CODE ON WAGES, 2019

Authored by

-Anuj Bhave National Law University, Delhi

-Lavanya Shetty NMIMS, Navi Mumbai

Edited by :

Ajal Verma National Law University, Bhopal


Introduction

A landmark step taken in the reformation of our labour laws is via the codification of the Code on Wages, 2019. The Code consolidates and subsumes within it, four major labour law legislations which are the Payment of Wages Act, 1936; the Minimum Wages Act, 1948; the Payment of Bonus Act, 1965 and the Equal Remuneration Act, 1976. The Code further aims to strengthen the labour law regime by bringing a more transparent and accountable system by transforming old laws.

The Code contains nine chapters covering the four Acts in one chapter each along with other important provisions.

Key provisions of the Code:

  1. Definition of ‘Wages’: The objective of the code is to provide a single uniform definition of 'wages' to be applied for all the aspects of wages. It states the specific ambit of the definition of ‘wages’.

Section 2 (y) of the code defines ‘Wages’ which includes salary, allowances, and other components expressed in monetary terms under the Code on Wages. This act excludes some components of the definition like bonus payments, house rent allowance, pension or provident fund, conveyance allowances, remuneration, overtime allowance, and gratuity payments. The definition of 'wages' differs across various labour legislations in India.

  1. The distinction between ‘Employee’ and ‘Worker’: Section 2 (z) clearly distinguishes between an ‘employee’ and ‘worker’. The scope of ‘employee’ is way broader than the meaning of the term ‘worker’, as employer includes managerial and administrative work as well. Whereas, ‘worker’ includes unskilled, technical, skilled, operational work. Only certain specific provisions under the Code relating to fixation and payment of minimum wages uses ‘worker’.

2. Equal Remuneration: Section 3 (1) which is consistent with the Equal Remuneration Act includes provisions against discrimination on basis of gender (i) concerning wages paid by the employers, concerning if the work done by the employee/workers is similar in and (ii) also concerning the recruitment of employees for same work or work of a similar nature. ‘Same work or Similar in nature’ means that the job needs the same level of skills, effort, time, responsibility, or experience under similar working conditions.

3. Bonuses: The whole Chapter IV deals with the Payment of Bonus. The bonuses to be given to the employees are supposed to be notified by the appropriate government, this bill is consistent with the provisions prescribed by the ‘Payment of Bonus Act’. The code also states conditions for disqualifications for the employees to gain bonuses. This code specifically mentions that dismissal of an employee from the service due to conviction for sexual harassment is an appropriate ground for dismissal of bonuses.

4. Changes concerning minimum wages: One of the most important introductions made by the Code was the concept of a floor wage.[1] According to it, any appropriate Government cannot fix the minimum wage less than the floor wage. This floor wage shall be fixed by the Central Government after taking into account the minimum living standards of workers unique to a geographical area. Moreover, if the minimum wage is more than the floor wage than such minimum wage shall not be reduced to the level of the floor wage. The other provisions relating to minimum wages are consistent with the Minimum Wages Act.

5. Payment of Wages: Chapter III of the Code deals with payment of wages. It lays down the method by which payment shall be made. Wages can be paid via currency notes or coins, cheque, or electronic mode as well. The employer can pay wages in different periods that are on a daily, weekly, fortnightly, or monthly basis. This scheme slightly departs from the one under the Payment of Wages Act which only mentions that a wage period shall not exceed one month and also prescribes two different time limits for payment of wages depending upon the total number of employees in an establishment.

6. Inspector-cum-Facilitator: Chapter VII of the Code deals with Inspector-cum-Facilitator. It mandates the appointment of an Inspector-cum-Facilitator to perform the dual functions of inspecting establishments and helping employers to better comply with the Code. The Inspector also has the power to examine any person and to conduct a search or seizure of records. The aim of having such authority was to remove irregularities in an inspection. Further, as per the Code, it prescribes the appropriate Government may lay down a specific inspection scheme, which may also contain web-based inspection processes.

7. Death of Employee: Another interesting provision in the Code talks about the condition when the employee has died before the payment of dues.[2] The provision accounts for the payment of wages by a person nominated by the employee. If no such person is nominated, then the dues shall rest with the specified authority who has the power to deal with the wages as prescribed in the Code.

Limitation Period: Another significant change brought about by the Code is the increase in the limitation period to three years from the date the claim arose.[3] Previously, the limitation period varied from six months to two years depending on the type of claim. The Code also puts the burden of proof on the employer to prove that dues such as bonuses, wages have been paid by the employer.[4]

1. Offenses: The Code further provides for the provisions on offenses and penalties under Chapter VIII. Some of these offenses include paying less than the due wage and contravening any other provisions. Several penalties are envisioned under the Code with the maximum penalty being imprisonment up to three months.

1. 11. Definitions of 'contractor' and 'contract labour': Clause 2(f) of the Code defines 'contractor', which is consistent with the Contract Labour (Regulation and Abolition) Act, 1970. It has defined contracts workers not including part-time workers or temporary ones either, who are employed for regular work of the establishment according to the mutually accepted regulations under the law attaining increments and other social benefits are not considered as contract labour’. Interestingly unlike the definition, the code doesn’t explicitly mention any references to 'contract labour' in the Code.

Conclusion

The whole concept of such a Code which codifies and consolidates labour laws is a step in the right direction to promote business. This Code has tried to balance the interests of the employer as well as the employee and should inspire confidence in the business community. One of the major benefits of this Code is the removal of ambiguity and confusion which had arisen due to multiple definitions given under the various labour law legislations. Even though many substantial provisions from the repealed legislations have been kept intact, the Code has done a good job of replacing the archaic provisions of these legislations. It will be interesting to note how does the Code will interact with other codes on occupational safety, health and working conditions, and industrial relations once they have been passed as well.

[1] Section 9, Code on Wages, 2019

[2] Section 44, Code on Wages, 2019

[3] Section 45(6), Code on Wages, 2019

[4] Section 59, Code on Wages, 2019

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