Introduction

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: (i) the Payment of Wages
Act, 1936, (ii) the Minimum Wages Act, 1948, (iii) the Payment of Bonus Act, 1965, and (iv) the Equal
Remuneration Act, 1976.
Once The President of India give his assent, the code shall be effective from the date of
publication in official Gazette.

Laws/ legislations subsumed

The Wage Code is to amend and consolidate the laws relating to wages, bonus and
matters connected therewith or incidental thereto. The Wage Code subsumes the
following four existing labour law enactments:
The Payment of Wages Act, 1936 (“PWA”);
The Minimum Wages Act, 1948 (“MWA”);
The Payment of Bonus Act, 1965 (“PBA”); and
The Equal Remuneration Act, 1976 (“ERA”).
The Ministry of Labour and Employment has on July 7, 2020 published the draft Code on
Wages (Central) Rules 2020 (Rules). These Rules are expected to replace the rules
notified under PWA, MWA, ERA, and PBA. The Rules prescribes the process and
fixation of the minimum wages, the process of making payment, constitution of the
Central Advisory Board for fixing floor wage, etc. The provisions of the Wage Code and
the Rules are now expected to be notified anytime soon.
The Wage Code comprises of 69 sections divided into nine chapters.
SALIENT FEATURES:
1. Uniform Applicability:The PWA is applicable to employees drawing wages equal to
or below a statutory limit and MWA is applicable only to scheduled employments. The
Wage Code now envisages uniform applicability of the provisions of timely payment of
wages and minimum wages to all employees irrespective of the wage ceiling and
sectors.
2. Uniform definition of wages: The definition of ‘wages’ slightly varied across PWA,
MWA, PBA and this has resulted in numerous litigations. Therefore, the Wage Code
seeks to provide a single uniform definition of ‘wages’ for the purposes of computation
and payment of wages to the employees. As per Wage Code, the term ‘wages’ means
all remuneration whether, by way of salaries, allowances or otherwise, expressed in
terms of money and includes basic pay; dearness allowance; and retaining allowance if
any.
The Wage Code lays down the list of exemptions which do not form part of the term
‘wages’ which inter alia includes the value of house accommodation, supply of electricity,
water, house rent allowance, bonus payable under any law, contributions to a pension or
provident fund, sums paid to defray special expenses, remuneration payable under any
award or order of a court/tribunal or settlement between parties, overtime allowance,
gratuity payable, retrenchment compensation, ex gratia, and other retrial benefits.
A significant introduction under the Wage Code is that in the event the quantum of the
exclusions (except gratuity, retrenchment, ex gratia, and retrial benefits) is exceeding
more than half or such other notified percentage (“Exclusion Limit”) of the
remuneration paid to the employee, then the amount in excess of Exclusion Limit will be
treated as wages.
3. The distinction between 'Employee' and 'Worker':The Wage Code provides
separate definitions of ‘worker’ and ‘employee’. The definition of ‘employee’ is broader
than that of ‘worker’. The term 'worker' refers to any person except an apprentice
employed in any industry to do any manual, unskilled, skilled, technical, operational,
clerical or supervisory work for hire or reward, whether the terms of employment be
express or implied and also includes working journalists and sales promotion
employees, but excludes persons who is employed mainly in a managerial or
administrative capacity; or person who is employed in a supervisory capacity drawing a
monthly wage exceeding INR 15,000 or such amount as may be notified by the Central
Government from time to time.
An 'Employee' under the Wage Code is any person employed other than apprentice on
wages by an establishment to do any skilled, semi-skilled or unskilled, manual,
operational, supervisory, managerial, administrative, technical or clerical work for hire or
reward, whether the terms of employment be express or implied.
4. Minimum Wages: The erstwhile MWA prescribed minimum wages only in relation to
scheduled employments. Now, the Wage Code empowers the appropriate government
to fix wages in all industries. A new concept of floor wage has been introduced. Under
the Wage Code, the Central Government is empowered to fix floor wage after taking into
account minimum living standards of a worker as applicable for different geographical
areas. The State Governments under no circumstance, shall fix a minimum wage rate
which is lower than the floor wage determined by the Central Government. Further, if the
minimum wages fixed prior to the fixation of the floor wage are higher than the floor
wage, then the appropriate government is prohibited from reducing those rates. The
Wage Code prescribes that the minimum wages are to be reviewed and revised by the
appropriate governments in intervals not exceeding five years.
5. Equal Remuneration: Similar to ERA, the Wage Code prohibits discrimination on
ground of gender with respect to wages by employers or for purpose of recruitment, with
respect to same or work of similar nature of work. The Wage Code ensures non-
discrimination against all genders, while under ERA the genders were specified and
limited to male and female human beings.
6. Payment of Bonus: There is no significant modification from PBA and the provisions
relating to the computation of bonus are also consistent with the terms of PBA. Earlier,
the applicability is limited to employees drawing wages not exceeding INR 21,000 per
month. Now, under the Wage Code, the appropriate government is empowered to fix the
wage threshold for determining the applicability. The Wage Code lists out the
disqualifications for receiving bonus in line with PBA like fraud, riotous or violent
behavior, or theft. However, the only additional disqualification is dismissal from service
due to conviction for sexual harassment.
7. Inspector cum Facilitator: The erstwhile enactments had the concept of inspectors
to carry out inspections and examinations to ensure compliance of the enactments. Now,
under the Wage Code, the inspector regime is replaced with Inspector-cum-Facilitator
who shall be a facilitator towards compliance and not just an inspecting authority. The
Inspector-cum-Facilitator is required to provide the employer an opportunity to rectify the
non-compliance within a specified time before initiating any prosecution proceedings.
The appropriate government may lay down an inspection scheme which may also
provide for generation of a web-based inspection and calling of information relating to
the inspection.
8. Time-bound resolution of claims: The Wage Code prescribed a limitation period of
three years for filing of claims by an employee as against the timelines prescribed under
the existing enactments. The dispute of fixation of bonus or eligibility for payment of
bonus be deemed to be considered as an ’industrial disputes’. An employee or any
registered trade union registered of which the employee is a member; or the Inspector-
cum-Facilitator can file an application for claims under the Wage Code before the
notified authority. The authority shall decide the claim within a period of three months.
Appeals are to be filed within a period of ninety days, which the appellate authority will
endeavour to dispose of them in three months. Claims are to be recovered as arrears of
land revenue and remit the same to the authority for payment to the concerned
employee.
9. Offences and Penalties: Unlike the provisions of earlier enactments, the penal
consequences under the Wage Code are not stringent and only entail imprisonment for
the second and subsequent offences. However, the quantum of fines for contraventions
under the Wage Code have been significantly increased. Further, the offences
punishable under the Wage Code, not being the offences punishable with imprisonment
only, be compounded by a gazetted officer, as appointed by the appropriate
government.