As part of an effort to simply the notoriously complex labour laws in India, the Indian Parliament has passed a Code on Wages Bill (the "Bill") which received assent from the President of India on 8 August 2019. We examine key changes introduced by the Bill, which includes the expansion of the scope of minimum wages to include all workers, the fixing of a "floor wage", and the requirement for timely payments by employers. 

Labour Reform 

The Bill was passed in the Lok Sabha (the lower house of Parliament) on 30 July 2019 and in the Rajya Sabha (the upper house of Parliament) on 2 August 2019. It received Presidential assent on 8 August 2019.

The Bill subsumes 4 central labour laws: The Payment of Wages Act 1936; the Minimum Wages Act 1948; the Payment of Bonus Act 1965; and the Equal Remuneration Act 1976. The myriad of legislation in India currently provides multiple definitions of wages, which has often been a cause of confusion. The Bill sets out a single definition of wages, which is expected to reduce compliance costs and disputes over wages. 

Key changes

At present, the provisions of both the Minimum Wages Act and the Payment of Wages Act only apply to workers below a particular wage ceiling working in scheduled industries. The Bill extends minimum wage entitlements to workers in all sectors. This change is expected to benefit some 500 million workers in India who had previously been outside the ambit of minimum wage entitlements, such as waiters and workers in the agriculture sector.

The Bill also allows the Central Government to fix a "floor wage", which will be calculated based on the minimum living conditions of workers. The Central Government may also prescribe different "floor wages" for workers in different geographic areas and who possess different skills. 

The Bill also expressly stipulates that workers are entitled to timely payments of wages, and envisages that workers will be notified of payment of their wages through a digital medium.

Penalties

The Bill also enhances the applicable penalties. For failure to comply with duties to make payments due to employees, the employer may now be punished with a fine of up to INR50,000. For any other failure, employers may be fined up to INR20,000. 

Key Takeaways

The changes brought about by the passage of the Bill have been in the making for some time – in 2017, the India Parliament had introduced a similar bill which subsequently lapsed due to the dissolution of the Parliament. Employers should bear in mind the wage entitlements of its workers and ensure that their employees are paid in accordance with the new Bill.