Wage Code Bill 2020 - Meaning and Requirement

What is a Wage Code Bill?

It is an Act which consolidates four Labour Laws regarding wages and bonus payments to make the provisions for minimum wages and timely payments of the wages to the workers in India. 

New Wage Code Bill is the first code in the series of four codes on which the government is working on to rationalize 44 labour laws and improve the ease of business in India.

Wage Code Bill 2020 replaces the four laws which are:

1. Minimum Wages Act, 1948

2. Payment of Wages Act, 1936

3. Payment of Bonus Act, 1965

4. Equal Remuneration Act, 1976

In this article we are going to discuss the 2020 Highlights of New wage code bill 2019 and also, Impact of wage code bill 2019.

Background

The Administration of India, in 2015, had started planning to consolidate 44 labour laws into four codes during the Government of Hon’ble Prime Minister Mr Narendra Modi. 

What is wage code bill 2019 ?

The Wage Code Bill was presented for the first time in Lok Sabha in August 2017 by the then Minister of State for Labour & Employment, which was referred to a Parliament Standing Committee. The committee submitted the report in December 2018 with 24 recommendations out of which 17 were incorporated into the bill. The bill lapsed due to the general elections. 

Later the Bill was reintroduced in 2019 which passed from Lok Sabha as well as Rajya Sabha, therefore it is referred to as Wage Code Bill, 2019.

Need for Wage Code Bill

Wage code bill was in discussion for a very long time. The need for the bill is described as follows:

1. It was required to remove the existing obsolete laws as well as irrelevant compliances and introduced the new as per today’s requirement to promote the growth of India in ease of business. 

2. Earlier Acts covered only 40% of workers or employees on the basis of schedule and income brackets. To cover the wages act for all workers or employees it was necessary to make changes.

3. It was observed that the definition for the same thing was varied in different laws. For example, the definition of the wage was different in different laws. Due to the number of litigations, it was difficult to get the appropriate results in court cases. Therefore it is tried to make a single definition to avoid confusion for employees as well as employers.

4. It is also essential to reduce the number of wages including State and Central Government for the ease of compliance.

Existing Acts Summary

1. Minimum Wages Act, 1948 - This act decided the minimum wages that must be paid to skilled and unskilled workers. The minimum wage was decided on determining factors such as skill, geography and schedule.

2. Payment of Wages Act, 1936 - The main objective of this act was to make sure regular and timely payment of wages to the employees. Also to check the unlawful deductions from the wages as well as illogical penalties being imposed on the employed person. This act was also suggested to the employer that the registers need to be maintained for their compliances.

3. Payment of Bonus Act, 1965 - The act aimed to regulate the bonus amount to be paid to the employees based on its profit and productivity in an establishment. This act was applicable for all establishments in India which have 20 or more employees working during the year.

4. Equal Remuneration Act, 1976 - The act enacted to avoid gender discrimination. It was stated about the equal remuneration for men and women for the same or similar type of work.

Key Aspects

By collectively combining earlier laws in a single Wage Code Bill 2019 expands and regularizes the labour law criteria. 

1. The unique definition of “employee” is included which states that an “employee” is any person (other than an apprentice) employed in any establishment on wages. Armed Force members are excluded in the definition.

2. The term “wages” also included in the act is unique which is described as all compensation such as salaries, allowances or other. It specifically states that basic pay, dearness allowance and retaining allowance would be included in wages. Whereas the excluded are: 

1. Bonus

2. Value of house, light, water, medical attendance or other amenities

3. Employer contribution to any pension or provident

4. Conveyance allowance or travel concession

5. House rent allowance

6. Overtime allowance

7. Commission payable to the employee

3. New unique “worker” definition states that “worker” is any person (except apprentice) employed in any industry. The definition excludes the following:

1. Air Force members

2. Employed in police service

3. Employed in a managerial or administrative capacity

4. Employed in supervisory capacity drawing wages more than 15,000/- per month.

4. Minimum wages would be counted on the basis of skills and geographical area whereas schedule is excluded. It also may include the additional minimum wages for the hazardous industries. It also states that the appropriate Government would keep the count at a minimum for the minimum wages.

5. Floor wages would be decided by the Central government on the basis of standards of a worker which even the appropriate government cannot change.

6. The appropriate government would issue wages by cheque or by crediting the wages in bank accounts.

7. The Inspector becomes Inspector-cum-Facilitator

8. The time period of filing a complaint against an employer is extended up to 3 years.

Overall Impact 

There are two major impacts of this bill on the employers. One is the impact of National Minimum Wages. The central government now has the power to decide the minimum wages nationwide. That means whatever the minimum wages the Central government would decide, the state government would not go below that, which ultimately affects the existing employers. The overall impact of this would be on the ease of business in India. The second major impact would be that employers would maintain comparatively less number of registers and have to look after fewer compliances.