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Agenda

• Background
• Structural Changes
• General Changes
• Equal Remuneration
• Minimum Wages
• Payment of Wages
• Payment of Bonus

Presented by - Govindaraju NS

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Background
• The Second National Commission on
Labour, recommended to amalgamate the
Labour Laws into 5 Codes in 2002.
(a) Industrial Relations;
(b) Wages;
(c) Social Security;
(d) Safety; and
(e) Welfare and Working Conditions.

• After various deliberations, now the Labour

Laws will be codified into four codes.
(a) Industrial Relations;
(b) Wages;
(c) Social Security;
(d) Occupations Safety, Health and
Working Conditions (OSH Code)
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Code on Wages
• The bill was introduced in the Lok Sabha
on August 10, 2017, lapsed as the 16th
Lok Sabha dissolved.
• The bill was reintroduced in the 17th Lok
Sabha on 23rd July 2019 after
incorporating the suggestions of
Parliamentary Standing Committee.
• The Parliament cleared the Bill and also
received the assent of President.
• The Code on Wages is now notified as
an Act.
• The effective date or appointed date for
its implementation and notification of
Rules are pending.

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Disclaimer

The analysis and interpretation expressed

in this presentation are based on my
experience and knowledge and the views
expressed are my personal views and do
not represent any company or individual

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Structural Changes
• The wage code consolidates 4 legislations – Minimum
Wages, Payment of Wages, Payment of Bonus and Equal
Remuneration.
• The objective of the code is to amalgamate, simplify and
rationalize the relevant provisions of the four central
legislations.
• Arranged in 9 chapters with 69 sections.
• Preliminary, Advisory Board, Payment of Dues, Claims and
Audit, Inspector-Cum-Facilitator, Offences and Penalties,
Miscellaneous are common chapters applicable to all the
topics of the Code.
• Separate Chapters for Minimum Wages, Payment of Wages
and Payment of Bonus are provided.
• The provisions related to Equal remuneration are included
in two sections of the first chapter.

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Structural Changes

• 115 sections of all the four legislations are

now brought under 69 sections.
• All applicable definitions for the Code are
brought together in the first chapter.
• This means a single definition holds good
for the entire Code.

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General Changes
 Application of the Code
• The Code does not have any specific section to explain the
application of the Code.
• It applies to all establishments, employees and employers unless
exempted specifically in the provisions of the code.
• The Code does not make any distinction between the organized
sector and unorganized sector.

 Appropriate Government
• Appropriate Government for the establishment of contractors who
work for Public Sector Undertakings or where the Central
Government is the appropriate Government – Clarity is brought.
• Now it is clear that the Central Government is the appropriate
Government for such establishments (Section 2(d) of the Code).

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General Changes
 Employer, Employee, and Worker
• “Employer" means a person who employs, whether directly or
through any person, or on his behalf or on behalf of any person,
one or more employees in his establishment and includes
Occupier and Manager (in case of Factory), Contractor and
Legal Representative of the deceased employer (Section 2(l) of
the Code).
• There is a distinction made between ‘employee’ and ‘worker’
(section 2(k) and 2(z) of the code).
• The employee definition covers all employees including
supervisory, managerial and administrative category
employees without any wage ceiling.
• The worker definition in the code excludes persons employed
mainly in a managerial or administrative capacity.

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General Changes
 Employer, Employee, and Worker
• The Supervisors are included in the definition of worker.
• However, if the monthly wages exceed 15k or amount as notified by
the Central Government, such supervisory staff are excluded from
the worker definition (Similar to the definition in the Industrial
Disputes Act 1947).
• The word ‘worker’ is used only in defining industrial dispute, fixation
of minimum wages, fixing the floor wages by Central Government
and in explaining the duties of ‘Inspector-Cum-Facilitator’.

• The worker definition includes working journalists and sales

promotion employees.

• The apprentices engaged under the Apprentices Act 1961 are

excluded from the definition of employee and worker.

