235. Dna - Code On Wages, 2019

DNA

DEEP NEWS ANALYSIS CODE ON WAGES, 2019 06.05.2020

NEWS HEADLINES

WHAT UPSC ASKS

Future Strategy

Critical Analysis National Interest

Challenges & Solutions

*Only for free circulation.

Historical Background

Code on Wages, 2019 Syllabus GS III: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment. Why in News? •

The recent Labour Code on Wages Act enacted in August 2019 consolidates and codifies previous wage regulations under one act.

Details •

The Code on Wages, 2019 was enacted, which seeks to define the norms for fixing minimum wages that will be applicable to workers of organised and unorganised sectors, except government employees and MGNREGA workers.

● 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. Provisions ➢ Coverage: The Code will apply to all employees.

The central

government will make wage-related decisions for employments such as railways, mines, and oil fields, among others. State governments will make decisions for all other employments. ○ Wages include salary, allowance, or any other component expressed in monetary terms. This does not include bonus payable to employees or any travelling allowance, among others. ➢ MGNREGA workers will not come under it. “MGNREGA payout is not exactly a wage. It is a programme, a scheme, which does not have a strict employer-employee relation. Its wages will continue to be fixed by the Rural Development Ministry.” ➢ Floor wage: According to the Code, the central government will fix a floor wage, taking into account the living standards of workers. ○ Further, it may set different floor wages for different geographical areas. ○ Before fixing the floor wage, the central government may obtain the advice of the Central Advisory Board and may consult with state governments.

The current floor wage, which was fixed in 2017, is at Rs. 176 a day, but some states have minimum wages lower than it such as Andhra Pradesh (Rs. 69) and Telangana (Rs. 69).

➢ Fixing the minimum wage: The Code prohibits employers from paying wages less than the minimum wages. ○ The minimum wages decided by the central or state governments must be higher than the floor wage. In case the existing minimum wages fixed by the central or state governments are higher than the floor wage, they cannot reduce the minimum wages. ○ Minimum wages will be notified by the central or state governments.

This will be based on time, or number of pieces

produced. ○ The minimum wages will be revised and reviewed by the central or state governments at an interval of not more than five years. ○ While fixing minimum wages, the central or state governments may take into account factors such as skill of workers, and difficulty of work. ➢ Overtime: The central or state government may fix the number of hours that constitute a normal working day. In case employees work in excess of a normal working day, they will be entitled to overtime wage, which must be at least twice the normal rate of wages. ➢ Payment of wages: Wages will be paid in (i) coins, (ii) currency notes, (iii) by cheque, (iv) by crediting to the bank account, or (v) through electronic mode.

The wage period will be fixed by the employer as

either: (i) daily, (ii) weekly, (iii) fortnightly, or (iv) monthly. ➢ Deductions: Under the Code, an employee’s wages may be deducted on certain grounds including: (i) fines, (ii) absence from duty, (iii) accommodation given by the employer, or (iv) recovery of advances given to the employee, among others. These deductions should not exceed 50% of the employee’s total wage. ➢ Determination of bonus: All employees whose wages do not exceed a specific monthly amount, notified by the central or state government, will be entitled to an annual bonus.

The bonus will be at least: (i)

8.33% of his wages, or (ii) Rs 100, whichever is higher. Besides, the employer will distribute a part of the gross profits amongst the

employees. This will be distributed in proportion to the annual wages of an employee. An employee can receive a maximum bonus of 20% of his annual wages. ➢ Gender discrimination: The Code prohibits gender discrimination in matters related to wages and recruitment of employees for the same work or work of similar nature. Work of a similar nature is defined as work for which the skill, effort, experience, and responsibility required are the same. ➢ Advisory boards: The central and state governments will constitute advisory boards. ○ Central Advisory Board will consist of: (i) employers, (ii) employees (in equal number as employers), (iii) independent persons, and (iv) five representatives of state governments. ○ State Advisory Boards will consist of employers, employees, and independent persons. ○ Further, one-third of the total members on both the central and state Boards will be women. ○ The Boards will advise the respective governments on various issues including fixation of minimum wages, and increasing employment opportunities for women. ➢ Facilitator-cum-inspector:

