The New Wage Code, officially known as the Code on Wages, 2019, is a landmark legislative overhaul meant to streamline and modernize India's laws governing wages. India used to run with multiple labor laws that were so fragmented and entangled that frequently created problems and used to become controversy in implementation. Hence this New Wage Code consolidates and simplifies these laws, making them stronger in an integrated framework, thus improving clarity in compliance. Uniform definitions and standards lead to fair and timely wage payments across various sectors. It promotes transparency in wage scales, reduces disputes, and thus requires this reform for India, which needs an environment of healthy growth that protects the rights of the workers.
Historical Background of New Wage Code
Historical Context
Prior to the enactment of the New Wage Code, India operated under multiple labor laws that governed various aspects of wage-related matters:
Payment of Wages Act, 1936 : It ensured the employees employed in any industry, factory, or other organizations were given wages without delay.
Minimum Wages Act, 1948 : It ensured the implementation of the minimum rate of wage for the employees working in some of the sectors so that they could be paid justly.
Payment of Bonus Act, 1965: Provided for the payment of bonus to workmen in specified factories, which is linked with productivity and profit.
Equal Remuneration Act, 1976: It also eliminated gender-based discrimination at work in the areas of wage and recruitment.
These Acts, although well-intentioned, introduced complications and inconsistencies in their implementation .
Need for Reform
There was a serious problem with the existing legal framework:
Fragmentation: With a multiplicity of laws and overlapping provisions, it was muddled and administrative burdens.
Inconsistencies: Varying definitions and conditions caused disputes and lack of clear legal precedence.
Compliance Issues: With the different standards, employers faced challenges in how to comply, and this would have consequences on performance and effectiveness.
Such issues highlighted the need for a unified and comprehensive wage regulation process.
Get to Know Kinds of Wages in Labour Law
Legislative Procedure
The way to New Wage Code included the following critical steps:
2015: The Narendra Modi government initiated the proposal to merge all four labor law codes under one umbrella - four codes from existing 44 central labor laws to rationalize labor laws and ease doing business.
2017: Code on Wages Bill was introduced in Lok Sabha on 10 August 2017 by the Minister of State for Labour and Employment (Independent Charge), Santosh Gangwar.
2019: The Code on Wages Bill, 2019 was again introduced in the House on 23 July 2019. The bill was passed by the Lok Sabha on 30 July 2019 and by the Rajya Sabha on 2 August 2019. The same was given assent by President Ram Nath Kovind on 8 August 2019.
This legislative process led to the enactment of the New Wage Code in order to simplify and harmonize wage-related laws in India.
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Features of New Wages Code 2019
Under the Code on Wages, 2019, the labor law structure of India witness significant reforms as follows:
Uniform Definition of 'Wages': The Code offers one uniform definition of 'wages' under all labor laws, thus obliterating the fog of ambiguity and potential disputes over wage computation.
Applicability to All Sectors: It extends the provisions of minimum wages and timely payment of wages to all establishments, both organized and unorganized sectors, thereby ensuring a much broader coverage.
Introduction of Floor Wages: The Code allows the central government to determine floor wages, which establishes the minimum or floor wage not below which any state shall fix the minimum wages and in that way ensures the minimum standard of living for the worker.
Simplified Bonus Calculation: It simplifies bonus computation and payment so that it would be much clearer, which takes away the burden of compliance from the minds of employers.
Timely payment of wages: The Code imposes heavy time bars for payment of wages which ensures timely receipt of the same by the employees thereby increasing financial security.
Ban on Wage Discrimination: It reinforces that there shall be no discrimination in wages and recruitment practices on the ground of gender and provides equal pay for equal work.
Get to Know What does Minimum Wage Means
In Conclusion,
The Code on Wages, 2019, presents a major step forward in the development of India's Labour law system through the integration and rejuvenation of wage and salary regulations. With a uniform definition of 'wages', the requirement of 'floor wages' and regular payment of wages, it ensures fair recompense for employees working in all sectors as well as financial security to the employees. Provisions of equal remuneration lead to gender-based wage discrimination being eliminated. This New Wage Code is a progressive step for India toward a better and more manageable labor market that benefits both employers and employees alike and progresses toward economic growth.
FAQs on the New Wage Code
Q1. What are 'wages' under the New Wage Code?
According to the Code on Wages, 2019, 'wages' includes all remuneration whether by way of salaries, allowances or otherwise expressible in terms of money or capable of being so expressed which would, if terms of employment were fulfilled be payable to any person employed in respect of his employment or of work done in such employment. This includes basic pay, dearness allowance, and retaining allowance, if any. However, it excludes certain items such as bonus, employer's contribution to provident fund, gratuity, and retrenchment compensation.
Q2. How are minimum wages determined and revised?
Steps for Determination and Revision of Minimum Wages Under New Wage Code are that the Central and State Governments established Advisory Boards to advise on the fixation and revision of minimum wages. The Code has established a methodology for fixation of minimum wages after considering many factors, such as the level of skill, the geographical locations, and the cost of living. The Central Government fixes a floor wage, which is the minimum wage all over the nation, but each state can fix its minimum wage over the ceiling and cannot fall below it. The minimum wages are reviewed and revised periodically to bring about the actual cost of living increases as well as inflation aspects.
Q3. What are the penalties for breach of wage protection?
The New Wage Code to punish against the failure to comply with the wage provisions. Fines: ₹ 50,000 to ₹ 1,00,000 for a general offense ,Imprisonment: Up to three months for a repeated offense
Q4. Are there specific exclusions for certain industries or establishments?
The New Wage Code applies to all establishments which have ten or more employees. However, the Central Government may exempt any establishment or class of establishments partially or fully from any provisions of this Code subject to such conditions as may be specified. Such exemptions have typically been used as a measure to promote the growth of certain industries or sectors. Thus, for instance, the Code makes provision for exemptions in circumstances where the application of certain provisions may not be possible or would have an adverse effect on the establishment.
Q5. What is the impact of the New Wage Code on existing employment contracts?
Existing employment contracts must be assessed and, if necessary, updated to conform with the provision of the New Wage Code. The terms of employment must comply with the Code on wages, bonuses, and other similar provisions. All provisions in the contract, with regard to service, that are advantageous to the employee shall be avoided with regard to the extent of inconsistency. Employers must update their contracts of employment by providing a status based on legal requirements and in preventing possible disputes.
