CODE ON WAGES, 2019

The Code on Wages, 2017 was introduced in the Lok Sabha on 10.08.2017 and referred to the Departmentrelated Parliamentary Standing Committee on Labour, which submitted its forty-third Report on 18th December, 2018.

However, before the said Bill could be passed in the said House, it lapsed on dissolution of the Sixteenth Lok Sabha.

Hence, the Code on Wages, 2019 has been further introduced in the 17th Lok Sabha and also examined by Parliamentary Standing Committee on Labour.

 According to the Statement of objects and reasons of the Code on Wages 2019, the Second National Commission on Labour, which submitted its report in June, 2002, had recommended that the existing set of labour laws should be broadly amalgamated into the following groups, namely: –

(a) Industrial relations;

(b) Wages;

(c) Social security;

(d) Safety; and

(e) Welfare and working conditions.

In pursuance of the recommendations of the said Commission and the deliberations made in the tripartite meeting comprising of the Government, employers’ and industry representatives, it has been decided to bring the proposed legislation. The proposed legislation intends to amalgamate, simplify and rationalise the relevant provisions of the following four central labour enactments relating to wages, namely: –

(a) The Payment of Wages Act, 1936;

(b) The Minimum Wages Act, 1948;

(c) The Payment of Bonus Act, 1965; and

(d) The Equal Remuneration Act, 1976.

The amalgamation of the said laws will facilitate the implementation and also remove the multiplicity of definitions and authorities without compromising on the basic concepts of welfare and benefits to workers.

The proposed legislation would bring the use of technology in its enforcement.

All these measures would bring transparency and accountability which would lead to more effective enforcement.

Widening the scope of minimum wages to all workers would be a big step for equity.

The facilitation for ease of compliance of labour laws will promote in setting up of more enterprises thus catalyzing the creation of employment opportunities.

The salient features of the Code on Wages, 2019, inter alia, are as follows: –

(a) It provides for all essential elements relating to wages, equal remuneration, its payment and bonus;

 (b) The provisions relating to wages shall be applicable to all employments covering both organised as well as un-organised sectors;

(c) The power to fix minimum wages continues to be vested in the Central Government as well the State Government in their respective sphere;

(d) It enables the appropriate Government to determine the factors by which the minimum wages shall be fixed for different category of employees. The factors shall be determined taking into account the skills required, the arduousness of the work assigned, geographical location of the workplace and other aspects which the appropriate Government considers necessary;

(e) The provisions relating to timely payment of wages and authorised deductions from wages, which are presently applicable only in respect of employees drawing wages of twenty-four thousand rupees per month, shall be made applicable to all employees irrespective of wage ceiling. The appropriate Government may extend the coverage of such provisions to the Government establishments also;

(f) It provides that the wages to employees may also be paid by cheque or through digital or electronic mode or by crediting it in the bank account of the employee.

However, the appropriate Government may specify the industrial or other establishment, where the wages are to be paid only by cheque or through digital or electronic mode or by crediting the wages in the bank account of the employee;

(g) It provides for floor wage for different geographical areas so as to ensure that no State Government fixes the minimum wage below the floor wage notified for that area by the Central Government;

(h) In order to remove the arbitrariness and malpractices in inspection, it empowers the appropriate Government to appoint Inspectors-cum-Facilitators in the place of Inspectors, who would supply information and advice the employers and workers;

(i) It empowers the appropriate Government to determine the ceiling of wage limit for the purpose of eligibility of bonus and calculation of bonus;

(j) In the place of number of authorities at multiple levels, it empowers the appropriate Government to appoint one or more authorities to hear and decide the claims under the proposed legislation;

(k) It enables the appropriate Government to establish an appellate authority to hear appeals for speedy, cheaper and efficient redressal of grievances and settlement of claims;

(l) It provides for graded penalty for different types of contraventions of the provisions of the proposed legislation;

(m) It provides that the Inspector-cum-Facilitator shall give an opportunity to the employer before initiation of prosecution proceedings in cases of contravention, so as to comply with the provisions of the proposed legislation. However, in case of repetition of the contravention within a period of five years such opportunity shall not be provided;

(n) It provides for the appointment of officers not below the rank of Under Secretary to the Government of India or an officer of equivalent level in the State Government to dispose of cases punishable only with fine up to fifty thousand rupees, so as to reduce the burden on subordinate judiciary;

