The Code on Wages, 2019 (hereinafter called as “Code”), consolidating the laws relating to wages and bonuses has been passed by both houses of the Parliament, and it received the President’s assent on August 08, 2019. The Code repealed the following Acts:
This Code extends to the whole of India.
This Code is divided into 9 Chapters as follows:
2. Minimum Wages
3. Payment of Wages
4. Payment of Bonus
5. Advisory Board
6. Payment of Dues, Claims, and Audit
8. Offenses and Penalties
The Code has universalized the provision of minimum wages and timely payment of wages to all employees irrespective of the sector and wages ceiling. The Code extends:
To all establishment where any industry, trade, business, manufacturing or occupation is carried out which includes Government establishment
To all kinds of employees irrespective of wages limit (Wages limit of Rs. 24,000/- per month for applicability of payment of wages Act, 1936 has been removed) whether skilled, unskilled, manual, supervisory, managerial, administrative, technical or clerical cross all sectors whether organized or un-organized.
To all kinds of employers i.e. any person who employed one or more employees.
HIGHLIGHTS /KEY FEATURES OF THE CODE ON WAGES, 2019
Payment of Minimum Wages: the Code prohibits employers from paying wages less than the minimum wage. This will be based on time, or a number of pieces produced. The minimum wages will be revised and reviewed by the central or state governments at an interval of not more than five years.
Floor wages: The Code introduces the concept of floor wages, whereby the central government will fix floor wages taking into account the minimum living standards of a worker for different geographical areas. The minimum rates of wages fixed by the state governments will have to be not less than the floor wages fixed by the central government. The aim behind the introduction of floor wages is to provide a basic standard of living for the employee.
Mode of Payment of through Digital: The Code provides that the wages to employees may also be paid by cheque or through digital or electronic mode or by crediting it in the bank account of the employee.
No discrimination on the grounds of gender and sex: The Wage Code prohibits discrimination of employees on the grounds of gender in matters relating to wages, and prohibits discrimination on the ground of sex in matters of recruitment and conditions of employment, for the same work or work of similar nature.
Definition of employee and worker: The Code defines the terms ‘employees’ and ‘workers.’ The term ‘employee’ has been given an expansive meaning by including even persons employed in a managerial, administrative, and supervisory capacity.
The term ‘worker’ excludes managerial and supervisory employees and includes sales promotion employees and working journalists.
Payment of Bonus: The Payment of Bonus Act applies only to employees earning less than Rs. 21,000/-. While the Code stipulates that employees earning below the salary threshold to be notified by the state government, will be eligible for payment of bonus, All employees whose wages do not exceed a specific monthly amount, notified by the Central or state government, will be entitled to an annual bonus. The bonus will be at least: (i) 8.33% of his wages, or (ii) Rs 100, whichever is higher. In addition, the employer will distribute a part of the gross profits amongst the employees. This will be distributed in proportion to the annual wages of an employee. An employee can receive a maximum bonus of 20% of his annual wages.
Advisory boards: The central and state governments will constitute advisory boards. The Central Advisory Board will consist of: (i) employers, (ii) employees (in equal number as employers), (iii) independent persons, and (iv)five representatives of state governments. State Advisory Boards will consist of employers, employees, and independent persons. Further, one-third of the total members on both the central and state Boards will be women. The Boards will advise the respective governments on various issues including (i) fixation of minimum wages, and (ii) increasing employment opportunities for women.
Efficiency in Procedural compliances: With the consolidation of the Payment of Wages Act, Payment of Bonus Act, Minimum Wages Act, and the Equal Remuneration Act into the Wage Code, multiple filings, and maintaining multiple records and registers under each of the four legislations is reduced.
Inspector-Cum-Facilitators: The Inspector-cum-Facilitator may advise to employers and workers relating to compliance with the provisions of this Code, inspect the establishments as assigned to him by the appropriate Government, subject to the instructions or guidelines issued by the appropriate Government from time to time.
Many changes have been introduced in inspection regimes, including web-based randomized computerized inspection schemes, calling of information electronically for inspection, etc. these changes have been brought about to ensure enforcement of labor laws with transparency and accountability.
Offenses: The Code specifies penalties for offenses committed by an employer, such as (i) paying less than the due wages, or (ii) for contravening any provision of the Code. Penalties vary depending on the nature of the offence, with the maximum penalty being imprisonment for three months along with a fine of up to one lakh rupees.
Limitation Period for Claim: The period of limitation for filing of claims by an employee has been enhanced to 3 years as against existing time period varying from 6 months to 2 years, to provide more time to file their claims.
The Code is a well-intentioned piece of legislation which aims to balance the interests of the employer and the employee. The Code aims for enforcement of labor laws with transparency and accountability, and it is expected to reduce the cost of compliance for employers significantly. The Code is being a historic step towards labor reforms and ease of doing business in India without diluting any basic rights of employees.