LEGAL UPDATE
D E CO DI NG
T H E CO D E O N
2 01 9
BY PUNEET GUPTA, ADVOCATE
FOUR STATUTES AMALGAMATED IN WAGE CODE
In a push to merge 44
INSIDE THIS
ARTICLE labour laws, into a set of
four labour codes, the
DEFINITIONS 2 ted.
Central Government has
brought the Code on Wag-
PAYMENT OF 2 es, (Bill) 2019, that has
BONUS
been passed by both the
houses of Parliament and
MINIMUM
WAGES
3 would soon become an
Act after assent accorded
EQUAL REMU-
by the President of India.
3
NERATION The Code shall amend
and consolidate the laws
PAYMENT OF 3 relating to wages and bo-
WAGES
nus and matter connected
therewith or incidental
CLAIMS/ 4
APPEALS/ thereto. The Code on Wag-
OFFENCES
es (hereinafter referred to
RETURNS/ 4 as ‘Code’) amalgamates
INSPECTIONS
various provisions con-
tained in four statutes: the
Payment of Wages Act of
1936, the Minimum Wag-
APPLICABILITY, EXTENT & COVERAGE
The Code has been
made applicable on es-
tablishments without
providing for any thresh-
old limit i.e. without any
minimum ceiling of num-
ber of employees. How-
‘Wage Code’ a superpower
ever, a threshold limit of
for employees. 20 or more employees
has been provided in the
Code for the application
of Chapter IV (Payment
of Bonus) on the estab-
lishments.
WAG E S ,
es Act of 1948, the Pay-
ment of Bonus Act of
1965 and the Equal Re-
mun 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 defini-
tion of worker and employ-
ee and makes labour in-
spectors, inspector-cum-
facilitator. 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 em-
ployee.
Unlike the repealed Acts,
the Wage Code applies
to all category of employ-
ees, irrespective of any
wage ceiling or employ-
ment in a scheduled Em-
ployment. However, for
the purposes of payment
of bonus, the employees
earning above a certain
limit (as may be pre-
scribed), shall stand ex-
cluded for payment of
bonus.
MAJOR CHANGES
· Country’s two-fifth population i.e.
50 crore workers would be benefit-
· Only MNREGA worker will not
come under it.
· Code bring Domestic and Agricul-
ture workers in its ambit.
· Code prohibits gender discrimina-
tion even in recruitment and condi-
tions of employment.
· Schedule Employments’ abolished-
Code 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 noti-
fied.
· Payment of Bonus through Bank
transfer only.
· Inspector becomes Inspector-cum-
Facilitator, obligated to give ad-
vice to employers & workers relat-
ing to compliance.
· Time limit for preservation of rec-
ords done away with.
· Scope of the term ‘employee’ now
takes in its ambit the persons
engaged in supervisory, manageri-
al & administrative work.
 DECODING
Page 2
THE CODE ON WAGES, 2019

HRA and Conveyance allowance specifi-

cally excluded from the wage definition
besides few more components. But the
INTERPRETATION & DEFINITIONS adding back of allowances exceeding
50% as wages would hurt business bad-
ly, as the bonus would be calculated on
the increased wages. Thus, there is a
“Wages” [Sec. 2(y)]: The term has been defined exhaustively under the Wage Code tak- need to have a relook in Compensation
ing into its sweep few inclusions but long list of exclusions. It also provides that where
Packages (wage structures) in light of
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 remunera- above changes.
tion and shall be accordingly added in wages.

