The Code on Wages, 2019 - Far from home? - Part II

Bar & Bench August 28 2019
Labour

Shardul S Shroff, Pooja Ramchandani and Ulka Bhattacharyya

Part Two

The first part of this article highlighted and analyzed the Code on Wages, 2019 (‘Wage Code’s’) key features. This part takes the discussion forward, by highlighting other changes, and pointing out areas which are likely to pose challenges in implementation going forward. 

Changes brought about by the Wage Code

The State Government or the Central Government in its role as the ‘appropriate government’ (‘AG’), fixes minimum wages in respect of establishments under its jurisdiction. The particular AG for any establishment depends on whether the establishment is controlled by the Central Government or the State Government. The Wage Code, by amending the definition of AG, clarifies the nature of establishments which would fall under the Central Government’s jurisdiction, for purposes of fixing minimum wages, as well as regulating that particular establishment.  

Another interesting addition is that by referring to ‘contractor’ in the definition of an ‘employer’, the Wage Code clarifies that a contractor is primarily responsible for paying minimum wages. Further, ‘employee’ under the Wage Code now includes individuals appointed in managerial, supervisory and administrative roles. This implies that such categories of employees come under the purview of the Wage Code, unlike the position under the Minimum Wages Act, 1948.  However, with regard to the factors for fixing minimum wages, the Wage Code refers only to ‘workers’ and not ‘employees’, thus creating inconsistency.

Other changes include increasing limitation periods for filing claims to three years (from existing periods ranging from six months to two years), as well as providing employers opportunities to comply with the facilitator’s written directions, before launching prosecution for non-compliance. These provisions are likely to impact enforcement.

Potential challenges in implementation

While the Wage Code substantially alters laws on payment of wages and bonus, it is important to point out that in light of persisting ambiguities, challenges in implementation may be on the anvil.

Harmonization and uniformity seems to be missing in the Wage Code’ definition of critical concepts (in addition to ‘wages’) such as establishment, employer, employee, hours of work and worker. Additionally, the definitions of ‘contractor’ and ‘contract labour’ may have been clarified to facilitate growth of service agreements.

Importantly, as three other comprehensive Labour Codes are proposed, it is critical that the provisions of the proposed Codes are aligned and harmonized with the Wage Code, and vice versa, to prevent problems in implementation. 

In terms of more granular issues, provisions on correction of arithmetic and clerical errors by the Appropriate Government have been omitted under the Wage Code; however, this could find place under subordinate legislation. Similarly, the Wage Code’s current prohibition of discrimination on grounds of gender  in matters relating to wages, and sex in the matter of recruitment and employment conditions could have been harmonized, to ensure due recognition of the third gender. Further, the Wage Code’s prohibition on imposing fines on employees below the age of fifteen requires clarity; currently per the Child Labour (Prohibition and Regulation) Act, 1986, the employment of children who have not completed the age of fourteen is restricted. Additionally, to strengthen the composition of the Central Advisory Board under the Wage Code, representatives of State Governments may be given fixed terms, to ensure maximum representation on the part of States.

Finally, considering that the Wage Code emphasizes simplicity and easier compliance, the Rules under the Wage Code, as well as the other proposed Labour Codes, should take into account already existing guidelines of the Ministry of Labour and Employment on rationalizing and consolidating registers, filings & forms, so as to simplify compliance-related burdens, to the extent possible. 

Conclusion

The passage of the Wage Code is an important development in India’s labour law framework. Reforms in this sphere, appropriately balancing multiple objectives of labour welfare, ease of compliance and rationalisation have been long overdue, and the proposed Wage Code is certainly a step forward in that direction. 

However, on a closer look at the changes introduced by the Wage Code, it is clear that scope for further clarity and simplification still remains. The Wage Code may require its creases to be ironed out significantly, as well as much greater harmonization and rationalisation with the previous legal regime and other Labour Codes. Thus, the Wage Code will have to be a work in progress for the foreseeable future, to ensure that a nation which was one of the first in the developing world to introduce laws on minimum wages back in 1948, has its present tryst with labour law reforms go right.

About the authors: Shardul S. Shroff is the Executive Chairman of the law firm, Shardul Amarchand Mangaldas & Co. Pooja Ramchandani is a Partner whereas Ulka Bhattacharyya is Research Fellow at the firm. 

Shardul S Shroff, Ulka Bhattacharyya, Pooja Ramchandani

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