The Code on Wages 2019: To what extent does it helps the Indian worker?

e bill is aspirational, symbolic and lacks credibility because the government simply does not have the enforcement wherewithal to implement it on such a big scale - Economist Prof KR Shyam Sundar

Over the past year, the government has taken steps to consolidate India’s complicated patchwork of labour laws into four codes. The Code on Wages, 2019, which received presidential assent on August 8, is the first of the codes to come into effect. This Wages Code has been enacted with the express objective of simplifying the Indian law on minimum wages and proposes to bring all workers in both the organised and unorganized sectors within its purview.

What is the Code on Wages 2019?

The Code on Wages, 2019 was introduced in Lok Sabha by the Minister of Labour, Mr. Santosh Gangwar on July 23, 2019. The Lok Sabha on July 30 had cleared The Code on Wages Bill, 2019, followed by the Rajya Sabha’s nod on August 2. The Bill was earlier introduced in Lok Sabha in August 2017, and was referred to the Parliamentary Standing Committee, which submitted its report in December 2018.

The Code basically seeks to universalise the provisions of minimum wages and timely payment of wages to all employees irrespective of the sector and wage ceiling. The Government notified the Code after it received assent from the President of India on August 8.

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.

 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.

According to the new law, a tripartite committee comprising representatives of trade unions, employers and the state government would fix floor wages for workers throughout the country.

It would also ensure that there is no discrimination between men and women as well as transgenders in getting wages.

There were 12 definitions of wages in various labour laws, leading to litigation besides difficulty in its implementation. Under the Code, the definition has been simplified and is expected to reduce litigation and also reduce compliance cost for employers.

According to the Code, the central government will fix a floor wage, taking into account 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.   

Reactions on the Code Bill

Since the Bill on the Code was first introduced, it has been attracting reactions from all sides. The RSS-affiliated Bharatiya Mazdoor Sangh (BMS) viewed the Code as a historical and revolutionary step. The BMS president CK Sajinarayanan says with this the last worker would now be covered with the minimum wages, instead of just those in the scheduled employment.

The Left-backed Centre of Indian Trade Unions (CITU) however has several objections. Its general secretary Tapan Sen says the formula for fixing minimum wage had been kept out of the Bill despite the fact that there is unanimity on this and which was also reiterated at the 46th Indian Labour Conference in 2015 attended by Prime Minister Narendra Modi. By not putting the formula in place, the bill leaves it at the government’s complete discretion, he reasoned.

Besides, he added, the definition of ‘wage’ is confusing, too long (42 lines) and too difficult to determine what wage is as per this definition. He questions different floor rates for different geographical areas, saying that makes the concept of a national rate “a deceptive ploy to mislead people”.

Sen further points out that the Bill defines ‘worker’ and ’employee’ differently in a deliberate attempt to leave room for exploitation of workers. This is in spite of the Parliamentary panel’s recommendation for a common and comprehensive definition of employee/worker to avoid discrimination between employees and workers for the purpose of minimum wages. That would have also brought clarity for implementation.

Economist Prof KR Shyam Sundar of the XLRI’s Xavier School of Management, Jamshedpur, says the bill is aspirational, symbolic and lacks credibility because the government simply does not have the enforcement wherewithal to implement it on such a big scale.

But to what extent will it help the Indian worker?

Anupama Kumar, who works at the Social Protection Initiative at Dvara Research, argues in Scroll.in that the Code fails to provide any real benefits to Indian workers. Kumar argues that it provides no guidelines to account for minimum consumption by households, despite the Supreme Court’s statements. Instead, it provides that the minimum wage is to be fixed with reference to the “the skill of workers required for working under the categories of unskilled, skilled, semi-skilled and highly-skilled or geographical area or both,” and may consider the “arduousness of work” performed.

In other words, it implies, workers could be left no better off than they are today.

Besides, Kumar adds, it must be noted that the floor-level minimum wage is purely indicative. States may continue to fix minimum wages below this figure. In fact, the Periodic Labour Force Survey, 2017-’18 reports that the average daily wage among some classes of workers in rural India continues to fall below this level.

Moreover, the Code only applies to establishments with more than 20 workers. This limit automatically excludes large numbers of informally employed workers, including commission or piece-rate workers, or those who work in the gig economy. 

Unlike even the Minimum Wages Act, it makes no provision for out-workers, who are contracted to work at home. Such workers may find themselves earning far below the amount required to satisfy their basic needs, but yet required to make contributions to social security or face criminal consequences for their failure to do so. In other words, the Wages Code may well not apply to those most in need of protection.

This means employers may also now have a perverse incentive to employ workers under informal arrangements or through intermediaries to avoid the application of the Code.

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