Introduction
4. Definition of Establishment: Means any place where any
industry, trade, business, manufacture or occupation is carried
on and includes Government establishment.
5. Definition of Contractor: Means a person who 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 supplies contract
labour for any work of the establishment as mere human
1. The Code on Wages, 2019:
resource and includes a sub-contractor.
► Approved by both houses of Parliament.
► Received Presidential assent on 8 August 2019. 6. Definition of wages: Means all remuneration whether by way
of salaries, allowances or otherwise, expressed in terms of
2. Draft Rules for Code on Wages: On 1 November 2019, preliminary money or capable of being so expressed which would If the
draft rules under the Code on Wages were issued for public terms of employment, express or implied, were fulfilled, be
comments. payable to a person employed in respect of his employment or
of work done in such Employment, and includes,
► On 7 July 2020, a notification was issued in the official gazette
a) Basic pay;
setting out the draft rules for the Code on Wages.
b) Dearness allowance; and
► Public comments on these draft rules are invited until 21 August
c) Retaining allowance, if any.
2020 (45 days from the notification date).
3. Key Details of the Draft Rules: Specified Exclusions.
► This Act may be called the Code on Wages, 2019. ► Statutory bonus, Overtime Allowance
► It extends to the whole of India. ► House Rent Allowance, Commission, Employer’s
► This will come into effect after their final publication in the contribution to Provident.
official gazette and on the commencement date of the Code on ► Sum paid to defray special Expenses. Value of house
Wages. accommodation/supply of water, light, medical
attendance or other
► Amenity. Conveyance allowance/ value of
Definition ► Travelling concession etc.
► Exclusions other than highlighted components capped at
► The Code on Wages, 2019, some definitions like employer,
employee, establishment, wages and worker in Code on Wages 50% of total remuneration.
apply to all the provisions of Code on Wages, 2019. The new ► Remuneration in kind to be upto 15% of total
definitions are more or less parallel to earlier definitions.
remuneration.
1. Definition of Employer: Means a person who employs whether ► The Code, apart from bringing uniformity in definition of
directly or through any person or on his behalf or on behalf of any wages, will resolve another issue. Earlier, the employers
person, one or more employees in his establishment, and includes would pay to its employee’s other allowances (not
occupier and manager in case of a factory. In case of any other necessarily in the form of money like HRA, Conveyance,
establishment, the person who has ultimate control over the affairs PF Etc.) which is more than basic wage and it affected the
of the establishment, a manager or managing director who has in-hand salary of a person.
been entrusted with the affairs. Also I includes a Contractor and
Legal Representative of the deceased employer. ► The Code has now introduced the concept of conditional
inclusion, wherein if the other allowances are more than
2. Definition of Employee: Any person other than an apprentice 50% of the total remuneration, the excess amount will be
employed on wages by the Establishment to do any skilled, semi- included in the wages. For instance (See Table 1), wages
skilled, unskilled, manual, operational, supervisory, managerial, payable to Mr. Amit is as under:
administrative, Technical or clerical work for hire or reward, Structure. 01
whether the terms of Employment are express or implied and also
S.No Particulars Amount (INR)
includes a person declared to be an employee by the appropriate
1 Basic 23,082
government, does not include any member of the Armed Forces.
2 Special Allowance 2,323
3. Definition of Worker: Any person other than an apprentice 3 HRA (50% of Basic) 11,541
employed in any industry to do any manual, unskilled, Skilled, 4 Conveyance Allowance 1,600
technical, operational clerical or supervisory work for hire or Total 38,546
reward whether the terms of employees be express or implied.
Also includes working journalists and sales promotion employees.
6) F&F Settlement: The New wage code states that wages payable
to an employee should be paid within two days of removal,
dismissal, resignation, or retrenchment.
