ELUCIDATING THE HIGHLIGHTS AND ENIGMAS OF THE CODE ON WAGES, 2019

Updated: Sep 14




This article has been authored by Likhita Agrawal who is a third-year law student studying at National Law university, Nagpur.


Introduction


The labour laws are of paramount importance in the terms of growth and development of an economy. One of these legal frameworks is related to emoluments i.e. wages. To remove ambiguity and confusion between several Acts and to give a precise inclusive legislature, the Parliament passed a new legislation on 8th August, 2019, which is titled as ‘The Code on Wages, 2019’ (hereinafter referred to as “Code”). The Code is a sort of an amalgamation of the four previous legislations pertaining to labour laws and it replaces these legislations. These legislation were The Payment of Wages Act, 1936, The Minimum Wages Act, 1948, The Payment of Bonus Act, 1965, and The Equal Remuneration Act, 1976. To bring the Code into implementation, the Central government in exercise of its power under Section 67 of the Code has brought draft of ‘Code on Wages (Central) Rules, 2020’ (hereinafter referred to as “Rules”), on 7th July, 2020 and has kept it in the public domain for recommendations and objections for a duration of 45 days.


Highlights Of The Code


The definition of wages has been given a wide scope by the Code under its Section 2(y). It gives a coherent and clear definition. It has been classified into three major components basic pay, dearness allowance, retaining allowance and has also mentioned a comprehensive list of those considerations which would not be part of wages. Moreover, if the exclusions stated, exceeds fifty percent of total remuneration, then it would be included within the ambit of wages. The Code presented a new concept of ‘floor wage’ for deciding the minimum wages which have to be determined by the Central Government. This floor wage takes the geographically minimum living standards of a worker into consideration. In the regard of the same, the appropriate Government which is defined under Section 2(d) determines the minimum wages. These minimum wages cannot be less than the floor wage.


Furthermore, the Code has tried to define and meticulously distinguish between the terms workers and employees. It elucidated that the term employee has wider purview than the term worker as the former one encompasses the person in the occupation of managerial and administrative work. Further, it also clarified the differentiation between the word contractor and contract labour. The Code states for appointment of an Inspector-cum-Facilitator for inspection regarding the compliance of minimum wages and other provisions of the Code. It has brought an extension in terms of time limit for filing the claims by an employee or worker, it mentioned the limitation period of three years. There were many ambiguities in the prior legislations in relation to the limitation period. And hence, it gives sufficient time for the proceedings and filing of the claim. Thus, due to the above-mentioned reasons the implementation of the Code can be beneficial.


Lacunas Of The Code And The Rules


The new Code has been drafted with a view to bring consistency in the laws of minimum wages and bring required changes to deal with current working scenario. Though the Code has introduced some new concepts, it has some ambiguities in its provision and has also left some important issues untouched. On scrutinization the Code and Rules at length, some loopholes can be observed.


Criteria considered for fixation of minimum wages


Rule 3 states the criteria which have to be taken into account for determining the minimum living standard. These criteria include the members in the family, food, clothing, rent, merit goods like children’s education and medical health, and sundry expenses such as electricity, fuel etc. The above-mentioned criteria are referred from the 15th Indian Labour Conference which was held in 1957 and also on the basis of Workmen Represented by Secretary v. Management of Reptakos Brett. And Co. Ltd. and Anr, which was decided by the Supreme Court in 1992. The ascertainment of minimum wages on the basis of this conference and the case may not be an appropriate idea because these are quite old and may not be suitable for the present lifestyle. The reason is that it does not include many expenses which are of essential nature in the present era like communication expenses, transportation expenses etc. The economy has moved much forward due to change in inflation, monetary and fiscal policy. Thus, the criteria for minimum wages should be decided on basis of the requirements of the present era.


Three consumption units for determining minimum wages


Another problem with the Code is that in the same Rule 3, it provides that minimum wage will be based assuming that there is a worker, her/his spouse and two children and hence considers sustenance of three adults. But here a major predicament arises of maintenance of parents who are in their old age. The Maintenance and Welfare of Senior Citizens Act, 2007 imposes a legal obligation on the children to maintain their parents, specifically from an economic point of view. The Code does not say anything about it. The provision for only three adults seems to be an evident lacuna in the Code. Even the “Report of the Expert Committee on Determining the Methodology for Fixing the National Minimum Wage” published by the Ministry of Labour and Employment in January, 2019, on certain calculations and research submitted that a family of standard working nature should take four adult for calculating minimum wages. Hence, considering both the justifications of the legal obligation of maintenance of parents and this report, the provision of three adult consumption unit needs to be revisited.


Huge Categorization


At instances there is some difficulty on implementing both the Code and the Rules. As the Section 6(6)(a) of the Code mandates the Appropriate Government to consider the skill of the workers and classify them into those four groups or on the basis of geographical area or taking the both into account. Rule 4(1) empowers the Central Government for division of the geographical area into metropolitan area, non-metropolitan area and the rural area. Thus, these stratifications can be arduous for the Governments, as again arrangements like skilled-metropolitan, skilled-non-metropolitan and likewise there would be total of twelve such categories. It may be vague at times due to transfer, change of jobs etc. to categorise the workers specifically to any one category.


No women representation


The Equal Remuneration Act, 1976, which is one of the four Acts that have been consolidated and also the Code talks about equality and no discrimination on the basis of gender but there is no women representation in the Technical Committee which performs advisory function to the Central Government in the respect of skill categorization.


Work hours


A major fallacy in the Rules is pertaining to the number of hours of work. A usual working day is of eight hours and the spread over of work can be extended to twelve hours a day. It is not in consonance with the “Hours of Work (Industry) Convention, 1919 (No. 1)” to which India is a signatory. The Convention states the work hours should be eight and the maximum spread over can be up to 10.5 hours. Hence, there is a discrepancy with International standards with regard to the maximum work hours.


Punishment


The Code mentions only fine as the punishment for breach for any provision of the Code and no imprisonment is provided. This may create leniency in terms of adherence to the provisions of the Code. The awarding of punishments like imprisonment act as a deterrent for the offender himself as well as the society at large.


Conclusion


The new legalisation is in the interest of the security of the labourers in many aspects but still there are gaps which are needed to be filled for efficient application of the Code and development for society as a whole. The discussed lacunas of the Code as well as the Rules may create more economical disparity in the society. The consideration of three adult consumption units and the issue of hours of work are problems which requires great concern and need reconsideration. The enactment of the new Code is a noble attempt as the previous four Acts failed to keep up with the changing economic and social needs. But leaving such lacuna as discussed earlier may have undesirable consequences for the workers and employees. Thus, endeavours should be made to resolve these loopholes and make it an efficient legislation in terms of social security of the workers and employees.

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