Decoding The Code On Wages Bill 2019-publication-final

LEGAL UPDATE

D E CO DI NG T H E CO D E O N 2 01 9

WAG E S ,

BY PUNEET GUPTA, ADVOCATE

FOUR STATUTES AMALGAMATED IN WAGE CODE INSIDE THIS ARTICLE

DEFINITIONS

2

PAYMENT OF BONUS

2

MINIMUM WAGES

3

EQUAL REMUNERATION

3

PAYMENT OF WAGES

3

CLAIMS/ APPEALS/ OFFENCES

4

RETURNS/ INSPECTIONS

4

In a push to merge 44 labour laws, into a set of four labour codes, the Central Government has brought the Code on Wages, (Bill) 2019, that has been passed by both the houses of Parliament and would soon become an Act after assent accorded by the President of India. The Code shall amend and consolidate the laws relating to wages and bonus and matter connected therewith or incidental thereto. The Code on Wages (hereinafter referred to as ‘Code’) amalgamates various provisions contained in four statutes: the Payment of Wages Act of 1936, the Minimum Wag-

es Act of 1948, the Payment of Bonus Act of 1965 and the Equal Remun era t ion Ac t o f 1976. The Code provides for all essential elements relating to wages, equal remuneration for every gender for the same or similar kind of work, its payment and bonus. It also deals with the definition of worker and employee and makes labour inspectors, inspector-cumfacilitator. The Code has brought gender equality in matters relating to wages in respect of the same work or work of a similar nature done by any employee.

APPLICABILITY, EXTENT & COVERAGE

‘Wage Code’ a superpower for employees.

The Code has been made applicable on establishments without providing for any threshold limit i.e. without any minimum ceiling of number of employees. However, a threshold limit of 20 or more employees has been provided in the Code for the application of Chapter IV (Payment of Bonus) on the establishments.

Unlike the repealed Acts, the Wage Code applies to all category of employees, irrespective of any wage ceiling or employment in a scheduled Employment. However, for the purposes of payment of bonus, the employees earning above a certain limit (as may be prescribed), shall stand excluded for payment of bonus.

MAJOR CHANGES

· Country’s two-fifth population i.e. 50 crore workers would be benefitted.

· Only MNREGA worker will not come under it. · Code bring Domestic and Agriculture workers in its ambit. · Code prohibits gender discrimination even in recruitment and conditions of employment. · Schedule Employments’ abolishedCode applies practically to all establishments. · Minimum Wage to be revised every 5 years, besides periodical revision of DA/VDA. · Central Govt. shall fix floor wage for different geographical areas and no State Government can fix the minimum wage below the floor wage.

· No deduction from the wages ex-

cept those authorized under the Code.

· Wages to be paid on expiry of 7th

day of month, irrespective of wage period other than the calendar month.

· Wages to be paid in current coin or

currency notes. But compulsorily through cheque or bank transfer in certain establishments to be notified.

· Payment of Bonus through Bank transfer only. · Inspector becomes Inspector-cumFacilitator, obligated to give advice to employers & workers relating to compliance. · Time limit for preservation of records done away with. · Scope of the term ‘employee’ now takes in its ambit the persons engaged in supervisory, managerial & administrative work.

DECODING THE CODE ON WAGES, 2019

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INTERPRETATION & DEFINITIONS

“Wages” [Sec. 2(y)]: The term has been defined exhaustively under the Wage Code taking into its sweep few inclusions but long list of exclusions. It also provides that where the ‘excluded allowances’ mentioned in clause (a) to (i) of Section 2(y) exceeds one-half, or such percent, as may be notified by the Central Govt, shall be deemed as remuneration and shall be accordingly added in wages.

HRA and Conveyance allowance specifically excluded from the wage definition besides few more components. But the adding back of allowances exceeding 50% as wages would hurt business badly, as the bonus would be calculated on the increased wages. Thus, there is a need to have a relook in Compensation Packages (wage structures) in light of above changes.

“Employee” [Sec. 2(k)]: The term takes in its ambit the persons engaged in supervisory, managerial, administrative work besides such other persons engaged in skilled, semi-skilled or unskilled, manual, operational, technical or clerical work.

“Employer” [Sec. 2(l)] means an occupier and/or the manager of the factory, or any person who has ultimate control over the affairs of the establishment and includes a contractor or legal representative of a deceased employer. “Inspector-cum-Facilitator" [Sec. 2(r) read with Sec. 51]: The Code provides for appointment of Inspector-cum-Facilitator, who has been obligated to give advice to employers and workers relating to compliance with the provisions of the Code and to carry out inspections of the establishments, amongst other powers vested in them.

“Establishment” [Sec. 2(m)]: The term ‘establishment’ means any place where any industry, trade, business, manufacture or occupation is carried on. Thus, giving a very wide amplitude to cover practically all type of units.

PAYMENT OF BONUS Threshold Limit for applicability: The provisions of payment of bonus shall apply to such establishments in which twenty or more persons employed or were employed on any day during an accounting year. However, by virtue of saving clause attached to this Code, the provisions of bonus shall continue to apply on the establishment that were earlier paying the bonus, irrespective of the employment strength.