Amount
S. No Particulars
(INR)
1 Basic (35% of Total salary) 38,500
7) Impact of non-compliance:
2 Conveyance Allowance 1,600
3 HRA ( 50% of basic) 19,250 Offense Penalty
4 Special Allowance 50,650 1. For first time defaulters, it's a fine
Total 110,000 If the wage paid is
of up to ₹ 50,000.
less than the
Structure. 02 2. For repeated breaches, the penalty
recommended
extends to imprisonment for 3
wage slab
months, with a fine of ₹ 1, 00,000.
1. For first time defaulters, it's a fine
► In the above table, the total remuneration for Mr. Amit is
of up to ₹ 20,000.
Rs. Breach of any other
2. For repeated breaches, the penalty
110,000, with 50% equalling Rs. 55,000. The excluded rule under the code
extends to imprisonment up to 1
portion (SL. No. 2-4) totals Rs. 71,500, whichs exceeds 50% on wages
month, and/or a fine of up to ₹
by Rs. 16,500. This excess will be added to the wages.
40,000.
Improper record
Fine up to ₹ 10,000
maintenance
Key provisions of the draft Rules
1) Norms for fixing minimum wages: The minimum wages to be 8) Compliances for employer: An employer is required to
maintain following registers (electronically or otherwise) in
fixed by the state government will be basis:
format specified in the Rules:
a) Geographical area: To be divided by the central government a) Register of wages, overtime, fine, deduction for damage
into 3 categories: (i) metropolitan area, (ii) non- and loss in Form I
metropolitan area and (iii) rural area. b) Employee register in Form IV
b) Skills: To be classified by the central government into 4 Also, an employer is required to issue wage slips to the
employees on or before payment of wages (electronically or
categories: (i) unskilled, (ii) semi-skilled, (iii) skilled and (iv)
otherwise) in a format specified in Form V of the draft Rules.
highly skilled.
9) Equal Remuneration: Applicable to all establishments, and no
2) Payment of wages timelines: discrimination should be made in the terms of employment
based on the gender of the employees.
► Section 17 of the Code on Wages prescribes the following
timelines for payment of wages to employees: 10) Equal Remuneration: same work or work of a similar nature
means work in respect of which the skill, effort, experience and
responsibility required are the same when performed under
Employee engaged Wages to be paid by similar working conditions by employees and the difference if
on any, between the skill, effort, experience and responsibility
Daily basis End of the shift 3) required for employees of any gender, are not of practical
Pa importance in relation to the terms and conditions of
Weekly basis Last working day of the week
employment
Fortnightly basis Before the end of the second day
after the end of the fortnight
► Sec 3(2) (i) No employer shall, reduce the rate of wages of
Monthly basis Before the expiry of 7th day of the any employee.
succeeding month
yment of Bonus Applicability: Applicable to all 11) Minimum Wages Applicability: The minimum wage scheme is
establishments, and no discrimination should be made in now extended to all types of employment and is not restricted
the terms of employment based on the gender of the only to scheduled employment.
employees. Wages: Follows the newly introduced wage definition
structure.
4) Payment of minimum bonus to contracted employees: Where
in an establishment, the employees are employed through a a) Working hours:
contractor and the contractor fails to pay minimum bonus to ► 9 hours in total (8 hours of work time with an additional 1
hour for breaks).
such employees, then, the establishment shall be liable to pay
► The existing regulation just mentions 9 hours; the new code
such minimum bonus to the employees.
adds an explicit mention of the breaks.
5) Mode of Payment: Wages can be paid by various methods such b) Overtime wage rules: Overtime wages cannot be less than
as cash, cheque, depositing in the bank account of the employee twice the normal wag
or by electronic mode. c) National floor wages: The central government will revisit the
national floor rate for minimum wages.
► For places where the minimum wage is higher than the
existing floor rate, the minimum wage will be retained.
► State governments will fix minimum floor rates which cannot
be less than the minimum wage.
► Review: Periodic review/revision of wages should happen
within 5 years after the introduction of this code.
