- The Code on Wages, 2019 has been passed by the Lok Sabha and Rajya Sabha, approved by Parliament and is now an Act of Parliament assented by the President.
- The Central Government, however, is yet to appoint a date by when the act shall be effective. It shall be announced by notification in the Official Gazette; and different dates may be notified for different provisions of this code.
- The Code replaces the following four laws: (i) the Payment of Wages Act, 1936, (ii) the Minimum Wages Act, 1925%, (iii) the Payment of Bonus Act, 1965, and (iv) the Equal Remuneration Act, 1976.
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Sr. No. |
Particulars |
Key Provisions |
Impact upon Employers |
| 1. | Definition of wages | Defined to include salary, allowances and other components expressed in monetary terms.
Lists down the specific items including certain allowances such as conveyance and house rent allowance which are excluded from the ambit of ‘Wages’. |
An interesting feature is that the excluded components cannot exceed one half or such other percent as notified by the Central Government of all the remuneration payable to the employee.
Since Allowances other than wages cannot be more than one half percent of total wages. Accordingly Employees CTC structures need to redefine. Ministry Of Labour and Employment has prepared a Preliminary draft of the Code on Social Security & Welfare by amalgamating all existing Labour Laws related to Social Security (Total 15 Labour Laws including EPF Act, ESIC Act, Payment of Gratuity Act, etc.) |
| 2. | Prohibition of Gender Discrimination | Consistent with the Equal Remuneration Act | Similar to Equal Remunerations Act 1976,
Bill reiterates no discrimination among male, female and transgender employees on the grounds of sex in the matter of wages No change in provisions |
| 3. | Minimum Wages | The Central Government shall fix floor wage taking into account minimum living standards of a worker and in this regard different floor wage may be fixed for different geographical areas.
The minimum rates of wages fixed by the Central/State Government shall not be less than the floor wage and if the minimum rates of wages fixed by the Central/State Government earlier are more than the floor wage, then; the Central/State Government shall not reduce such minimum rates of wages fixed by it earlier. |
The minimum wages for different Scheduled Employments will be abolished.
There may be one common minimum wage for all employments which will also include previously not included employments. |
| 4. | Payment of Wages | The Code on Wages provides for payment of all wages in current coin or currency notes or by cheque or by crediting the wages through digital or electronic mode.
It also specifies the time limit for payment of wages and clearly specifies that in the event that an employee is removed, dismissed, retrenched, resigns or becomes unemployed due to closure of an establishment, the wages shall be paid within two working days. |
Payment of wages has been made applicable to all class of establishments and employees.
Previously only employees earning less than INR 24,000 per month were covered and establishments defined or notified were covered. |
| 5. | Permissible Deductions | Consistent with POWA provision, an employee’s wages may be deducted on certain limited grounds including: (i) fines, (ii) absence from duty, (iii) accommodation given by the employer, or (iv) recovery of advances given to the employee, among others 12. |
These deductions should not exceed 50% of the employee’s total wages.
Authorized deductions exceed 50% of the wages, the excess may be recovered by the employer in the manner prescribed. |
| 6. | Payment of Bonus | Consistent with the Payment of bonus act,
The bonus shall be at least 8.33% of his wages or Rs 100, whichever is higher and maximum 20% of his/her annual wages. |
Conviction for sexual harassment is now an additional disqualification for the payment of bonus.
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| 7. | Records, Returns and Notices. | The Code on Wages mandates the employer to maintain a registers/return/display of a notice in the manner to be specified in the rules. | Notification on the date of applicability of this new Act is yet to be announced.
Thereafter appropriate Governments (Central & States) shall frame Rules and share registers and return formats if any under this code. |
| 8. | Offences | The Code on Wages specifies penalties for offences committed by an employer, such as (i) paying less than the due wages, or (ii) for contravening any provision of the Code on Wages. Penalties vary depending on the nature of the offence, with the maximum penalty being imprisonment for three months and/or with a fine of up to Rs. 100,000. 1. As per section 45(2), in the case of a claim arising out of payment of wages which is less than the prescribed minimum wages, the Employer will be liable to pay compensation up to 10 times the amount. |
Example: If an Employer running a small unit with 100 employees are charged for non payment of the prescribed minimum wages coming to Rs 1000 per employee. Then the arrear amount of minimum wages itself will come to Rs 36 Lakhs. He will also be liable to pay compensation of Rs. 3 Crores and 60 Lakhs. Thus it will be like sounding a death knell to the industry. |
