Article (September-2019)


Highlights of Code on Wages 2019

Anil Kaushik

Designation : -  

Organization : -  


164512 Total View        

1. The code on wages, 2019 bill has now become an Act since it has received the assent of president of India on 8.08.2019. The Act has not been enforced so far because govt. has yet to notify the date of applicability of the complete Act or different dates for different provisions for commencement of the code.

2. The code has 68 Sections in 9 Chapters which subsumes four existing Acts namely Minimum Wages Act, Payment of Wages Act, Payment of Bonus Act and Equal Remuneration Act.

3. The code will be applicable to all establishments and factories and the provisions of this code will apply to all employees irrespective of category and status. Even if the employer is having one or more employee, all provisions of this code will apply to such employer, which is not similar to existing laws. For example Payment of Bonus Act is applicable to establishment employing 20 or more employees. Payment of Wages Act covers those employees drawing less than 24,000 per month. Minimum Wages Act applies to the workmen of scheduled employments only. With this code, the limit of employees for the purpose of applicability is gone. The limit of wages up to 24,000 per month in case of claiming illegal deduction or delay in wages also is no more. All employees including supervisors and managers can now seek protection against illegal deductions and or delay in wages against employer.

4. The code provides 26 definitions of different terms taken from four existing laws with certain changes and modifications in some definitions. Contract labour has been defined as a worker who is employed in or in connection with the work of an establishment  when he is hired in or in connection with such work by or through a contractor with or without knowledge of the principal employer and includes inter states migrant worker. The definition excludes the person from the definition who is regularly employed by the contractor for any activity of his establishment and his employment is governed by mutually accepted employment condition and gets regular increment, social security coverage and other welfare benefits. There is no definition of principal employer in the code. The meaning of the definition would be that only those persons would be deemed as contract labour who are hired in connection with the work of the establishment of principal employer.

5. The definition the employer provides that a person who employs any person whether directly or through any person or on his behalf or on behalf of any person one or more employees in his establishment including contractor and legal representative of deceased employer, which means in respect of contract labour employed in this establishment/factory, occupier of a factory or the person who has ultimate control over the affair of this establishment will be deemed as employer for the purpose of the provisions of this code. Also, for the purpose of bonus, now employer will be responsible in respect of bonus for contract labour also which is not till now as per payment of Bonus Act definition.

6. The definition of same work or work of a similar nature taken from Equal Remuneration Act is expanded. It is now made applicable to all employees instead of Man vs. Woman.

7. The code has the definition of wages which is changed from the existing one provided in three laws namely Payment of Wages Act, Payment of Bonus Act and Minimum Wages Act. The definition excludes HRA, Conveyance allowance, bonus, value of any house accommodation, overtime, commission, gratuity, retrenchment compensation and remuneration payable under any award or settlement between the parties or order of a code or tribunal. The definition further provides that if the amount of such allowances exceeds 50% of all remuneration, than such exceeded amount paid under different allowance will be deemed as part of wages. The definition further provides that for the purpose of equal wages to all genders conveyance allowance, HRA, overtime and remuneration payable under any award or settlement shall be taken for computation of wage. The impact of this definition of wage would be that most of the allowances which are now part of minimum wages will now be excluded to the limit of 50% of remuneration. Similarly these allowances would be excluded for the purpose of determining bonus eligibility. It is not understandable why the remuneration payable under any award or settlement are at one level excluded from the definition of wages and then and other level it is included for the purpose of equal wages and payment of wages. What purpose is it going to serve, need to be seen in future.

8. The definition of the worker is taken from Industrial Disputes Act with minor changes. In I.D. Act apprentice is included in the definition of workman whereas in the code it is excluded. Minimum wages talks of employee limited only to scheduled employment including out worker. The definition of worker in code excludes apprentice under the Apprentice Act and persons employed in supervisory capacity drawing wages exceeding 15,000 per month and who is employed mainly in managerial or administrative capacity. Working journalists and sales promotion employees are included in the definition. Presently the person employed in supervisory capacity drawing up to 10,000 only is excluded from the definition of workman under I.D. Act.

9. The code also provides the definition of employee covering all category including supervisory, managerial and administrative. The applicability of the provisions of the code to all including managers is not available under existing four laws, thus extending legislative protection to all employees across the board.

10. While Section 3 of the code prohibits gender discrimination on wage related matters, does not include provision regarding gender based discrimination during recruitment, existing Equal Remuneration Act prohibits employer in wage payment as well as recruitment whereas of employees based on gender.

11. The code provides that a national minimum wage may be fixed by central government. It may also set separate national minimum wages for different states or regions of the nation. State government may also fix their minimum wages but that shall not be lower than the national minimum wage fixed by central government. In case the existing minimum wage of a state is higher than the national minimum wage, same cannot be reduced by the state. Minimum wages will be linked only to factors such as skills set and geographical location. The minimum wages will be extended to all sectors and the concept of scheduled employments is gone. The minimum wages will be revised every five years. Currently the Minimum Wages Act allows the state government flexibility in deciding when to revise minimum wages as long as it is not more than five years. The reason of removing the flexibility in fixing minimum wages even before five years is not clear. Whereas no time period has been specified for the central government to revise the national minimum wages. The objective of the changes in minimum wages is that every worker should get at least minimum wage throughout the country in organised as well as unorganised sector.

As present many of the states have multiple minimum wages. The methodology of the present code in respect of minimum wages has been simplified and rationalised by doing away with the type of employment as one of the criteria of fixation of minimum wage. It is expected to reduce the number of minimum wage rates across the country.

The challenge would be that despite having regional level minimum wages rate may lead to disparity among various regions with varying economic profiles.

12. Section 17 (2) of the code provides that even in case of resignation by the employee from the services, his wages will be paid within 2 working days of his resignation. It is additional inclusion in the provision of Payment of Wages Act. Till now condition of payment of wages within 2 working days is applicable only in case of removal or dismissal from service or retrenchment or un-employment due to closure of establishment. The condition of resignation is not there in existing law. It certainly extends protection to those employees also who leave the services of their own and wait for their full and final dues for long.

13. In respect of bonus, code does not provide any wage limit or eligibility or wages basis of calculation. The same shall be notified though separate notification. For the purpose of disqualification from receiving the bonus one more condition of conviction for sexual harassment has been added. Now there are four condition for which bonus will not be payable. Till now it is only three.

14. The time limit for initiating claims under the code has now been prescribed as of three years. At present under the Payment of Wages Act it is only one year. The time limit has been increased from one to three years to protect the interest of workers and to make uniformity for filing claims for minimum wages, bonus and equal remuneration etc. At present time limit varies from 6 months to one year under existing laws.

15. The provisions of the code empowers the government to notify a wider territory for an inspector now to be known as facilitator, which could be done via randomised selection process. The Code also allows the government to conduct web-based inspection and seek information electronically. The inspectors are to be renamed as facilitators who will carry out inspection and provide information to employer for better compliance.

16. The penal provisions have been made more rigorous. The offences under the code have also been made compoundable. For not paying what is due to the employee, the fine is up to 50,000. In case of repetition of offence with in 5 years, penalty includes imprisonment up to 3 months and a fine up to one lakh rupees or both. In case of other violations of provisions of code, fine has been specified as Rs. 20,000. In case of repetition of offence with in 5 years penalty include imprisonment up to 1 months and a fine up to Rs. 40,000 rupees or both.