Mandatory Minimum Wages is a Reality Now?

This article was written by Shachi Sawla, a student of Alliance University.

The Code on Wages, 2019 was introduced by the Minister of Labor, Mr. Santosh Gangwar in the Lok Sabha on July 23, 2019. This code regulates wage and bonus payments in all kinds of employment where any industry, trade, business, or manufacture is being carried out.The code seeks to provide uniformity in the provisions of minimum wages and timely payment of wages to all employees irrespective of the sector and wage ceiling. The term wages is defined in simpler way so as to reduce litigation and also the compliance cost for employers. The code also seeks zero discrimination between men and women as well as transgender in getting the wages.

This code has subsumed the following four existing labor acts:

1. Minimum Wages Act – This act determines the minimum amount of wages which an employee should get on the basis of their skills involved, geographical region where employee resides and the schedules under which the he falls.
2. Payment of Wages Act – It guarantees timely payment of wages along-with the permissible deductions, allowances and overtime pay as authorized by the act.The Act lets the employer knows what all are the registers he has to maintain for the purpose of compliances.
3. Payment of Bonus Act – It provides for annual payment of bonus to employees and the method to determine the amount the same
4. Equal Remuneration Act – This act aims that there should not be any discrimination in distributing the salary on the basis of gender and both shall be paid the same on the performance of same work.[1]

Key provisions of the Code 2019

• Uniformity in Coverage: This Code is applicable to all the employees. The central government has the power to take decisions for employments such as railways, mines, and oil fields, among others.  State governments would make decisions for other remaining employments.
• A simplified definition of wage: This code removed the multiplicity and complexity of wage’s definitions given in various labor laws. Now the term wage includes salary, allowance, or any other component expressed in monetary terms, but is exclusive of bonus payable to employees or any travelling allowance, among others.
• State wages to be higher than the national floor rate: The minimum wages decided by Central or State Government can’t be lower than the floor wage. In case where the existing minimum wage fixed by either governments is higher than the floor wage, they cannot reduce the minimum wages. The Bill specifies that the Central Government will fix the national floor rates as well as minimum wage in certain sectors (such as railways and mining) while considering factors like cost of living of workers, skill of workers and hazardousness of work. The State Government will determine and set the minimum wages for their respective states. However, the Central Government may set different floor wage for different regions of the country and may take the advice of the Central Advisory Board and consult with state governments.

• Setting up the minimum wage:The Code forbids the employer from paying wages lesser than the minimum wages, which shall be notified either by the State or Central Government. The code links minimum wages to the skills of the employees and the. Minimum wages shall be determined on multiple factors ranging from level of skills used or number of units produced to the type and place of their employment. The bill also states that the minimum wages must be reviewed and revised every five years and the overtime rate must be set at twice the standard wage rate across the country.[2]
• Overtime: In case, where an employee works more than the regular working hours, then they are eligible to get the overtime wage which is to be at least twice the standard wage rate. It is on the Central or State Government to decide as to how many hours constitutes a normal working day.
• Payment of wages:Wages will be paid in (i) coins, (ii) currency notes, (iii) by cheque, (iv) by crediting to the bank account, or (v) through electronic mode.  The wage period will be fixed by the employer as either: (i) daily, (ii) weekly, (iii) fortnightly, or (iv)monthly.[3]
• Deductions:As per the code, wages may be deducted of the concerned employee only in cases which includes: (i) fines, (ii) absence from duty, (iii) place of accommodation provided by the employer, (iv) recovery of advances given to the employee. But these deductions should not be in excess of 50% of the employee’s total wage.
• Payment of bonus:Employees will be entitled to an annual bonus, whose wages do not cross specific amount as prescribed by State or Central Government. The bonus amount must be:

1. Either 8.33% of his wages,
2. Or, Rs 100, whichever is higher.

An employer can’t give bonus of more than 20% of the concerned employee’s annual wages. However, the employer has to distribute a certain amount of gross profit in addition to the bonus which shall be given in proportion to the annual wages of such employee.

• No to Gender Discrimination:The code clearly forbids any kind of gender discrimination in matters pertaining to wages and recruitment of employees for work of similar nature. Work of similar nature includes work which requires similar skill, experience and responsibility.
• Constitution of Advisory boards:Central Government shall constitute the Central Advisory Board which will comprise of (i) equal number of employers &employees, (ii) independent persons, and (iii)five representatives of state governments.  State Governments shall constitute State Advisory Boards which comprise of employers,employees, and independent persons.  Members of both the boards whether central or state shall include at-least 1/3^rd of the total members as women members.  These Boards will advise the respective governments on matters with regards to: (i) fixation of minimum wages, and (ii) increasing employment opportunities for women.
• Penalties under the Code: The code provides for penalty for employers on commission of offences in matters like payment of lesser wages than the standard wages, or acting in contravention to provisions of this code. The employer can be imprisoned maximum to the extent of three months along-with fine not more than one lakh rupees as a penal action depending upon the nature of the offence.

Conclusion

The object of the code is to broaden the scope of labor laws so as to make the compliance easier for employers. India has almost 2000 types of minimum wages which has been notified from time to time either by the State Government or Central Government, this code aims to reduce the number to 300. Moreover, it removes the multiple definitions and authorities without altering the basic objective, i.e., labor welfare and social security and it also draws transparency and accountability into the structure.Earlier, only the scheduled employer were covered in the minimum wages act which consisted of only approximately 40% of the total employed workforce, now this code would provide benefit close to over 50 crore workers which will be a very positive approach towards achievement of the objective .

One of the main concern is fixation of the minimum wage rate, for which  various factors are to be considered before finalizing it, such as employees’ skill, arduousness and audaciousness of work, regional factor and any other factor as maybe prescribed by the government by way of notification in the Official Gazette . Although this code talks about the universality of minimum wage but there is no single statutory minimum wage which is applicable to all the states as well as sectors.While the idea of bringing this code is good but the real problem in hand is its implementation. The enforcement mechanism seems inadequate.

However, most of the labor laws are really old and some are even made before independence. But better late than never as they say so some 50 years or so later India now has a The Code on Wages, 2019 which consolidates and codifies previous wage regulations under one act to bring about a much awaited social change. Nevertheless the question remains, in a country with such a significant wage inequality in the workforce, how effective will the Wage Code be?

[1]Heena Siddique, Code On Wages Bill, 2019 | Complete Analysis, <https://esipfadvisor.com/blog/code-on-wages-bill-2019/>, last accessed on 24/02/2020

[2]The Code on wages Bill, 2019 : What Employers in India Need To Know, <https://www.india-briefing.com/news/code-on-wages-bill-2019-employers-need-to-know-19062.html/>, last accessed on 24/02/2020

[3]The Code on Wages, 2019, Ministry: Labour and Employment<https://www.prsindia.org/billtrack/code-wages-2019> last accessed on 24/02/2020