Eligibility for bonus: An employee who worked for 30 days in an accounting year and having wages not exceeding such amount per mensem as determined by notification, by the appropriate Government, shall be entitled for bonus under this chapter. Where the wages of the employee exceeds such amount per mensem, as determined by notification, by the appropriate Government, the bonus payable to such employee shall be calculated as if the wages of such employee were such amount, so

determined by the appropriate Government or the minimum wages fixed by the appropriate Government, whichever is higher. Minimum and Maximum Bonus: The Code provides for a minimum of 8.33% and maximum of 20% of bonus. A complete procedure for calculating the allocable surplus profits etc. and the provisions for set-on and set-off has been given under this Chapter.

LEGAL UPDATE

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PAYMENT OF BONUS Different Departments or undertakings and branches may have different rate of bonus: Where for any accounting year a separate balance sheet and profit and loss account are prepared and maintained in respect of any such department or undertaking or branch, then, such department or undertaking or branch shall be treated as a separate establishment for

the purpose of computation of bonus for the accounting year. Infancy period for newly setup establishments and for departments or undertakings or branches set up by existing establishments:- The Wage Code provides an infancy period of 5 years following the year in which the employer sells the goods manufactured or render

services, from the payment of bonus until such establishment or branch derives any profits. Further, such Establishment or branch will be liable for payment of bonus only for that accounting year, where it derives the profits. During the infancy period of 5 years the provisions of set-on and setoff will not apply to such establishment or branch etc.

MINIMUM WAGES Minimum wages for different categories and geographical areas: The fixation/revision of minimum wages has to be done taking into consideration the skill of workers, viz unskilled, skilled, semi-skilled and highly-skilled and also on the basis of different geographical areas and would also take into account the arduousness of work, hazardous occupations or processes or underground work. EQUAL REMUNERATION The Code prohibits any discrimination in an establishment among employees on ground of gender in matters relating to recruitment, payment of wages, bonus etc. by the same employer in respect of the same work or work of a similar nature requiring same skill, effort, experience and responsibility when performed under similar working conditions by employees.

Floor Wage:

Revision every 5 years:

The Central Government shall fix floor wage for different geographical areas so as to ensure that no State Government fixes the minimum wage below the floor wage.

The appropriate Government shall review or revise minimum rates of wages ordinarily at an interval not exceeding five years.

No Employer shall pay to any employee wages less than the minimum

Time Rate/Piece Rate:

rates of wages

Minimum Wages may be fixed at piece rate and time rate basis by the hour, by the day or by the month and also for piece work.

notified under the Code.

PAYMENT OF WAGES The Code provide for payment of all wages in current coin or currency notes or by cheque or by crediting the wages through digital or electronic mode in the bank account of the employee except as may be notified by the appropriate Government in specified industrial or other establishment in which wages to be paid only by cheque or by crediting in bank account.

As per Section 17 of the Code, the employer shall pay wages to the employees, engaged on daily basis, at the end of the shift; on weekly basis, on the last working day of the week, that is to say, before the weekly holiday; on fortnightly basis, before the end of the second day after the end of the fortnight; on monthly basis, before the expiry of the seventh day of the succeeding month.

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CLAIMS

LIMITATION

APPEALS

Claims can be raised by the employee concerned, or any trade union registered under the Trade Unions Act, 1926 of which the employee is a member, or by the Inspector-cum-Facilitator.

The period of limitation for filing of claims by a worker has been enhanced to three years, as against the existing time period varying from six months to twelve months.

Appeals may be filed against the Orders of the Authority within 90 days from the date of such Order.

COMPOSITION OF OFFENCE Only the offences for which there is no punishment with imprisonment may be compounded. The compounding money shall be a sum of fifty per cent of maximum fine.

RECORD, RETURNS & INSPECTIONS

Every employer is required to maintain a register containing the details with regard to persons employed, muster roll, wages and such other details in such manner as may be prescribed.

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Every employer is required to issue wage slips to the employees in the form prescribed. OFFENCES & PENALITIES The quantum of penalties and fines has been increased that may extend to Rs. 50,000 in case of violations. The Enhanced penalties shall be imposed on the employer who is again found guilty of similar offence already committed by him, for which he has been convicted. In such repeat offences he shall be pun-

ishable with imprisonment for a term which may extend to three months or with fine which may extend to one lakh rupees, or with both. The Inspector-cumFacilitator shall give an opportunity to the employer to comply with the provisions of Code by written directions before proceeding with the initiation of prosecution.

ACCURACY OF BALANCE SHEETS Balance sheet and profit & loss account duly audited by the auditors duly qualified to act as auditors of companies under Companies Act, 2013, shall be presumed to be accurate and it shall not be necessary for the corporation or company to prove the accuracy of such statements.

This Code empowers employee and trade unions to file criminal complaints directly against the employer which the old laws did not provide.

ENQUIRY OF OFFENCES To reduce the burden on subordinate judiciary, the power to impose penalty/ fines has been given to officer not below the rank of Under Secretary to the Government of India or an officer of equivalent rank in the State Government to dispose of cases punishable only with fine up to fifty thousand rupees.

This article is prepared by Advocate Puneet Gupta. The author is the third generation practicing consultant in the family of professionals engaged in the field of Industrial & Labour Laws, having presence in the region since 1942. You may reach the author at : Email: [email protected] Mobile: +91 98720 46812 -

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Disclaimer: This article is prepared and furnished for information and knowledge enhancement of all interested. You may choose to reproduce or redistribute this article for non-commercial purposes in part or full to any other person with due acknowledgment of the author. The opinions and analysis expressed herein are entirely those of the author. Even though the author has used his extensive experience and knowledge in analyzing the Code, it is not to be taken as complete and accurate in all respects. This article has been prepared without regard to the objectives or opinions of those who may receive it.