Code of Wages

Amendments To The Wage Code 2019

The Code on Wages (2019) or the Wage Code is an Indian Legislative Act of the Parliament of India that intends to consolidate 44 labour laws (state and central) into 4 comprehensive codes. The Code of Wages intends to make it easier for businesses to function while rationalizing and streamlining the labour laws. The Code Of Wages, 2019 is expected to apply to both the organized sector and unorganized sector employees alike.

Code of Wages

The Wage Code 2019, subsumes the previous legislation relating to Wages, which include:

  • The Payment of Wages Act, 1936.
  • The Minimum Wages Act, 1948
  • The Payment of Bonus Act, 1965
  • The Equal Remuneration Act, 1976

In the earlier legislation (The Payment of Wages Act and the Minimum Wages Act) the provisions made applied only to those workers who drew wages below a certain amount and ceiling. However, the new code on wages has ensured that all establishments, employers, and employees will be covered. (Except Indian Armed Forces of the Union and Apprentice under Apprentices Act, 1961).

 

KEY CHANGES IN THE WAGE CODE

  • The Wage Code ensures that the provisions of timely payment of wages and minimum wages will apply to all employees irrespective of the sector of work or the wage ceiling. Employees who are paid monthly shall be paid by the 7th of the following month. Weekly basis payment for workers should be paid on the last day of the week and daily wagers must receive payment by the end of the same day.

 

  • The Wage code makes a distinction between national minimum wage (calculated based on an objective formula) and national floor wage (no concrete methodology has been given for its calculation). For example, the national minimum wage calculated by a government-appointed committee in 2018 was ₹375 per day, whereas, the national floor wage in the same year was a mere ₹176 per day. Hence, all state governments are required to fix the minimum wage which cannot be lesser than the national floor rate of wages.

 

The Wage Code and the employer:

  • The Wage Code emphasizes that there can be no discrimination based on gender when it comes to wages.
  • Each state or appropriate Government will have to set minimum wage standards. No employer can pay lesser than that.
  • When it comes to PSUs, Railways, or any company which is controlled by the Central Government, then the Wages will be per that. Other companies will have to follow the minimum wages set by the state in which they are operating.
  • The components of the minimum wage has been made clear. It must consist of a basic rate of wages, cost of living allowance, and value of concessions if there are any.
  • The appropriate Government has to review and revise the minimum rate of wages every 5 years per the cost of living and national minimum wages as of that day.
  • The Wage Code gives powers to the Central Government to fix floor wages for different geographical areas to make sure that no state government has fixed a wage below the floor wage which has already been set by the central government.
  • An employer has to pay an employee who works overtime twice the amount of his/her wages.
  • The Wage Code also ensures provision for mandatory payment of bonuses to an employee if the said employee has been drawing a minimum amount of wages and has worked for 30 days in an accounting year regardless of whether the company has an allocatable surplus. If the company has a surplus, the bonus could go up to 20%.
  • In an attempt to remove the Inspector Raj system, the Wage Code has provided for the appointment of an inspector cum facilitator who can provide both employers and employees advice relating to compliance with the several provisions of the Code as well as inspecting the establishments assigned to him, subject to the guidelines issued by the Government from time to time.

 

Wage Code in the time of COVID-19:

As the Nationwide lockdown relaxes, to improve and boost the economy, direct FDI as well as domestic private capital, many state governments are loosening the labour law regulations at a fast pace with labour rights in a free fall. This is to ensure that the labour laws are more flexible to attract further investment. this in turn will affect the “ease of doing business” rank. India’s current rank is 63 as of 2019 as opposed to 130 in 2016.

The current state of migrant laborers in the country shows how diluted the current labour laws are. It does appear that the current COVID-19 situation has provided a window to further diluting labour rights. The states of Uttar Pradesh and Madhya Pradesh have suspended labour rights to three years and 1,000 days respectively.

While all the above suspensions are being passed off as necessary to pull in FDI from China by enticing firms globally, it seems like a cover. In these times, neither can the labour force protest (lockdown prevents public gathering) nor can there be strikes (only 33% of the workforce is allowed and production days are lost).

 

The Code on Wages is an overdue piece of legislation that the current Government has been working on since 2015. When implemented correctly, it seeks to do both -remove the Inspector Raj concept and also most importantly unify the definition of “Wages”. The new code looks to balance the interests of both the employer and the employee. However the arrival of the pandemic and the ensuing economic chaos could be a possible step back in the quick implementation.

 

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