The Code on wages Bill 2019 – The ultimate Guide

Why Code on Wages Bill 2019

India had a lot of labour laws and it was always confusing to refer to so many labour laws. Therefore, Govt of India decided to simplify, amalgamate and rationalize the relevant provisions of the existing Central Labour Laws.

This initiative will reduce the complexity in compliance due to multiplicity of labour laws. At the same time, the basic aspects of safety, security and health of workers will not get reduced in any way.

The initiative has resulted in drafting of four Labour codes –

  1. Code on Wages
  2. Code on Industrial Relations
  3. Code on Social Security
  4. Code on Occupational Safety, Health and Working Conditions

So, “Code on Wages Bill, 2019” on the “Wage Code Bill” is the first in a series of four labour codes proposed in the government’s labour reform initiative.

The earlier Acts on Wages

Before, Code on wages 2019, India had following wage related labour laws which are now obsolete –

  1. Minimum Wages Act
  2. Payment of Wages Act
  3. Equal Remuneration Act
  4. Payment of Bonus Act

Code on Wages Act, 2019 is the Act to amend and consolidate the above laws relating to wages, bonus and related matters. The code received the assent of the President on 8th August 2019.

Code on Wages 2019 – Main Provisions – The Ultimate Guide

  1. The code allows the Centre to set a minimum statutory wage or the national minimum wage. The central government can set a separate minimum wage for different regions or states.
  2. The minimum wage fixed by the Centre will no longer be based on employment but on geography and skills.
  3. The bill also provides that the central government will fix minimum wages for certain sectors, including railways and mines.
  4. There shall be no discrimination on the ground of gender in matters relating to wages, by the employer.
  5. No employer shall pay to any employee wages less than the minimum rate of wages notified by the appropriate Government.
  6. For the purpose of fixation of minimum rate of wages under this section, the appropriate Government,—
    (a) shall primarily take into account the skill of workers required for working under the categories of unskilled, skilled, semi-skilled and highly-skilled or geographical area or both; and
    b) may, in addition to such minimum rate of wages for certain category of workers, take into account their arduousness of work like temperature or humidity normally difficult to bear, hazardous occupations or processes or underground work as may be prescribed by that Government
  7. The Central Government shall fix floor wage taking into account minimum living standards of a worker.
    Different floor wage may be fixed for different geographical areas
  8. The minimum rates of wages fixed by the appropriate Government under section 6 shall not be less than the floor wage.
  9. if the minimum rates of wages fixed by the appropriate Government earlier is more than the floor wage, then, the appropriate Government shall not reduce such minimum rates of wages fixed by it earlier.
  10. The code on wages act, 2019 also specifies that the rate of payment of overtime, shall not be less than twice the normal rate of wages.
  11. The employer shall fix the wage period for employees either as daily or weekly or fortnightly or monthly subject to the condition that no wage period in respect of any employee shall be more than a month:
  12. The employer shall pay wages to the employees as per below specified timeline –
    (i) at the end of the shift, for employees engaged on daily basis
    (ii) on the last working day of the week, for employees engaged on weekly basis ( that is to say, before the weekly holiday)
    (iii) before the end of the second day after the end of the fortnight; for employees engaged on fortnightly basis,
    (iv) before the expiry of the seventh day of the succeeding month, for employees engaged on monthly basis
  13. Bonus shall be paid to every employee, drawing wages not exceeding such amount per mensem, as determined by notification, by the appropriate Government, by his employer, who has put in at least thirty days work in an accounting year, an annual minimum bonus calculated at the rate of eight and one-third per cent of the wages earned by the employee or one hundred rupees, whichever is higher. (whether or not the employer has any allocable surplus during the previous accounting year)
  14. For the purpose of calculation of the bonus where the wages of the employee exceeds such amount per mensem, as determined by notification by the appropriate Government, the bonus payable to such employee under sub-sections (1) and (3) of the act, shall be calculated as if his wage were such amount, so determined by the appropriate Government or the minimum wage fixed by the appropriate Government, whichever is higher.
  15. Where in respect of any accounting year referred to in sub-section (1) of the Act, the allocable surplus exceeds the amount of minimum bonus payable to the employees under that sub-section, the employer shall, in lieu of such minimum bonus, be bound to pay to every employee in respect of that accounting year, bonus which shall be an amount in proportion to the wages earned by the employee during the accounting year, subject to a maximum of twenty per cent. of such wages.
  16. All amounts payable to an employee by way of bonus under this Code shall be paid by crediting it in the bank account of the employee by his employer within a period of eight months from the close of the accounting year:
  17. The appropriate Government may, by notification, appoint Inspector-cum-Facilitators for the purposes of this Code who shall exercise the powers conferred on them.

You can download the full Act PDF – Code on Wages Act, 2019 below –

Leave a Reply