THE CODE ON WAGES, 2019

Author: Siddharth Negandhi, 1st Year, LL.B, Jitendra Chauhan College of Law This article has been written by the author while pursuing the internship programme with us. INTRODUCTION: The government under the leadership of our Honorable Prime Minister Shri Narendra Modi started forming a plan in the year 2015 to synthesize India’s 44 labour laws into four codes in order to vindicate labour laws and improve business conditions. In 2019’s Union Budget, finance minister Nirmala Sitharaman ensured that the registration process and the return filings would get streamlined and equalized. With many definitions related to labour getting regulated and standardized, lesser disputes relating to the labours was being expected. The Code of Wages, 2019 is a well directed and a thoroughly planned regime which intends to safeguard and balance the interests of both employer and the employee. Although the code contains a considerable fragment of the repealed legislation, it makes a suitable effort to substitute their outmoded provisions. LEGISLATIVE HISTORY: The Code on Wages Bill was introduced in the Lok Sabha on 10th of August, 2017 by the Minister of State for Labour and Employment, Santosh Gangwar. The Bill was mentioned to a Parliamentary Standing Committee on 21st August, 2017. On 18th December, 2018 the Committee set forth its report. The Committee formed 24 recommendations of which 17 were assimilated into the Bill. The Bill lapsed on account of the dissolution of the 16th Lok Sabha ahead of the 2019 general elections. The Code on Wages Bill was reintroduced in the house on 23rd July, 2019[1]. Gangwar affirmed that the government had held discussions with the trade unions, employers and the State Government and had tripartite negotiations on 10th March, 2015 and 13th April, 2015. Gangwar, with respect to the existing labour laws added that it only governed payment of wage for about 40% of the labour force and the Code on Wages would extend its scope to the entire labour force irrespective of any sector. He also made sure that necessary provisions were made relating to the timely payment to wages which would result in relief to workers in the unorganized sector of the economy. Lok Sabha passed the bill on 30th July, 2019. The Bill was passed by the Rajya Sabha on 2nd August, 2019. President Ram Nath Kovind gave his assent on the 8th of August, 2019 and the Bill was notified in the Gazette of India on the very same date. SCOPE AND APPLICABILITY: The Code of Wages, 2019 is applicable to workmen in unorganized and organized sector, while the Central Government would continue to make decisions related to wage for mines, railways, oil fields and central public sector undertakings. The scope of The Code of Wages Bill involves the amalgamation of The Payment of Wages Act, 1956; The Payment of Bonus Act, 1965; The Minimum Wages Act, 1948 and The Equal Remuneration Act, 1976[2]. WAGE COMPUTATION: Wages, under the Bill would include salary, allowance, or any other component which can be expressed in monetary terms. It does not include bonus payable to the employees or any travelling allowance, among others. ▪ Floor Wage: According to the Code of Wages, 2019, the Central Government is bound to fix a floor wage, taking into consideration the standard of living of the workers. The Central Government may set different floor wages for various different geographical areas[3]. The Central Government, before fixing the floor wage, may obtain the suggestions of the Central Advisory Board and also can consult with the State Government[4]. The minimum wages as decided by the Central Government or the State Government are sought to be higher than the floor wage[5]. ▪ Computing the minimum wage: The Code of Wages, 2019 doesn’t allow employers from paying wages which turn out to be less than the minimum wages. This would be centered on time, or number of pieces produced as notified by the Central or the State Government. The minimum wages would be amended and reviewed by the Central or State Government at an interval of not more than 5 years[6]. The State or Central Government, while forming and fixing the minimum wages may take the following things into consideration:- i. Difficulty of work. ii. Skill of workers. ▪ Overtime regulation: The State or the Central Government is bound to affix determine the number of hours that form a normal working day. If in any case, the employees tend to indulge into overtime, then such employees are entitled to overtime wage, which must be at least twice of the normal wage rate. ▪ Payment of Wages: Wages would be paid to the employees in the form of:- i. Coins, ii. Currency notes, iii. Cheques, iv. Crediting to the bank account directly or v. Through