The Impact of Wages Code 2019 on Minimum Wages

ABSTRACT:

The Indian Government has introduced 3 labour codes to enhance the working conditions of labourers and improve the labour legislation. They are,

1. The Code on Wages 2019
2. The Industrial Relations Code 2020
3. The Social Security Code 2020

These codes significantly make an impact on their respective areas, like minimum wages,  social security of labourers and industrial relations. Now, we are going to see the  Wages Code 2019, which was drafted in 2016 and will have an impact on the minimum wage system in the country. After reading this article, we will get a clear idea of the New Wages Code by its introduction, benefits, challenges and overview.

KEY WORDS: Labour legislations, Minimum Wages, Wage Code, Protection of Labour’s

INTRODUCTION:

The history of labour legislation started in the colonial era. The British government enacted many labour legislations to protect the labourers and stop the exploitation by the employers. Before 1936, the laboratories in India didn’t have any awareness of their wages. So the employers exploited them by giving them less as wages and irregular wage periods. A social activist submitted a draft of the Weekly Wages Act 1925 to the British government. Then the British government formed a Royal Commission on wages. The Payment Wages Act 1936 was enacted based on a report submitted by the Royal Commission. That was the start of the wage system in India. Thereafter, many legislations were created to regulate the wage system of India.

In 1948, the independent Indian government enacted the Minimum Wages Act 1948 to ensure regular and timely minimum wages to the labourers. This act was amended several times by the government to enhance the living standards of labourers. The Wages Code of 2019 was created by the Indian government to repeal and replace the Minimum Wages Act and enhance the regulations regarding minimum wage payment. This code contains many regulations that can be balanced in the modern industrial era. We can move to the overview benefits and challenges of the wage code one by one^[1].

OVERVIEW OF THE ACT:

We know that every labour legislation has a long history from the British Colonial Era. This act has the experience from its ancestral legislations, like the Minimum Wages Act 1948 and its amendments. So, we can easily get this act’s objectives, key provisions and scope through the old legislation.

Objectives:

• To ensure that all workers receive a universal minimum wage.
• To promote fair wages among all workers.
• To consolidate and simplify the existing labour Laws.
• To ensure the timely payment of wages.
• To uplift the standard of living of every worker.
• To improve the social security of every worker.
• To strengthen the minimum wage system of India.
• To empower the workers by providing many rights and protection.
• To classify the authorised deductions^[2].

Key features:

• Uniform definition of wages: This code introduced a uniform definition of wages which is applicable to all workers without any discrimination. Wages a basic pay given by the employer to the employee for fulfilling the working conditions. It includes bonus payments, house rent allowance and conveyance allowance.”
• Minimum wages: The code regulates the minimum wages for all workers in the nation. Every employer must give a minimum wage to their workers. All the employees should follow the floor wages, which are fixed by the central government.
• Floor wages: A wage fixed by the central government will be considered as the basic pay for certain work. The employers can’t give any wages less than the floor wages. So, Floor wages are the lowest amount of wage declared by the central government.
• Timely payment of wages: The employers must pay the wages within the specified time.

1. All workers must receive the wages within the first 7 days of every wage period (if there were less than 1000 workers).
2. All workers must receive their wages within the first 10 days of every wage period (if there are more than 1000 workers).
3. The mining and Port workers must receive wages within the first 7 days of every wage period.
4. If any employee is dismissed by the management, the employee must receive the we just within two days of dismissal.
5. All wages should be paid on working days (not on holidays).

• Payment modes: The employees can be paid their wages through coins, currency notes, cheques, bank transfers or electronic mode. The payment modes can be decided by the appropriate government.
• Authorised deductions: The employer cannot deduct money from the wages of workers except for the reasons described in this code.

They are,

• Fine
• Absence
• Damages (caused by the employee)
• Contribution to the provident fund
• Welfare fund
• Home loans
• Income tax
• Contributions to pension.

Equal remuneration: this act prohibits discrimination among the workers regarding their religion, caste and gender. This code ensures equal pay for equal work in all nature of sectors. The code especially protects the women workers’ rights towards equal pay for equal work.

