Wage Code: ‘No establishment which depends for existence on paying fees less than living wages to its workers has any right to continue. By living wages, it is meant more than the bare subsistence level- the wages of decent living.’ -Franklin D. Roosevelt

India’s regulatory framework governing labor laws has been very complex. And sometimes ambiguous with the proper need for revision and amendments. The proposed creation of four Labour Codes, including the Wage Code. It has streamlined multiple central labor laws on wages and bonuses, occupational health and safety, social security, and industrial relations, respectively. And it has been a much-needed step towards consolidation, simplification, and precision. The administration under the government of PM Narendra Modi, 2015 has started planning to consolidate about 45 labor laws into four codes.

Wage Code Bill

The Wage Code Bill initially drafted and presented for the first time in Lok Sabha in August 2017, which referred to a Parliament Standing Committee. The committee submit its report in December 2018 with 24 recommendations out of which 17 were incorporate into the bill, but then the bill lapse due to the general elections. Later on, the bill again taken into consideration by the Labour Minister Mr. Santosh Gangwar and approved by both the Houses, receiving the Presidential assent on 8 August 2019. Thus, with the commencement of the Wage Code[2] from 18th December 2020, the purpose is to significantly overhaul India’s labor laws in relation to wages and bonuses.

The Wage Code aims to amalgamate and rationalize the old and obsolete laws relating to wages and bonuses as stated in the preamble of the bill. Thus the Code replaces and consolidates four laws i.e., (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, with some additions and departures.

Wage and bonus payments

[3] It also seeks to regulate wage and bonus payments in all employments where any industry, trade, business, or manufacture is carry out. It applies to the whole of India and contains 9 Chapters and 69 Sections. Pertinently, the consolidation looks for achieving the enforcement, implementation, and harmonization of the labor laws but the ultimate effectiveness of the Wage Code can only be assess in the real way of its implementation in a country like India which grapples a wage crisis affecting the significant informal labor population. This article critically analyzes the Code of 2020 and the reforms the Code aims to achieve through its implementation.

Broader Aspect Of The Code Of 2020

The Wage Code is back with the claim that it will address the wage crisis by simplifying the multiplicity of definitions and authorities involved. The enactment of the Code has brought various significant labor legislation under one umbrella in a more systematized and organized manner.

The key features being-

The Code has widened the scope of the definition of employee and employer as it includes both organized and unorganized sectors. In addition, to the applicability of the Minimum Wages Act, to only Scheduled Employment, the Code applies to all types of employment and covers all wage workers, so that the benefits extend to all skilled, semi-skilled, manual, operational, managerial, administrative, technical, and clerical work. Further, it defines the term ‘worker’ as any person employed in any industry, excluding Air Force, Police Service, etc.[4]
With regards to Wages, the term is define as which include salary, allowance, or any other component express in monetary terms but does not include bonus payable to employees or any traveling allowance, among others. This definition of wage is expect to bring a landscape change as to how industries can structure their pay packages. At present many organizations have structured the salary range from 20% to 40% CTC, but with the implementation of this Wage Code, the salary structure will change so as to comply with the legislation.[5] Also, in terms of payment of wages, the Code prescribes the mode of payment which includes- coins, currency notes, cheques, by crediting to the bank account, or through any electronic mode, whichever is acceptable to the worker.[6]

Respect of Minimum Wage

In respect of Minimum Wage, Chapter 2 of the Code provides for the payment of minimum wages, more than the floor wage,[7] prohibiting the employers from paying wages less than the prescribed minimum wage rate determined by the factors of the worker’s skill and difficulty of work done, as notified by the Central or State Government, based on hours worked or no of pieces produced. Also, Sec 10, provides for the regular revision at an interval of not more than five years and with regard to overtime work the appropriate government is empower to fix the no. of hours of work and such overtime work wage will not be less than twice the rate of normal wage. Also in terms of any deduction, it should not exceed more than 50% of the employee’s total wage on reasonable ground.[8]
With regard to Determination of Bonus, Wage Code changes the eligibility criteria for the payment of bonus and the method of calculation as previously, the benefit of bonus hinged on a prescribed wage ceiling but by this Code, it is to notify by the Central Government which is to calculate on the higher of the notified wage ceiling or the minimum wage. The prescribed minimum bonus under the Code is 8.33% and the maximum can be 20% of the annual wage.

