Latest News

Govt. clears wage code in new wave of labour reforms

The Union cabinet on 3rd July cleared the long-awaited Code on Wages Bill, paving the way for its introduction in the ongoing session of Parliament, signalling its intent to reform India’s labour policies, widely considered a difficult and potentially controversial second-generation reform.


The Code on Wages is the first of four proposed labour bills long envisaged to replace 44 archaic labour laws. The government hopes to clear the bill at the earliest as it has already undergone the scrutiny of a Parliamentary Standing Committee after it was first introduced by the NDA government in August 2017.


Union minister for Information and Broadcasting Prakash Javadekar confirmed that the Cabinet has cleared the bill and that the government would share details of the legislation after tabling it in parliament.


Government officials who asked not to be named said that while the current Minimum Wages Act and the Payment of Wages Act apply only to employees engaged in certain kinds of jobs, the “Code on Wages allows provisions of minimum wages and payment of wages to cover employees in both the organised and unorganised sectors.”


The bill, popularly called the Wage Code, also allows payment of wages by depositing the same in the bank account of the employees, electronically or by cheque.


The Wage Code, originally envisaged during the UPA era, replaces four existing laws, the Payment of Wages Act, 1936, the Minimum Wages Act, 1948, the Payment of Bonus Act, 1965, and the Equal Remuneration Act, 1976. The legislation allows the central government to decide the national floor rates for wages in some sectors including the railways and mines, while the state governments can decide the minimum wages for others. And it sets the overtime rate at twice the standard wage rate.


The Centre will also recommend a national minimum floor rate and states cannot pay less than this. The bill also allows the Centre to set different national minimum wages for different parts of the country.


The bill says that minimum wages must be revised by the central or state governments every five years.


Among the changes suggested by the Standing Committee in 2017 were to remove the distinction between “employees” and “workers”, and to eradicate gender discrimination not just in wages but also in recruitments and transfers. An official aware of the matter indicated that how “employees” (those in managerial and administrative roles) and “workers” (others) are defined is unlikely to be changed in the Wage Code at this stage.


The UPA government had originally planned to simplify the complex and archaic labour laws into just four codes. The plan, however, could not see the light of day as the Congress-led coalition, surviving on outside support didn’t have the numerical strength to push labour reforms through Parliament. The NDA government’s first attempt in the area of labour reforms in 2017 was also met with similar opposition. Rationalising the labour laws was seen as such a cumbersome and politically risky work that even in the era of economic liberalisation in 1991, the labour sector remained untouched.


The Wage Bill was introduced in the Lok Sabha in August 2017 but lapsed at the end of the 16th Lok Sabha.


Senior government officials said that the wage and other three codes are aimed to further enhance the ease of doing business in the country, one of the pet projects of Prime Minister Narendra Modi. In the President’s speech to the joint sitting of both Houses last month, President Kovind remarked, “Work is underway in full earnest to transform India into a Global Manufacturing Hub. Keeping in view Industry 4.0, a New Industrial Policy will be announced shortly.In‘Ease of Doing Business’, India has leapfrogged 65 positions during the past five years, from a ranking of 142 in 2014 to 77. Now our goal is to be among the top 50 countries of the world.In order to achieve this, process of simplification of rules will be further expedited in collaboration with the States. In this sequence, necessary amendments are also being brought in the Companies Law.”


The four Codes — wages, industrial relations, social security and industrial safety & welfare—will also protect the rights of workers.


Tapan Sen, general secretary of CITU (Centre of Indian Trade Unions), said, “The basic tenets fixing the minimum wages is under bureaucratic control. This has been done ignoring the consensus decision of the 2014 Indian Labour Conference. Also, while combining the existing laws, several provision relating to the rights of the workers have not been incorporated in the Wage Code.”


Manish Sabharwal, Chairman of TeamLease, a recruitment and online job portal, though backed the idea of labour code and said, “I think it’s a fantastic idea to simplify labour laws. It is much required. But I am of the opinion that instead of four Codes there should be a single, comprehensive labour code.”