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Code of Wages Act, 2019
The Government has notified the Code on Wages Bill, 2019 after it received assent from the
President of India on August 8, 2019. The Bill was passed by Lok Sabha on 30 th July, 2019
and by Rajya Sabha on 2nd August, 2019. The Bill is the first in the series of four labor codes
that the government is working on to rationalize its 44 labor laws and improve the ease of
doing business in the country. The Act aims to transform the old and obsolete labour laws
into more accountable and transparent ones. Among the four Acts being subsumed in The
Code on Wages Act, The Payment of Wages Act, 1936 belongs to pre-independence era
and The Minimum Wages Act 1948 is also 71 years old. The Payment of Bonus Act, 1965
and The Equal Remuneration Act, 1976 are also being subsumed in the Code. After the
enactment of the Code, all the four Acts stand repealed.
Worker’s Issues
Wages had always been the central concern of workers and entrepreneurs. The
provisions of the Minimum Wages Act and the Payment of Wages Act did not cover
substantial number of workers, as the applicability of both these Acts is restricted to the
Scheduled Employments / Establishments.
Laws on wages do not cover workers getting monthly wage of more than Rs 18,000.
Present minimum wage system in India has 1,915 minimum wages for various scheduled
job categories across states.
1 in every 3 wage worker in India is not protected by the minimum wage law
Under the Constitution of India, Labour is a subject in the Concurrent List of the Seventh
Schedule where both the Central & State Governments are competent to enact legislation.
The Code ensures minimum wages along with timely payment of wages to all the employees
and workers. The Code seeks to regulate and streamline wage and bonus payments in all
the employment sectors where any industry, trade, business, or manufacture is carried out.
The central government will make wage related decisions for employment sectors, inter alia,
railways, mines, oil fields, etc. and the state governments are to make similar decisions for
all the other employment sectors.
The salient features of the Code are as following:
The Code on Wage universalizes the provisions of minimum wages and timely payment
of wages to all employees irrespective of the sector and wage ceiling. At present, the
provisions of both Minimum Wages Act and Payment of Wages Act apply on workers
below a particular wage ceiling working in Scheduled Employments only. This would
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ensure "Right to Sustenance" for every worker and intends to increase the legislative
protection of minimum wage from existing about 40% to 100% workforce.
There are 12 definitions of wages in the different Labour Laws leading to litigation
besides difficulty in its implementation. The definition has been simplified and is
expected to reduce litigation and will entail at lesser cost of compliance for an employer.
An establishment will also be benefited as the number of registers, returns, forms etc.,
not only can be electronically filed and maintained, but it is envisaged that through rules,
not more than one template will be prescribed.
At present, many of the states have multiple minimum wages. Through Code on Wages,
the methodology to fix the minimum wages has been simplified and rationalised by
doing away with type of employment as one of the criteria for fixation of minimum wage.
It will substantially reduce the number of minimum wages in the country from the
existing more than 1915 rates of minimum wages.
Many changes have been introduced in the inspection regimes including web based
randomised computerised inspection scheme, jurisdiction-free inspections, calling of
information electronically for inspection, composition of fines etc. All these changes will
be conducive for enforcement of labour laws with transparency and accountability.
It would also ensure that there is no discrimination between men and women as well as
transgenders in getting wages. It will enhance India’s ranking in Global Gender gap
Report, which is currently 108 out of 149 countries
The Bill allows provisions of minimum wages, as well as timely payment of wages, to
cover all employees in both the organized as well as unorganized sectors. The
unorganized sector, in general, includes labor-intensive industries and small businesses
employing less than 10 workers in total. Currently, the provisions of the Minimum Wages
Act, 1948 and the Payment of Wages Act, 1936 apply to workers employed in certain
kinds of jobs and below a particular wage ceiling only.
The Code links minimum wage across the country to the skills of the employee and the
place of employment. Currently, laws fix minimum wages based on multiple factors,
ranging from the level of skill set to the type of employment.
The Code authorises the Central Government to set the national floor rates for wages, as
well as minimum wage in certain sectors (such as railways and mining). The state
government will fix the minimum wages for their regions, which cannot be lower than the
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national floor wage set by the Central Government. However, the Central Government
may set different national minimum wages for different parts of the country.
Key Take aways:
Unorganized sector workers like agricultural workers, painters, persons working in
restaurants and dhabas, chowkidars etc. who were out of the ambit of minimum
wages will get legislative protection of minimum wages.
It has been ensured in the Act that employees getting monthly salary shall get the
salary by 7th of next month, those working on fortnightly basis, before the end of the
second day after the end of the fortnight, weekly basis shall get the salary on last day
of the week and daily wagers should get it on the same day.
Introduction of statutory Floor Wage to be computed based on minimum living
conditions, will extend qualitative living conditions across the country to about 50
crore workers. It is envisaged that the states to notify payment of wages to the
workers through digital mode.
There were instances that due to smaller limitation period, the claims of the workers
could not be raised. To protect the interest of the workers, the limitation period has
been raised to 3 years and made uniform for filing claims for minimum wages, bonus,
equal remuneration etc., as against existing varying period between 6 months to 2
years.
Minimum wages must be revised by the central or state governments at an interval of
five years.
The overtime rate will be at least twice the normal rate of wages of the employee.
It universalizes the provisions of minimum wages and timely payment of wages to all
employees irrespective of the sector and wage ceiling and seeks to ensure "Right
to Sustenance" for every worker and intends to increase the legislative protection
of minimum wage.