Bonus provisions: This code contains bonus regulations. The employer must give the bonus according to the minimum bonus rate of 8.33 per cent of wages should be given as a bonus to all workers regardless of their size or establishment (when the industry/workplace receives the profit).

Claims and penalties: If any employees don’t receive the minimum wage according to the act can claim their rights before the industrial tribunal or the labour Court. The industrial tribunal or Labour Court can award compensation up to 10 times the claim amount. The code has designated authority to award compensation up to 50000 rupees for noncompliance with the act (for the first time). If the noncompliance is repeated by the workplace, the fine will be increased up to 1 lakh and imprisonment up to 3 months will be awarded.

Scope: This code has a clear and defined scope. The wage code did not apply to Armed Forces, Bank Employees or Employees of a few public sector undertakings^[3].

IMPACT OF THE ACT:

• Ensures universal coverage of minimum wages.
• Standardised minimum wage fixation.
• The introduction of a Floor wage.
• Increased protection for unorganised sector workers.
• Promotes remuneration for workers.
• Reducing wage disparities.
• Simplify the wage structure.
• The introduction of the inspector-com-facilitator concept.
• Imposes penalties for non-compliance.
• Ensure employers adhere to minimum wage provisions.
• Reduced poverty among the workers.
• Contributes to economic health by increasing consumer spending power.
• Promotes transparency in wage payment^[4].

ANALYSIS OF THE ACT:

The Code on Wages, 2019, marks a significant reform in India’s labour legislation, aiming to streamline wage-related laws and ensure fair compensation for all workers. By consolidating four existing laws—the Payment of Wages Act, 1936; the Minimum Wages Act, 1948; the Payment of Bonus Act, 1965; and the Equal Remuneration Act, 1976—the Code introduces a unified framework to address wage disparities and enhance compliance.

Universal Applicability and Floor Wage

One of the Code’s pivotal features is its universal applicability. Unlike previous laws that applied only to specific sectors or wage thresholds, the Code extends minimum wage provisions to all employees across organised and unorganised sectors. This inclusivity aims to protect approximately 500 million workers, particularly in the informal sector, from exploitation. The introduction of a national “floor wage” set by the central government ensures that no state can set minimum wages below this benchmark, promoting uniformity while allowing states to adjust rates based on regional factors like skill levels, arduousness of work, and cost of living.

Simplified Definitions and Compliance

The Code provides a standardised definition of “wages,” encompassing basic pay, dearness allowance, and retaining allowance, while excluding components like bonuses, house rent allowance, and pension contributions. This clarity reduces ambiguities that previously led to litigation and compliance challenges. Additionally, the Code introduces the role of “Inspector-cum-Facilitators” to replace traditional inspectors, focusing on guidance and compliance rather than punitive measures. This shift aims to foster a more cooperative approach between employers and regulatory authorities.

Gender Equality and Timely Payment: Reinforcing the principle of “equal pay for equal work,” the Code prohibits wage discrimination based on gender, ensuring that men and women receive equal remuneration for similar work. Moreover, it mandates timely payment of wages, stipulating that wages must be paid within seven days for establishments with fewer than 1,000 employees and within ten days for larger establishments^[5].

BENEFITS OF THE ACT:

1. Universal Coverage: The Code extends minimum wage provisions to all employees across organised and unorganised sectors, eliminating previous limitations based on wage thresholds or specific industries.
2. Introduction of Floor Wage: A national floor wage is established by the central government, ensuring that no state sets minimum wages below this benchmark, promoting uniformity while allowing regional adjustments.
3. Simplified Definition of Wages: The Code provides a standardised definition of “wages,” encompassing basic pay, dearness allowance, and retaining allowance, while excluding components like bonuses and house rent allowance. This clarity reduces ambiguities and litigation.
4. Regular Revision of Minimum Wages: The Code mandates that minimum wages be revised and reviewed by the central or state governments at intervals not exceeding five years, ensuring wages remain aligned with economic conditions.
5. Timely Payment of Wages: Employers are required to pay wages within seven days for establishments with fewer than 1,000 employees and within ten days for larger establishments, ensuring workers receive their earnings promptly.
6. Equal Remuneration: The Code prohibits wage discrimination based on gender, ensuring that men and women receive equal remuneration for similar work. 
7. Overtime Compensation: Employees working beyond normal working hours are entitled to overtime wages at a rate not less than twice their regular wages, promoting fair compensation for extra work.
8. Streamlined Compliance Mechanism: The introduction of “Inspector-cum-Facilitators” replaces traditional inspectors, focusing on guidance and compliance rather than punitive measures, fostering a cooperative approach between employers and regulatory authorities.
9. Consolidation of Laws: By merging four existing labor laws into a single code, the legislation simplifies the legal framework, making it easier for employers to understand and comply with wage-related regulations.
10. Enhanced Worker Protection: The Code aims to protect approximately 500 million workers, particularly in the informal sector, from exploitation by ensuring fair wages and timely payments, thereby promoting social security and welfare.

