BANARAS HINDU UNIVERSITY

FACULTY OF LAW
Labour and Industrial law
ON
Salient features on Code of Wages,2019

SUBMITTED BY:- SUBMITTED TO: -

MAYANK RAJPOOT Dr. RAJU MANJHI
SIR

CLASS: - B.A.LL.B VIiith SEMESTER

ROLL NO.:- 33 REMARKS:-

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 ACKNOWLEDGEMENT
I would like to express my special thanks of gratitude to my teacher
ASSISTANT PROFESSOR RAJU MANJHI SIR who gave me the
golden opportunity to do this wonderful project on the topic
“SALIENT FEATURES OF CODE OF WAGES,2019”, which
also helped in doing a lot of research and I came to know about so
many new things and I am really thankful to them.

Secondly, I would also like to thank my parents and friends who

helped me a lot in finalizing this project within the limited time frame.

---MAYANK RAJPOOT

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 INDEX

S. NO. CONTENTS PAGE

NO.
1. Introduction 4

2. Definition of wages under the Code 5

3. Highlights of the code 6

4. Some other definition 7

5. Conclusion 12

6 Bibliography 14

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 INTRODUCTION

The Code on Wages, 2019 was introduced in Lok Sabha by the Minister of
Labour, Mr. Santosh Gangwar on July 23, 2019. It seeks to regulate wage and
bonus payments in all employments where any industry, trade, business, or
manufacture is carried out.  The Code replaces the following four laws:

(i) the Payment of Wages Act, 1936,

(ii) the Minimum Wages Act, 1948,
(iii) the Payment of Bonus Act, 1965, and
(iv) The Equal Remuneration Act, 1976.

This Code is the first of the four labour codes which has now become an
Act, and has replaced four labour regulations viz. the Payment of Wages
Act, 1936; the Minimum Wages Act, 1948; the Payment of Bonus Act,
1965; and the Equal Remuneration Act, 1976.

It is important for the industry at large to understand the key aspects that
the Code will impact. Having brought together various previous
legislations under a single umbrella, the Code has expanded the
definition of “employer”
The Code on Wage universalizes the provisions of minimum wages and
timely payment of wages to all employees irrespective of the sector and
wage ceiling. At present, the provisions of both Minimum Wages Act
and Payment of Wages Act apply on workers below a particular wage
ceiling working in Scheduled Employments only. This would ensure
“Right to Sustenance” for every worker and intends to increase the
legislative protection of minimum wage from existing about 40% to
100% workforce. This would ensure that every worker gets minimum
wage which will also be accompanied by increase in the purchasing
power of the worker thereby giving fillip to growth in the economy.
Introduction of statutory Floor Wage to be computed based on minimum
living conditions, will extend qualitative living conditions across the
country to about 50 crore workers. It is envisaged that the states to notify
payment of wages to the workers through digital mode.

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Definition of wages under the Code:
As per the Code – (i) basic pay, (ii) dearness allowance and (iii) retaining
allowance have been included as components of 'wages'.
Further, the Code excludes the following components from the definition
of wages: (a) bonus payments;
(b) value of the house-accommodation, supply of light, water, medical
attendance or other amenity or of any service excluded from the
computation of wages by an order of the appropriate Government;
(c) employer contributions to any pension or provident fund;
(d) conveyance allowances;
(e) sums paid to the employee to defray special expenses on him by the
nature of his employment;
(f) house rent allowance;
(g) remuneration payable under award or settlement between the parties
or order of court or tribunal;
(h) overtime allowance;
(i) commission payable to employee;
(j) gratuity payments; and,
(k) retrenchment compensation or other retirement benefit payable to the
employee or any ex-gratia payment made to the employee on the
termination of his employment.

Highlights of the Code

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˃ Definition of 'wages'
 The definition of 'wages' varies across labour legislations in India. The
Code seeks to provide a single uniform definition of 'wages' as
applicable to minimum wages, payment of wages and payment of bonus.
It is to be noted that for the purpose of equal wages to all genders and for
the purpose of payment of wages, the emoluments specified in
clauses (d), (f), (g) and (h) (specified above), should also be considered
for computation of wages.
 The Code prescribes that if the sum-total of the excluded components
(apart from gratuity and retrenchment compensation) exceeds 50% (Fifty
Percentage) (or such other percentage notified by the Central
Government) of the total remuneration, then that portion of the amount
exceeding 50% (Fifty percentage) (or such other percentage notified by
the Central Government) is also to be calculated as 'wages' under the
Code. Employers should be particularly wary of such a stipulation in
devising salary structures for their employees.

˃ Separate definitions of 'worker' and 'employee'

 The Code provides for separate definitions of 'worker' and
'employee' The definition of 'employee' is broader than that of 'worker' as
it includes persons carrying out managerial and administrative work. The
definition of 'worker,' however, expressly includes working journalists
and sales promotion employees.