Wage Code envisages

Chapter 7 of the wage Code envisages a new reform as replacing the Inspector by the appointment of an Inspector cum Facilitator, with powers and duties for the purpose to- (a) provide advice to employers and workers relating to compliance with the provisions of Code and to inspect the establishments as assigned to him by the Appropriate Government. This enables to have inspections through a web-based scheme and electronic summoning of information, so as to ease the compliance burden with current trends of globalization.
Chapter 8 elucidates upon the non-compliance of provisions as under Offences and Penalties and specifies the burden of proof on the employer as in case of arbitrary payment of wages or any act in contravention of a provision of the Code as punishable with fine up to 1 lakh and maximum imprisonment up to 3 months

Drawbacks Of The Code

The Code of 2020 is consider to be one of the landmark legislation after the Minimum Wages Act. However, on detailed analysis, it is axiomatic that the code has omitted or diluted essential provisions of the existing legislations as-[9]

In Relation to Minimum Wage Rate–

The Code has reiterated aspects of minimum wages, from the existing provisions, but still. It fails to define a uniform methodology to calculate or fix an adequate minimum wage. The Code fails to recognize the recommendations of the Indian Labour Conference of 2015, and the aspect which was brought into light by the SC in Raptakos Brett Case[10], as a methodology to determine the minimum wages giving priority to needs of the workers instead of identifying them as mere factors of production.

The Code makes this a discretionary power of the administrators to decide a minimum wage rate. Without any clarity or standard for the same. As a result, the State Government with this power may turn into competition with other states. To have the lowest wage rates so as to bring in more investments in the state. Violating the spirit of the constitution. Thereby, the Code may bring about a repressed wage rate with negative welfare to its object.

Employer friendly than employee-friendly-

In the Minimum Wages Act, we have the criminal liability on the part of the employers. Which in accordance with the act is shift to civil liability with a more lenient punishment. More of in terms of compensation.

In Sanjit Roy v. the State of Rajasthan,[11] it was held by the SC that any non-adherence to the minimum wages would lead to forced labor and will be strictly punishable by the law. On comparing the Code with the consolidate act, the employers have an opportunity to choose for an automated. Self-certificate scheme and hence can naturally pretend to work in compliance with the labor laws. Thus, the Code fails to maintain a balance between the interests of the employers and employees for labor welfare.

In Relation to Payment of Wages and Bonuses-

The Code gives an arbitrary power of discretion into the hands of the employer. As the employers are empower to cut the wages of employees as per the reasons. They find justified as a low performance on the part of the employee. The criteria for payment of bonus creates avoidable confusion. Raising doubts as to whether the notified wage ceiling is the same for eligibility and calculation of bonus. And whether the bonus provisions of the Wage Code are intend to cover all employees or not.

No Jurisdiction of court in matters of low wage rate. –

This is one of the most critical changes which can be highlighted. In the Code as it takes away the court’s jurisdiction to look into the matters. Of low wage rate as the code provides for the establishment of quasi-judicial body. And an appellate body with sole and unlimited power. To restore any such violations but are not subject to any review by a higher court of law. This is a clear violation of Sec.9 of CPC and needs to be revised or repealed.

No Concept of Back Wages–

In India, there have many cases, where the workers terminated or removed. In an unjustifiable, illegal, unjust, and unfair manner by their employers. This aspect has dealt with by the higher courts base on jurisprudential aspects. Where if proven the same, reinstatement is award along with back wages.

In Regional Chief Engineer v. Their Workmen,[12] SC drew various conditions of payment of back wages which includes that if the employee during the period of termination takes employment in any other establishment, no payment of wages or reinstatement will be made. Thus, like the Court, despite multiple existing scenarios of illegal unjustify termination. The Code also leaves the ambiguity of difference between remuneration. That the worker may earn in the new establishment and the conditions. Under which he had to take up the emergency employment, as unattended.