(o) It provides for compounding of those offences which are not punishable with imprisonment;

(p) It provides that where a claim has been filed for non-payment of remuneration or bonus or less payment of wages or bonus or on account of making deduction not authorised by the proposed legislation, the burden shall be on the employer to prove that the said dues have been paid to the employee;

(q) It enables the appropriate Government to constitute Advisory Boards at Central and State level to advice the Central Government and the State Governments, respectively, on matters relating to wages, women employment, etc.;

(r) The period of limitation for filing of claims by a worker has been enhanced to three years, as against the existing time period varying from six months to two years, to provide a worker more time to settle his claims.

COVERAGE OF THE CODE ON WAGES, 2019

 The Code on Wages, 2019 contains Sixty-Nine Clauses and divided into Nine Chapters.

Chapter I deals with Preliminary

Chapter II deals with Minimum Wages

Chapter III deals with Payment of Wages

 Chapter IV deals with Payment of Bonus

Chapter V deals with Advisory Board

Chapter VI deals with Payment of Dues, Claims and Audit

Chapter VII deals with Inspector-Cum-Facilitator

Chapter VIII deals with Offences and Penalties

Chapter IX deals with Miscellaneous

Chapter I - Preliminary

Clause 1 of the Bill seeks to provide the short title, extent and commencement

Clause 2 of the Bill seeks to define certain expressions used in the Code, which, inter alia, include “accounting year”, “Advisory Board”, “appropriate Government”, “employee”, “employer”, “Tribunal”, “wages” and “worker”.

Clause 3 of the Bill seeks to provide for the prohibition of discrimination on ground of gender. It provides that no employer shall, for the purpose of prohibiting the discrimination among employees on ground of sex in matters relating to wages, shall reduce the rates of wages of any employee.

Clause 4 of the Bill provides for determination of disputes with regard to same or similar nature of work. The dispute shall be decided by such authority as may be notified by the appropriate Government.

Clause 5 of the Bill seeks to provide for payment of minimum rates of wages. The wages less than the minimum rates of wages notified by the appropriate Government for a State or any part thereof shall not be paid to any employee.

 Clause 6 of the Bill seeks to provide for fixation of minimum wages. Such fixation of minimum wages by the appropriate Government shall be subject to the powers of the Central Government to fix floor wage. The minimum wages shall be for time work, piece work, and for the period by hours or day or month. It provides for floor wage for different geographical areas so as to ensure that no State Government fixes the minimum wage below the floor wage, notified for that area by the Central Government.

Clause 7 of the Bill seeks to provide components of the minimum wages. Any minimum rate of wages fixed or revised by the appropriate Government may, inter alia, consist of basic rate, cost of living allowance and value of the concessions, if any.

Clause 8 of the Bill seeks to provide the procedure for fixing and revising minimum wages.

Clause 9 of the Bill seeks to provide the power of Central Government to fix floor wage. Different floor wages may be fixed for different geographical areas. The Central Government before fixing the floor wage may obtain the advice of the Central Advisory Board.

Clause 10 of the Bill seeks to provide, inter alia, for wages of employee who works for less than normal working day. An employee, where his failure to work is caused by his unwillingness to work and not by omission of the employer to provide him with work, shall not be entitled to receive wages for a full normal working day.

Clause 11 of the Bill seeks to provide wages for two or more classes of work. It provides that an employee who does two or more classes of work, to each of which different rate of minimum wages is applicable, the employer shall pay to such employee in respect of the time respectively occupied in such class of work, wages at not less than the minimum rate in force in respect of each such class.

Clause 12 of the Bill seeks to provide minimum time rate wages for piece work.

Clause 13 of the Bill seeks to provide for fixing hours of work for normal working day, day of rest and payment for work on day of rest by the appropriate Government.

Clause 14 of the Bill seeks to provide for payment of wages for overtime work which is in excess of the number of hours constituting a normal working and the overtime rate shall not be less than twice the normal rate of wages.

Clause 15 of the Bill seeks to provide for payment of all wages in current coin or currency notes or by cheque or by crediting the wages through digital or electronic mode in the bank account of the employee except as may be notified by the appropriate Government in specified industrial or other establishment in which wages to be paid only by cheque or by crediting in bank account.