The

Code

replaces

"inspector"

with

"facilitator-cum-inspector", who may give "advice to employers and workers relating to compliance with the provisions of this Code. It will help to remove arbitrariness and malpractices. The inspection will be done based on an inspection scheme, which will include a web-based inspection schedule. The inspection scheme will be decided by the central or state governments. ➢ Offences: The Code specifies penalties for offences committed by an employer, such as (i) paying less than the due wages, or (ii) for contravening any provision of the Code. Penalties vary depending on the nature of offence, with the maximum penalty being imprisonment for three months along with a fine of up to one lakh rupees. Background ● The Code of Wages, 2019 is the first in the series of four labour codes. Codification proposes to simplify 44 central labour laws into four codes to bring them in sync with the emerging economic situation, facilitate

easier compliance by establishments, promote ease of living and ensure labour welfare and wage and social security for workers. ● The amalgamation is in line with the recommendation of the second National Commission on Labour of 2002 and tripartite consultations (among government, industry and employee representatives) held earlier. ● The Economic Survey of 2018-19 had highlighted the complexity in the minimum wage system in India by pointing out that there were nearly 429 scheduled employments and 1,915 scheduled job categories for unskilled workers across India covered by the Minimum Wages Act of 1948. (The code removes the concept of 'scheduled employments' declared as such by the central and state governments.) ● The Economic Survey of 2018-19 had pointed out that one-third of workers covered under the Minimum Wages Act of 1948 (meant only for only the scheduled employments) have "fallen through the cracks and is not protected by the minimum wage law". Need of the code

Advantages of the code ● Inclusive: The code will give the right to minimum wages to the entire 50 crore workforce. The Code will bring under its ambit even domestic workers. ○ Earlier, 60% of workers are not covered under the Minimum Wages Act. While the Payment of Wages Act ensures timely payment of wages, it applies only to people earning less than Rs.24,000 a month in scheduled employments, leaving out a large number of workers. ● Minimum wage: It would benefit two-fifths of its population, or 50 crore workers ensuring them both a minimum wage and timely payment of it.

● Rationalisation: The code drastically brings down the number of wage rates from 2,000-plus to around 300. Because under the Code, the minimum wage will be fixed by primarily taking into account skills and/or geography whereas, before the implementation of the Code, minimum wage rate was implemented by factoring in occupation, skill levels and geographical area. The occupation category is done away with. ● Compliance cost: Simplified definition of labour is expected to reduce litigation and also reduce compliance cost for employers. ● Addressing the gender gap: The gender gap is high in India and the Code tries to address it. According to data from the Labour Ministry, of all the worker groups, the average daily wage of a casual rural female worker is the lowest at Rs 104. Criticism of the code ● Floor wage might be worse than the market wage rate in which case the entire purpose of having minimum wages and improving standard of living collapses. ● Wage Code does not define or outline the methodology for fixing an adequate

minimum

wage.

It

ignores

the

formula,

which

was

unanimously recommended by the Indian Labour Conference (ILC). ● The

Equal

Remuneration

Act,

1976,

prohibits

gender-based

discrimination in terms of wages, recruitment and conditions of service. The Code, however, has omitted the last two. ● The presence of a large informal sector — 93 per cent of workers are in the informal economy according to the latest Economic Survey — suggests that enforcement is likely to be problematic. ● The International Labour Organisation’s Labour Inspection Convention of 1947 (Convention C081) — it has been ratified by India — provides for a well-resourced and independent inspectorate with provisions to allow thorough inspections and free access to workplaces. Ignoring these

provisions,

code

proposes

another

ad-hoc

and

unclear

mechanism called the “inspection scheme”. ● There is concern that if wages are pushed up, without being linked to productivity, companies will respond by hiring fewer workers which may further skew the capital-labour ratio. ● While the code takes into account regional variations, wage differences across regions could impact labour mobility.

Conclusion •

A well-designed minimum wage system, as articulated in the Economic Survey 2018-19, can help “reduce inequalities in income, bridge gender gaps in wages and alleviate poverty”. It could also help address the imbalance of power between workers and employers.

•

Further, state governments should desist from competitive populism to inflate minimum wages to an extent that it would make industry unviable and uncompetitive.

Source: https://www.prsindia.org/billtrack/code-wages-2019 https://www.businesstoday.in/opinion/columns/code-on-wages-bill-2019universal-minimum-wage-enforced-organised-sector-workers-unorganisedworkforce/story/367641.html https://economictimes.indiatimes.com/news/economy/policy/decoded-whatcode-on-wages-mean-for-the-50-crore-workers-it-aims-tobenefit/articleshow/70515807.cms https://www.epw.in/engage/article/protection-workers-wages-india-labourwage-code https://www.thehindu.com/opinion/op-ed/the-broken-promise-of-decentand-fair-wages/article30070255.ece