Code of wages-An Act to amend and consolidate laws relating to wages and bonuses and related matters
The Labour Laws of India are intricate to comprehend. To alleviate the complexity, Code on Wages, 2019 (“Code”) was enacted which merges four important legislations with the objective to amend and consolidate the laws relating to wages and bonus and matters connected therewith or incidental thereto.
The Code brings in uniformity in some of the important terms defining them as follows:
The Code, unless explicitly exempts, is applicable to all the employees and workers employed in factories, establishments and unorganized sections.
The Code is applicable to the whole of India and explicitly by virtue of section 69 repealed and replaced the provisions of the Payment of Wages Act, 1936, the Minimum Wages Act, 1948, the Payment of Bonus Act, 1965 and the Equal Remuneration Act, 1976.
Key aspects to note in the Code
Employee is any person (except the 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 by expressed or implied terms of employment, also including a person declared to be an employee by the appropriate government but does not include any member of the Armed Forces of the Union;
Worker is any person (except an apprentice as defined under the Apprentices Act, 1961) 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, and includes— (i) working journalists as defined under section 2(f) of the Working Journalists and other Newspaper Employees (Conditions of Service) and Miscellaneous Provisions Act, 1955; and (ii) sales promotion employees as defined under section 2(d) of the Sales Promotion Employees (Conditions of Service) Act, 1976, and for the purposes of any proceeding under this Code in relation to an industrial dispute, includes any such person who has been dismissed, discharged or retrenched or otherwise terminated in connection with, or as a consequence of, that dispute, or whose dismissal, discharge or retrenchment has led to that dispute, except a person–– (a) who is subject to the Air Force Act, 1950, or the Army Act, 1950, or the Navy Act, 1957; or (b) who is employed in the police service or as an officer or other employee of a prison; or (c) who is employed mainly in a managerial or administrative capacity; or (d) who is employed in a supervisory capacity drawing wage of exceeding fifteen thousand rupees per month or an amount as may be notified by the Central Government from time to time.
Contract Labour is a worker who shall be deemed to be employed in or in connection with the work of an establishment when he is hired in or in connection with such work by or through a contractor, with or without the knowledge of the principal employer and includes inter-State migrant worker but does not include a worker (other than part-time employee) who –– (i) is regularly employed by the contractor for any activity of his establishment and his employment is governed by mutually accepted standards of the conditions of employment (including engagement on permanent basis), and (ii) gets periodical increment in the pay, social security coverage and other welfare benefits in accordance with the law for the time being in force in such employment.
Employer is 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 under section 2(n) of the Factories Act, 1948 and, where a person has been named as a manager of the factory under section 7(1) (f) the said Act, 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 is entrusted to a manager or managing director, such manager or managing director; (iii) contractor; and (iv) legal representative of a deceased employer;
Wages is all remuneration whether by way of salaries, allowances or otherwise, expressed in terms of money or capable of being so expressed which would, if the terms of employment, express or implied, were fulfilled, be payable to a person employed in respect of his employment or of work done in such employment, and includes,
(i) basic pay;
(ii) dearness allowance; and
(iii) retaining allowance, if any,
but does not include,
(a) any bonus payable under any law for the time being in force, which does not form part of the remuneration payable under the terms of employment;
(b) the value of any house-accommodation, or of the supply of light, water, medical attendance or other amenity or of any service excluded from the computation of wages by a general or special order of the appropriate Government;
(c) any contribution paid by the employer to any pension or provident fund, and the interest which may have accrued thereon;
(d) any conveyance allowance or the value of any travelling concession;
(e) any sum paid to the employed person to defray special expenses entailed on him by the nature of his employment;
(f) house rent allowance;
(g) remuneration payable under any award or settlement between the parties or order of a court or Tribunal;
(h) any overtime allowance;
(i) any commission payable to the employee;
(j) any gratuity payable on the termination of employment;
(k) any retrenchment compensation or other retirement benefit payable to the employee or any ex gratia payment made to him on the termination of employment:
For calculating the wages under this clause, if payments made by the employer to the employee under clauses (a) to (i) exceeds one-half, or such other per cent. as may be notified by the Central Government, of the all remuneration calculated under this clause, the amount which exceeds such one-half, or the per cent. so notified, shall be deemed as remuneration and shall be accordingly added in wages under this clause;
For the purpose of equal wages to all genders and for the purpose of payment of wages, the emoluments specified in clauses (d), (f), (g) and (h) shall be taken for computation of wage.
Where an employee is given in lieu of the whole or part of the wages payable to him, any remuneration in kind by his employer, the value of such remuneration in kind which does not exceed fifteen per cent. of the total wages payable to him, shall be deemed to form part of the wages of such employee.
The Code defines how the minimum rate of wages are calculated viz. based on– (a) for time work; or
(b) for piece work.
The minimum rate of wages on time work basis may be fixed based on any one or more of the following wage periods, namely:––
(i) by the hour; or
(ii) by the day; or
(iii) by the month.
For the purpose of fixation of minimum rate of wages, the skill of workers required for working under the categories of unskilled, skilled, semi-skilled and highly-skilled or geographical area or both shall be taken into consideration; and for certain category of workers, their arduousness of work like temperature or humidity normally difficult to bear, hazardous occupations or processes or underground work shall be considered.
Any minimum rate of wages fixed or revised may consist of
(a) a basic rate of wages and an allowance at a rate to be adjusted, at such intervals and in such manner as the appropriate Government may direct, to accord as nearly as practicable with the variation in the cost of living index number applicable to such workers ("cost of living allowance"); or
(b) a basic rate of wages with or without the cost of living allowance, and the cash value of the concessions in respect of supplies of essential commodities at concession rates, where so authorized; or
(c) an all-inclusive rate allowing for the basic rate, the cost of living allowance and the cash value of the concessions, if any.
The Code prescribes that there shall be, an annual minimum bonus applicable to the establishments employing atleast 20 employees on any day of the accounting year whose wages do not exceed the specific monthly amount as notified by the Central or State Government and the minimum bonus shall be at the rate of 8.33 percent and the maximum bonus payable shall not exceed 20 percent of such wages.
The Code under Section 3 prescribes that there shall be no discrimination in an establishment or any unit thereof among employees on the ground of gender in matters relating to wages by the same employer, in respect of the same work or work of a similar nature done by any employee. No employer shall, reduce the rate of wages of any employee; and make any discrimination on the ground of sex while recruiting any employee for the same work or work of similar nature and in the conditions of employment, except where the employment of women in such work is prohibited or restricted by or under any law.
Every employer of an establishment to which this Code applies shall
(i) maintain a register containing the details with regard to persons employed, muster roll, wages and such other details in such manner as may be prescribed;
(ii) 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.;
(iii) issue wage slips to the employees in such form and manner as may be prescribed except the employer who employs not more than five persons for agriculture or domestic purpose (provided that such employer, when demanded, shall produce before the Inspector cum-Facilitator, the reasonable proof of the payment of wages to the persons so employed). Here the expression "domestic purpose" means the purpose exclusively relating to the home or family affairs of the employer and does not include any affair relating to any establishment, industry, trade, business, manufacture or occupation.
The Code, under chapter 7 describes the appointment and responsibilities of the Inspector cum Facilitator who will advice the employers and workers on the compliance mechanism. The Code imposes duty on the Inspector to judiciously act upon the inquiries and non-compliance of the provisions as against the employer.