Introduction

The Code on Wages 2017 was introduced in Lok Sabha on August 10 2017 and is currently pending approval. Once it is passed by both houses and receives presidential assent, it will come into force on the date on which it is notified in the Gazette of India. The code seeks to integrate, amend and simplify the following four central labour laws with regard to wages:

  • the Payment of Wages Act 1936;
  • the Minimum Wages Act 1948;
  • the Payment of Bonus Act 1965; and
  • the Equal Remuneration Act 1976.

The objective of the consolidation of the abovementioned laws is to reduce the multiplicity of definitions given under various labour legislation and foster a conducive labour environment by facilitating ease of compliance, thereby promoting the establishment of more organisations and creating more employment opportunities.

Salient features

The salient features of the Code on Wages are as follows:

  • Minimum wages – this section prescribes the obligations and procedures for:
    • paying minimum wages;
    • setting minimum wages and establishing the components therein;
    • fixing and revising minimum wages, including wages for classes of work and duration of work; and
    • fixing hours of work and wages for overtime work.
  • Wages – this section sets out the requirements for:
    • paying wages;
    • setting wage periods;
    • deducting wages; and
    • imposing fines on employees.
  • Bonuses – the section of bonuses sets out:
    • the requirements for eligibility;
    • how bonuses and related aspects are calculated;
    • the timeframe for payment; and
    • the exemptions for certain categories of employment.
  • Advisory boards and facilitators – the code envisages the establishment of central and state advisory boards, which will advise the government on:
    • fixing and revising minimum wages;
    • providing employment opportunities for women and any other matters relating to the code; and
    • establishing a facilitator, which will be responsible for:
      • providing information and advice to employers and workers;
      • inspecting establishments; and
      • notifying cases of non-compliance.
  • Dues, claims and audits – this segment prescribes the procedures and requirements for:
    • making claims;
    • paying dues;
    • auditing employers' accounts;
    • maintaining records;
    • filing returns; and
    • displaying notices.
  • Offences and penalties – this portion of the code contains provisions relating to cognisance of offences and penalties and the composition thereof.

Significant changes to prevailing law

Applicability

The code applies to all establishments where any industry, trade, business, manufacturing or occupation is carried out which includes government establishments. Unlike the present regime, where some of the legislation applies to specified establishments depending on the nature of the industry and number of employees, the code prescribes exemptions only for certain types of establishment with respect to compliance with the payment of bonuses.

National minimum wage

The code proposes a national minimum wage, to be set by the central government, which could differ between states and geographical areas. The national minimum wage will constitute the minimum base, below which states cannot prescribe minimum wages. It would enable the appropriate government to determine the factors by which minimum wages will be fixed for different categories of employee. When determining minimum wages, the following factors should be considered:

  • the skills required;
  • the arduousness of the work assigned;
  • the geographical location of the workplace; and
  • other aspects considered necessary.

Advisory boards The code envisages setting up advisory boards at the central and state level. These boards will have representation from employees, employers and independent persons.

Further, one-third of the total members will be women. The boards will advise the respective governments on aspects including:

  • setting minimum wages; and
  • increasing employment opportunities for women.

Facilitators

Inspectors under the current legislation will be replaced with facilitators with wider powers. In addition to powers of inquiry and investigation, they are also empowered to provide the employers and workers with advice regarding effective means of complying with the law.

Payment of dues

The code has widened the responsibility of payment of dues to the proprietor. It provides that where the employer fails to pay dues under the code, the company, firm or association that owns the employer is liable.

Claims

In place of a number of authorities at multiple levels, the code empowers the appropriate government to appoint one or more authorities to hear and decide claims under the proposed legislation. It enables the appropriate government to appoint an appellate authority to hear appeals in order to ensure speedy and efficient redressal of grievances and settlement of claims.

Payment of wages

The payment of wages has been digitised under the code. The code provides that wages will be paid in coins, currency notes, by cheque or through digital or electronic mode.

It also prescribes that the wage period will be fixed by the employer as daily, weekly, fortnightly or monthly.

Penalties for offences

The penalties for non-compliance are enhanced under the code. The code also provides for compounding those offences which are not punishable with imprisonment.

Prosecution

The code specifically sets out that, in the case of contravention, the facilitator must give the employer an opportunity to respond before initiating prosecution proceedings. However, if an employer contravenes the act again within five years, this opportunity will be lost. Under the code, if a claim is filed stating that an employer failed to pay remuneration or bonuses, provided reduced wages or bonuses or made an unauthorised deduction to wages, the employer has the burden of proof to show that this is untrue. Further, the code prescribes that managing directors who consent to or are involved in an offence will be prosecuted.

Limitation

The period of limitation for workers to file claims will be extended to three years.

For further information on this topic please contact Pooja Ramchandani or Anjuli Marwah at Shardul Amarchand Mangaldas & Co by telephone (+91 11 4159 0700) or email (pooja.ramchandani@amsshardul.com or anjuli.marwah@AMSShardul.com). The Shardul Amarchand Mangaldas & Co website can be accessed at www.amsshardul.com.

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