• Payment of Bonus
  • Section 26 states that the Wages ceiling for eligibility for Bonus and calculation of Bonus has to be fixed by the Appropriate Governments.
  • The minimum bonus shall be paid on an annual basis at the rate of 8.33% (eight and one-third percent) of the wages or Rs. 100 whichever is higher, irrespective of the employer having an allocable surplus of the previous accounting year.
  • Section 28 states that the employee shall be disqualified from receiving bonus under this Code, if he is dismissed from service for:
    • fraud
    • riotous or violent behaviour while on the premises of the establishment
    • theft, misappropriation or sabotage of any property of the establishment; or
    • conviction for sexual harassment.
  • Section 36 states that if the allocable surplus exceeds the minimum bonus payable to employees, the employee shall be entitled to receive the bonus in proportion to their wages, subject to a maximum of 20% of their wages.
  • Section 31 envisages that the allocable surplus shall be calculated in accordance with the provisions of the Code. It shall be equal to 60% in the case of a banking company and 67% in the case of other establishments, of the available surplus. The available surplus shall be the gross profits of that accounting year minus certain deductions i.e., depreciation admissible under income tax and direct tax that the employer is liable to pay.
• Equal Remuneration
  Section 3 has included the word ‘gender’ so as to widen the duty of an employer to pay equal wages to its employees, thereby promoting gender equality.
  The amendment will ensure no discrimination in payment of wages amongst males, females and individuals falling within the definition of ‘transgender’.
  The organization has the responsibility to pay equal remuneration to male and female employees who perform the same type of work or work of a similar nature. This equal remuneration extends to all genders, including transgender individuals, regarding house rent, allowances, conveyance allowance, or any remuneration payable under any settlement or award.
• Limitation period for claims
  The period of limitation for filing of claims for minimum wages, bonus, equal remuneration etc., by workers has been enhanced to 3 years as against existing time period varying from 6 months to 2 years, to provide more time to file their claims.
• Advisory Boards
  Section 42 of the code states that The central and state governments will constitute advisory boards. The Central Advisory Board will consist of:
  • employers
  • employees (in equal number as employers)
  • independent persons, and
  • 5 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.
• Penalties for Employers:
  Under Section 54, employers who violate the new codes face specific fines and potential imprisonment, depending on the nature and frequency of the offense:
  • Underpayment of Wages (First Offense): If an employer hires an employee under the code and pays less than the required amount, they shall be held liable for a fine of up to ₹50,000.
  • Underpayment of Wages (Repeat Offense): If that same employer commits the same offense again within five years of the first offense, they are liable for imprisonment of up to three months, or a fine of up to ₹1,00,000, or both.
  • General Violations of Orders or Rules (First Offense): If an employer breaks any other order or rule made under the code (e.g., related to working hours, notices, but other than underpayment or record keeping), they shall be held liable for a fine of up to ₹20,000.
  • General Violations of Orders or Rules (Repeat Offense): If the employer is found guilty of a similar general violation again within five years of a previous conviction, they are liable for imprisonment of up to one month, or a fine of up to ₹40,000, or both.
  • Failure to Keep Proper Records: If an employer fails to keep proper records or keeps faulty records for the establishment, they shall be liable for a fine of up to ₹10,000.
• Composition of offences:
  If an employer has committed an offense for which the punishment includes both imprisonment and a fine, that offense can be settled (compounded) by a Gazetted Officer specified by the government. This settlement is only possible if the accused person applies to settle the violation either before or after a prosecution has started. The accused must pay 50% of the maximum fine decided for that specific offense. However, an offense cannot be settled if it is committed for a second time, or within five years of committing the first offense.
  Once an offense is compounded, no further legal action shall be started against the employer for that specific violation. The power of the Gazetted Officers to compound the offense shall be subject to the control, supervision, and direction of the appropriate government. In cases where the compounding of the offense takes place after prosecution has begun, the court shall be notified about the compounding of the offense.
  • Other provisions
    • Pursuant to enactment of the Code, Section 8(2) will stipulates a procedure to fix minimum wages and it will become a right of every worker thereby providing legislative protection to workers in the unorganized sector as well.
    • Inclusion of workers in the committee will ensure appropriate representation of the workers in procedure for determination of wages and while considerations for fixing & revising minimum wages.
    • This Code seeks to provide a methodology to be followed by the Appropriate Government which is primarily based on the skills of the workers.
    • Arduousness of working conditions of workers such as temperature or humidity normally difficult to bear, hazardous occupations, processes or underground work are to be considered while determining and/or revising the wages by the Government
    • Duty of Inspectors & Penalties
      The code provides the appropriate government to appoint Inspectors-cum-Facilitators (in the place of Inspectors), to carry out inspections. Such Inspectors-cum-Facilitators may advise employers and employees for better compliance. This has been done with the objective of removing the arbitrariness and malpractices in inspection.
      The maximum penalty for any offence is limited to imprisonment for three months and/ or with a fine of up to INR 100,000.
    • Role of Labour authorities: The new code where the Inspector-cum-Facilitator who shall give opportunity to the first-time employer to rectify their mistake of non-compliance prior to initiating action. In case of repetition of the same or other offence within the five years of committing the first offence, the relaxation of rectify the mistake shall not be given.

POINTS TO WATCH OUT

• Section 9 of the Code introduces the concept of ‘floor wage’ which is to be fixed by the Central Government for different geographical areas taking into account the minimum living standards and Section 9(2) of the Code prohibits the State Government from lowering their minimum wages below such floor wage as may be fixed by the Central Government.
• This will increase the business labour cost and therefore the industries will hire less workers to keep the total labour costs same which will result in increase of unemployment rate.
• The code shall bring social disparity as minimum wages are to be fixed at varying rate from states to states or zones to zones depending upon the geographical conditions as; North zone, South zone, East Zone, West zone and North East zone. This may lead to job outsourcing as industries/establishments can move their facilities to countries where labour costs are lower.
• The new Code can also raise the cost of living as higher wages will allow the employees to pay more for housing and living.

CONCLUSION

Thirty-four States/Union Territories (UTs) have pre-published the draft rules under the Code on Wages, which are yet to be notified and implemented. Three States have notified the rules under the Code on Wages.

It is expected that after its implementation, the Wage Code will cover more than 50 crore employees and ensure the "Right to Sustenance" for every worker by increasing the legislative protection of minimum wages. This is a welcome move, making India a more formal economy and helping fulfill India's aim to become a $5 Trillion economy. Due to this initiative, employment in India is projected to show remarkable growth, rising from 47.5 crore in 2017-18 to 64.33 crore in 2023-24—a net addition of 16.83 crore jobs in just six years.

The Code on Wages, 2019, promotes equity, fairness, and inclusion in India’s labour market. It will ensure social security and uniform wage security, safeguarding both employers' interests and workers' rights. The code is going to empower both enterprises and workers, building a workforce that is productive and protected, and aligning with the evolving world of work. This may pave the way for a more resilient, self-reliant, and competitive nation.

The HR, Legal, Finance and business users must familiarise themselves with the code and evaluate potential impact on their operations and make use of time in hand before states start rolling out their rules.