Code on Wages, 2019 – Impact on the Indian Industry

Background and Intent

India’s labour laws were formulated and adopted during the pre and early post-independence days. At the time, these laws were written to govern factories and industries, which was the need of the day. These laws were archaic and did not meet the needs of modern day enterprises. Most of the labour laws had not been amended to keep with the times, despite repeated lobbying from industries and attempts by several prior governments, primarily due to the complexities existing within the Indian industry and the labour ecosystem.

The Code on Wages, 2019 became law on the 8th of August, 2019. Although the government has not notified the effective date of the new law, the Code of Wages, 2019 is essentially an amalgamation of 4 major labour legislations: The Minimum Wages Act, The Payment of Wages Act, The Equal Remuneration Act and the Payment of Bonus Act, with several new provisions. The main intent of the new code is to “transform the old and obsolete labour laws into more accountable and transparent ones which is need of the hour1)Press Information Bureau, GoI – Ministry of Labour & Employment – Lok Sabha Passes the Code on Wages Bill, 20192)Entire text of the Code on Wages, 2019.

Summary of the Code on Wages, 2019

The code is applicable to all industries and employers, and has far reaching implications for all. From increased prosecution risk to 100 times increase in penalties, the Government is serious about putting the fear of law into one and all and ensuring that non-compliance is not to be taken lightly.  We, at BCP Associates, have analysed the new law at length and composed a summary of the new law.

  • Timeline of the Code on Wages, 2019:
    • Bill introduced on 27/07/2019
    • Passed by the Lok Sabha on 30/07/2019
    • Passed by the Rajya Sabha on 02/08/2019
    • Received presidential assent on 08/08/2019. It was gazetted on the same day
  • Purpose of the code: “To amend and consolidate the laws relating to wages and bonus and matters connected therewith or incidental thereto”
  • Applicability – One code for all
    • Applies to employees and workers in the organized and unorganized sectors of the economy
    • Agnostic of the industry they work in or the type of work they do
  • All Employees now covered under Wage Code:
    • No more scheduled employment, minimum wages to be fixed on skill and geography
    • Managers and supervisors covered under minimum wages and payment of wages provisions (ref. Section 13 and 14)
  • Overtime wages: Managers, supervisors and administrative staff eligible for overtime wages and weekly off
  • No gender discrimination: No gender discrimination of employees in wage matters by employers for same or similar work
  • All workers are employees but all employees not workers: Distinction between employee and worker defined which has large scale implications throughout the code
  • From ease of doing business to scare of prosecution: Code allows employees and trade unions to complain directly to the Magistrate thereby encouraging the employer to be held to ransom
  • Fear of punishments is now REAL: Stringent punishments and imprisonment for contraventions – all directors/persons in control of the company are punishable (ref. Section 55) Fine prescribed is 100 times more than the earlier statute
  • Contractor is also employer: Burden of compliance and payment equally shared (ref. Section 2(l)(iii))
  • Contractor’s permanent employee who is employed for any activity of his establishment, if deputed to work in another establishment may no longer be contract labour: Major changes that are in favour of the principal employer (ref. Section 2(g))
  • No more leeway for large employers: Payment of wage Chapter applies to all employees and employers without wage ceiling
  • Maintaining a wage register at home: Proof of payment to domestic workers like maids and cooks – cash vouchers and registers to be maintained
  • Section 2(y)Proviso: 50% of excluded items like HRA, OT, Conveyance allowance are to be considered as wage
  • Wolf in sheep’s clothing? Inspector cum Facilitator has no roles of facilitation, only inspection
  • Centralized notices with no more geographical limits to inspection: Web-based inspection notices and random inspection of establishments that will be initiated through an online inspection process

In Conclusion

Overall, while the code does have a lot of positive elements, at the same time, the blanket power of prosecution given to employees and unions and the phenomenal increase in penalties are scary. We hope that the much needed amendments to these provisions happens before the full-fledged implementation of the Act begins.

If you need a more detailed analysis of the new Code on Wages, 2019 law, write to us at [email protected] and we will email a detailed presentation.

References   [ + ]

1. Press Information Bureau, GoI – Ministry of Labour & Employment – Lok Sabha Passes the Code on Wages Bill, 2019
2. Entire text of the Code on Wages, 2019

5 thoughts on “Code on Wages, 2019 – Impact on the Indian Industry”

  1. Hi sir this is Girish HR Manager from panacea Medical technologies pvt Ltd Whitefield.

    To calculate Over time allowance , is it required to consider HRA, conveyance allowance and other not applicable components for calculate double Over time allowance.

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