SET ON AND SET OFF OF ALLOCABLE SURPLUS UNDER THE

CODE ON WAGES: AN ANALYTICAL STUDY

8.3 Labour Laws - II

SUBMITTED BY:
Ritik Shalya
UG18-74
SEMESTER VIII YEAR IV

SUBMITTED TO:

Mr. Jagdish Khobragade (Assistant Professor of Law)

MAHARASHTRA NATIONAL LAW UNIVERSITY, NAGPUR

Introduction
Labour-related legislation is listed under the concurrent list in the Indian Constitution, which
means that both the Central Government and the State Government have equal authority and
permission to create labour laws. Currently, for labour welfare, more than 100 state laws and
more than 45 federal laws have been passed, frequently on topics that overlap.

In order to harmonise and streamline the nation's labour laws, the Central Government has
issued four labour codes: I the code on wages; (ii) the code on industrial relations; (iii) the
code on social security and welfare; and (iv) the code on occupational safety, health, and
working conditions. Each of these codes will be covered in four parts, starting with this one.

Codes on Wages, 2019 ("Wage Code" or "Code") is awaiting word of when it will go into
effect. The Wage Code's main goal is to combine the four labour statutes that currently
address wages into a single, comprehensive code. The four labour statutes are Payment of
Wages Act, 1936, Payment of Bonus Act, 1965, Equal Remuneration Act, 1976, Minimum
Wages Act, 1948.

The government's goal is to unify and cover all four laws under one statute, the Wage Code,
given they all govern different parts of the same subject, wages. Hence, the Wage Code is the
first stage in the country's labour laws' implementation, enforcement, and harmonisation.

Code on Wages: Coverage and Applicability

Employees in both the organised and unorganised sectors are subject to the Code. The
Payment of Wages Act of 1936 only applied to factories, a few specific establishments, and
employees who drew monthly wages up to INR 24,000, and the Minimum Wages Act of 1948
only applied to scheduled employments. By contrast, provisions relating to wage payment
under the Code will be applicable to all employees, regardless of their wage ceiling and type
of employment.

According to this Code, decisions about wages will be made by the State Government for all
other sectors and the Central Government for employment in the railway, mines, and oil

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fields, among others. As contractors are now included in the definition of "employee," they
will have the right to receive minimum pay in accordance with the Code.

Definition of Worker
The definition of a worker under labour laws may vary depending on the country or
jurisdiction. In general, a worker is someone who performs services for an employer in
exchange for remuneration, which can be in the form of wages, salary, commission, or any
other form of compensation.

Under labour codes, workers are usually distinguished from independent contractors who
provide services to a company but are not considered employees. The distinction between
employees and independent contractors is important because employees are entitled to certain
rights and benefits, such as minimum wage, overtime pay, social security contributions, and
protection against discrimination and harassment, whereas independent contractors are not.

In Indian law, a "worker" refers to any person who is employed in any industry, trade,
business, or occupation, whether directly or through a contractor, and whether in a
supervisory, technical, or manual capacity. This definition of "worker" is provided under
various labour laws in India, including the Industrial Disputes Act, 1947, and the Factories
Act, 1948.

The definition of "worker" also includes persons who have been dismissed, discharged, or
retrenched in connection with, or as a consequence of, any industrial dispute. It covers all
types of employees, including permanent, temporary, and contract workers, and includes
those employed in both organized and unorganized sectors.

Under Indian labour laws, workers are entitled to various rights and protections, such as
minimum wages, overtime pay, social security benefits, protection against discrimination and
harassment, and the right to form and join trade unions. The definition of "worker" is
significant because it determines the applicability of various labour laws and the rights and
protections available to workers under those laws.

The Code prohibits gender discrimination in matters related to wages and recruitment of
employees for the same work or work of similar nature, except in cases where employment of
women in such work places is prohibited/restricted under the laws. 'Work of similar nature' is
defined as 'work for which the skill, effort, experience and responsibility required are the
same'.

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Employer
In addition to the standard definition of a person who employs workers in its establishments,
the Code has specifically defined "employer" to include an occupier or manager of a factory,
a person with ultimate control over the company affairs, a managing director, a contractor,
and the legal representative of a deceased employer.

Such a definition was either absent from the existing law or it was limited to factories and
other enterprises where government officials exercise ultimate authority over the business. As
a result of this being insufficient, it was unclear what kind of employer it was.

What is Allocable Surplus?

The

Conclusion
The Code on Wages provides for the distribution of a portion of an establishment's net profits
among its employees in the form of allocable surplus. The provisions for setting off and
carrying forward of the allocable surplus ensure that the establishment is not burdened with
excessive obligations in case of losses, while also allowing for the equitable distribution of
profits among the employees.