Wages Act,1936 to Code on Wages,2019

THE PAYMENT OF WAGES ACT, 1936

The Payment of Wages Act regulates the payment of wages to categorize classes of persons employed in industry and its importance cannot be under-estimated. The Act guarantees payment of wages on time and without any deductions except those authorised by the Act. The Act provides for the responsibility for payment of wages, fixation of wage period, time and mode of payment of wages, permissible deduction as additionally casts upon the employer an obligation to seek the approval of the Government for the acts and permission for which fines may be imposed by him and also for machinery to hear and decide complaints relating to the deduction from wages or in delay in payment of wages, the penalty for malicious and vexatious claims. The Act does not apply to workers whose wage is Rs. 24,000/- or more per month. The Act as well provides to the effect that a worker cannot contract out of any right bestowed upon him under the Act.

This Act is Central legislation being administered by both Central and State governments in their respective spheres as defined under the Act. In its original form, it suffered from innumerable lacunae and therefore did not give effective protection against unfair practices in regard to payment of wages. With the gaining of experience in its working, it was amended several times. Since then it applied to workers of most of the organized industries, and the payment limit for coverage of workers was raised to Rs, 1600/- per month in 1982.

CODE ON WAGES, 2019

The Code on Wages, 2019 was introduced in Lok Sabha by the Minister of Labour, Mr Santosh Gangwar on July 23, 2019. It seeks to regulate wage and bonus payments in all employments where any industry, trade, business, or manufacture is carried out.  The Code replaces the following four laws those are the Payment of Wages Act, 1936, the Minimum Wages Act, 1948,  the Payment of Bonus Act, 1965, and finally, the Equal Remuneration Act, 1976.

• Coverage: This Code will apply to all employees and cater to their needs.  The central government will make wage-related decisions for employments like railways, mines, and oil fields, among others.  State governments will make decisions for all other employments.Wages include salary, allowance, or any other component expressed in monetary terms. This does not include bonus payable to employees or any travelling allowance, among others.
• Floor wage:  The Central government will fix a floor wage, taking into consideration the living standards of workers.  Further, it is going to set different floor wages for different geographical areas.  Before fixing the floor wage, the central government might obtain the advice of the Central Advisory Board and may consult with state governments.  The minimum wages determined by the central or state governments which should be higher than the floor wage. In case the existing minimum wages fixed by the central or state governments are higher than the floor wage, they cannot reduce the minimum wages.

• Fixing the minimum wage: The Code prohibits employers from paying wages less than the prescribed minimum wages.  Minimum wages will be notified by the central or state governments.  This will be based upon time, or a number of pieces produced.  The minimum wages will be revised and reviewed by the central or state governments at a regular interval of five years.  While fixing minimum wages, the central or state governments may take into account factors such as the skill of workers, and the difficulty of work undertaken.
• Overtime: The central or state government will likely fix the number of hours that constitute a normal working day.  In case employees work in excess of a normal working day, they will be entitled to overtime wage, which must be at least twice the normal rate of wages.
• Payment of wages: Wages are going to be paid in (i) coins, (ii) currency notes, (iii) by cheque, (iv)by crediting to the bank account, or (v) through electronic mode.  The wage period will be fixed by the employer as either: daily, weekly, fortnightly, or monthly.
• Deductions: Under the Code, an employee’s wages may be deducted on certain grounds including fines, absence from duty, accommodation given by the employer, or recovery of advances given to the employee, among others etc.  These deductions should not exceed 50% of the employee’s total wage.
• Determination of bonus: All employees whose wages do not exceed a particular monthly amount, notified by the central or state government, will be entitled to an annual bonus.  In addition, the employer will distribute a part of the gross profits amongst the employees.  This will be distributed in proportion to the annual wages of an employee.  An employee can receive a maximum bonus of 20% of his annual wages.
• Advisory boards: The central and state governments will constitute advisory boards. Also, one-third of the total members on both the central and state Boards will be women.  The Boards will advise the respective governments on various issues including fixation of minimum wages,  increasing employment opportunities for women etc.
• Offences: The Code specifies penalties for offences committed by an employer, such as paying less than the due wages, or for contravening any provision of the Code.  Penalties vary depending on the nature of the offence, with the maximum penalty being imprisonment for three months along with a fine of up to one lakh rupees.

CRITICAL ANALYSIS

The Code has been passed by the both the Houses of the Parliament and has also received Presidential assent. Its date of enforcement is yet to be notified in the Official Gazette, upon which, the Current Laws relating to wages will stand repealed.

Analyzing the two sections at hand that is the section 20 of the Payment of Wages Act, 1936 and the new section in the Labour Code on Wages, 2019 S.54, the critical analysis reveals that the punishments provided under the S. 20 were bit obsolete as the amount of fine was Rs. 2000 or so and is not much also doesn’t have a deterrent effect in today’s scenario. But looking at the S. 54 this problem is well taken care of and the amount of penalty is being increased.

Then S. 20 is very exhaustive and provides innumerable classes of penalties and fines for different offences concerned with maintaining of register or repeating the same offence. Same has been maintained in S.54 of the Labour Code,2019 but its more clear and precise thereby leading to less of confusion and stating it in more concise and to the point manner.

To conclude, the Code on Wages is likely to be seen as one of the important policy decisions of the Indian government during this term. It has the potential to impact almost 500 million workers across the country²¹. It has been a long-standing agenda of the government to codify and consolidate labour laws in order to promote ease of doing business in India. With almost 45 federal level laws and close to 100 state-level laws dealing with labour and employment aspects, it was the need of the hour to consolidate, amalgamate, simplify, rationalize and codify these laws.

The Code emphasizes compliance as it increases the cost of non-compliance. Gone are the days when employers could take it easy on non-payment of overtime wages as Shops & Establishments laws hardly provided a deterrent with a paltry fine. At the same time, diligent employers who are willing to comply with the Code get an opportunity to compound the offence. Prior to the Code, only some States had introduced provisions for compounding offences in their respective States. The Code makes this opportunity to compound uniformly available and is a step forward in the direction of ease-of-business. In some cases, the Code also provides an opportunity to rectify the breach and in which case employers need not worry about prosecution. Thus it was necessary that the code came in being thereby making laws more stringent and fulfilling the requirements of current times.

Author: Akanksha Anand,
Vivekananda Institute of Professional Studies, 4th year/ Student