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Step towards amalgamation of labour laws

Published: Dec 26, 2019

Shweta Jain

PEOPLE work for money and labour class gets money in form of wages. In India, to protect and promote the interest and rights of labour, we have big bunch of laws. The list is not only long but also sometimes leads to confusion and overlapping when it comes to their compliances. In order to simplify the laws pertaining to labour and wages, recently a comprehensive code on wages, called Wage Code, 2019, has been passed by the Lok Sabha and Rajya Sabha on July 30, 2019 and August 02, 2019 respectively. It received assent of the President on August 8, 2019. The date from which it will become applicable is yet to be notified by the government. The Wage Code replaced the 4 major Acts namely 'The Payment of Wages Act, 1936', 'The Minimum Wages Act 1948', 'The Payment of Bonus Act, 1965' and 'The Equal Remuneration Act, 1976'. The Wage Code was drafted after considering suggestions of Parliamentary Standing Committee and recommendation of other stakeholders.

The Minimum Wages Act, 1948 was applicable only to employees engaged in scheduled establishments and the Payment of Wages Act was applicable to employees drawing salary below a statutory limit but the Wage Code propose uniform applicability of the provisions of timely payment of wages and minimum wages to all employees irrespective of the wage ceiling and sector. As we all are aware that the definition of 'wages' varies across labour legislations in India, this Wage Code provides a single uniform definition of 'Wages' applicable to minimum wages, payment of wages and payment of bonus. Section 5 of Wage Code, 2019 provides that no employer shall pay less than minimum wage rate notified by appropriate Government.

Section 3 of the Wage Code provides that employees shall not be discriminated on the ground of gender in matters relating to wages by the employer for same work. Moreover there cannot be any discrimination on ground of gender while recruiting employees, except where the employment of women in such work is prohibited or restricted by or under any law for the time being in force.

Chapter II and III of Wage Code provides most important provisions of Code. The Wage Code states where an employee is removed or dismissed or resigns from services or becomes unemployed due to closure of organization, then the wages payable to him is to be paid within 2 working days of his dismissal or removal.

The Wage Code allows the Government to fix the number of hours that constitute a normal working day. Any employee who works in excess of a normal working day, will be entitled to overtime wage, which must be at least twice the normal rate of wages. The wage period can be daily, weekly, fortnightly or monthly. The Code specifies and recognizes different modes of payment of wages. The wages can be paid in coins and/or currency notes or by cheque, or by crediting to the bank account or through electronic mode. 

The Wage Code provides that Central and State Governments will constitute advisory boards. The Central Advisory Board created by Central Government will consist of: (i) employers, (ii) employees (in equal number as employers), (iii) independent persons, and (iv) five representatives of state governments.  On the other hand, State Advisory Boards will consist of employers, employees, and independent persons. There is important provision in code that, one-third of the total members of Boards will be women.  These Boards will advise the respective governments on issues pertaining to labour and wages. For example, fixation of minimum wages, employment opportunities for women etc.

Section 18 of Wage Code allows certain deductions from an employee's wages. The deduction can be for fines, absence from duty, accommodation given by the employer or recovery of advances given to the employee,amenities and facilities provided by employer or for damage to or loss of goods expressly entrusted to employees for custody and for certain other specified reasons.  Total deduction should not exceed 50% of the employee's total wage.

Chapter IV of Wage Code provides provisions for payment of Bonus. All employees whose wages do not exceed a specific amount per mensem, notified by Government, will be entitled to an annual bonus.  The bonus will be at least: (i) 8.33% of his wages, or (ii) Rs. 100, whichever is higher. An employee can receive a maximum bonus of 20% of his annual wages.

Though Wage Code intends to simplify process and procedures of application of labour laws but enforce maintenance of wide range records. The employer needs to keep record of persons employed, wage amount and other prescribed details. Provision of maintenance of records does no apply to employer having not more than 5 employees for domestic or agriculture purpose.

In case any employer commits offence under Wage Code, such as pay less than the due wages or contravenes any provision of the Wage Code, then such employer is liable for penalty. This penalty can vary depending on the nature of offence, with the maximum penalty being imprisonment for three months along with a fine of up to one lakh rupees.

A disputed claim under the Wage Code can be adjudicated and determined by an authority appointed by the Government. An application for adjudication of claim arising under Wage Code can be filed within a period of three years from the date on which the claim arises. The time period of 3 years is kept in Wage Code so that employees will get a longer opportunity to initiate action for their claims.


Benefits under the Wage Code extend to all employees which were not covered in erstwhile laws, including people performing skilled, semi-skilled, unskilled, manual, operational, supervisory or clerical work. Thus, the scope & applicability of the benefits has been expanded considerably under the Code. It removes multiplicity of definition of same term in different Acts, overlapping of authority and provides for minimum wages. Arriving at minimum wage and its implementation would continue to be dynamic due to changing needs of the society and disparities in geographical area of country. Penalty provision for non compliance will help to ensure enhanced compliance of Wage Code. Overall it is good move and a right step towards amalgamation of erstwhile Acts and we hope that rest of labour laws will soon be converted in to Codes.