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General Changes
 Contractor & Contract Labour
 The definition of ‘Contractor’ and the ‘Contract Labour’ is
introduced in the Code.

 The ‘Contractor’ definition under CLRA Act 1970 is adopted with a

minor change (Section 2(f) of the Code).
- ‘Contractor’, in relation to an establishment means, a person,
who –
(i)Undertakes to produce a given result for the establishment,
other than a mere supply of goods or articles of manufacture
to such establishment, through contract labour; or
(ii)Supplies contract labour for any work of the establishment
as mere human resource and includes a sub-contractor.

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General Changes
 Contractor & Contract Labour
 There are two parts in ‘Contract Labour’ definition – Inclusion and
Exclusion.

 The inclusion part of the ‘Contract Labour’ definition is similar to

the CLRA Act 1970. But now the Code includes Inter-State migrant
worker as Contract Labour.

 The exclusion part excludes (Section 2(g) of the Code) –

- employees regularly employed by the contractor for any
activity of his establishment and on mutually accepted
conditions of employment and
- Who gets periodical increment in the pay, social security
coverage and other welfare benefits.

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General Changes
 Contractor & Contract Labour

• The legislation intends to make a difference between the contract

labour supplied to other establishments by the contractor and the
employees for any activity of his own establishment and excludes
his own employees from the definition of Contract Labour.

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General Changes
 Establishment 2(m), Factory 2(n) & Government Establishment
2(o)
• Establishment definition covers any place where any industry,
trade, business, manufacture or occupation is carried on and
includes Government establishment.

• It may appear very simple but intends to cover all trades,

occupations, professions or commercial activities irrespective of
whether it is an organized sector or unorganized sector.

• Factory definition is linked to the Factories Act 1948.

• Government establishment means any office or department of the

Government or Local Authority.

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General Changes

 Salary or Wage (Section 2(y) of the Code)

• A single wage definition is provided in the Code.

• “Wages" means all remuneration whether by way of salary,
allowances or otherwise, expressed in terms of money or capable
of being so expressed which would, if the terms of employment,
express or implied, were fulfilled, be payable to a person employed
in respect of his employment or of work done in such employment.

• The wage definition specifically includes Basic Pay, Dearness

Allowance, and Retaining allowance if any.
• However, retaining allowance is not defined.

• Remuneration paid in kind which does not exceed 15% of the total
wages shall be deemed to form part of the wages.
General Changes
 Salary or Wage (Section 2(y) of the Code)

Exclusions from the Wage Definition

• Bonus under the Code.

• Value of any amenity or service like house accommodation, the supply of light, water,
medical attendance etc.
• Contribution to PF or Pension Fund.
• Conveyance Allowance or value of any travelling concession.
• Any sum paid to defray special expenses which may entail on the employee due to his nature
of employment.
• House Rent Allowance (HRA).
• Remuneration payable under any award or settlement.
• Over time allowance.
• Any commission payable.
• The Gratuity payable on the termination of employment.
• Retrenchment compensation, retirement benefit or any exgratia paid on termination of
employment.

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General Changes
 Salary or Wage (Section 2(y) of the Code)
• Note the specific change on “HRA” – The HRA was included in Minimum
Wages Act and now the Code excludes.

• The legislation intends to put a restriction of 50% on excluded

components of the wages.

• If the excluded remuneration exceeds (other than a gratuity, retrenchment

compensation, retirement benefit or exgratia) one-half or such other per
cent as may be notified of all the remuneration covered in the inclusion
part, then such excess should be treated as remuneration/wages of the
inclusion part. This condition was not part of all the four legislations.

• The Conveyance Allowance or value of any travelling concession, House

Rent Allowance (HRA), Remuneration payable under any award or
settlement and any Over Time Allowance shall be counted as wages for
the purpose of equal wages to all genders.
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General Changes
 Salary or Wage (Section 2(y) of the Code)
• The Salary structure of the employees may need a review in view
of these changes.

