Consolidation of Indian labour laws - Good Start with Code on Wages

Minimum wage is one of the basic human right/necessity for workmen as it influences the earning and living of crores of workers laboring in different organized/unorganized sectors in the country.

Given the eminence of minimum wage on the living of workers community it is imperative to establish a unique/dedicated code to govern the matters associated with the minimum wage prospect.

In this backdrop, The Code of Wages, 2019 (Code) has been enacted and notified by the central government with the objective to institute guidelines in relation to wages, to simplify the compliance aspects related to minimum wages and to ensure workers will be receiving minimum wages without any discrimination.

The said Code will replace certain existing labor acts (the Payment of wages Act, Minimum Wages Act, Payment of Bonus Act and the Equal Remuneration Act) and establish a unique code for the welfare of workers.

The following are the key highlights of the Code:

·       Definitions of Employee, Contract Labor and Wages are redefined to integrate all key variants emerged in the labor arena over course of time.

·       Contract labor shall not include employees hired on full time basis for the contractor’s establishment and deployed to the principal employer’s establishment.

·       Provision of single register and returns is established.

·       State governments are empowered with the authority to fix bonus threshold.

·       Any wage division in excess of 50% will be considered as wages in all additional amounts.

·       Prospect of scheduled employment is detached from the Code.

·       Overtime payment will be provided to managers, supervisors and administrators.

·       Central government will fix minimum wage – State government will decide wage equal to or above the minimum wage decided by the central government.

Following is the gist of regulations to be complied by factories and companies in relation to workers wages:

Central/State Advisory Board

·       A central/state advisory board will be constituted separately to address the matters related to minimum wages at central/state level.

·       Central advisory board/state advisory board shall consist of employer/employee representatives in equal proportion, independent members not exceeding 1/3 of board. 1/3 of the board shall be women. In addition, 5 representatives from state governments in Central advisory board.

·       Central advisory board/state advisory board shall advise the central/state government on the following matters:

a)     Minimum wages fixation/revision;

b)     Enhancement of women employment opportunities;

c)     Guidelines in relation to women employment/women safety matters; and

d)     Any other matters related to Code.

Minimum wage provisions

·       An Employer is strictly forbidden from discriminating on employees in relation to wages payment on the ground of gender except in the cases where employment of women employees is strictly prohibited.

·       Every employer is obligated to pay employees the minimum wage rates as specified by the central/state government from time to time.

·       Employee skill set (highly skilled, skilled, semi-skilled), geographical, complexity/hazardous nature of work, climate aspect and other risks associated with the work will be taken into consideration in the determination of minimum wages.

·       Basic wage rate, cost of living, cash value of concessions etc., will form the core aspects of the minimum wages.

·       Wage rates will be determined for time work/piece work.

·       The government will determine the minimum wages for employees recruited on piece work basis in line with the minimum wages for time work basis.

·       Minimum wages for employees working on time work basis can be determined in the terms of hours, days and months.

·       Prior to fixing/revision of minimum wages, the government has to constitute a committee comprises of employers/employees in equal number and independent persons to evaluate the components that will influence the fixation of minimum wages and submit the recommendations to the government.

·       The government shall finalize the minimum wages taking into considerations the recommendations made by the committee.

·       Review/revision of minimum wages shall ordinarily be performed by the concerned government within an interval not exceeding time period of 5 years.

·       Employees who have worked less than minimum required work hours in a given day shall be entitled to full payment except in case the reason for less working hours is employee unwillingness to work.

·       Employees who have worked for over time shall be entitled to payment for all over time worked hours which will be double to the normal wage rate.

·       Mode of wage payment shall be in cash or deposit wage amount in the employee account. Wage payment can be done on daily, weekly, two weekly and monthly basis.

·       Wages payment to the employee (who is out of the job due to removal/dismissal/ retrenchment/resignation) has to be paid within 2 days of such removal, dismissal, retrenchment and resignation.

·       However, in certain cases the wages payment shall be made by the employer within designated timelines established by the government.

Deductions from employee salary

·       The employer shall be authorized to make the deductions from the employee salary in the following cases,:

a)     Fines imposed on the employee for any legitimate reason;

b)     Cut in employee salary for unplanned absence from duty or any kind of loss/damage caused to the employer assets due to employee neglect or default;

c)     Provision of house rent/accommodation and such amenities and services supplied by the employer subject to the provisions of Code;

d)     Deductions made pursuant to recuperation of deductions and loans made from any fund constituted for the welfare of labor/ loans granted for house-building or other purposes;

e)     Tax deductions pursuant to the pertinent central/state tax laws;

f)       Deductions for subscription to, and for repayment of advances from any legally sanctioned scheme and for co-operative society payment; 

g)     Deductions made subject to employee consent for contribution to trade union and any other central/state designated fund; and

h)     Deductions for recovery of losses sustained by the railway administration on account of employee acceptance of forged/damaged currency and employee failure to collect the monies due to the railway department/incorrect refund of train fares.

·       The accumulation of the deductions shall in no event exceed the 50% of the wage amount. If in case the deductions accumulation exceeds 50% - Such exceeded amount could be recovered.

·       No employee shall be held responsible for the employer failure to deposit any deductions with the state/central government.

·       No fines shall be imposed on the employee except upon occurrence of any employee acts/omissions from the authorized list. No fine will be imposed on employee under 15 years and fine amount in any case shall not exceed 3% of wage to be paid to employee in a given wage period.

·       Provisions related to payment of wages shall not be applicable to government establishments unless the state/central government has issued a notification specifying the application of these provisions to government establishments.

