess, at the overtime rate which shall not be less than twice the normal rate of wages.
Deduction from wage is permitted only in the following purposes-
  1. Fines
  2. Absence from duty
  3. Accommodation given by the employer
  4. Deductions for damage to or loss of goods
  5. Deduction for service rendered
  6. Recovery of advances given to the employee.

These deductions should not exceed 50% of the employee’s total wages. In cases where the authorized deductions exceed 50% of the wages, the excess may be recovered by the employer in the manner prescribed.
The Code on Wages distinguishes between an ‘Employee’ and ‘Worker’. An ‘Employee’ is any person employed for wages by an establishment to do any skilled, semi-skilled or unskilled, manual, operational, supervisory, managerial, administrative, technical or clerical work.
A ‘Worker’ refers to any person employed in any industry to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work but excludes-
someone who is employed mainly in a managerial or administrative capacity; or
someone who is employed in a supervisory capacity drawing a monthly wage exceeding INR 15,000, or such amount as may be notified by the Central Government from time to time.
The Code expands the definition of ‘same or similar work’ to account for experience of the individual as well, in addition to skill, effort and responsibility.
The Wage Code has proposed a new definition of ‘contract labour’ which excludes individuals who are regularly employed by the contractor under mutually accepted standard and conditions of employment, and who get periodic increments in pay, social security benefits, etc. As per the code, “contract labour” means a worker who shall be deemed to be employed in any establishment through a contractor. So, standard and conditions of employment of contract labour and regular employee shall be same.
The definition of ‘employer’ includes a ‘contractor’ too, which indicates that a contractor would also need to independently comply with all the obligations in the Wage Code to safeguard the interest of the employees.
The provisions relating to bonus under the Code on Wages shall apply to only those establishments employing 20 employees on any day in that accounting year. All employees whose wages do not exceed a specific monthly amount, notified by the Central or State government, will be entitled to an annual bonus. The bonus shall be at least 8.33% of his wages or Rs 100, whichever is higher. In addition, the employer will distribute a part of the gross profits amongst the employees. This will be distributed in proportion to the annual wages of the employee. An employee can receive a maximum bonus of 20% of his/her annual wages.
The Code prescribes larger fines for non-compliance. If an employer pays to any employee less than the amount due to such employee under the provisions of this Code shall be punishable with fine which may extend to 50,000 rupees. If he repeats the offence within 5 years, imprisonment for 3 months and/or with a fine of up to 1 lakh rupees. In case of contravention of any other provision of this Code or any rule , the employer shall be punishable with fine which may extend to 20,000 rupees. In case of subsequent offence, the fine amount may extend to 40,000 rupees.
The Code on Wages mandates the employer to maintain a register containing the details of the persons employed, muster roll, wages and such other details in the manner to be specified in the rules by the appropriate government. It also provides for the display of a notice on the notice board at a prominent place at the establishment containing the abstract of the Code on Wages, category-wise wage rates of employees, wage period, day or date and time of payment of wages and the name and address of the Inspector.
Thus, the key proposal in the Code comprises a mandatory national wage floor (minimum wage) which will be binding on the states to implement. But the industry body is of the opinion that the minimum wages fixed by states should be based on three criteria – geographic location, skill and occupation. In this connection, Confederation of Indian Industries opined that the concept of a national minimum wage will affect job creation, so it is necessary to give states power to fix their own minimum wages.


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