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General Changes
 Advisory Boards and Gender Diversity (Chapter V)
• The advisory boards earlier were constituted under the Minimum
Wages Act 1948.
• Now, the advisory boards have been given additional responsibilities
of advising appropriate Government on other matters relating to the
Code.

• One-third of the members of the board should be women.

• Providing advice on fixation or revision of minimum wages and other

connected matters is continued as it is.

• It shall also advise on providing increasing employment opportunities

for women.

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General Changes
 Advisory Boards and Gender Diversity (Chapter V)
• It shall also advise on the extent to which women may be employed
in any establishments or employments.

• Now there is a possibility that the State Government may give

direction to increase the employment for women in private
establishments. However, inviting representations from such
establishments is necessary before issuing any directions in this
regard (Section 42(9) of the Code, Chapter V).

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General Changes
 Dues, Claims and Audit (Chapter VI)
• The employer is responsible to pay all the payments of employees
including dues if any.

 Payment of Dues or amounts in case of death or in case of

whereabouts not known (Section 44 of the Code).

• To be paid to the nominated person.

• If no nomination or unable to pay to the nominated person,
deposit with the authority notified.
• On deposit with the authority, the employer is discharged from his
liability.
• This is similar to the provisions detailed in section 25-A of the
Payment of Wages Act 1936.

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General Changes
 Dues, Claims and Audit (Chapter VI)
 Claims
• An application for a claim can be made by employee, Trade Union or
the Inspector-Cum-Facilitator before the notified authority (Section
45 of the Code).

• The appropriate Government will notify the authorities to hear and

determine the claims (Section 45 of the Code).

• The application for claim to be made within a period of 3 years from

the date claim arises. The limitation was earlier ranging from 6
months to 2 years in the legislations.

• The authority under the Code may order ten times of the claim as
compensation in addition to the actual claim amount and it applies
to all dues – wages, bonus etc.
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General Changes
 Dues, Claims and Audit (Chapter VI)

 Claims
• The aggrieved person by an order of the authority under the Code
can file an appeal before the appellate authority appointed under
the Act. The appeal should be made within 90 days from the date of
the order of the authority (Section 49 of the Code).

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General Changes
 Registers, Returns & Display (Chapter VI)
• Muster Roll and Wage registers to be
maintained.
• Abstract of the Code to be displayed.
• Category wise wage rates, wage period, day
or date and time of payment of wages,
name and address of the Inspector-Cum-
Facilitator to be displayed.
• Wage slips to be issued to the employees.
• Register of Fines and Deductions to be
maintained.
• Notice specifying acts and omissions which
attract imposition of fines should be
displayed.

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General Changes
 Inspector-Cum-Facilitator - the Combined approach of Inspection
and Facilitation (Chapter VII)
• The legislation intends to combine the facilitation and inspection
rather than only policing or inspection.

• The Inspector is renamed as an Inspector-Cum-Facilitator.

• The appropriate Government may establish an inspection scheme

which may provide for generation of web-based inspection and
calling of information relating to inspection electronically.

• This means it is aimed at digitizing the inspection mechanism.

• However, it is left to the discretion of the appropriate Government.

General Changes
 Inspector-Cum-Facilitator / the Combined approach of Inspection
and Facilitation (Chapter VII)
• The appropriate Government may confer jurisdiction of randomized
selection of inspection for the purpose of the Code to the Inspector-
Cum-Facilitator.

• This means the inspectors will continue to inspect the

establishments based on randomized selection.
• This can also mean – getting away from the jurisdiction based
inspectors. Inspectors will be allotted based on the randomized
selection through web based system.

• Now, the Inspector has the responsibility of advising employers and

workers relating to compliance with the provisions of the code.

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General Changes
 Industrial Disputes
• The Industrial Disputes definition is introduced in the Code.

• “Industrial Dispute" means,— (i) 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 labour, of any person; and (ii) 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; (Section 2(q) of the Code).