Clause 16 of the Bill seeks to provide for fixation of wage period for employees which shall not be more than a month either as daily or weekly or fortnightly or monthly and the said wage periods may be fixed different for different establishments.

Clause 17 of the Bill seeks to provide time limit for payment of wages on monthly basis, daily basis, weekly basis and fortnightly basis. In case of removal, dismissal, retrenchment, resignation from service or in the case of un-employment due to closure of the establishment, the wages payable to an employee shall be paid within two weeks. The appropriate Government may provide time limit apart from the time limit provided in this clause.

Clause 18 of the Bill provides for deductions which may be made from the wages of an employee. No deduction from the wages shall be made except those as are authorised under the proposed legislation. The upper ceiling of deduction is fifty per cent. Of the wage in any wage period. It further provides that if an employer commits default in depositing the deduction made from the employees’ wages in the account of the trust or Government fund or any other account, as required, the employee shall not be held responsible for such default. Clause 19 of the Bill seeks to provide the imposition of fines by the employer on any employee. The fine shall be imposed on any employee only in accordance with the approval and procedure as specified in the clause.

Clause 20 of the Bill seeks to provide for the deductions for absence from duty. The amount of such deductions shall in no case bear to the wages payable to the employee in respect of the wage period for which the deductions is made in a larger proportion than the period for which he was absent bears to the total period within such wage-period during which by the terms of his employment he was required to work. An employee shall be deemed to be absent from the place where he is required to work if, although presence in such place, he refuses in pursuance of a stay-in strike for any other cause which is not reasonable in the circumstances, to carry out his work.

Clause 21 of the Bill seeks to provide deductions for damage or loss. The deductions for damage or loss shall not exceed the amount of the damage or loss caused to the employer by negligence or default of the employee. The deductions shall not be met until the employee has been provided an opportunity of showing cause against the deductions or otherwise than in accordance with the procedure prescribed by rules.

Clause 22 of the Bill provides for deductions for services rendered. Such deductions shall not be made from the wages of employee unless the house accommodation, amenity or service has been accepted by him as a term of employment or as otherwise. Such deductions shall also not exceed an amount equivalent to the value of such amenity or service supplied. The appropriate Government may impose conditions for such purpose.

Clause 23 of the Bill seeks to provide for deductions for recovery of advances. Certain conditions have been provided in the said clause subject to which the deductions shall be made for the recovery of advance of money given to an employee before and after the employment began.

Clause 24 of the Bill seeks to provide deductions for recovery of loans and the manner for such recovery shall be provided in the rules.

Clause 25 of the Bill seeks to provide that the provisions relating to payment of wages provided in Chapter III in the proposed Code shall not be applicable to Government establishments unless the appropriate Government applies such provisions to any Government establishment as may be specified by it by notification.

Clause 26 of the Bill seeks to make provisions for eligibility for bonus. The threshold limit for payment of the bonus is the wages not exceeding such amount per mensem as determined by notification, by the appropriate Government. Where the wages of the employee exceeds such amount per mensem, as determined by notification, by the appropriate Government, the bonus payable to such employee shall be calculated as if the wages of such employee were such amount, so determined by the appropriate Government or the minimum wages fixed by the appropriate Government, whichever is higher. The other details regarding the payment of bonus have also been provided in this clause.

Clause 27 of the Bill seeks to provide for proportionate reduction in bonus in case where an employee has not worked for all the working days in an accounting year, etc.

Clause 28 of the Bill seeks to provide for computation of the number of working days for the purposes where an employee has not worked for all the working days in an accounting year. Provisions have been made in this clause to cover certain days as working days as specified therein.

Clause 29 of the Bill seeks to specify certain disqualifications, on the basis of dismissal from service for fraud, etc., for receiving bonus.

Clause 30 of the Bill seeks to provide for the purposes of computation of bonus that the establishment shall include its departments, undertakings and branches, where for any accounting year a separate balance sheet and profit and loss account are prepared and maintained in respect of any such department or undertaking or branch, then, such department or undertaking or branch shall be treated as a separate establishment for the purpose of computation of bonus for the accounting year, such department, undertaking or branch was, immediately before the commencement of that accounting year treated as part of the establishment for the purpose of computation of bonus.