“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 oth-
er 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 estab-
lishments 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, irre-
spective 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 calcu-
lated 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 high-
er.
Minimum and Maximum Bonus:
The Code provides for a mini-
mum of 8.33% and maximum of
20% of bonus.
A complete procedure
for calculating the allocable sur-
plus profits etc. and the provi-
sions for set-on and set-off has
been given under this Chapter.
LEGAL UPDATE
PAYMENT OF BONUS
Different Departments or
undertakings and branch-
es may have different
rate of bonus: Where for
any accounting year a
separate balance sheet
and profit and loss ac-
count 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 sep-
arate establishment for
MINIMUM WAGES
Minimum wages for dif-
ferent categories and
geographical areas:
The fixation/revision of
minimum wages has to
be done taking into con-
sideration the skill of
workers, viz unskilled,
skilled, semi-skilled and
highly-skilled and also on
the basis of different geo-
graphical areas and
would also take into ac-
count the arduousness of
work, hazardous occupa-
tions or processes or un-
derground work.
EQUAL
REMUNERATION
The Code prohibits any
discrimination in an es-
tablishment among em-
ployees on ground of gen-
der 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 requir-
ing same skill, effort,
experience and responsi-
bility when performed
under similar working
conditions by employees.
Page 3
the purpose of computa- services, from the pay-
tion of bonus for the ac- ment of bonus until such
counting year. establishment or branch
derives any profits. Fur-
Infancy period for newly
ther, such Establishment
setup establishments
or branch will be liable for
and for departments or
payment of bonus only
undertakings or branches
for that accounting year,
set up by existing estab-
where it derives the prof-
lishments:- The Wage
its. During the infancy
Code provides an infancy
period of 5 years the pro-
period of 5 years follow-
visions of set-on and set-
ing the year in which the
off will not apply to such
employer sells the goods
establishment or branch
manufactured or render
etc.
Floor Wage: Revision every 5 years:
The Central Government The appropriate Govern- No Employer
shall fix floor wage for ment shall review or re-
different geographical vise minimum rates of shall pay to any
areas so as to ensure wages ordinarily at an
that no State Govern- interval not exceeding
employee
ment fixes the minimum five years. wages less than
wage below the floor
wage. the minimum
Time Rate/Piece Rate: rates of wages
Minimum Wages may be notified under
fixed at piece rate and
the Code.
time rate basis by the
hour, by the day or by the
month and also for piece
work.
PAYMENT OF WAGES
The Code provide for pay- As per Section 17 of the
ment of all wages in cur- Code, the employer shall
rent coin or currency pay wages to the employ-
notes or by cheque or by ees, engaged on daily
crediting the wages basis, at the end of the
through digital or elec- shift; on weekly basis, on
tronic mode in the bank the last working day of
account of the employee the week, that is to say,
except as may be notified before the weekly holi-
by the appropriate Gov- day; on fortnightly basis,
ernment in specified in- before the end of the
dustrial or other estab- second day after the end
lishment in which wages of the fortnight; on
to be paid only by cheque monthly basis, before the
or by crediting in bank expiry of the seventh day
account. of the succeeding month.
LEGAL UPDATE Page 4

CLAIMS LIMITATION APPEALS

Claims can be raised by The period of limitation Appeals may be filed

the employee concerned, for filing of claims by a against the Orders of the This Code
or any trade union regis- worker has been en- Authority within 90 days empowers
tered under the Trade hanced to three years, as from the date of such employee and
Unions Act, 1926 of against the existing time Order. trade unions to
which the employee is a period varying from six file criminal
member, or by the In- months to twelve months. complaints
spector-cum-Facilitator. directly against
the employer
COMPOSITION OF OFFENCE which the old
laws did not
Only the offences for which there is no punishment with imprisonment may be com- provide.
pounded. The compounding money shall be a sum of fifty per cent of maximum fine.

ACCURACY OF
RECORD, RETURNS & INSPECTIONS BALANCE
SHEETS
Every employer is re- Balance sheet and profit
quired to maintain a reg- & loss account duly audit-
ister containing the de- ed by the auditors duly
tails with regard to per- qualified to act as audi-
sons employed, muster tors of companies under
roll, wages and such oth- Companies Act, 2013,
er details in such manner - - shall be presumed to be
as may be prescribed. accurate and it shall not
be necessary for the cor-
Every employer is
poration or company to
required to issue wage
prove the accuracy of
slips to the employees in
such statements.
the form prescribed.
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 Gov-
ernment of India or an of-
ficer of equivalent rank in
the State Government to
dispose of cases punisha-
ble only with fine up to fifty
thousand rupees.

OFFENCES & PENALITIES This article is prepared by Advocate

The quantum of penalties
and fines has been in-
creased that may extend
to Rs. 50,000 in case of
violations.
The Enhanced
penalties shall be im-
posed on the employer
who is again found guilty
of similar offence already
committed by him, for
which he has been con-
victed. In such repeat
offences he shall be pun-
ishable with imprison- Puneet Gupta. The author is the third
ment for a term which generation practicing consultant in the
may extend to three family of professionals engaged in the
months or with fine which field of Industrial & Labour Laws, hav-
may extend to one lakh
ing presence in the region since 1942.
rupees, or with both.
You may reach the author at :
The Inspector-cum-
Facilitator shall give an Email: ad.puneet79@gmail.com
opportunity to the em-
ployer to comply with the Mobile: +91 98720 46812
provisions of Code by - -
written directions before
proceeding with the initia-
tion of prosecution.

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