• The definition is borrowed from the Trade Union Act 1926 and
Industrial Disputes Act 1947 (Section 2(k) and 2-A of ID Act 1947 and
section 2(g) of the Trade Union Act).
General Changes
 Industrial Disputes related to payment of Bonus
• Any dispute arises between an employer and his employees with
respect to—

 (a) fixation of bonus or eligibility for payment of bonus under

the provisions of this Code;
 (b) the application of this Code, in respect of bonus, to an
establishment in public sector;

then, such dispute shall be deemed to be an industrial dispute

within the meaning of the Industrial Disputes Act, 1947 (Section
46 of the Code).

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General Changes
 Offences and Penalties (Chapter VIII)
• The Code provides for graded penalty for different types of
contraventions.

• Any payment less than the amount due is punishable with fine which
may extend to 50K.
• Similar offence within five years attracts imprisonment for a term
which may extend to three months or with fine which may extend to
one lakh rupees, or with both.

• Any other contravention is punishable with fine which may extend to

20K.
• Similar offence within five years attracts imprisonment for a term
which may extend to one month or with fine which may extend 40K,
or with both.

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General Changes
 Offences and Penalties (Chapter VIII)
• The employer shall be punishable with fine which may extend to
ten thousand rupees for Non-maintenance or improper
maintenance of records in the establishment,

• An opportunity to the employer to comply with the provisions of the

code by way of a written direction before proceeding on the
prosecution to be provided.
• If the employer complies with the direction within the time frame
given, the Inspector-Cum-Facilitator shall not initiate such
prosecution proceeding.

• However, if similar violations repeated within a period of five

years, the prosecution shall be initiated in accordance with the
provisions of the Code (Section 54(3) of the Code).

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General Changes
 Offences and Penalties (Chapter VIII)
 Compounding or Composition of offences
 Offence not being punishable with imprisonment only, or with
imprisonment and also with fine, may, on an application of the accused
person, either before or after the institution of any prosecution, be
compounded by a Gazetted Officer, as the appropriate Government may,
by notification, specify, for a sum of fifty per cent of the maximum fine
provided for such offence.

• However, this will not be available for a subsequent offence committed

within 5 years from the earlier offence or if convicted for similar offence
earlier (Section 56 of the Code).

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General Changes
 Miscellaneous/Others (Chapter IX)
 Direction to State Governments
• The Central Government may, for carrying into execution of the
provisions of this Code in the State give directions to the State
Government, and the State Government shall abide by such
directions (Section 65 of the Code).
• There is a compulsion on the State Governments to abide.

 Power to Make Rules

• Both Central and State Governments have the power to make rules
for implementation of the Code.
• It was confined only to the Central Government earlier under the
Payment of Bonus Act and Equal Remuneration Act.

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General Changes
 Miscellaneous/Others (Chapter IX)
 The burden of Proof
• When a claim is made by any employee on account of non-
payment or less payment of wages or bonus or unauthorized
deductions, the burden to prove that the payments have been
made and no unauthorized deductions have been made lies with
the employer (Section 59 of the Code).

Employers is
required to
retain proper
records

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Equal Remuneration
• The provisions of the Act are covered in one definition and two
sections (section 2(v), 3 & 4 of the Code).

• Definition of ‘Same work or work of a similar nature’ in the Equal

Remuneration Act 1976 addressed the gender equality issues
(section 2(h) of the Act).
• Now the definition under the Code seems to have the intention of
addressing much more than the gender equality.

• It talks about equality between employees when the skill, effort and
responsibility are the same and also when performed under similar
working conditions.

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Equal Remuneration
• The Code retains the prohibition on discrimination in wages on the
ground of gender (section 3 of the Code).
• The Code also retains prohibition on discrimination while recruiting
men and women, service conditions like promotions, training or
transfer.

