An Insight into the Code on Wages Bill 2019

The Indian government, in 2015, began to contemplate a plan to consolidate India’s 44 labour laws into four specific codes. This was primarily to rationalize labour laws and enhance the ease of doing business. The other three codes include the Occupational Safety, Health and Working Conditions Code, the Industrial Relations Code, and the Code on Social Security.

The Code on Wages Bill, however, will incorporate four specific laws:

• Minimum Wages Act (MWA)
• Payment of Wages Act (PWA)
• Payment of Bonus Act (PBA)
• Equal Remuneration Act (ERA)

The bill was ratified by the Rajya Sabha on August 2, 2019, and received the assent from President Ram Nath Kovind on August 8. The bill is a part of a series of many labour reforms initiated by the Government of India.

The Impact of the Code on Wages Bill

According to Labour Minister Santosh Kumar Gangwara, the new law will positively impact around 50 crore workers in the country. Other changes that the bill will induce include:

• A committee of trade unions, employers and the state government will fix a floor wage for workers nationwide.
• The new definition of wages will cap allowances at 50% of total compensation, impacting Provident fund (PF) and gratuity components and take-home pay of employees.
• The basic pay will constitute 50% or more of total pay as per the new code. This will affect most employees' salary structures as the non-allowance part is usually lower than 50%.
• As provident funds (PF) are based on basic salary, it will increase, which means that the take-home pay will decrease.
• Post-retirement pay-out will be higher due to increased contributions to provident funds.
• Companies will experience a rise in their costs as the contribution towards PF and gratuity increases.

Key Features of the Code on Wages Bill

Here are some of the salient features of the Code on Wages Bill, 2019:

• Uniform Applicability: The Wage Code ensures uniform applicability of the timely payment of wages, irrespective of wage ceilings and different industrial sectors.
• Uniform Definition of Wages: The Wage Code provides a single uniform definition of ‘wages’ for the purposes of computation and payment of wages to the employees, eliminating the variable definitions across PWA, MWA, PBA.
• Separate Definitions for Employee and Worker: The Wage Code provides separate definitions of ‘worker’ and ‘employee’. The definition of ‘employee’ is broader than that of ‘worker’.
• Equal Remuneration: The Wage Code prohibits gender discrimination in terms of wages by employers or for recruitment purposes, for the same or similar nature of work.
• Payment of Bonus: The Wage Code retains the provisions relating to the payment of bonus consistent with the terms of PBA. However, it empowers the appropriate government to fix the wage threshold for determining the applicability.

Aspirants can find complete information about upcoming Government Exams through the linked article. More exam-related preparation materials will be found through the links given below.

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