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Review Of Wage Code Bill, 2019 And Its Implications

Wage Code Bill, 2019 is a comprehensive act which simplifies the various labour laws and combines four of them with reference to wages and bonus payments and matters incidental there to. It is the first code acquiring status of an Act out of the four labour codes; The Code on Wages 2019 ,The Occupational Safety, Health and Working Conditions Code 2019,The Code on Social Security 2019 and The Industrial Relations Code 2019.

As pointed above, the Wage Code Bill, 2019 subsumed and simplified the four legislations; Minimum Wages Act, 1948 (for fixing minimum rates of wages in certain employments) ,Payment of Wages Act, 1936 (to regulate the payment of wages of certain classes of employed person), Payment of Bonus Act, 1965 (for payment of bonus to persons employed in certain establishments on the basis of profits or production or productivity) and Equal Remuneration Act, 1976 (to provide equal remuneration to men and women and to prevent gender discrimination in employment matters).

This bill amalgamates, simplifies and rationalises existing labour legislations for the ease of doing business, removes existing outdates laws, provides unique definitions, universal application throughout India to all establishments, employees and employers, removes social, gender and income disparities and aims to bring uniformity by establishing National Floor Wage.

�Minister of State (I/C) for Labour and Employment Shri Santosh Kumar Gangwar said that it is a historic Bill which aims to transform the old and obsolete labour laws into more accountable and transparent ones which is need of the hour. As many as 17 present labour laws are more than 50 years old and some of them even belong to pre-independence era.�[1]

Perusal of the references reveals prevalence of more than 40 Central Labour Laws out of which some have been rendered, outdated or insufficient to redress grievance or anomalous there in. The Administration of India, during the Government of Hon�ble Prime Minister Narender Modi, in 2015, had started planning to consolidate 40 Central Labour Laws into four codes in order to remove anomalous and deficiency in existing laws by establishing new ones as per today�s need and for better wage policy.

In August 2017, The Wage Code Bill was presented for the first time in Lok Sabha and was referred to Parliamentary Standing Committee which submitted its report in December, 2018 having 24 recommendations and out of which 17 were incorporated into the bill. However, the bill lapsed due to the general elections. In 2019 the Bill was reintroduced and was passed from both the houses. The bill was passed in Lok Sabha on July 30, 2019 and in Rajya Sabha on August 2, 2019.

The President of India , Ram Nath Kovind gave its assent on August 8,2019 .Therefore, it came to be known as Wage Code Bill, 2019.The draft rules under the Code ("Rules") were published in form of handbook on July 7, 2020 in public domain for feedback and suggestions. The Code on Wage Bill, 2019 is scheduled to come into effect from April 1, 2021.

Scope of the Bill

The bill has wide scope in view of its coverage and positive implications. The Wage Code Bill, 2019 has IX Chapters and 69 Clauses which shall simplify, unite and rationalise the existing Labour Laws.
  • Chapter I provides for definition- applicable across the code.
  • Chapter II-IV covers provisions related to Minimum Wage, Payment of Wages and Payment of Bonus and Provisions of Equal Remuneration
  • Chapter V-VIII covers provisions related to Central Advisory Board and State Advisory Boards, Payment of Dues, Claims and Audits, Inspector-cum-Facilitator and Offences and Penalties.
  • Chapter IX provides Miscellaneous Provisions.
  • The code is aimed at benefiting approximately 500 million workers across the country.[2] It will apply to all establishments, employees and employers across the Indian States and Union Territories.
  • The wage code, clearly states the objective �to promote equity and labour welfare on the one hand and encourage investment and setting up of more enterprises on the other, thereby catalysing creation of more employment opportunities.�[3]
  • It also covers wage-related decisions for employments such as railways, mines, and oil fields by Central Government.
Crux of the Bill
It is comprehensive, easy to follow, implemented by employers and establishments and has positive as well as negative implications.
  • It has provision to standardise wages and bonus payments in all areas of employment including organised and unorganised sectors; including commercial establishment and facilitates easier compliance.
  • It clearly defines and limits employee, wages, worker, contractor and contract labour.
  • It sets aside schedule and income brackets and focuses on skill and geographical location to calculate minimum wage.
  • It is consistent with the Equal Remuneration Act, the Code, inter-alia, includes provisions prohibiting discrimination on grounds of gender (i) with respect to wages by employers, with respect to same work or work of a similar nature done by employees and (ii) with respect to recruitment of employees for same work or work of a similar nature.[4]
  • It seeks for uniform floor wage, applicable to all types of establishment and trades; except hazardous industries with separate minimum wage.
  • The onus of fixation of National Floor Wage will lie on central government, which will not be liable to any later modifications by appropriate government.
  • Provisions for paying wages to employee by appropriate government through cheque or by crediting in the bank account.
  • Minimum wages are liable be revised/ reviewed at the interval of not exceeding 5 years.