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Minimum Wages
Key Changes
• Minimum Rate of Wages will be notified by the
appropriate Government as per the Code.
• The Code has done away with the Scheduled
employments. No schedule is appended.
• While fixing the minimum wages, the appropriate
Government shall primarily account the skill of
This specific
workers required for working under the direct
categories of unskilled, skilled, semi-skilled and guideline
highly-skilled or geographical area or both. was not
• The appropriate Government may consider available in
the
arduousness of work like temperature or Minimum
humidity normally difficult to bear, hazardous Wages Act
occupations or processes or underground work 1948.
while fixing the minimum wages.

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Minimum Wages
Key Changes
• The Code intends to cover all employees irrespective of whether it is
organized sector or unorganized sector.
• This means the Government has to fix the minimum wages for all
employees.
• Class and Category of employees are used interchangeably. However,
definitions are not clarified.
 Floor Wages
• The Central Government now has the responsibility to fix national
floor wages taking into account minimum living standards of the
worker.
• The Central Government may consult Central Advisory Board and
State Governments before fixing such floor wages.
• The floor wage may be fixed for different geographical areas.
• The State Governments cannot fix the minimum wages less than
the national floor wages.
Minimum Wages
Retained Provisions
• The employer is not permitted to pay anything less than the
minimum wages fixed.
• The review or revision in minimum wages at an interval not
exceeding five years.

• Fixing minimum wages for time work or piece work.

• Guaranteed time rate in the case of piece-rate.

• Fixing basic rate and dearness allowance or all-inclusive rate (Section

7 of the Code).
• The method followed during fixation or revision of minimum wages
not altered (Section 8 of the Code) - Procedure for fixing minimum
wages through notification method or based on recommendations
of the committees.
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Payment of Wages
Key Changes
• Wage ceiling for applicability of payment of wages is no longer
exists.
• Payment of wages in the case of monthly rated employees before
the expiry of 7th day of the succeeding month.

• Payment of wages in case of termination/dismissal/retrenchment –

the 2nd working day is retained. In addition, the separation due to
resignation is added (Section 17(2) of the Code).
• The maximum ceiling on deductions in any wage period is restricted
to 50% of the wages (Section 18(3) of the Code).

• The deduction towards LIC premium, contribution to welfare fund

constituted by employer or trade union, insurance premia towards
Fidelity Guarantee Bonds have been dropped.
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Payment of Wages
Retained Provisions
• Mode of payment of wages.
• No wage period shall be more than a month.
• Most of the authorized deductions.
• Deductions towards damages and losses.
• Provisions related to the imposition of fines.
• Deduction of wages up to 8 days if 10 or more employees acting in
concert absent themselves without due notice.
• Non-applicability of the provisions to Government Establishments.

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Payment of Bonus
Key Changes

 Applicability of the Payment of Bonus (Section 40(2) of the Code)

• Application to establishments having 20 or more employees is
retained. However, the number of employees in an accounting year
is the matter.

• There is no binding on the employer to continue the provisions if the

number of employees is reduced.

• Moreover, the appropriate Government could have covered the

establishments having less than 20 employees. There is no such
provision now.

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Payment of Bonus
Key Changes

 Rationalization of Definitions
• A single accounting year commencing on the 1st day of April.
• Allocable Surplus and Available surplus are explained inside the Code
instead of definition section.
• A single definition of establishment is provided and some of the
definitions have been dropped.

 Wage Ceiling for Calculation of Bonus (Section 26(2) of the Code)

• The rule is retained. However, the exact amount of Rs.7000 is not
appearing in the Code. Instead, the specified amount per month will
be as fixed by the appropriate Government (Section 26(2) of the
Code).

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Payment of Bonus
Key Changes
 Wage Ceiling for eligibility of Bonus (Section 26(1) of the Code)
• The rule of wage ceiling for applicability of Bonus is retained.
• The appropriate Government will notify the wage ceiling from time
to time.
• There is a possibility that every appropriate Government can fix this
ceiling.

 Exemption based on the profit-sharing scheme (Section 41(1)(i) of

the Code)
• The appropriate Government now can exempt any establishment
having regard to any other scheme of profit-sharing available in such
establishments.

