The enactment of the Code on Wages, 2019 (‘Wage Code’) is the long-awaited first step in rationalizing India’s complex labour laws. The Government of India has notified the Code on Wages, 2019 (‘Wage Code’) after it received assent from the President of India on 08.08.2019. The Code on Wages once notified shall apply to all employees both in organised and unorganised sectors irrespective of their wage ceiling and type of employment. This is significant from the standpoints of greater compliance and facilitating the ease of doing business in India. the Wage Code isa significant departure from the scope and limits laid down by the earlier law on equal remuneration and payment of wages in India andshall regulate remuneration/ wages payments in all employments and aims at providing equal remuneration to employees carrying out work of similar nature in every industry, trade, business or manufacture.

India’s regulatory framework governing labour laws is complex, before introduction of Wage Code there were 12 definitions of wages under various labour laws, leading to litigation besides difficulty in its implementation. The Preamble to the Wage Code states that it’s aim is to, “amend and consolidate the laws relating to wages and bonus and matters connected therewith or incidential thereto.” On notification of the effective date of implementation the Code on Wages shall subsume and repeal the four important labour laws i.e. :

The Payment of Wages Act, 1936

The Minimum Wages Act, 1948

The Payment of Bonus Act, 1965

The Equal Remuneration Act, 1976

This Article highlights the key features and the changes introduced by the Wage Code. The Rules under the Code on Wages are yet to be released. Readers are requested to note that the Code on Wages is yet to be notified and enforced. For specific query please write to us and we shall be happy to assist.

2. Important changes and benefits from Business and employee perspective:

Business: the most important change from business point of view is that the code is likely to bring down the number of returns, registers, and forms etc. which will reduce the cost of compliance and improve the ease of doing business in India.

Employee: The most relevant change that the Wage Code brings to the employees is the universality of its applicability to all employees in all sectors. All employees will get the benefits of provision for timely payment of wages. Since Labour is a subject falling under concurrent list of the Constitution of India both Central and State Governments are competent to enact legislation subject to certain matters being reserved for the Central Government. As per the provisions of The Code Central Government shall have the power to fix the floor wage rate for all forms of employment for different geographic areas. The State Government cannot set the minimum wages below the floor wage rate fixed by the Central Government. The Code further stipulates that such minimum wages shall be reviewed in an interval not exceeding five years.

2.1. Some Important changes introduced by the Code on Wages:

Definition of Employer: Employer has been defined under the Code as any person who on his behalf or on behalf of any person, one or more employees in the establishment. In relation to a factory the owner of the factory or the manager as the case may be. With respect to any other establishment the person or authority who has ultimate control over the affairs of the establishment and where such affairs are entrusted to a manager or managing director such manager or managing director as the case may be. The term establishment has been defined under S.2 (m) where any industry, trade, business, manufacture or occupation is carried on and includes Government establishments.

Employee and worker: A distinction has been made under the Code between an employee and a worker. A worker has been defined as a person who is employed by any establishment to do any skilled or unskilled work of technical, operational or supervisory work but does not include a person who has been appointed in a Managerial or administrative capacity or who draws a monthly wage exceeding Rs.15,000. While an employee has been defined as a person (other than those employed under Apprentices Act, 1011) employed on wages by an establishment to do any skilled or unskilled, managerial, clerical, supervisory, operational, technical or administrative work whether the terms of employment are expressed or implied. Distinction has been made between an employee and a worker.

Definition of ‘Wages’: The definition of ‘Wages’ under the Code on Wages has been defined to include salary, allowances and other components expressed in monetary terms or capable of being so expressed The Code lists down the specific items including certain allowances such as conveyance and house rent allowance which are excluded from the ambit of ‘Wages’. The Code however makes a significant distinction between wages and excluded components and lays down that the excluded components cannot exceed one half or such other percentage of the wage as may be notified by the Central Government. In the event the excluded components exceed one half of the wages such excess amount would be considered as a part of wages and not excluded components.

Industrial Dispute: Another significant feature of the Code is the wide extension of the definition of Industrial Dispute. The Code defines Industrial Dispute as any dispute between employers and employers, or between employers and workers or between workers and workers which is connected with the employment or non- employment or the terms of employment or with conditions of labour, of any person.