Clause 31 of the Bill seeks to provide for payment of bonus out of allocable surplus. It also empowers the appropriate Government to notify the authority having jurisdiction for calling upon the employer to produce the balance sheet before it.

Clause 32 of the Bill seeks to provide for the computation of gross profit in the case of a banking company and in any other case in such manner as may be provided by rules by the Central Government.

Clause 33 of the Bill seeks to provide for the computation of available surplus in respect of any accounting year.

Clause 34 of the Bill seeks to specify the sums which shall be deducted from the gross profits as prior charges which includes the sums as may be provided by rules to be made by the Central Government.

Clause 35 of the Bill seeks to provide for the calculation of direct tax payable by the employer. Such direct tax for any accounting year shall be calculated at the rate applicable to the income of the employer for that year subject to the provisions specified in that clause.

Clause 36 of the Bill seeks to provide for set on and set off of allocable surplus. It provides as to how the allocable surplus exceeding the amount of maximum bonus payable to the employee shall subject to the limit of 20 per cent. Of the total salary or wages of the employee in that accounting year be carried forward for being set on in the succeeding accounting years up to and inclusive of fourth accounting year for the purpose of payment of bonus in such manner as may be provided by rules by the Central Government. It further provides that where for any accounting year, there is no available surplus or the allocable surplus in respect of that year, falls short of the amount of the minimum bonus payable to the employees and there is no amount or sufficient amount carried forward and set on which could be utilised for the purpose of the minimum bonus, then, such minimum amount or the deficiency shall be carried forward for being set off in the succeeding accounting years and so on up to and inclusive of the fourth accounting year in such manner as may be provided by rules by the Central Government. It also provides that the applicability of such rules in other cases and for the taking into account at first instance the amount of set on or set off carried forward from the earliest accounting year.

Clause 37 of the Bill seeks to provide for the adjustment of customary or interim bonus payable under the proposed legislation.

Clause 38 of the Bill seeks to provide for deduction of the amount of loss caused by the employee on account of misconduct from the amount of bonus payable by the employer to the employee in respect of the concerned accounting year only and the employee shall be entitled to receive the balance, if any.

Clause 39 of the Bill seeks to provide the time limit for payment of bonus. The bonus payable to an employee shall be paid by crediting in the bank account of the employee by his employer. It also specifies regarding the extension of period for payment of bonus in certain cases and the upper limit of the extension which shall not exceed two years and in case of a dispute for payment at higher rate, the employer shall pay eight and one third per cent. Of the wages earned by the employee as per the provisions of the proposed legislation within the time limit.

Clause 40 of the Bill seeks to provide for the application of the provisions of Chapter IV regarding payment of bonus to establishments in public sector in certain cases as specified in the said clause.

Clause 41 of the Bill seeks to provide for the non-applicability of the provisions of Chapter IV regarding the payment of bonus in certain cases which, inter alia, include employees employed in Life Insurance Corporation of India, Indian Red Cross Society or any other institution of a like nature including its branches, Reserve Bank of India, etc. It also provides that the provisions regarding the payment of bonus shall apply to such establishments in which twenty or more persons employed or were employed on any day during an accounting year.

Clause 42 of the Bill seeks to provide for Central Advisory Board to be constituted by the Central Government which shall be tripartite in nature having representatives from employees, employers and independent persons as well as there will be one third representation of women in this Board and the said Board shall advice the Central Government on issues referred to it. It also provides that every State Government shall also constitute a State Advisory Board for advising the State Government, inter alia, on fixation or revision of minimum wages, increasing employment opportunities, etc. The State Advisory Board may constitute one or more committees or sub-committees to look into issues pertaining to matters specified in the clause. One third members of the State Advisory Board shall be women.

Clause 43 of the Bill seeks to provide the responsibility for payment of various dues of the employees. In case of failure to pay the dues, the concerned company or firm or association or any other person who is the proprietor of the establishment shall be responsible for the payment of dues.

Clause 44 of the Bill seeks to provide for payment of various undisbursed dues of the employee in case of his death. Such dues will be paid to the persons nominated by the employee and where there is no such nomination or for any reasons such amount cannot be paid to the person nominated, then, the dues shall be deposited with the Authority specified in the rules, who shall deal with the amount in the manner provided in such rules. Where the dues are paid by the employer in accordance with this clause by the employer, then, he shall be discharged of his liability to pay the dues.

