Overview of Code on Wages Bill 2019

The Code on Wages, 2019 (commonly referred as the Wage Code) replaces the following laws: Payment of Wages Act, 1936

1. Minimum Wages Act, 1948
2. Payment of Bonus Act, 1965
3. Equal Remuneration Act, 1976

Highlights

• 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. Where previously the definition of wages varied across labour legislations, the Code now provides a single definition as applicable to minimum wages, payment of wages and payment of bonus.

• Contractors are covered by the term ‘employees’ under the Code.

• The term ‘floor wage’ has been introduced under Section 9 which mandates that the Central

• Government shall fix floor wage considering minimum living standards of a worker in a prescribed manner. The minimum floor wage shall not be less than the floor wage fixed by the Central Government.

• Exempted components are capped at 50 per cent

• Section 17 prescribes the time limit for payment of wages. The payment of wages shall be done before the 7th day of the succeeding month irrespective of the number of employees.

• Section 17 further stipulates that in the event of removal, dismissal of an employee from service, retrenchment, or resignation from service by the employee, the wages shall be paid to the employee within two working days of his removal, dismissal, retrenchment or resignation, as the case may be.

• Section 29 lays down that persons convicted of sexual harassment would not be eligible for bonus.

• The Code on Wages is a well-rounded legislation that seeks to balance the interests of the employer and the employee. It aims to remove the ambiguity in the existing labor laws by having a common definition of ‘wage’. This is likely to have a significant impact on the net payable salary of the employees. The Code will further aid in ease of doing business by replacing obsolete provisions and streamlining the laws.