˃ Equal Remuneration
 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
 Further, it is relevant to note that under the Equal Remuneration Act, the
definition of remuneration was vague, and included basic wage or salary
and any additional emoluments whatsoever payable in cash or kind to a
person employed in respect of employment or work done. However, as
per the Code, the components that will constitute wages for the purpose

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of payment of equal remuneration irrespective of gender, leaving little
room for confusion in this regard.

˃ Changes with respect to minimum wages

 The procedure for determination of minimum wages by the appropriate
Government is in line with the provisions of the Minimum Wages Act.
However, the Code introduces the concept of a floor wage, which is to
be determined by the Central Government after taking into account the
minimum living standards of workers in a manner to be prescribed,
which may be different for different geographical areas. The appropriate
Government can, under no circumstance, fix a minimum wage rate
which is lower than the floor rate determined by the Central
Government. However, if the existing minimum wages fixed by the
appropriate Government is higher than the floor wage, they cannot
reduce the minimum wages. Further, the Code prescribes that the
minimum rate of wages are to be reviewed and revised by the
appropriate Government in intervals not exceeding five years.
 The Code provides that in case an employee works on any day in excess
of the number of hours constituting a normal working day, the employer
is to pay him for every hour or for part of an hour so worked in excess, at
the overtime rate which should not be less than twice the normal rate of
wages.

˃ Removal of threshold limit for triggering the application of

payment of wages provisions
 Previously, the Payment of Wages Act read with Notification No. S.O.
2806 (E) dated August 29, 2017 issued by the Ministry of Labour and
Employment, was applicable only to employees drawing wages below
INR 24,000/- (Indian Rupees Twenty-Four Thousand only) per month.
However, the Code makes no mention of any such threshold and it
appears that the payment of wages provisions in the Code will be
applicable to all employees across the board.
The Code is applicable to all employees across the board. Accordingly,
the Code has raised the responsibility of an employer to ensure proper
wage structuring and timely payment of such wages to all its employees.

˃ Definitions of 'contractor' and 'contract labour'

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Clause 2(f) of the Code defines 'contractor', along the lines of the
Contract Labour (Regulation and Abolition) Act, 1970. The Code has
also defined 'contract labour'. Workers (other than part-time employees)
who are regularly employed by the contractor for any activity of his
establishment, where their employment is governed by mutually
accepted standards of the conditions of employment and who get
periodical increment in the pay, social security coverage and other
welfare benefits as per the law would not be considered as contract
labour. Interestingly, despite the definition, the Code does not contain
any references to 'contract labour' in the Code. However, the Code on
Occupational Safety, Health and Working Conditions, which is yet to be
passed, contains a nearly similar definition of 'contract labour' and
detailed provisions to regulate it. Once the Code on Occupational Safety,
Health and Working Conditions is passed, better clarity on the regulation
of contract labours can be expected.

˃ Provisions relating to period and payment of wages

 The Code has provided express provisions for the employer to fix the
wage period for the employees on a daily, weekly, fortnightly or monthly
basis, and stipulates the time limits for payments by the employer under
each of such wage periods. In this era of the gig-economy where
monthly basis payments are less relevant and increasingly more number
of employees are migrating out of the formal sector, this is a welcome
inclusion. This scheme departs from the one under the Payment of
Wages Act which merely mentions that a wage period shall not exceed
one month, and prescribes two different time limits for payment of
wages based on the number of employees in an establishment.

˃ Changes with respect to payment of bonus

 While the threshold to determine the payment of bonus to employees is
required to be notified by the appropriate government, it is to be noted
that the provisions relating to the computation of bonus are consistent
with the terms of the Payment of Bonus Act.
 The Code lists disqualifications for receiving bonus along the lines of
the Payment of Bonus Act. However, it is to be noted that the Code
additionally provides that dismissal from service due to conviction for

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 sexual harassment would also be considered as a ground for
disqualification for receipt of bonus under the Code.

˃ Increase in period of limitation for filing claims and filing of

claims by trade unions

 The Code prescribes a limitation period of three years (calculated from the
date on which claims arose) for filing of claims by an employee as against the
existing time period varying from six months to two years, to provide a worker
more time to settle his claims. The Code now allows the trade union of which
the employee is a member to file claims. Additionally, the Code places the
burden of proof on an employer to prove that the amounts claimed by the
employee have been paid.

˃ Provision for inspectors-cum-facilitators

 The Code provides for appointment of inspectors-cum-facilitators and
their powers. These authorities would have a dual function – providing
compliance advisory to employers and workers and conducting
inspections. Further, as per the Code, the appropriate Government may
lay down an inspection scheme, which may also contain web-based
inspection processes.

˃ Revamped provisions for offences and penalties

The Code has provided an impetus for trade unionism by allowing a
registered trade union to make complaints for offences under the
Code. The Code provides for a graded penalty system for contraventions
under the provisions of the Code. Unlike the provisions under the
Minimum Wages Act and the Payment of Bonus Act which provide for
punishment of imprisonment up to six months, the penal consequences
under the Code are relatively lenient and only entail punishment with
fine. However, the Code penalises a second conviction within a span of
five years from the first conviction with imprisonment. The quantum of
fines for contraventions under the Code has seen a significant increase.
Additionally, it is to be noted that the offences of non-maintenance or
improper maintenance of records and registers in the establishment are
punishable only with a fine.

