Code on Wages, 2019
In India, there are about 17 legislative laws for the protection of labor rights and employment. Each law specifies a unique definition for labor classification and for a grant of minimum wages. Each law also provides a separate clarification on the terms of employment and class of labors for claiming rights under different case situations, which besides posing difficulties in implementation of labor laws, was also increasing litigation and compliance costs for employers.
With a view to place a common wage code and remove converging provisions under different labor laws, the ‘’ Code on Wages, 2019‘’ was introduced. As a bill, it was passed in Lok Sabha in July 2019 and has now received acceptance from both the Houses of Parliament on 8th August 2019.
Here are some key takes from the proposed code for labor class.
About
The code seeks to regulate wages and payments of perks to labor class employed in distinct industries, trade or business. The Code subsumes 4 existing employment laws including:
- The Payment of Wages code, 1936
- The Minimum Wages code, 1948
- Payment of Bonus code, 1965
- Equal Remuneration code, 1976.
Applicability
- The code extends to the whole of India
- The code will be applicable on:
- all employees satisfying the law term – ‘employee’ as any person (other than an apprentice engaged under the Apprentices Act, 1961), employed on wages by an establishment to do any skilled, semi-skilled or unskilled, manual, operational, supervisory, managerial, administrative, technical or clerical work for hire or reward, whether the terms of employment be express or implied, and also includes a person declared to be an employee by the appropriate Government, but does not include any member of the Armed Forces of the Union;
- all employers satisfying the law term – ‘employer’ as a person who employs, whether directly or through any person, or on his behalf or on behalf of any person, one or more employees in his establishment and where the establishment is carried on by any department of the Central Government or the State Government, the authority specified, by the head of such department, in this behalf or where no authority, is so specified the head of the department and in relation to an establishment carried on by a local authority, the chief executive of that authority, and includes,—
(i) in relation to an establishment which is a factory, the occupier of the factory as defined in clause (n) of section 2 of the Factories Act, 1948 and, where a person has been named as a manager of the factory under clause (f) of sub-section (1) of section 7 of the said code, the person so named;
(ii) in relation to any other establishment, the person who, or the authority which, has ultimate control over the affairs of the establishment and where the said affairs are entrusted to a manager or managing director, such manager or managing director;
(iii) (Contractor )or; and
(iv) a legal representative of a deceased employer;
Minimum Wage Rate
The code does not specify a particular limit over wages to be paid to employees, rather it places a minimum rate of wages to be notified by the Central government. The wages shall be fixed on the basis of the ‘the time work’(hour/day/month) or on’ the piece work’ done by the employee.
For placing a minimum wage rate :
- Not only the geographical location but also the skills & (Acts) usually possessed by the employee being of grade skilled, semi-skilled or highly skilled shall be considered;
- Also, depending on the work conditions, the pay rate of the employee shall be considered taking in care humid or high temperatures, hazardous occupations, underground works, etc.
- Communities will be placed, also decide the minimum floor wage rate.
Minimum Rate of Wages = Basic rate of wages suggested compared with the cost of living index and availability of concessions on necessities.
Payment of Wages
Rules for payment of wages including timeline, payment modes have been defined under Section 15 to 25 of the new wage code.
On settlement of minimum wage rate, the employee shall have to
- Pay wages through accepted payment modes by the employee other than specially notified by the government.
- Pay wages either daily/weekly/monthly depending on the employer’s preferences.
- Pay wages within two days of his retirement/retrenchment/resignation or closure of the business.
Deductions
No deductions shall be allowed to the employers to deduct from the wages of the employees other than those specified in the Code.
Some allowable deductions from wages
- For fines imposed on the employee.
- For absence from duty
- For fines imposed for damage of goods
- For house accommodation or other amenities supplied by the employer.
- For loans granted to an employee
- For Income tax purposes or tax levy under other statutory laws.
- For a contribution of the employer towards the social security of employees (with acceptance from employee).
- For payments made to cooperative societies made on behalf of the employee.
- For payments made for membership of Trade Union Act, 1926 (after receiving acceptance from employee).
Some non- Allowable deductions
- Deductions in excess of 50% of the total wage amount.
Note: For all deductions, proper registers have to be maintained by the employers in a proper format as may be prescribed.
Payment of Bonus
The Code specifies for the payment of bonus to employees for which the employer:
- Has to calculate and pay an annual minimum bonus at the rate of 8 *1/3 % of the wages earned or Rs 100 whichever is higher if he had worked at least 30 days in the particular year in the entity.
- Has to place an agreement to allow bonus in excess of the amount stated in the above provision.
An employee shall be denied the bonus benefit if he is dismissed from the duty for involvement in any fraud/theft/conduct of sexual harassment or for riotous or violent behavior.
Payment of Dues / Claims and Audits
Sections 43 to 50 specifies for the clearance of dues, claims, and audits to be conducted under the new wage code.
For non-payment of wages to employees, an employer shall be issued a summon notice by the Gazetted officer appointed by the government for settlement of employee claims.
Penalties / Offences
Section 52 to 56 of the Code, implies penal actions that an employee or the employer’s face for breach of any provision of the code. For non-compliance with the code, an employer shall be charged with a penalty of Rs 50,000 which might even extend to Rs 1 lakh as the case may be.
The Code strives to build strong statutory support for employees to receive their annual work returns from their employers and enforce them legally with better clarity on provisions and rights made available. The new wage code not only places a stable code of conduct for employers but also streamlines the compliance of entities though earlier abided by multiple labor laws.
The Code universalizes the provisions for minimum wages and assures there timely payment of wages with strict penal provisions on offenders.
Ignorance of company obligations can attract severe penalties
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