Prohibition on Gender based discrimination: The Code on Wages places clear restriction on gender based discrimination in matters relating to payment of wages by the same employer, in respect of the same work or work of similar nature i.e. requiring similar skills, talent and qualification, done by an employee. It further states that all disputes if any arises in this regard shall be adjudicated by an authority to be specified by Central Government.

Payment of minimum rate of wages: The Code on Wages states that no employer shall pay any employee less than the minimum rate of wages notified by the appropriate Government.

Floor Wage: The Central Government has the authority to fix floor wages and the Central Government may fix different floor wages for different Geographical areas.

Working Hours & Overtime: The Central or State Governments may fix the number of hours that constitute a normal working day. A day of rest should be provided for every duration of seven days of work. The Code further states that if an employee works on a rest day the wages paid to the employee for such day of work shall not be less than overtime wage which may be double the normal rate of wages. If an employee works in a day in excess of normal working hours such overtime work shall be paid at overtime rate which shall not be less than twice the normal wage.

Mode of payment of wages: All wages should be paid in current coin or currency notes or by cheque or by crediting the wages in the bank account of the employee of by electronic mode. The Central or the State Government may specify the establishments in which the wage should be paid only by cheque or by crediting the wages in employees bank account.

Time limit for payment of wages: The Code on wages prescribes time limit for payment of wages. In case of payment of wages on daily basis at the end of the shift, in case of weekly payments before the weekly holiday, on monthly basis before the expiry of the seventh day of the succeeding month.

The Code further specifies that in all cases where an employee has been removed, dismissed or resigned or left due to closure of establishment the wages payable to him shall be paid within two working days from the date of the employee’s resignation.

Permissible Deductions under the Code on Wages: An employee’s wage may be deducted on the grounds of 1. Fine imposed on him, ii. Deductions for his absence from duty; iii. Deductions for damages to or loss of goods specifically entrusted to the employee iv. Deduction for house accommodation; v. Deductions for such other amenities which the appropriate Government may specify; vi. Deductions for recovery of advance and or loans.

It is further specified under the Code that any loss of wages to an employee for a good and sufficient cause in matters of withholding increment, promotion or reduction to a lower post or suspension shall not be deemed to be deduction from wage where the provisions made by the employer in this regard satisfy the requirements specified in the notification issued by the appropriate Government in this behalf.

Bonus payments: terms and conditions for payment of bonus have been described in detail in the Code on Wages however the said terms and conditions are applicable to establishments employing more than 20 employees. An employee can receive maximum bonus of 20% of his annual wages.

Records, Returns and Notices: The Code on Wages prescribes that every employer shall maintain a register containing the details with regard to persons employed, muster roll, wages and such other details in the manner to be specified by the Government..It further states that every employer shall display a notice on the notice board at a prominent place of the establishment containing the abstract of this code, category wise wage rates of employees, wage period, day or date and time of payment of wages, and the name and address of the Inspector- cum- Facilitator having jurisdiction. It further states that every employer shall issue wage slip to the employee in the form and manner to be specified by the Government. The Code further states that provisions of this section may not apply if the employer has recruited less than five persons for agricultural or domestic purposes.

Appointment of Inspector cum Facilitator: The Code on Wages makes provision for appointment of Inspector cum Facilitator who shall advice employers and workers relating to compliance with the provisions of the code. And inspect any premises which may be assigned to him by Central or State Government as the case may be, The Inspector cum Facilitator has been given sufficient powers of examination, inspection and to carry put search and seizures and such other powers as may be prescribed to curd arbitrariness and deviations from the law as laid down under the Code on Wages. The Code further specifies that no action should be taken by Inspector cum Facilitator as against an employer without giving him an opportunity to rectify non- compliance within a prescribed period of time. The Code however makes it clear that on repetition of the same offence within a period of five years such opportunity to rectify may be afforded to the Employer.

Penalties for Offences: The Code on Wages specifies penalties for offences committed in contravention of the provisions of the Code by an employer. The maximum punishment in case of contravention of the provisions of the Code on Wages have been prescribed as upto three months of imprisonment or a fine of Rs.1,00,000. The Code further specifies that if the offence committed under the Code is a Company then every person who was in charge of and responsible for the conduct of business of the company as well as the company shall be guilty of offence except in cases where such person can prove that the offence was committed without his knowledge.

Effects of laws, agreements etc. inconsistent with this code: The Code on Wages clearly states that provisions of the Code shall have effect over any law or agreement inconsistent with the Code.