Code on wages 2019 - India consolidates Labour Laws

A much-awaited reform, towards codification of Indian Labour Laws on equal remuneration, rates of minimum wages and bonus payments to employees has finally been set in motion with the enactment of “The Code on Wages, 2019” and published in the Official Gazette after receiving Presidential Assent on August 08, 2019. With the introduction of the said Code, the present legislation’s namely the Minimum Wages Act, 1948, The Payment of Wages Act, 1936, The Payment of Bonus Act, 1965 and The Equal Remuneration Act, 1976, will become obsolete and redundant. The amalgamation of these laws will universalise the provisions of minimum wages and timely payment of wages to all employees irrespective of the sector and wage ceiling, removing the multiplicity of definitions and authorities without compromising The Code provides for the minimum wages as well as timely payment of wages to all employees on the basic concepts of welfare and benefits to workers, hence bringing transparency and accountability which would lead to more effective enforcement. The Code provides for the minimum wages as well as timely payment of wages to all employees.

The Code strives to rationalise and simplify the wage and bonus payments across the different employment sectors where any trade, business or manufacturing activities are carried out. The plethora of legislation regulating the payment of wages did not cover a vast section of the workers in the unorganized sector, who will get protection under the minimum wages under the Code.

India, where ‘Labour’ is the real source of energy behind immense growth potential, has set in motion the much-awaited codification of its Labour Laws with the enactment of “The Code on Wages, 2019” (Code). It is an amalgamation of Labour Laws relating to wages and bonus and matters connected therewith or incidental thereto. The Code on Wages, 2019 has been passed by both Houses of the Parliament and has received the assent of the President on 8th August 2019 through an Official Gazette.

44 Labour Laws have been subsumed into 4 Labour Codes. These include: Code on Wages, on Occupational Health and
Safety, on Social Security and Welfare, and on Industrial Relations.

Coverage

  • The Code universalizes the provisions of minimum wages and timely wages to all employees, irrespective of the sector or wage ceiling.
  • While the Central Government will continue making wage-related decisions for employments such as railways, mines, oil fields, the central public sector undertaking etc., the State Governments shall make such decisions for all other employments including for private sector establishments.
  • Hence, the new Code is expected to consolidate the Labour Laws of India and simplify them for better understanding and implementation.

Breakdown

  • Chapter 1 – Definitions, applicability, provisions, and coverage of the Bill, which mandates equivalent remuneration for all workers in India
  • Chapter 2 – Minimum wages and contains provisions and policies relating to the payment of such minimum wages.
  • Chapter 3 – The ‘payment of wages’ is dealt with.
  • Chapter 4 – The ‘payment of bonuses’ is covered.
  • Chapter 5 – Provides guidelines for the creation of an advisory board on the subject of fair wages.
  • Chapter 6 – Talks about the ways in which claims can be raised under the Code on Wages.
  • Chapter 7 – deals with the need to appoint a Facilitator or Inspector to enforce the provisions of the Bill.
  • Chapter 8 – Outlines various possible offences under the Code on Wages and the associated penalties.
  • Chapter 9 – Some miscellaneous provisions and other aspects of the new code have been listed down for reference.

Key Features

Simplified Defining a ‘Wage’ – Under the provisions of the Code on Wages, a wage has been defined as any allowance, salary, or other forms of regular payment made in monetary terms. Bonuses and travelling or housing allowances do not fall within the ambit of wages.

Employees Vs Workers- According to the new Code, an employee is an individual (apart from an apprentice) employed by an organization or person to perform skilled, unskilled, or semi-skilled tasks in return for regular wages. On the other hand, a worker is a person hired to perform any task in return for a one-time monetary reward or payment.

Gender Discrimination- The Code on Wages stipulates that an employer can’t discriminate between employees performing the same (or similar) work, vis-a-vis the payment of wages, on the basis of the gender of said employees.

Working Hours and Overtime- The number of hours in a normal working day can be determined by the Central or State Government. If employees work in excess of the hours required in a normal working day (or on a  holiday), such employees will be
entitled to overtime pay (which must be double the normal wage, at least)

Limitation Period of Claims- The period of limitation for filing of claims by an employee or a worker has been enhanced to three years, as against the existing time period varying from six months to two years, to provide more time to file their claims.

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 which shall range from 8% to 20%. It shall apply to only those establishments employing at least 20 employees or if at least 20 employees have been employed on any day in that accounting year.

Inspector cum Facilitator- The Code on Wages requires the appropriate Government to appoint Inspectors cum Facilitators (in the place of Inspectors), to carry out inspections and provide information to employers and employees for better compliance.

Penalties and Fines- The Code of Wages decriminalizes all offences except where it is a repeat of a similar offence within 5 years and allows compounding of the first offence. It also prescribes larger fines for noncompliance.

Conclusion

In the era, where exists multiplicity in definitions and compliances under the existing Labour Laws, The Code on Wages promotes ease of doing business in India, by codifying and consolidating Labour Laws, without compromising on the basic concepts of employee welfare and benefits, making it easier for employers to understand and thereby comply; and for the labour authorities to enforce the laws.

As Labour Laws in India continue to evolve, it is important for businesses to seek and obtain assistance with regards to
labour contracts and employment terms of services to ensure their policies are legally compliant.

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