We are witnessing the much awaited development in the Labour Law reforms regime.

It is said
and debated that the current Labour Laws in India are outdated, archaic and do not sync with
the present technology, requirement of industries and generation dynamics. The Government
of India has already taken positive steps to codify the 44 Labour Laws into 4 codes. The Second
National Commission on Labour, which submitted its report on June 2002 had recommended
that the existing set of Labour Laws should be broadly amalgamated into the following groups,
namely:–– (a) Industrial Relations; (b) Wages; (c) Social Security; (d) Safety; and (e) Welfare
and Working Conditions. After having various discussions with interested parties, now the
Labour Laws will be codified into four codes namely:- (a) Industrial Relations; (b) Wages; (c)
Social Security; (d) Occupations Safety, Health and Working Conditions (OSH Code).

Code on Wages
The bill was introduced in the Lok Sabha on August 10, 2017, lapsed as the 16th Lok Sabha
dissolved. The bill was reintroduced in the 17th Lok Sabha on 23rd July 2019 after incorporating
the suggestion of Parliamentary Standing Committee. The code will now take through the
normal course of the law-making procedure. The bill is passed already in both the houses and
will proceed to President’s assent. After the President gives assent, the Bill is notified as an
Act. Subsequently, the Bill is brought into force and rules and regulations to implement the Act
are framed by the Labour Ministry, and tabled in Parliament for approval. If the statute provides
rule-making power to the States, then the states have to frame rules or adopt model/central
rules for implementation in the State.

The Code on Wages consolidates the provisions of four Acts namely, Payment of Wages,
Minimum Wages, Payment of Bonus and Equal Remuneration. As usual, no statute or law can
be complete in all respects and cannot address each and every issue and there will be some
issues and challenges and so the Code on Wages.

I. Application of the Code

The code does not have any specific section to explain the application of the code. It applies to
all establishments, employees, and employers unless exempted specifically in the provisions
of the code. The coverage or the applications need to be inferred from the definitions of
employee, employer, establishment and other relevant definitions.
II. Employee and Worker
There is a distinction made between
The code excludes the apprentices
‘employee’ and ‘worker’. The employee
definition includes all employees including engaged under the Apprentices
managers, supervisors and administrative staff Act 1961. However, it is unclear
whereas the worker definition does not include whether the trainees under NEEM
administrative and managerial staff. The Scheme or Standing Orders are
supervisors are excluded if their monthly wage
covered under the Code or not.
is more than Rs.15000 or the sum notified by
the Central Government.
III. Contractor & Contract Labour
The contactor is equally given importance as an
employer. The contractor will equally
responsible for the implementation of the code
with respect to his employees. Now the question
arises is there a need of Contract Labour
(Regulation and Abolition) Act 1970 going
forward?
The definition of ‘Contractor’ is
introduced in the code. Interestingly
the Code also defines “Contract
Labour”. The employee definition
does not make any difference
between regular and contract Labour
and the employer definition
includes contractor as an employer.

IV. Inspector-Cum-Facilitator - the Combined approach of Inspection and

Facilitation
The inspector is renamed as an Inspector-Cum-
Facilitator. The legislation intends to combine the This means the Inspectors will
facilitation and inspection rather than only continue to inspect the
policing or inspection. The provisions are brought establishments based on randomized
for the generation of web-based inspection and selection. The conclusion one can
calling of information relating to inspection
make is that the inspection system at
electronically. However, the appropriate
Government may confer jurisdiction of a the choice of the Inspector will
randomized selection of inspection for the purpose continue.
of the Code to the Inspector-Cum-Facilitator.
V. Salary or Wage
A single wage definition is
This also means that 50% of the total remuneration provided in the Code.
to be counted for calculation of Bonus and other Conveyance allowance and
HRA are specifically excluded
benefits subject to the restrictions provided in the
from the wage definition in
Code. However, there is no direct answer on addition to a few more
coverage of special allowance, education allowance components. The legislation
and medical allowance which can be treated as intends to restrict the excluded
excluded components if they are paid to defray components to 50% of the total
special expenses. There seems to be a need to relook remuneration. A specific
at the remuneration structure of the employees provision is incorporated in the
considering these changes. Code on this front.

VI. Industrial Disputes

The code intends to separate a
claim and an industrial dispute. Application for claim and Industrial Dispute are
The industrial dispute is
two different terms and cannot be equated together
defined in the Code. Any
dispute between employers and in the Employment Law. The question still remains
workers is included as a un answered whether the authority under the Code
dispute. However, the dispute can decide the Industrial Disputes or not and also
between employees and whether a dispute between an employee and
employer is not specified as an employer is an Industrial Dispute or Not.
Industrial Dispute in the
definition. Any employee can
raise a claim before the notified authorities in case of less or nonpayment of wages, bonus or
dues.
VII. Offences and Penalties
The Code provides for graded penalty for different types of contraventions. The Inspector-
Cum-Facilitator should give an opportunity to the employer to comply with the provisions of
the code by way of a written direction before proceeding on the prosecution. Offence not being
an offence punishable with imprisonment only, or with imprisonment and also with fine, may
be compounded either before or after the initiation of prosecution.
VIII. Minimum Wages
Minimum Rate of Wages will be notified by the
The legislation intends to cover all appropriate Government as per the Code. Currently,
types of employees whether Minimum wages are notified for the employments
listed in the schedule of the Minimum Wages Act
organized or un organized. The
1948. Now there is no such schedule or scheduled
Governments may face challenges employments. While fixing the minimum wages,
in enforcement considering the the appropriate Government shall primarily account
preparedness and availability of the skill of workers required for working under the
resources. categories of unskilled, skilled, semi-skilled and
highly-skilled or geographical area or both. The
Central Government now has the responsibility to fix national floor wages taking into account
minimum living standards of the worker. The State Governments cannot fix the minimum
wages less than the national floor wages.
IX. Manner of arriving at Bonus percentage
Even though the bonus calculation, minimum and maximum bonus are retained, the guiding
schedules on set on and set off (4th Schedule), Computation of Gross Profits (1st and 2nd
Schedule), sums deductible from gross profits (3rd Schedule) have been dropped and the power
to prescribe guidelines now rests with the Central Government.
X. Confidentiality if the balance sheet is called for by the authority notified
The authority notified may call upon the employer
to produce balance sheet when there is a dispute Now the question is if the balance
regarding the quantum of bonus. The authority
sheet or contents of the balance sheet
shall not disclose any information contained in
the balance sheet unless agreed to by the are not disclosed, where is the
employer. However, a provision is inserted under question of clarification? These are
section 47(2) of the code which talks about two contradicting provisions.
clarification on any item in the balance sheet or
profit and loss account. The trade union or employees can make an application seeking the
clarification and if the authority satisfied with the request, then it can order to supply such
clarification to the corporation or company.
Whatever the issues or concerns one can raise or make, the Code on Wages has got many
positive points and the best effort has been made to simplify and consolidate the provisions
contained in 115 sections of all the four legislations into 69 sections.

This document is prepared by Govindaraju NS. The Author is working as General Manager – HR & Legal in a
Multinational Company in Bangalore and also represents an employer organization and an HR Forum.

DISCLAIMER: This document is prepared and furnished for information and knowledge enhancement of all interested. You may choose to
reproduce or redistribute this report for non-commercial purposes in part or in full to any other person with due acknowledgment of the
Author. The opinions and analysis expressed herein are entirely those of the author. Even though the author has used his extensive
experience and knowledge in analyzing the Code, it is not to be taken as complete and accurate in all respects. This document has been
prepared without regard to the objectives or opinions of those who may receive it.