It sets out time limit for payment of wages not later than 7th of each succeeding month
  • In case of unemployment due to closure, removal, dismissal, retrenchment, resignation from the service the employer is bound to release the due wages within 2 working days.
  • The role of inspector has is changed to inspector-cum-facilitator.
  • The code encourages web-based inspection process.
  • The process of registration and filing of returns has been streamlined with online submission instead of hard copy.
  • Offence and penalties have been revamped. It includes provision of compounding offence and extends the period of filing complaint against employer up to 3 years. The Code places the burden of proof on an employer to prove that the amounts claimed by the employee have been paid.[5]

Positive Implications of the Bill
  • There is clear interpretation of the term wage laying to rest the previous disputes.
  • It provides protection to the vulnerable workers and foster fair competition through extension of legal coverage given to the floor wage and minimum wages nationwide to all wage earners irrespective of any schedule or wage ceiling. This will improve welfare of millions of low-paid workers in India.
  • It seeks fixation of minimum wage across the nation by central government on the basis of standard of living; with state government bound to fix minimum wage equal or above the floor wage. Consequently, there will be change in wage setting process, increase in the level of wages and remove income disparities within and across states
  • It simplifies and rationalise the complex minimum wage structure in India which also provides space for collective bargaining among workers and employers.
  • It insures timely payment of wages by 7th of each succeeding month.
  • It removes disparity of wages due to gender and also includes transgender in its ambit through equal remuneration and pay clause.
  • It seeks for payment of overtime, increased gratuity and post retirement benefits.
  • It envisage single template for filing returns online, thereby removing requirement of maintaining of registers, returns and other official bindings.[6]
  • It bolsters rights of contractual employee who can claim minimum bonus from primary employer in case contractor fails to oblige.
  • It provides extension of limitation period from 2 to 3 years, thereby allowing raise of claims of workers.
  • It introduces compoundable offences, which allows compromise between employer and employee and drop of charges.

Negative Implications of the Bill
  • The code provides for fixation of higher wages which can discourage employers from hiring.
  • The government�s intervention to impose floor wage will disturb the equilibrium of wages.
  • Increases cost of employment due to increase in wages on account of inculcation of part of employment benefits.
  • Decrease in take home salary due to increased deduction of PF (provident fund) from net salary.
  • Increased social disparity due to fixation of minimum wages on the basis of location; which can lead to job outsourcing by industries.
  • Lack of uniformity and compliance on account of empowerment of states to fix ceiling of bonus; which renders employees in some states ineligible for wage bonus.
  • Decreased effectiveness due to inclusion of some, exclusion of other elements and retaining some of wage rules turning the code a mixed bag.
  • Availability of overtime wage without any element of legal obligation, only to set off employees with fixed minimum wages; excluding managerial and supervisory employees.
  • Increases gratuity cost of company due its calculation based upon inclusion of allowance in the basic pay.
  • Curtails employer�s right to deduction.
  • Incompatibility of web based inspection scheme with ILO�s Labour Inspection Convention, 1947. [7]
  • It has overriding effect and is inconsistent with other existing labour laws.
The Wage Code Bill, 2019 is an amicable legislation. It is aimed at transforming the old and obsolete labour laws; promote transparency and accountability in its enforcement. The Wage Code Bill, 2019 further balances, the interest of employers and employees. It will introduce many reforms in India�s wage system; subsumes four Central Law and vindicate 40 others.

The bill universalises application of minimum wage irrespective of schedule or income brackets to all employees. It also simplifies the minimum wage structure of the country. The bill takes one step ahead to fulfil long time demands of trade unions. However, the Wage Code Bill, 2019 has some loose ends as fails to redress many purple issues.

It highlights minimum wage but is silent about fair wages. Though the code was discussed at length by several representatives but it failed to have any representative of the labour union. The Code like any other existing central labour laws fails to take care of migrant labours.

Further, the code provides for web based inspection which defies one of the conventions of ILO. It fails to impose adequate fine/penalties on violators. The provision of the code strengthens the business community, but it is short of improving welfare of millions of low paid workers across India. In a nutshell, the bill is a catchall act for its overweighing positive implications. It is all set to be implemented in near future.

  1. Lok Sabha Passes the Code on Wages Bill, 2019,Ministry of Labour & Employment, July 30, 2019 1 Press ReleaseIframePage.aspx?PRID=1580782
  2. Yogima Sharma, Parliament Passes Wage Code Bill To Ensure Minimum Wage For Workers, Economic Times
  3. See para 3 of �Statement of objects and reasons� of the Code on Wages Bill, 2019 (GoI 2019c: 30)
  4. Clause 3 of Code on Wages, 2019
  5. Clause 59 , The Code on Wages, 2019
  6. Devika Sharma, Code on Wages Bill, 2019 received President�s assent � The Code on Wages, 2019 to be enacted, August, 2019,
  7. Convention C081 - Labour Inspection Convention, 1947 (No. 81)

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