Clause 45 of the Bill seeks to provide for appointment of Authority by the appropriate Government to decide the claim of employees which arises under the provisions of the proposed legislation. The said authority shall have powers to award payment of claim amount along with compensation which may extend up to ten times of the claim amount. Further, if an employer fails to pay the amount of claim and compensation awarded by the Authority, then, the said Authority shall issue a recovery certificate to the Collector or District Magistrate of the district where the establishment is located who shall recover the same as arrears of land revenue and remit the same to the authority for payment to the concerned employee. Any application before the authority for claim referred above may be filed by the employee concerned or Inspector-cum-Facilitator or by any Trade Union of which the employee is a member.

Clause 46 of the Bill seeks to provides that if a dispute arises between an employer and his employees with respect to the bonus payable under the proposed legislation or the application of this Code, in respect of bonus, to an establishment in public sector, then, such dispute shall be deemed to be an industrial dispute under the Industrial Disputes Act, 1947.

Clause 47 of the Bill seeks to provide that if in any dispute referred to the authority, appellate authority, a Tribunal or an arbitrator, any corporation or a company (other than a banking company) submits to the said authority, appellate authority, a Tribunal or an arbitrator, the documents like balance sheet and profit and loss account duly audited by the Comptroller and Auditor-General of India or by auditors duly qualified to act as auditors of companies under Companies Act, 2013, then, such documents shall be presumed to be accurate and it shall not be necessary for the corporation or company to prove the accuracy of such statements. However, when an application is made to the said authority, appellate authority, Tribunal or arbitrator by any employee or a Trade Union being a party to the dispute requiring any clarification to the said statements, then, on order of the authority, appellate authority, Tribunal or arbitrator the concerned corporation or company, as the case may be, shall clarify the same.

Clause 48 of the Bill seeks to provide for audit of accounts of employers not being corporations or companies. Where an employer fails to get the accounts audited then there is provision for getting the accounts audited by such auditor or auditors as the authority thinks fit and the expenses of and incidental to such audit including the remuneration of auditor or auditors shall be determined by the authority and be paid by the employer. In case of failure of payment, this clause contains the provision for the recovery of such expenses.

Clause 49 of the Bill makes provisions for appeal against the order of the authority.

Clause 50 of the Bill seeks to provide for records, returns and notices. The said clause makes provisions for the maintenance of register by the employer containing the details with regard to persons employed, muster roll, wages and such other details in the manner to be specified in the rules by the appropriate Government. It also provides for the display of a notice on the notice board at a prominent place at the establishment containing the abstract of the proposed legislation, category-wise wage rates of employees, wage period, day or date and time of payment of wages and the name and address of the Inspector-cum-Facilitator having jurisdiction. The employer who employs not more than five persons for agriculture or domestic purpose is exempted from the provision but when demanded, he shall produce before the Inspectorcum-Facilitator the reasonable proof of the payment of wages to the persons employed.

Clause 51 of the Bill seeks to provide for appointment of Inspector-cum-Facilitator and their powers. The Inspector-cum-Facilitator may supply information and advice to employer and workers concerning the most effective means of complying with the provisions of the proposed legislation. The said clause also empowers the Inspector-cum-Facilitator to inspect the establishment based on inspection scheme.

Clause 52 of the Bill seeks to provide for cognizance of offences under the provisions of the proposed legislation. The cognizance of the offences shall be taken by the court on a complaint. No court inferior to the Metropolitan Magistrate or Magistrate of the first class shall try the offences.

Clause 53 of the Bill seeks to provide for the appointment of officers not below the rank of Under Secretary to the Government of India or equivalent level officer in the State Government to dispose of cases punishable only with fine up to fifty thousand rupees, and procedure therefor, so as to reduce the burden on subordinate judiciary.

Clause 54 of the Bill seeks to provide penalties for offences. Enhanced penalties shall be imposed on the offender who is again found guilty of similar offence already committed by him, for which he has been convicted. The Inspector-cum-Facilitator shall, before initiation of prosecution proceedings, give an opportunity to the employer to comply with the provisions of the proposed legislation. The prosecution proceedings shall not be initiated against the employer who complies with the said provisions within the period specified. Such opportunity shall not be accorded to an employer, if the violation of the same nature of the provisions of proposed legislation is repeated within a period of five years from the date on which the first violation was committed.

