Since the dawn of the Industrial Age, there have been quite a few disputes regarding the wages between the workers and the businessmen the world over. The current dispensation at the Centre has enacted The Code on Wages to take care of such disputes. It replaces – the Payment of Wages Act, the Minimum Wages Act, the Payment of Bonus Act, and the Equal Remuneration Act; staying true to its preamble which states – “An Act to amend and consolidate the laws relating to wages and bonus and matters connected therewith or incidental thereto”. It is the first in a series of labour codes that will take care of India’s ever-increasing workforce.

This Code has an unprecedented ambit. This becomes quite clear by the conspicuous absence of the eligibility threshold that existed in Section 4(6) under the Payment of Wages Act, and also by explicitly laying down in the definition of the ‘employer’ that they can also employ indirectly through a ‘contractor’, thus contractual employees also come under its scope. In addition to that, the definition of ‘employee’ has been widened to include persons engaged in managerial, supervisory, and administrative work. The Wage Code has also moved ahead of the concept of ‘scheduled employment’, which is enshrined in the Schedule annexed in MWA and also in Section 1(4) read with sub-clauses (a) to (g) of clause (ii) of Section 2 of POWA, meaning thereby that minimum wages must be paid across all industries.

The Way Forward 

Under the Code, the Central government has done away with the archaic practices like getting rules made for carrying into effect the provisions of this Code by the appropriate government, ratified by the Parliament or relevant legislatures, respectively (which is laid under Section 26(6) of the POWA; Section 38(3) of the Payment of Bonus Act (POBA); Section 30A of the MWA; and also Section 13(3) of the Equal Remuneration Act (ERA)).

Moreover, under the Code, the Central government’s control over the State governments is limited to fixing the floor wage under Section 8, and in respect of matters relating to issues referred to the Board under Section 42(3)(d), which is in contrast to the power bestowed on the Central government to give directions to the State government for the execution of the Act (under Section 28 of the MWA, and Section 14 of ERA).

Under Section 6(3),

the appropriate government will fix minimum rates of wages on the time work basis; both for the employees that are employed on a time work basis as well as those employed on a piece work basis; similar to the manner provided in Section 3(2)(c) read with Section 17 of the MWA. Under Section 6(6) of the Code, the appropriate government will also take into account factors like the skill of workers, geographical area, and arduous nature of the work, etc. for fixing the minimum rate of wages.

Under Section 42 of the Code,

‘Advisory Boards’ at the central and state level are set up for advising the appropriate government; (i) regarding fixation of minimum wages and other connected matters; (ii) for the purpose of providing increasing employment opportunities for women or; (iii) with regard to the extent to which women may be employed in such establishments or employments as the appropriate Government may, by notification, specify in this behalf (iv) in any other matter relating to this code.

These boards are an attempt to bring all the stakeholders to the table. Keeping the sensitivities of industrial disputes in perspective; the employer and employee segments have been given equal representation. While on the other hand it has been stipulated that one-third of members will be women. It is only through the aid and advice of these boards; the appropriate government is mandated to exercise its power under the Code.

What is a Wage?

According to the MWA, wages were defined as all remunerations, capable of being expressed in terms of money; which will be payable in respect of the employment. The POBA adds dearness allowance to the definition of wages given by the MWA. On the other hand, according to the Code, the ‘wage’ includes basic pay, dearness allowance, and; as well as retaining allowance, if any. Just like MWA, the Code excludes components like contribution paid by the employer to any pension or; provident fund, conveyance allowance, house rent allowance, overtime allowance, gratuity payable on the termination of the employment, etc. It is stipulated that the excluded components cannot exceed one-half of the employee’s wages or; such other percentage as notified by the Central government. If the amount exceeds, then the exceeding amount will be considered as wages.

The Code has maintained the same percentage of bonus as stipulated under Section 10 of the POBA; according to Section 26 of the Code, the bonus will be at least 8.33% of the employee’s wages or Rs 100, whichever is higher, along with the bonus the employees will also partake the gross profits proportionally to their annual wages. The employees whose wages do not exceed the specific monthly amount as specified by the central or; state government will be entitled to an annual bonus. An employee can only receive a maximum bonus of 20% of his annual wages.

According to Section 15 of the Code,

the wages will be paid in coins, currency notes, by cheque, by crediting the wages in the bank account, or by electronic mode. And as per Section 16, the employer can set the wage period as daily, weekly, fortnightly, or monthly, subject to the condition that no wage period in respect of any employee shall be more than a month.

Other Provisions

The Code essentially picks verbatim, the provisions regarding fixing the hours of the normal working day and the provisions for the payment for the work done beyond the normal working hours from the MWA, laid in Sections 13 and 14 of the aforementioned Act. Thus, the appropriate government may set the total hours constituting a normal working day, and; pay an overtime wage to an employee who works in excess of the normal working day according to Section 14 of the Code. The Code fixes the overtime rate at twice or more than the normal rate of wages. Along with being entitled to overtime, an employee’s wages can also be deducted in accordance with Section 18(2) of the Code for reasons including – absence from duty, damage to or loss of goods expressly entrusted to an employee, among others, which is in consonance with the provisions of the POWA.

Section 3 of the code,

states that no discrimination can be made by the employer on the basis of the sex of the employee hired for the work of similar nature and in the conditions of employment, which is an affirmation to the principle laid down in Section 4 and 5 of the ERA. This provision can also be extrapolated to endow due recognition on the third gender.

Carrying on the legacy of the previous Acts (Section 10 – 12 of ERA; Section 22 – 22C of MWA; Section 28 – 30 of POBA), the Code has been given teeth in the form of imprisonment and; penalties for offences under chapter VIII.

The Wage Code has very efficiently trodden the tight rope balancing the rights of the employer and the employee, so it seems and has gone a step further to ensure compliance, by providing that even an employee or a registered Trade Union can file a complaint before a Court of Law for persecuting the employer; there cannot be a better mechanism than this to ensure that the employers are pliable.

The Code has diverged from the traditional role of ‘Inspector’, as has been laid down in all the previous Acts (Section 9 of ERA; Section 19, 22F(2) of MWA; S. 27 of POBA; Section 14, 14A of POWA), the code is supposed to supplant. It envisages the office of ‘Inspector-cum-Facilitator’ whose job will be not only to conduct inspection but; also facilitate the compliance of norms by the employer and employee by removing the lacunae in the inspection process. Inspections may be conducted through a web-based digital system. Which is a welcome step in view of the larger ‘Digital India’ vision.


Considering the fact that; there are around 45 federal laws and 100 state-level laws focusing on various aspects of labour and employment. One can find it absolutely mind-boggling to resolve a labour dispute. Instead of finding a solution, due to the multiplicity of laws; one can only find himself getting stuck in a logjam. The consolidation of labour laws is a welcome step, as this code might impact around 500 million workers across India. But it seems that most of the significant features of the previous laws remain as it is; which makes one think that whether this is a cut-and-paste job or is it a reform.


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