The Code on Wages, 2019

The Code on Wages, 2019


What to study?

For prelims and mains: Key features of the new code, need, significance, need for uniform wage across the country.

Context: The Centre will soon notify the rules that will create the mechanisms to fix a floor wage that would then undergird the minimum wages for different categories of workers — unskilled, semi-skilled, skilled and highly skilled — that the States and Central government would have to set and enforce.

This is in accordance with the Code on Wages, 2019.

Overview of the new code:

The new code will amalgamate the Payment of Wages Act, 1936, the Minimum Wages Act, 1948, the Payment of Bonus Act, 1965, and the Equal Remuneration Act, 1976.

  1. Coverage: The Code will apply to all employees. The central government will make wage-related decisions for employments such as railways, mines, and oil fields, among others. State governments will make decisions for all other employments.
  2. Wages include salary, allowance, or any other component expressed in monetary terms. This does not include bonus payable to employees or any travelling allowance, among others.
  3. Floor wage:According to the Code, the central government will fix a floor wage, taking into account living standards of workers. Further, it may set different floor wages for different geographical areas.  Before fixing the floor wage, the central government may obtain the advice of the Central Advisory Board and may consult with state governments.
  4. The minimum wages decided by the central or state governments must be higher than the floor wage. In case the existing minimum wages fixed by the central or state governments are higher than the floor wage, they cannot reduce the minimum wages.
  5. Payment of wages:Wages will be paid in (i) coins, (ii) currency notes, (iii) by cheque, (iv) by crediting to the bank account, or (v) through electronic mode.  The wage period will be fixed by the employer as either: (i) daily, (ii) weekly, (iii) fortnightly, or (iv) monthly.
  6. Deductions: 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.
  7. Gender discrimination: The Code prohibits gender discrimination in matters related to wages and recruitment of employees for the same work or work of similar nature.
  8. Advisory boards: The central and state governments will constitute advisory boards.  The Central Advisory Board will consist of: (i) employers, (ii) employees (in equal number as employers), (iii) independent persons, and (iv) five representatives of state governments.  State Advisory Boards will consist of employers, employees, and independent persons.  Further, one-third of the total members on both the central and state Boards will be women.  The Boards will advise the respective governments on various issues including: (i) fixation of minimum wages, and (ii) increasing employment opportunities for women.

Concerns with New Wage Code

  • Starvation Wages: It has been alleged that the new wage code will push the starvation wages further by increasing the income capacity and purchasing power of the informal workers.
    • The increase in purchasing power of the workers will lead to the decrease in savings which inturn will reduce expenditure for productive purposes.
    • The introduction of concept of “floor wages” would mean that “starvation wages” which currently guarantees just ₹178 per day, will continue to exist and would promote forced labour.
    • This has been highlighted by Supreme Court in his judgement in U. Unichoyi and Others vs. The State of Kerala case, where it remarked that in an underdeveloped country which faces the problem of unemployment on a very large scale, it is likely that labour offers to work even on starvation wages.
  • Deduction of Wages Clause: The new law provides for the arbitrary deduction of wages (upto 50% of monthly wage) based on performance, damage or loss, advances etc.
    • The deduction clause will lead to reduced bargaining power and right of association of workers. The workers will not be able to demand even basic work rights in fear of wage deduction.
    • In India, the informal sector employers dominate the workers due to caste and higher social status, therefore the above provision may have the potential to become a handy tool for exploitation of these workers.

Significance:

  • This is expected to effectively reduce the number of minimum wage rates across the country to 300 from about 2,500 minimum wage rates at present.
  • Codification of labour laws will remove the multiplicity of definitions and authorities, leading to ease of compliance without compromising wage security and social security to workers.
  • It is expected to provide for an appellate authority between the claim authority and the judicial forum which will lead to speedy, cheaper and efficient redressal of grievances and settlement of claims as that of earlier.

Way Forward

  • The government should focus on “Need Based Minimum Wage” covering nutrition, healthcare, education, housing and provisions of old-age. Therefore, guaranteed minimum wage should be treated as a fundamental constitutional right for every citizen of India.
  • According to the new law, the revision of minimum wages is to be done after every 5 year, which is quite a long period considering the volatility in the market. Therefore, minimum wages should be adjusted to inflation so as to align the wages to market volatility.
  • The National Commission for Labours should be formed to streamline the issues and challenges of labour market and fixing discrepancies in national level minimum wage computation.

For the minimum wage system to play a meaningful role in aligning protection with the promotion of sustainable growth, it must be properly designed, its goals clarified, and its enforcement made effective.

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