Bonus

·       Employer shall be obligated to pay a minimum of 8.33% bonus to employee provided such employee worked more than 30 days in an accounting year.

·       If in case the bonus quantum exceeds the minimum bonus slab then the employer has to pay the bonus proportion to the wages earned by the employee during the accounting year subject to a maximum slab of 20%.

·       For the purpose of calculating the employee working days the following components will also come under the ambit of working days:

a)     Employee laid off pursuant to an legal recognized agreement;

b)     On leave (including maternity leave) with wages paid; and

c)     On leave due to temporary disablement occurred in course of employment.

·       Employee shall not be eligible to receive the bonus if such employee is out of employment for fraud, imprisonment for sexual harassment, unethical/violent behavior, theft, misappropriation or sabotage of employer property.

·       Bonus shall be paid out of allocated surplus which shall constitute 60% for banking company / 67% for other establishments out of available surplus.

·       If the employer pays any bonus in advance then the employer has the right to deduct such advance bonus from the actual bonus figure and pay the rest of bonus to the employee.

·       If the employer suffers any loss due to the misconduct of employee then the employer has the right to deduct monies for such loss from the employee bonus amount.

·       The bonus amount should be credited into the employee account within 8 months from the closing date of the accounting year, unless said duration is extended beyond 8 months by the central/state government.

·       Provisions related to bonus shall not be applicable to employees of Life Insurance Corporation of India, central/state government establishment, universities, non-profit organizations, Reserve Bank of India, public sector financial institution and seamen of the Merchant Shipping Act, 1958.

Inspector-cum-Facilitator

·       The central/state government shall appoint Inspector-cum-Facilitator to exercise certain powers conferred on such inspector within the allocated jurisdiction.

·       The Inspector-cum-Facilitator has the right to perform following acts:

(a) Educate the employers/workers about the importance of compliance with the Code;

(b) Inspect and examine the allocated establishments;

(c) Examine any person who is found in any premises of the establishment;

(d) Require any person to give any reasonable information essential for inspection/examination of establishments;

(e) Search, seize or take copies of any documents maintained in the establishments;

(f) Submit report to the concerned government about any instance of violations by any establishments; and

(g) Exercise such other powers as may be prescribed.

Penalties

·       A penalty up to INR 50, 000 will be imposed on the employer for payment of wages (monies) less than the statutory prescribed limits.

·       Imprisonment up to 3 months/penalty upto INR one lakh will be imposed for commission of subsequent offence on same cause of action within 5 years from the date of commission of first offence.

·       A penalty upto INR 20, 000 will be imposed for violation of any provision of the Code.

·       Imprisonment upto one month/penalty upto INR 40, 000 will be imposed for commission of subsequent of offence on same cause of action (Code violation) within 5 years from the date of commission of first offence.

·       Fine upto INR 10,000 will be imposed for non-maintenance or improper maintenance of records in the establishment.

·       If company commits any offence then the company/officer in charge shall be liable and get punished accordingly. If any officer proves that the offence is committed without such officer knowledge then the officer will not be guilty of company offence.

General provisions

·       In general employer shall be liable to pay the wages of employees. However, in case the employer fails to make the payment then the company or firm or association or any other person who is the proprietor of the establishment shall be responsible for wage payment.

·       In case of employee death/ no knowledge of employee whereabouts the amount due to the employee shall be paid to person nominated on employee behalf pursuant to Code provisions. If no person is nominated then such due amounts will be deposited with the designated authority.

·       The central government has the ability to appoint certain adjudicating authority to adjudicate the claims related to wages under the Code.

·       Such adjudicating authority shall endeavor to resolve the claim within 3 months from the receipt of the claim.

·       Such adjudicating authority has the authority to issue compensation 10 times to the actual amount claimed under the claim depending upon the circumstances around the claim.

·       If employer fails to pay the compensation then the adjudicating authority has the authority to recover compensation with the assistance of Collector/Magistrate and pay the recovered money to the concerned employee. 

·       Such claim application may be filed by employee, trade union and inspector cum facilitator. Application has to be filed within 3 years from the date of cause of action arises.

·       If any party aggrieved by the adjudicating authority order then such party may file an appeal before the appellate authority within 90 days of the adjudicating authority order. The appellate authority shall dispose of such appeal within 3 months from the appeal filing date.

·       Every employer is obligated to maintain an employee register with the details (Employee name, Employee ID number, Wages and such other details).

·       A notice reflecting the Code abstract, employees wage rates category-wise, wage period, day or date and time of payment of wages, and the name and address of the Inspector-cum-Facilitator) should be affixed at the place perceptible to the workers in the establishment premises.

·       No suit for the recovery of minimum wages, wage deduction, discrimination in wages payment and bonus payment shall be entertained unless such claim is covered under any provision/direction/proceeding under the Code.

·       If any employee claims that non-payment of wage/bonus or less payment of wage or unauthorized deductions then the burden is on the employer to prove to the satisfaction of court that the employer does not owe any dues to employee.

·       Any contract by the employee to relinquish such employee right to any monies or bonus shall be void.

The beauty of the Code is that it will establish a single reference point in relation to minimum wages and elude the prospect of referring to multiple enactments.

The sanctity of the Code is that it will ensure that:

·       All the workers serving in labor arena will receive minimum wages as determined by the central/state government.

·       No person will be denied payment of minimum wages on the ground of any race, sex, religion, gender, caste, color etc.,

·       Employer will be liable to pay the minimum wages to all workers employed in the respective establishment.

·       Stringent punishment will be imposed on the employers for violation of the Code provisions.

·       Strict adherence to the Code's provisions by employers/employees/other persons shall guarantee the overall welfare of the workers community.

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