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Overview: Code on Wages

The Union Government enacted the Code on Wages in 2019, replacing four labour legislations: the Payment of Wages Act, 1936, the Minimum Wages Act, 1948, and the Payment of Bonus Act, 1965, and the Equal Remuneration Act, 1976. Although it empowers the appropriate government (the state governments) to fix appropriate wage ceilings, the broad provisions seek to introduce uniformity in wage and remuneration systems in India.

The Code is applicable to all establishments irrespective of the sectors or wage ceilings. The term ‘wage’ itself has been given a uniform definition to mean all remuneration whether, by way of salaries, allowances or otherwise, expressed in terms of money and includes basic pay; dearness allowance; and retaining allowance if any. It also incorporates exceptions to the definition such as the value of house accommodation, supply of electricity, water, house rent allowance, bonus payable under any law, contributions to a pension or provident fund, sums paid to defray special expenses, remuneration payable under any award or order of a court/tribunal or settlement between parties, overtime allowance, gratuity payable, retrenchment compensation, ex gratia, and other retiral benefits. A change has been brought in wherein the government will fix a floor wage taking into account the living standards of workers. This floor wage can be fixed taking into account the different geographical areas, therefore incorporating diversity and adaptability. Minimum wages, which cannot be lower than floor wages, have to be set by the central and state governments and are to be revised every 5 years. Employers can make deductions from an employee’s wages only in the circumstances prescribed by the Code and for no other reasons. Deductions from wages cannot exceed fifty percent of the total wages. Notably, the Code makes a distinction between ‘employee’ and ‘worker’, wherein the former is a broader term, meaning any person employed other than apprentices 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. The definition of ‘worker’ refers to any person except an apprentice employed in any industry to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward, whether the terms of employment be express or implied.

The Code mandates equal remuneration and prohibits discrimination on the ground of gender. The government will also notify normal working hours, on the basis of which overtime wages can be paid. Overtime wage is payable at the rate of twice the normal wages where the working hours exceed normal working hours. The Code also makes provisions to calculate and payment of bonus wages. It prescribes for the establishment of advisory boards consisting of equal representation from employers and employees, together with independent individuals to advise the government on fixing and revising minimum wages and increasing employment for women. The Code, like the other three labour codes that have been passed subsequently, provides for the position of the ‘Inspector-cum-Facilitator’ who will act as an advisor to employers to provide guidance concerning the Code and compliance with it, as well as act in the role of an inspector with the powers to supervise compliance with the Act and take action against contraventions. Additionally, the Code provides for a limitation period of three years for filing of claims by an employee. An employee or any registered trade union of which the employee is a member; or the Inspector-cum-Facilitator can file an application for claims under the Wage Code before the notified authority, who shall decide the matter within a period of three months. Provisions for appeals have also been provided in the Code. Overall, the Code seeks to replace the existing complex framework of four legislations, and provide rights and remedies for wage-earners in a seamless manner.

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