The government of India and various State Governments have been taking various measures to promote ease of doing business in India. Proposed Labour Law Codes by Central Government, or labour reforms in India, if implemented in an appropriate manner can have a far-reaching impact towards reducing the compliance burden on corporates without comprising the welfare of the workforce.
The government of India has proposed to implement the following four Labour Codes on a Pan India basis to consolidate numerous Central and State Labour Law legislations:
- The Industrial Relations Code
- The Social Security Code
- The Occupational Safety, Health and Working Conditions Code; and
- The Code of Wages
With this note, LexComply.com wishes to initiate a Knowledge Series to share insight on the compliances under proposed Labour Law Codes. In this note, we will plan to give insight on the applicability of the Code of Wages and definitions thereunder.
The Code of Wages was passed in the year 2019. This Code has been enacted to regulate the terms of payment of wages to the employees. This Code consolidates the following Laws:
- Payment of Wages Act, 1936,
- Minimum Wages Act, 1948,
- Payment of Bonus Act, 1965 and
- Equal Remuneration Act, 1976
The Code of Wages will be extended to the Whole of India covering all types of workforce i.e. skilled, semi-skilled or unskilled, manual, operational, supervisory, managerial, administrative, technical or clerical work in a private sector or public sector or government employee, however, will not include the following:
- Apprentice covered under Apprenticeship Act; and
- Member of the Armed Forces of the Union
The Code of Wages will be applicable on all type of establishments wherein any industry, trade, business, manufacturing or occupation is being carried on and it also includes establishments of the Government, whereas, The Code of Wages also provide for exemptions in different chapters for different category of establishments.
- In the Code of Wages, the Government has introduced the term “ Occupation” by virtue of it can be interpreted that the applicability of this Code will also be on non-profit motive establishments except in the cases where specific exemptions are provided in the Code.
- The Payment of Wages Act, 1936, as applicable on the employees of the Factories or Railway administration having wages of less than Rs. 24,000 per month except in the few states like Haryana and Karnataka wherein the said act is applicable also on Shop, and Commercial Establishments. Whereas The Code of Wages will extend to all types of establishments.
- Payment of Bonus Act, 1965 is applicable on Factories and in case of any other establishment having 20 or more employees on any day during the previous accounting year, wherein the case of the Code of Wages, the provisions pertaining to payment of bonus will be applicable on all type of establishments, other than Factories, 20 or more employees on any day during the previous accounting year except:
- Public sector undertakings, provided if in any accounting year an establishment in public sector sells any goods produced or manufactured by it or renders any services, in competition with an establishment in the private sector, and the income from such sale or services or both, is not less than twenty percent. of the gross income of the establishment in the public sector for that year; and
- Establishments are provided in Section 41 of the Code.
Whereas in the case of Factories we need to consider the limits of employees provided under the definition of Factories as provided in section clause (m) of section 2 of the Factories Act, 1948 and rules made thereunder by State Governments.
As per Section 2(k) of The Code of Wages, an Employee means any person employed in an establishment for wages, for any type of work including skilled, semi-skilled or unskilled, manual, operational, supervisory, managerial, administrative, technical, or clerical work in a private sector or public sector or government employee however will not include the following:
- Apprentice covered under Apprenticeship Act; and
- Member of the Armed Forces of the Union
Whereas currently as per the Payment of Bonus Act, 1965, there is an additional condition that the Salary of the Employee should not exceed Rs. 21,000 per month. This means that once The Code of Wages becomes effective the provisions pertaining to Bonus will be applicable to every employee irrespective of the salary/wages.
In the above-stated definition, the word “managing agent” as mentioned in the definition of Employer under The Payment of Bonus Rules, has been deleted, and instead word “Contractor” has been added. This will add to more accountability on Contractors in the case of Contract Labour.
