At best, India’s labour laws are fragmented and piecemeal. There is a plethora of statutes, and very often, that makes their interpretation and application difficult. In order to simplify the Indian labour laws, a uniform labour code has been proposed. The Code on Wages Bill, 2019 (“The Bill”) has been formulated in an attempt to unify and simplify labour laws in the country.


The Bill combines four existing laws on wages and bonus, namely: The Payment of Wages Act, The Minimum Wages Act, The Payment of Bonus Act and the Equal Remuneration Act. Passed by both Lok Sabha and Rajya Sabha, the Bill is awaiting assent by the President.


The Bill stands out due to a number of features.


For starters, it applies to employees in both, organised and unorganised sectors. One key feature of the Bill which is a departure from the previous bills is its inclusiveness irrespective of wage thresholds. Unlike the Payment of Wages Act which applied only to employees earning up to INR 24000 or Minimum Wages Act which only applied to scheduled employments, the Bill is applicable to all employees.


The Bill also defines ‘wages’ as salary, allowances and other components which can be expressed in monetary terms. It has specifically excluded certain components such as conveyance and house rent allowance from the ambit of the definition of `wages’ and stated that such exclusion cannot exceed half of the total compensation. If the excluded components exceed more than half of the total remuneration paid, they shall be considered as wages. 


The Bill also aptly captures the long-standing distinctions between workmen and non-workmen. Earlier, the term employee or non-workmen was not defined in any other statute and always drew its purport from the definition of the term ‘workmen’. 

The Bill defines an ‘employee’ as , “any person (other than an apprentice engaged under the
Apprentices Act, 1961), employed on wages by an establishment to do any skilled, semi-skilled or unskilled, manual, operational, supervisory, managerial, administrative, technical or clerical work for hire or reward, whether the terms of employment be express or implied…
”. The Term `worker’ specifically excludes, inter alia, persons employed in managerial, administrative or supervisory capacity (drawing wages in excess of INR 15,000).

In consonance with its predecessor (i.e. the Equal Remuneration Act), the Bill prohibits discrimination on the basis of gender, especially in the conditions of work and payment of wages. The principle of same wages for similar work’ is embodied in the Bill.


It also introduces a new concept of ‘floor wage’ which is akin to the minimum wages fixed under the Minimum Wages Act. The only distinction is that the floor wages shall be applicable to all employees whereas minimum wages are applicable to only scheduled employments under the Minimum Wages Act. The floor wage shall be fixed after considering the minimum living standards and geographical areas. It shall be the benchmark upon which various state governments will then fix minimum wages for each state. The minimum wages fixed by state governments should not be less than the floor wage.


The Bill also provides for the mode and timeline of payment of wages. Whenever an employee is discharged from employment for whatsoever reason, he/she shall be paid his/her dues within two days. In matters of payment of bonuses, the Bill is consistent with the Payment of Bonus Act. Every establishment with 20 or more employees is mandated to pay bonus to employees who earn less than the monthly stipulated amount. 8.33% is the minimum bonus payable.


The Bill also stands out for two other noteworthy features. One, it requires state governments to appoint inspector-cum-facilitators for carrying out inspections. Two, it provides the employer the right to be heard, in the event of any violation. The Bill also prescribes a maximum penalty of INR 1 lakh and states maximum penal provision as imprisonment for a period up to three months.


The Code on Wages aims for simplification by merging four important legislations and bringing India’s wage laws under one umbrella. This will lead to better implementation. 


Earlier, there was a huge structure of officers and regulating bodies under each of these Acts. Such huge and wasteful infrastructure will now be replaced with a single system which would be sufficient to implement the provisions under the Code of Wages Bill.


The introduction of the concept of floor wage would ensure that no arbitrariness is extant in fixing state-wise minimum wages. It will also ensure that a basic minimum wage in accordance with the floor wage is being paid throughout the country. The applicability of the Code of Wages to all employees is also a welcome step. Amalgamation of all the important provisions in one place and a uniform definition of wages shall go a long way in reducing legal disputes pertaining to interpretation.


It is high time that India attempts to simplify its legal system and the plethora of legislations that exist. Having a single point system and one unified law would be easier for people to comprehend and comply with as well as easier for authorities to implement. It will also be cost effective as multiple agencies and officers will not be required and one infrastructure would be adequate to apply and implement the law.

Soumya Shekhar

Soumya Shekhar is an independent legal research consultant based out of Hyderabad. She routinely writes on legal issues.

The views and opinions expressed in the article are those of the authors and do not necessarily reflect the official policy or position of The Tilak Chronicle and TTC Media Pvt Ltd.

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