electronic mode. The period of the wages are to be fixed by the employer as either:- i. Daily, ii. Weekly, iii. Fortnightly, or iv. Monthly[7]. ▪ Deductions under the Code of Wages, 2019: Under this Code, the deductions in an employee’s wage could be on the following grounds:- i. Absence from duty, ii. Fines, iii. Accommodation provided by the employer, or iv. Recovery of advances provided to the employee, among others. The deductions should not exceed 50% of the employee’s total wage. ▪ Bonus determination: As notified by the Central or the State Government, all employees whose wages does not exceed a particular monthly amount, would be entitled to an annual bonus. The bonus would be at least:- i. 8.33% of the employee’s wages or ii. Rs. 100, whichever is higher. Furthermore, as provided in the Code, an employer will distribute a part of the gross profits amongst the employees[8]. The profits so distributed would be proportionate to the annual wages of an employee. As per the Code, an employee is bound to receive a maximum bonus of 20% of his annual wages. ▪ Prohibition of Gender discrimination: The Code strictly prohibits gender discrimination in matters relating to wages and also the recruitment of employees for the same work or work of similar nature[9]. The work of similar nature can be referred to as work for which skills, efforts, experiences and responsibilities required are the same. ADVISORY BOARDS: The advisory boards, as per the code shall be constituted by the Central or the State Government. The Central advisory board shall consist of:- i. Employers, ii. Employees, in equal number as employers, iii. Independent persons and iv. Five representatives of the State Government. OFFENCES, PENALTIES AND COMPOUNDING: The Code of Wages, 2019 has provided a boost for trade unionism by permitting a registered trade union to make complaints for offences under the Code. Unlike the provisions under the Payment of Bonus Act and the Minimum Wages Act, which provided for punishment of imprisonment up to 6 months, the recent Code provides for a graded penalty system for contraventions, for which the penal consequences are relatively lenient and only entail punishment with fine[10]. However, the Code of Wages penalizes a second conviction with a span of five years from the first conviction with imprisonment. However, the quantum of fines for contravention has seen a significant increase. CONCLUSION: I firmly believe that slashing off the four major Acts to give birth to a single Code was a remarkable attempt by the Indian government to meet the market corporeality. Furthermore, the recent corona virus pandemic may pave way for many wage related disputes among the employer and employee as there had been complete lockdown on industrial and manufacturing units resulting in minimal or no revenue generation for the employer and hence least wage earning possibility for the employees. The labour disputes may go sky high after the lockdown is lifted and also it would be noticeable as to how the litigation with respect to labour cases would take place. Will the COVID- 19 prompt a force majeure clause? only time will tell. The amended regulations must have the provision to understand the future demands with respect to artificial intelligence and many such new technologies which can be the actual reality in the coming time. References: [1] The Code on Wages Act, 2019, 29 of 2019, Act of Parliament (India). [2] Mr. M. Govindarajan, The Code on Wages, 2019, Tax Management India (Aug 17, 2019), https://www.taxmanagementindia.com/visitor/detail_article.asp?ArticleID=8680 [3] Admin, New Wage Code Bill, Career IAS (Jul 9, 2019), https://careerias.org/8-july-2019-career-editorial/#. [4] Pca, The Code on Wages 2019 Notified in Official Gazette, CiteHR (Aug 9, 2019), htps://www.citehr.com/613599-pfa-code-wages-2019-notified-official-gazette.html#2430362. [5] AC Team 2, Parliament passed Code on Wages Bill, 2019, AffairsCloud (Aug 3, 2019), https://affairscloud.com/parliament-passes-code-on-wages-bill-2019/.

[6] Ibid no 5.

[7] Key highlights of the bill, Indiathinkers(Aug 19, 2019), https>//www.indiathinkers.com/2019/09/the-code-on-wages-2019.html. [8] Supra no 4.

[9] Rashmi Pradeep & Anna Thomas, A primer on code on wages, Peoplematters(Feb 25, 2020),https://www.peoplematters.in/article/compensation-benefits/a-primer-on-code-on-wages-24808.

[10] Divya Gupta, Code on wages, 2019 – Key features, Tax Guru(Dec 26, 2019), https://taxguru.in/corporate-law/code-wages-2019-key-features.html. Views and opinions as expressed in the Research Articles are solely of the author and any member of the core team of the website shall not be liable for the same.

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