In order to ensure transparency and accountability, the code seeks to reform the
inspection regime by introducing web based random computerised inspection
scheme, jurisdiction-free inspections, calling of information electronically, the
composition of fines, etc.
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Provision Current laws Code on Wages, 2019
Minimum Wages Act: Minimum
wages are fixed for scheduled Minimum wages will be paid
employments. to all employees.
Payment of Wages Act: Applies Provisions regarding
to employees whose wages do not payment of wages will apply
exceed Rs 24,000 per month. to all employees.
Coverage
Payment of Bonus Act: Applies Bonus will apply to
to employments with 20 or more employees whose wages do
persons and for employees whose not exceed a monthly
wages do not exceed Rs 21,000 amount notified by central or
per month. state governments.
Minimum Wages Act: Minimum
Mandates that minimum
Revision of wages must be revised by the
wages be revised in five-
minimum central or state governments at
year intervals.
wages least once every five years.
The central government may
set a national minimum
National
No provision. wage and may set different
minimum
national minimum wages for
wage
different states and regions.
Minimum Wages Act: Allows the
relevant central or state
Sets overtime wage at two
Overtime governments to set overtime
times the normal wages.
wage wage.
Equal Remuneration Act: Prohibits Prohibits gender
gender discrimination in wage discrimination in wage
payment. payment.
Gender
discrimination Prohibits gender discrimination in Prohibits gender
recruitment, transfers, and discrimination in recruitment.
promotions.
Appointment of a Facilitator to
carry out inspections, and
provide information to employers
Minimum Wages Act, Payment of and employees for better
Wages Act, Payment of Bonus compliance.
Act, and Equal Remuneration
Act: Inspectors are appointed to Inspection will be done on the
Inspections carry out (i) surprise checks, and (ii) basis of an inspection scheme,
examine persons and require them which will include a web-based
to give information, among other inspection schedule.
powers.
The inspection scheme will be
decided by the central or state
governments.
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Minimum Wages Act: Offences
include (i) paying employees less
than minimum wages, and (ii) not
providing for a day of rest in the Employers who pay less
week. Penalties include fine up to than what is due under the
Rs 500 and imprisonment up to six Code will pay a fine of up
months. to Rs 50,000. If an
employer is guilty of repeat
·Payment of Wages Act: Offences offence within five years,
include (i) non-payment of wages at penalties include
specified time period, (ii) imprisonment up to three
unauthorised deductions from months or a fine of up to
wages. Penalties include fine up to Rs 1 lakh or both.
Rs 7,500.
Employers who do not
Penalties
Payment of Bonus Act: In case a comply with any other
person or company does not provision of the Code will
comply with the Act, they can be pay a fine of up to Rs
punished with imprisonment up to 20,000. If an employer is
six months or fine up to Rs 1,000. guilty of the same offence
again within five years,
Equal Remuneration penalties include
Act: Offences include: (i) non- imprisonment up to one
maintenance of documents in month or a fine of up to Rs
relation to employees, and (ii) 40,000 or both.
discrimination against women in
recruitment. Penalties include fine
up to Rs 20,000 or imprisonment up
to one year.
Annual minimum bonus to be
calculated at the rate of eight
and one-third per cent. of the
Payment of minimum bonus - wages earned by the
Minimum bonus which shall be 8.33 employee or one hundred
percent of the salary or wage earned by rupees, whichever is higher
the employee during the accounting year whether or not the employer
or one hundred rupees, whichever is has any allocable surplus
higher. during the previous
accounting year.
Payment of maximum bonus - Where Where the allocable surplus
the allocable surplus exceeds the exceeds the amount of
Payment of amount of minimum bonus payable to minimum bonus payable to
Bonus Act the employees under that section, the the employees under that sub-
employer shall, in lieu of such minimum section, the employer shall, in
bonus, be bound to pay to every lieu of such minimum bonus,
employee in respect of that accounting be bound to pay to every
year bonus which shall be an amount in employee in respect of that
proportion to the salary or wage earned accounting year, bonus which
by the employee during the accounting shall be an amount in
year subject to a maximum of twenty per proportion to the wages
cent, of such salary or wage. earned by the employee
during the accounting year,
subject to a maximum of
twenty per cent. of such
wages.
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Impact
It seeks to reduce compliance costs for employers.
It is expected to reduce litigation as it streamlines the definition of wages.
It will substantially reduce the number of minimum wages in the country from the
existing more than 1915 rates of minimum wages.
This would ensure that every worker gets a minimum wage which will also be
accompanied by an increase in the purchasing power of the worker thereby giving a fillip
to growth in the economy.
Penalties
Employers who pay less than what is due under the Code will pay a fine of up to Rs
50,000. If an employer is guilty of repeat offence within five years, penalties include
imprisonment up to three months or a fine of up to Rs 1 lakh or both.
Employers who do not comply with any other provision of the Code will pay a fine of up
to Rs 20,000. If an employer is guilty of the same offence again within five years,
penalties include imprisonment up to one month or a fine of up to Rs 40,000 or both.
Inspections
Act provides appointment of a Inspector-cum-Facilitator to carry out inspections, and
information to employers and employees for better compliance.
Inspection will be done on the basis of an inspection scheme, which will include a web-
based inspection schedule. The inspection scheme will be decided by the central or state
governments.
Ensures Ease of Doing Business
The Act prescribes one registration for an establishment, one license, one return and this
will help save time, resources and other efforts of the organisations.
Earlier, out of the 13 labour laws six required separate registration. With the
proposed ‘one licence one return’ businesses will save considerable time and
resources
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