Article Detail

The Code on wages is labour code which replaced following four Acts forming into a single Code:-

1. Payment of Wages Act
2. Minimum Wages Act
3. Payment of Bonus Act
4. Equal Remuneration Act

The Code was passed in the Parliament on 2^nd August 2019. The Act came into effect on 8^th August 2019; Code on wages is a comprehensive and consolidated structure of Labour and Employment.

Section 2(y) of the Code on wages states:-

“"wages" means all remuneration whether by way of salaries, allowances or otherwise, expressed in terms of money or capable of being so expressed which would, if the terms of employment, express or implied, were fulfilled, be payable to a person employed in respect of his employment or of work done in such employment, and includes,—

1. basic pay;
2. dearness allowance; and
3. retaining allowance, if any,

but does not include––

1. any bonus payable under any law for the time being in force, which does not form part of the remuneration payable under the terms of employment;
2. the value of any house-accommodation, or of the supply of light, water, medical attendance or other amenity or of any service excluded from the computation of wages by a general or special order of the appropriate Government;
3. any contribution paid by the employer to any pension or provident fund, and the interest which may have accrued thereon;
4. any conveyance allowance or the value of any travelling concession;
5. any sum paid to the employed person to defray special expenses entailed on him by the nature of his employment;
6. house rent allowance;
7. remuneration payable under any award or settlement between the parties or order of a court or Tribunal;
8. any overtime allowance;
1. any commission payable to the employee;
10. any gratuity payable on the termination of employment;
11. any retrenchment compensation or other retirement benefit payable to the employee or any ex gratia payment made to him on the termination of employment:

Provided that, for calculating the wages under this clause, if payments made by the employer to the employee under clauses (a) to (i) exceeds one-half, or such other per cent. As may be notified by the Central Government, of the all remuneration calculated under this clause, the amount which exceeds such one-half, or the per cent. So notified, shall be deemed as remuneration and shall be accordingly added in wages under this clause:

Provided further that for the purpose of equal wages to all genders and for the purpose of payment of wages, the emoluments specified in clauses (d), (f),(g)and(h) shall be taken for computation of wage.”

Major impacts on Employers:

Previously, all the four Acts contained different definitions of ‘Wages’ which was arduous even for the Enforcement Authorities while checking the records maintained.

Moreover, the definition of Wages under Minimum Wages Act under section 2 (h) stated:-

“"wages" means all remuneration, capable of being expressed in terms of money, which would, if the terms of the contract of employment, express or implied, were fulfilled, be payable to a person employed in respect of his employment or of work done in such employment, [1] [and includes house rent allowance]”

Here, House Rent Allowance was included under minimum wages; thus, many employers’ divided Minimum wages under head of Basic Wage and House Rent Allowance. Even SC was of the same opinion (G4S Security Services v/s APFC)[2] to minimise the burden of Statutory Provident Fund.

With the implementation of this Code, employers cannot split wages under the head of HRA counting same as a part of Minimum Wage. Thus, there’s an extra burden on the part of the employers for Provident Fund.

Furthermore, none of the previous definitions of all four acts mentioned about the percentage criteria of the allowances with reference to the wages. Definition of Wages, under the Codes of Wages, 2019 states the percentage criteria of the allowances which should not be greater than fifty per cent of the wages. This might impact the establishments freezing the basic wage and incrementing the allowances.

Lastly, the value of remuneration in kind, will be included in wages up to 15 per cent of the total wages.