Clause 55 of the Bill seeks to provide for offences by companies. If the offence is committed by a company, every person who at the time the offence was committed, was in charge of and was responsible to the company for the conduct of business of the company, as well as the company shall be deemed to be guilty of offence and shall be liable to be proceeded against and punished accordingly. Protection has been provided where offence has been committed without the knowledge or where all due diligence to prevent the commission of the offence has been exercised. The director, manager, secretary or other officer of the company with the consent or connivance of whom the offence has been committed shall also be deemed to be guilty.

Clause 56 of the Bill seeks to provide for composition of offences. Only the offences for which there is no punishment with imprisonment shall be compounded. The compounding money shall be a sum of fifty per cent. Of maximum fine. There is no compounding for a similar offence compounded earlier or for commission of which conviction was made committed for the second time or thereafter within a period of five years. Chapter IX deals with Miscellaneous Clause 57 of the Bill seeks to provide bar of suits. The matters in which the court shall not entertain the suit, inter alia, relate to the recovery of minimum wages, any deduction from wages, discrimination in wages and payment of bonus.

Clause 58 of the Bill seeks to provide for protection of action taken in good faith by the appropriate Government or any officer of that Government under the provisions of the proposed legislation. Clause 59 of the Bill seeks to provide regarding burden of proof. The burden of proving that the dues on account of remuneration or bonus, etc., have been paid shall be on the employer.

Clause 60 of the Bill seeks to provide that any contract or agreement whereby an employee relinquishes the right to any amount or the right to bonus due to him under the provisions of the proposed legislation shall be null and void in so far as it purports to remove or reduce the liability of any person to pay such amount.

Clause 61 of the Bill seeks to provide for overriding effect in respect of laws, agreements, etc., which are inconsistent with the provisions of the proposed legislation. Such laws, agreements, etc., shall not affect the provisions of the proposed legislation.

Clause 62 of the Bill seeks to provide for delegation of powers. The appropriate Government may, by notification, delegate the powers exercisable by it in the proposed Code with or without any condition to the officer or authority subordinate to that Government, etc., as may be specified in the notification.

Clause 63 of the Bill seeks to provide for exemption of employer from liability in certain Cases. The employer who is charged with an offence under the provisions of the proposed legislation shall be entitled upon complaint duly made by him, to have any other person whom he charges as the actual offender, brought before of the court at the time appointed for hearing the charge and if used he proves that he has, after the commission of the offence has been proved, due diligence to enforce the execution of the provisions of the proposed legislation and the other person committed the offence without his knowledge, consent or connivance, then, that other person shall be convicted of the offence and the employer shall be discharged.

Clause 64 of the Bill seeks to provide for protection against attachment of assets of employer with Government.

Clause 65 of the Bill seeks to provide for the powers of the Central Government to give directions to the State Government for carrying into execution of the provisions of the proposed legislation and such directions shall be binding.

Clause 66 of the Bill seeks to provide that the provisions of the proposed legislation shall not effect the provisions of the Mahatma Gandhi National Rural Employment Guarantee Act, 2005 and the Coal Mines Provident Fund and Bonus Schemes Act, 1948, or of any scheme made thereunder.

Clause 67 of the Bill seeks to confer power upon the appropriate Government to make rules. Such powers are of general nature for carrying out the provisions of the proposed legislation and also the matters on which such rules may be made have been specified. There is provision for laying the rules, as the case may be, before the Parliament or the State Legislature.

Clause 68 of the Bill seeks to confer power upon the Central Government to make provisions published in the Official Gazette and not inconsistent with the provisions of the proposed legislation for removing the difficulty. Such powers shall not be exercised after expiry of a period of two years from the commencement of the proposed legislation and every order published under this clause shall be laid before the each House of Parliament.

Clause 69 of the Bill seeks to provide for repeal of certain enactments, namely, the Payment of Wages Act, 1936, the Minimum Wages Act, 1948, the Payment of Bonus Act, 1965 and the Equal Remuneration Act, 1976, and saving of things done and action taken there under.