As per Section 2 (z) worker” means any person employed in any industry to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward, whether the terms of employment be express or implied, and includes—
But does not include any such person––
- (a) who is subject to the Air Force Act, 1950, or the Army Act, 1950, or the Navy Act, 1957; or
- (b) who is employed in the police service or as an officer or other employee of a prison; or
- (c) who is employed mainly in a managerial or administrative capacity; or
- (d) who is employed in a supervisory capacity drawing wage of exceeding fifteen thousand rupees per month or an amount as may be notified by the Central Government from time to time; or
- (e) an apprentice as defined under clause (aa) of section 2 of the Apprentices Act, 1961
Out of the Four Acts which are consolidated in The Code of Wages, the “ worker” has been used only in the Equal Remuneration Act, 1976. Therein the term worker means the workers employed in the establishments on which The Equal Remuneration Act, 1976 is applicable.
3. As per Section 2 (g) of The Code of Wages, “contract labor” means a worker who shall be deemed to be employed in or in connection with the work of an establishment when he is hired in or in connection with such work by or through a contractor, with or without the knowledge of the principal employer and includes inter-State migrant worker but does not include a worker (other than a part-time employee) who ––
- is regularly employed by the contractor for any activity of his establishment and his employment is governed by mutually accepted standards of the conditions of employment (including engagement on a permanent basis), and
- gets periodical increment in the pay, social security coverage, and other welfare benefits in accordance with the law for the time being in force in such employment.
In comparison with the meaning of Contract Labour in The Contract labor “(Regulation and Abolition) Act, 1970, the proposed definition provides for the exclusion of permanent/regular employees of contractor from the definition of Contract Labour subject to certain conditions.
4. As per Section 2 (q) of The Code of Wages, “industrial dispute” means,—
- Any dispute or difference between employers and employers, or between employers and workers or between workers and workers which is connected with the employment or non-employment or the terms of employment or with the conditions of labor, of any person; and
- Any dispute or difference between an individual worker and an employer connected with, or arising out of, discharge, dismissal, retrenchment, or termination of such worker;
Whereas as per Section 2(k) of The Industrial Disputes Act, 1947 “industrial dispute” means any dispute or difference between employers and employers, or between employers and workmen, or between workmen and workmen, which is connected with the employment or non-employment or the terms of employment or with the conditions of labor, of any persons.
Key variations are as under:
5. As per Section 2 (v) of The Code of Wages” same work or work of a similar nature” means work in respect of which the skill, effort, experience, and responsibility required are the same when performed under similar working conditions by employees and the difference if any, between the skill, effort, experience, and responsibility required for employees of any gender, are not of practical importance in relation to the terms and conditions of employment;
The new Definition is almost the same as that under the Equal Remuneration Act, 1976 except that instead of men or women, the new definition covers all genders. This has been introduced to also cover Transgender within the ambit of Labour Laws.
6. Section 2 (y) of the Code of Wages provides for the definition of “ Wages”. Term Wages and Remuneration have been defined in the Minimum Wages Act, 1948, The Payment of Wages Act, 1936, and The Equal Remuneration Act.
The key Difference is as under :
1). The New Definitions excludes the following additional heads from the ambit of wages
- Amount of bonus payable to an employee as per the Payment of Bonus Act, 1965 or any law other law in force and any amount in addition to such bonus payable as Bonus will be considered as part of wages;
- House Rent Allowance
- remuneration payable under any award or settlement between the parties or order of a court or Tribunal;
- any overtime allowance;
- any commission payable to the employee;
- any retrenchment compensation or other retirement benefit payable to the employee or any ex gratia payment made to him on the termination of employment
2). The new definition does not exclude the following from the definition:
- any conveyance allowance
- any contribution paid by the employer to any scheme of social insurance
3). The New definition also provides for the limit up to which the amount paid under clause
(a) to (i) of the definition of “Wages” will not be considered as part of the wages. It states that if the payments made under clauses (a) to (i) exceeds 50% or such other percentage as notified by the Central Government of the total payments made to an employee then such access will be considered as part of the Wages.
4). It also clarifies that this term of Wages will be used for the purpose of provisions pertaining to Equal Remunerations and payment of wages:
The payments made under clauses (d), (f), (g), and (h) shall be considered as part of the wages.
Whereas The Central Government has taken a step forward to consolidate the labor laws in the proposed Codes but the key is that the definitions and provisions in the codes should be consistent with each other unlike in the previous laws. In the new article, we will share our insights on the various other key provisions of the Code of Wages provided under different Chapters.
The content of this article by Team LexComply.com is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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