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Under the Code, the inspector-cum-facilitator is required to afford an
opportunity to the employer before initiating prosecution proceedings in
cases of first contraventions. This window will benefit contraventions
which are non-intentional or due to genuine lack of information on the
part of the employer. Exhaustive procedures in relation to compounding
of offences have been provided under the Code.
Analysis

 The Code attempts to unify the definition of 'wages', which is a step

towards providing better clarity. However, the provision of separate
definitions for 'worker' and 'employee' and their usage within the Code
leaves room for confusion. Further, the Code seeks to change the
'Inspector Raj' perception in relation to the Government's regulation of
labour by introducing inspectors-cum-facilitators instead of merely
inspectors.

The Code has created a pivotal transformation with respect to offences

and penalties. Substantial rationalisation and proportionality, with an
intent to support rather than hamper the conduct of business is evident
from the penal provisions. The Code encourages technology adoption in
matters such as mode of payment of wages, inspection procedures, which
are aimed at achieving its digitalisation goals in governance

. Other salient features

a. Records, Registers and Notice - The Code provides that every
employer should maintain registers containing details as to persons
employed, wages paid to such employees, muster rolls and such
other details in such a manner as may be prescribed. While the
manner in which such records are to be maintained is yet to be
prescribed, the expectation is that this process will be more efficient
than the current process whereby such registers are required to be
maintained and returns required to be filed under each of the
legislations.

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 Further, the Code mandates that every employer is required to
display a notice on the notice board at a prominent place in the
establishment containing the abstract of the Code, category-wise
wage rates of employees, wage periods, time for payment of wages
etc. The employer is also required to issue a wage slip in such form
and manner as would be prescribed.

b. Overriding effect- The provisions of this Code will have effect,

notwithstanding anything inconsistent therewith contained in any
other law for the time being in force or in the terms of any award,
agreement, settlement or contract of service. Any contract or
agreement whereby an employee relinquishes the right to any
amount or the right to bonus due to the employee under this Code
will not be enforced.
c. Preservation of actions taken under existing laws- Once the
Code is notified, the corresponding legislations will stand repealed.
However, any actions taken under those enactments or any
notification, nomination, appointment, order or direction made
thereunder or any amount of wages provided in any provision of
such enactments will be deemed to have been done or taken or
provided for such purpose under the corresponding provisions of this
Code and will be in force to the extent they are not contrary to the
provisions of this Code or until they are repealed

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CONCLUSION
The Code is a well-intentioned piece of legislation which aims to balance
the interests of the employer and the employee. Though the Code
contains substantial portions of the repealed legislations, it makes a
decent attempt to replace their obsolete provisions. The provisions of the
Code inspire confidence in the business community, and further clarity
can be realised once the subordinate legislations and rules under the
Code are in place. It would also be interesting to gauge how the other
codes relating to social security, industrial safety and welfare, and
industrial relations will interact with the Code of Wages once they are
passed.
The Code is an essential step towards streamlining labour laws in India.
The Code encourages an environment of co-operation between the
administrative bodies and the employers by emphasizing on compliance
rather than imposition of penal action. With the reduction in multitude of
regulators, the inspection environment can also be expected to become
simpler, with faster resolution of issues in relation to compliance. The
Code also covers both the organized and the unorganized sector, thus
paving the way for a large proportion of the workforce being afforded
protection from any discriminatory practices and for ensuring that a fair
wage is paid to all. The Code is expected to not only reduce employer-
employee disputes, but also disputes between the implementing agencies
and the employers. That said, there are issues that need urgent attention
of the Government including in relation to wage threshold that could be
imposed across India in respect of qualification norms for bonus payouts,
diverse parameters being set for wage computation, restrictions that may
be imposed on structuring the salary of highly remunerated employees
and conflicting provisions regarding overtime wages, lest it reverses the
benefits that the Code had set out to achieve. One of the stated objectives
of the Code, as reflected in its statement of objects and reasons, is to
bring the use of technology in its enforcement and to bring in
transparency and accountability. A lot would therefore, depend on how
the rules and regulations are framed and whether the Government goes
the extra mile to ensure consistency and certainty in the implementation
of the various provisions of the Code, including in ensuring that the
inspection regime is truly employer-identity agnostic. Any measure that

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facilitates ease of compliance of labour laws will stimulate growth, and
will hopefully act as a catalyst in boosting employment in India.

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BIBLIOGRAPHY
Books-

 Aggarwal, S.L. Labour Relations Law in India, Atma Ram

and Co, Delhi, 1970.
 Mishra, S.N., Labour and Industrial Laws, Allahabad Law
Agency,Allahabad,1997

Websites-
 https://www.mondaq.com
 https://www.prsindia.org

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