Recently, the Ministry of Labour and Employment has announced a new set of draft rules for implementing the 2019 Code on Wages Act. Following their publication on 7th July 2020, these draft rules have been circulated for public comments and suggestions during a 45-day period.
Changes in the Latest Draft
The latest draft is largely similar to the preliminary draft published back in November 2019, but it comes with a significant amendment. The ministry has modified the eligibility requirement for minimum wages and other benefits from nine hours to eight. It was clarified that the previous stipulation of nine hours included an hour of rest, which now is separately mentioned from the eight working hours.
About Code on Wages Act 2019
The Code on Wages Act 2019 aims to overhaul the old labour laws into more transparent and accountable versions. It sets the groundwork for the introduction of minimum wages and labour reforms in India. The Act seeks to eliminate the multiple definitions of wage, thus reducing potential litigation and compliance cost for employers.
The Act regulates wages and bonus payments across all employment sectors where any industry, trade, business, or manufacture is being executed. Links are made between employee skills and place of employment to establish minimum wage. The Act simplifies the methodology for fixing the minimum wage by eliminating the need to consider the ‘type of employment’.
Provisions under Code on Wages Act
Provisions have been put in place to universalise the minimum wages and timely payment of wages for all employees, regardless of the sector or wage ceiling. There is a focus on ensuring the ‘Right to Sustenance’ for every worker, with an aim to enhance the legislative protection of minimum wage.
Salaries need to reach monthly paid employees by the 7th of the following month, weekly paid workers should receive their wages on the last day of the week, and daily wagers should be compensated on the same day. The Central Government is given the authority to determine floor wages, keeping in mind workers’ living standards. Different floor wages may be set for various geographical areas, but the minimum wages decided by the central or state governments must surpass the floor wage.
Calculation of Minimum Wage
As per the draft rules, a standard working-class family, including one earning worker, spouse, and two children, would be the basis for calculating the minimum wage. This would take into account a net intake of 2,700 calories per day each, 66 meters of cloth a year, rent expenditure equaling 10% of food and clothing expenditure, miscellaneous expenses making up 20% of minimum wage, and expenditures on children’s education, medical care, recreation, and contingencies amounting to 25% of the minimum wage.
The Code on Wages Act of 2019 subsumes four major labour laws:
– The Payment of Wages Act, 1936
– The Minimum Wages Act, 1948
– The Payment of Bonus Act, 1965
– The Equal Remuneration Act, 1976
To guide regarding skill categories, the Centre will form a technical committee. Additionally, an advisory board might recommend the minimum wage.
Types of Wages
There are several types of wages described by the International Labour Organisation. A ‘Minimum Wage’ is the lowest amount employers can legally pay their workers for work performed during a certain period. It covers basic life necessities like food, shelter, and clothing. A ‘Living Wage’ includes basic needs as well as education, health, insurance, etc., and is determined based on cost of living in a specific community. The ‘Fair Wage’ stands as a mean between the ‘Living Wage’ and ‘Minimum Wage’. Lastly, a ‘Starvation Wage’ refers to wages insufficient for meeting basic life necessities.