These benefits collectively aim to create a more equitable and transparent wage system in India, enhancing the livelihood of workers and simplifying compliance for employers^[6].

CONCLUSION:

The Code on Wages, 2019, marks a significant reform in India’s labour legislation, aiming to streamline wage-related laws and ensure fair compensation for all workers. By consolidating four existing laws, the Payment of Wages Act, 1936; the Minimum Wages Act, 1948; the Payment of Bonus Act, 1965; and the Equal Remuneration Act, 1976—the Code introduces a unified framework to address wage disparities and enhance compliance. Its universal applicability ensures that minimum wage provisions extend to all employees across organised and unorganised sectors, promoting inclusivity and protection for approximately 500 million workers.

The introduction of a national “floor wage” set by the central government ensures that no state can set minimum wages below this benchmark, promoting uniformity while allowing states to adjust rates based on regional factors like skill levels, arduousness of work, and cost of living. Additionally, the Code reinforces the principle of “equal pay for equal work,” prohibits wage discrimination based on gender, and mandates timely payment of wages. However, challenges persist, including ambiguities in definitions and the need for effective enforcement mechanisms.

SUGGESTIONS:

• Ensure consistent and clear definitions of terms like “employee” and “worker” to avoid ambiguities and implementation challenges.
• Establish robust monitoring and enforcement mechanisms to ensure compliance, especially in the unorganised sector.
• Mandate periodic reviews and revisions of minimum wages to align with inflation and changing economic conditions.
• Launch initiatives to educate employers and employees about their rights and obligations under the Code to promote compliance.
• Develop digital platforms for wage payments and record-keeping to enhance transparency and reduce disputes.
• Involve trade unions, employer associations, and civil society in the implementation process to address concerns and gather feedback.
• Issue detailed guidelines on wage calculations, taking into account factors like skill levels and cost of living, to ensure uniform application across states.

By addressing these suggestions, the Code on Wages, 2019, can more effectively achieve its goal of ensuring fair and equitable wages for all workers in India.

REFERENCES:

• S.C. Srivastava, Labour Laws in India (Eastern Book Company, 2020)
• P.L. Malik, The Code on Wages 2019: A Commentary (LexisNexis, 2020)
• Kamala Sankaran, Indian Labour Laws: A Critical Analysis (Wolters Kluwer, 2020)
•  R.N. Sharma, Labour and Employment Laws: A Handbook (Thomson Reuters, 2020)
• S.S. Srivastava, The Wages Code 2019: An Insight (Bharat Law House, 2020)
• V.K. Singh, Labour Laws: Simplification & Rationalization (Universal Law Publishing,2020)

^[1] S.C. Srivastava, Labour Laws in India (Eastern Book Company, 2020)

^[2] P.L. Malik, The Code on Wages 2019: A Commentary (LexisNexis, 2020)

^[3] Kamala Sankaran, Indian Labour Laws: A Critical Analysis (Wolters Kluwer, 2020)

^[4] R.N. Sharma, Labour and Employment Laws: A Handbook (Thomson Reuters, 2020)

^[5] S.S. Srivastava, The Wages Code 2019: An Insight (Bharat Law House, 2020)

^[6] V.K. Singh, Labour Laws: Simplification and Rationalisation (Universal Law Publishing, 2020)