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Inadequacy in the Wage Code is inadequate

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Inadequacy in the Wage Code is inadequate

What is Wage Code Bill 2019? 

The Wage Code Bill 2019 replaces four laws — the Payment of Wages Act, 1936; the Minimum Wages Act, 1948; the Payment of Bonus Act, 1965; and the Equal Remuneration Act, 1976. The 2017 Bill remained unpassed in the last Lok Sabha. The government has reintroduced it recently.

Key Features of Wage Code Bill 2019:

The Wage Code contains numerous positives, such as universal minimum wages and a statutory national floor-level minimum wage, both for the first time in the history of labour legislation in India, among other things.

Benefits of Wage Code Bill 2019:

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.

Universal Coverage:

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 Code  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 a minimum wage which will also be accompanied by an increase in the purchasing power of the worker thereby giving a fillip to growth in the economy. The 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 the payment of wages to the workers through digital mode.

Lesser Litigation:

There are 12 definitions of wages in the different Labour Laws leading to litigation besides difficulty in its implementation. The definition has been simplified and is expected to reduce litigation and will entail at a lesser cost of compliance for an employer. An establishment will also be benefited as the number of registers, returns, forms, etc., not only can be electronically filed and maintained, but it is envisaged that through rules, not more than one template will be prescribed.

Reduction in number of Minimum Wages rates

At present, many of the states have multiple minimum wages. Through Code on Wages, the methodology to fix the minimum wages has been simplified and rationalised by doing away with type of employment as one of the criteria for fixation of minimum wage. The minimum wage fixation would primarily based on geography and skills. It will substantially reduce the number of minimum wages in the country from existing more than 2000 rates of minimum wages.

Better enforcement of Labour Laws

Many changes have been introduced in the inspection regimes including web-based randomised computerised inspection scheme, jurisdiction-free inspections, calling of information electronically for inspection, the composition of fines, etc. All these changes will be conducive for the enforcement of labour laws with transparency and accountability. There were instances that due to the smaller limitation period, the claims of the workers could not be raised. To protect the interest of the workers, the limitation period has been raised to 3 years and made a uniform for filing claims for minimum wages, bonus, equal remuneration, etc., as against existing varying period between 6 months to 2 years.


Under the Code, an employee’s wages may be deducted on certain 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.  These deductions should not exceed 50% of the employee’s total wage.

It can be said that a historical step for ensuring statutory protection for minimum wage and timely payment of wage to 50 crore worker in the country has been taken through the Code on Wages besides promoting ease of living and ease of doing business.

Shortcomings of Wage Code Bill 2019:

Unclear Objectives

The Preamble of the Code should state the substantive aims of the Code, such as preventing gender-based discrimination, extending universal minimum wages, and so on, rather than stating that it is to “amend [and] consolidate the laws relating to wages bonus and matters connected…”, which is a procedural act.

Non-inclusion of agriculture workers

The Code proclaims that it covers all workers in the organised and unorganised sectors (which should include agriculture also. The Code does not specifically mention the inclusion of agriculture.

Dilution of Gender-based equity

The Code has diluted the provisions relating to gender-based equity in the labour market, contained in the existing Equal Remuneration Act, (ERA) 1976, and missed an opportunity to do more in this regard. Its original draft included only a provision prohibiting gender-based discrimination in wages, and responding to the Parliamentary Standing Committee’s recommendation, it has included the prohibition of such discrimination in recruitment only in case of similar work. It has left out existing entitlements concerning conditions of service subsequent to recruitment, such as promotions, training, and transfers. Further, the ERA even conceived ways and means of increasing employment opportunities for women by consulting expert advisory committees. To conceive that gender-based discrimination pertains only to earnings and perhaps at the recruitment stage, and to ignore pernicious forms of discrimination and even deprivation in many aspects of the world of work is to adopt a narrow approach.

Multiple wage rates for different occupations

By providing for a mandatory national floor-level minimum wage instead of the earlier minimum wage rate, the Wage Code will surely bring down the numerous minimum wage rates that exist currently. It propagates multiple wage rates by stipulating minimum wages at the national, zonal and state levels, and further on the basis of norms like skill (four types), arduousness and hazardous. What is worse, it empowers the government to create more norms and yet expects that the number of minimum wage rates will be kept at a minimum.

If the objective of minimum wages is to prevent exploitation or poverty alleviation, it should provide not “merely for the bare sustenance of life, but for the preservation of the efficiency of the worker”. In other words, it should provide for some measure of education, medical requirements and amenities as well. Why should there be a hierarchy of multiple minimum wage rates based on skills? Regional peculiarities could be tackled by a state-level single minimum wage, plus a universal variable cost of living allowance adjusted quarterly instead of half-yearly.

Determination of minimum wage

More important is the debate on the determination of the minimum wage, and the fact that the expert committee’s “scientifically arrived at minimum wage” falls far short of the Seventh Pay Commission’s level of ~18,000. This needs urgent resolution lest labour becomes restive. Further, the existing law stipulates revision of minimum wages “within an interval of any five years”, while the Code requires revision “ordinarily at an interval not exceeding five years”, and the latter may formalise revision only after every five years if at all it is done religiously by governments.

Restricted dispute representation opportunities

The Minimum Wages Act allows representation on behalf of minimum wage-deprived workers by a legal practitioner, any authorised office-bearer of a trade union, an inspector, or any authorised person chosen by the Authority concerned, which empowers the affected workers considerably. But the Code restricts representation to the trade union of which the affected workers are members and the inspector. Given low and declining rates of unionisation, this will hurt workers.

Weak powers to inspectors

Finally, the role envisaged for the curiously titled “inspector-cum-facilitator” is quite limited, as the fundamental “power of entry at any time (or even reasonable hours), any frequency and unintimated one” has been removed in the Code, which violates International Labour Organisation norms on this. The inspection system needs reform to remove harassment and corruption, but the Code is making inspectors powerless “visitors”.

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