In a recent move, the Lok Sabha passed the much-debated Code on Wages Bill of 2019. This bill was initially put forth in the Lok Sabha in 2017 and was assessed by the Parliamentary Standing Committee, which concluded its report in December 2018. Owing to the dissolution of the 16th Lok Sabha, the Bill lapsed until it was reintroduced and subsequently passed.
Constitutional Provisions Relevant to the Bill
As per Article 43 of the Indian Constitution, the state is tasked with ensuring that all workers receive a living wage and decent working conditions. Such conditions should allow for a satisfactory standard of life that includes full indulgence in social, cultural and leisure activities. The Seventh Schedule’s Concurrent List includes Labour as a subject, giving both Central & State Governments the power to legislate in this matter.
The Need for the Bill
The Code on Wages Bill aims to simplify the definition of wages. At present, labour laws consist of as many as 12 definitions of wages, leading to unnecessary litigation and inefficient implementation. By streamlining this definition, the bill is expected to reduce legal wrangling and lower compliance costs for employers. Furthermore, establishments will enjoy greater convenience through electronic documentation. It is hoped that eventually, no more than a single template will be required for returns, registers, and other forms.
What the Bill Brings to the Table
The bill’s primary objective is to replace outdated labour laws with more transparent and accountable ones, paving the way for labour reforms and minimum wages in the country. This legislation is applicable to all employment sectors where there is industry, trade, business or manufacturing. The four laws being amalgamated into this bill are The Payment of Wages Act (1936), The Minimum Wages Act (1948), The Payment of Bonus Act (1965) and The Equal Remuneration Act (1976).
The Impact on Minimum Wage
The bill seeks to ensure a “Right to Sustenance” for every worker by standardizing the provision of minimum wages and ensuring timely wage payment irrespective of the sector and wage ceiling. Currently, the Minimum Wages Act and Payment of Wages Act only apply to workers in Scheduled Employments who fall below a certain wage ceiling. With the implementation of the new legislation, workers in the unorganized sector, such as agricultural workers, painters, dhaba and restaurant employees, chowkidars etc., will also be covered.
| Terms | Definitions |
|---|---|
| Wages | Included in the bill are salary, allowances, or any other monetary components excluding bonuses or travel allowances among others. |
| Minimum Wage | As per the International Labour Organisation, it is “the minimum remuneration that an employer must pay wage earners for work performed during a given period.” It includes basic life needs like food, shelter, and clothing. |
| Living Wage | A ‘living wage’ covers not just basic needs but also includes education, health, insurance etc. It provides for a minimum income based on the cost of living in a specific community. |
| Fair Wage | A ‘fair wage’ refers to a mean between ‘living wage’ and ‘minimum wage’ |
Forward-Thinking Measures within the Bill
The bill changes the way minimum wages are calculated, eliminating “type of employment” from the criteria. Instead, it focuses on geography and skills. It also aims to revolutionize the inspection regime by implementing random computerized inspections, jurisdiction-free audits, and electronic information calls. The period for filing claims for minimum wages, bonus, equal remuneration has been extended to three years. Moreover, it seeks to prohibit gender discrimination in matters related to wages and recruitment.
The Anticipated Impact
The Code on Wages Bill, 2019, is expected to bring about monumental change in labour laws. It will take steps to streamline definitions and reduce litigation, thus lowering compliance costs for employers. The number of minimum wages across the country is projected to decrease significantly from more than 2000 rates currently in place. This ensuring that every worker receives a fair minimum wage, leading to increased purchasing power which will further stimulate economic growth.