CONCLUSION

This critical analysis of the Wage Code 2020, is to bring about the sanguinity of the application and implementation. Of the Code in the present socio-economic scenario. Where the old parameters and perception of people have ceased to exist and demands for a radical and progressive approach. From critically comparing and analyzing the need, benefits, and drawbacks of the New-Wage Code.

It can be concluded that the highlights of the Code are universalization of provisions of minimum wages. So, ensuring timely payment of wages to all employees, easing the compliance of setting up. Of more enterprises as it broadens the scope of incentive and opportunities. And thereby, the code by consolidating the existing labor laws removes the multiplicity of definitions and authorities.

What The Code Does?

To a greater extent, the Code tries to bring reforms from the previous laws, but it still does not satisfy. The beneficial interest of safeguarding the workers from the arbitrary and unreasonable attitude of the employers. In addition, it puts more discretionary powers. In the hands of administrative authorities to deal with the different issues. Which should have been a matter of check and balance.

Therefore, to conclude, the Code may have brought in development from the existing laws. But it still stands to be an older version that needs to have uplifting the worker’s condition-based amendments. For its true implementation.

The attempt to simplify the law appears to poise and creating more confusion. From the definition of wages to the lack of clarity over the term ‘workers’ and ‘other employees’ and a meritocratic approach. Towards payment of bonus irrespective of individual performance. In my opinion, through the observation and study upon the matter. It becomes pertinent on the part of lawmakers to address the grounds for shortcomings. Of the Code in a practical-based approach than pushing. Through new legislation to create more ambiguity upon the subject than progress.

Reference

[1] Aayusha Gupta, 4th-year law Student in CMR School of Legal Studies, https://www.linkedin.com/in/Aayusha-gupta-2b86901a9.

[2] Hereinafter Code of 2020.

[3] Critical Analysis of the Wage Code Bill, 2019, LEXINSIGHT (Feb3rd, 2021,11:17AM), https://lexinsight.wordpress.com/2020/05/07/critical-analysis-of-the-wage-code-bill-2019.

Wage Code Bill References

[4] Wage Code Bill, 2019, LAWYER (Feb3rd, 2021, 11:37 AM) https://www.lawyered.in/legal-disrupt/articles/wage-code-bill-2019/.

[5] Atul Gupta, Code on Wages 2019: In Simplification, Confusion?, BLOOMBERG QUINT (Feb3rd, 2021 11:34 AM) https://www.bloombergquint.com/opinion/code-on-wages-2019-in-simplification-confusion.

[6] KR Shyam Sundar, The Wage Code Bill is a Mixed Bag, THE HINDU (Feb 3^rd, 2021 12:07 AM) https://www.thehindubusinessline.com/opinion/the-wage-code-bill-is-a-mixed-bag/article28738969.ece.

[7] Pooja Ramchandani and Ulka Bhattacharyya, The Code on Wages, 2019- Far from home? – Part I, BAR AND BENCH (Feb3rd, 2021 14:20 PM) https://www.barandbench.com/amp/story/columns%2Fthe-code-on-wages-2019-far-from-home-part-i.

Mini Raman

[8] Mini Raman, The Code of Wages Bill, 2019- A Bird’s Eye View, MONDAQ(Feb3rd, 2021 14:36 PM) https://www.mondaq.com/india/employee-benefits-compensation/840596/the-code-of-wages-bill-2019-a-bird39s-eyes-view.

[9] Nivedita Jayaram, Protection of Workers’ Wages in India: An Analysis of the Labour Code on Wages. 2019, EPW,(Feb 3^rd, 2021,17:45PM) https://www.epw.in/engage/article/protection-workers-wages-india-labour-wage-code.

[10]Raptakoss Brett Case, 2008 (2) MhLj 229.

[11] Sanjit Roy v. State of Rajasthan, 1983 AIR 328.

[12] Management of Regional Chief Engineer v. Their Workmen, 2018 SCC OnLine SC 1587.