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Payment of Bonus
Key Changes
 Payment of Bonus linked to production or productivity (Section
26(5) of the Code)

• Previously, there was a possibility to enter agreement or settlement

on payment of bonus linked to productivity or production subject to
the assurance of minimum bonus of 8.33% (Section 31A of the Act).

• There is a similar provision in the new code (Section 26(5) of the

code) in a revised manner.
- A demand for more than 8.33% can be determined by an
agreement or settlement.
- However, the maximum bonus shall not exceed 20% of the wages
earned by the employee.

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Payment of Bonus
Key Changes

 Disqualification from receiving the bonus if dismissed from service

(Section 29 of the Code)

• Previously (section 9 of the Act), there was a possibility to disqualify

from receiving the bonus if dismissed for fraud or riotous or violent
behaviour while on the premises of the establishment or theft,
misappropriation or sabotage of any property of the establishment.

• Now ‘Conviction for sexual harassment’ is added.

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Payment of Bonus
Key Changes

 Manner of arriving at Bonus percentage

• The manner of arriving at Bonus percentage by calculating available
surplus, allocable surplus are all retained.
• However, the guiding schedules on set on and set off (4th Schedule),
Computation of Gross Profits (1st and 2nd Schedule), sums deductible
from gross profits (3rd Schedule) have been dropped and the power
to prescribe guidelines now rests with the Central Government.

• The deduction of development rebate or investment allowance as

prior charges from the gross profits as allowed under section 6 of
the Payment of Bonus Act 1965 has been dropped. However, the
Central Government may prescribe such other sums as prior charges.

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Payment of Bonus
Key Changes
 Confidentiality if the balance sheet is called for by the authority
notified (Section 31(3) of the Code)
• The authority notified may call upon the employer to produce
balance sheet when there is a dispute regarding the quantum of
bonus. However, the authority shall not disclose any information
contained in the balance sheet unless agreed to by the employer.

• However, a provision is inserted under section 47(2) of the code

which talks about clarification on any item in the balance sheet or
profit and loss account. The trade union or employees can make an
application seeking the clarification and if the authority satisfied
with the request, then it can order to supply such clarification to the
corporation or company.

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Payment of Bonus

Key Changes

• Now the question is if the balance sheet or contents of the

balance sheet are not disclosed, where is the question of
clarification? These are two contradicting provisions.

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Payment of Bonus
Key Changes

 Payment of Bonus in case of dispute for payment at the higher rate

(Section 39(2) first proviso of the Code)
• The employer is obligated to pay 8.33% bonus within the
statutory time limit of 8 months from the close of the accounting
year. There was no such direct provision earlier.

 Mode of Payment of Bonus (Section 39(1) of the Code)

• Previously, there was a possibility to pay the bonus by cash
(section 19 of Act). Now, the code mandates that the bonus
shall be paid by crediting it in the bank account of the
employee.

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Payment of Bonus
Retained Provisions

• Calculation of Bonus which is linked to the minimum wages or a

ceiling amount whichever is higher. This logic is retained.
• The 30 days working criteria for bonus eligibility is retained.

• No change in the Minimum and Maximum Bonus percentage.

• The exemption of 5 years for the new establishments is retained.

• Set on and Set off concept is not modified.

• Adjustment of Advance, customary or puja bonus is intact.

• Proportionate deduction of bonus in case of guilty of misconduct

causing financial loss to the employer is retained without any
changes. However, the deduction should be from the Bonus payable
to that accounting year only.
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Payment of Bonus
Retained Provisions

• Provisions related to an exemption for establishments in the public

sector is intact.
• The provision related to payment of bonus if the establishment sells
goods or provides service in competition with the private sector and
income from such sale or service is not less than 20% of the gross
income, then the provisions of the code apply in case of payment of
bonus.
• The exemptions granted under Bonus Act for different category of
institutes or organizations like, LIC, Red Cross, universities and
education institutes, hospitals which are not for profit etc., are
retained.
• No change in the time limit for payment of bonus.