The Wage Code finally saw light of day, as it was passed in
July 2019. After the lapse of its first iteration in 2017, modifications
suggesting by the Standing Committee were taken into consideration, as were the
opinions of industry experts, organisations and some trade unions.
This is the first of four proposed codes which now enjoys
place as an Act. The new Code on Wages looks to unify the Minimum Wages Act,
1948, the Payment of Bonus Act, 1965, Payment of Wages Act, 1936, and the Equal
Remuneration Act, 1976. This move is an attempt to simplify and consolidate regulations
and help keep them uniformly implementable. Let us try and understand the key
areas of impact under the Wage Code:
Employer and Employee
The wage code has redefined the terms employer and employee
as under: -
-
"employee" means, 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
-
"employer" means 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 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;
There are two major aspects that are covered through the altered
definitions of employer and employee, which include:
(a)
The regulations now being applicable across both
the private and public sectors
(b)
Only specially exempted(armed forces and apprentices
under the Apprentice Act) are excluded from the defined scope of employer and
employee; and all other employees, employers and establishments fall under its
scope with regard to the provisions of the Minimum Wages Act and the Payment of
Wages Act
Wages
The Code aims at unifying the term ‘wages’ so as to reduce
ambiguity and inconsistency. In the code, wages have been defined as:
"wages" means 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: Provided that, 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: Provided further that 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.
Explanation.––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
There are now three components of wages:
1.
inclusions – basic pay, dearness allowance, retaining
allowance
2.
specific exclusions – statutory bonus, house
accommodation, utilities, conveyance and travel allowance, overtime, settlements, retrenchment
compensation, special work expenses, PF and pension contribution
3.
conditions pertaining to the quantum of
exclusions - These exclusions may NOT add up to over 50 percent of total
remuneration. In the event that does exceed, the excess will be considered
wages. This is a measure to ensure companies do not formulate structures where
wages are less than 50 percent of total remuneration)
Minimum Wages
The following pointers have been instated with respect to
minimum wages of states:
-
basis the standard of living within the
geography, a national floor rate for wages will be set by the central
government
-
Minimum wages will be retained in states where
the rates are higher than the floor wages
-
State governments may fix their minimum wages,
provided it is not lower than the floor wage rate
-
Wages for overtime may not be less than twice
the normal wage rate
-
Minimum wages will be reviewed at periods not
exceeding five years
Payment of Bonus
There is now no ceiling on the bonus payable unless notified
by the respective State governments. This is opposed to the current ceiling of
Rs. 21,000
Equal Pay
Equal remuneration will be given for work, regardless of
gender, and there shall be no discrimination
Payment of wages
-
As against the earlier mandate of settling wages
on the 10th of every succeeding month, the settlement has now been
ordered on the 7th of every succeeding month
-
In the case of resignation, termination,
dismissal or retrenchment due to closure of establishment, wages must be
released within two working days
-
The limitation period for filing bonuses,
claims, equal remuneration and minimum wages has been extended to three years.
The earlier window was between 6 months and 2 years
Others
-
The onus of proving compliance with respect to
number of days worked, provision of appointment letter etc. now rests with
employer. This was earlier the responsibility of the employee
-
Relief to Principal Employer: The Principal
Employer is not liable in the Contractor has not been compliant. This is
provided he has complied with all necessary provisions and has made all due
payments to the Contractor
-
Inspections:
The appointment of inspectors to carry out inspections. Inspectors to
advise and guide on better compliance. Maximum penalty of three months and/or
fine upto Rs. 1,00,000 for non-compliance
