Code on Wages Bill 2019 - Why is it a Game-Changer?

On 23 July 2019, the Code on Wages Bill was introduced and passed in the Lok Sabha. This bill, if made into law, will improve the standard of living of about 50 crore workers across the nation and provide legislative protection against labour exploitation, which is a problem faced by the citizens working in the unorganised sector.

What is the Code on Wages Bill?

It is one of the four codes that seek to improve the ease of doing business and attract investments into the Indian economy to improve its growth and development.
The four codes will encompass wages, social security, industrial safety and welfare, and industrial relations.
These codes will subsume 44 existing labour laws through certain amendments to solve contemporary labour and related issues.
The Code on Wages Bill, 2019 incorporates the four existing laws –

The Minimum Wages Act, 1948
The Payment of Wages Act, 1936
The Payment of Bonus Act, 1965
The Equal Remuneration Act, 1976.

If this bill is made into law, it will repeal the above-mentioned laws.
The Code on Wages Bill earlier introduced on 10^th August 2017 and was referred to the Parliamentary Standing Committee. The latter submitted the report on 18^th December 2018. It was lapsed due to the dissolution of 16^th Lok Sabha.
Thus, the new and revised bill, as per the recommendation of the Standing Committee was introduced in the Lok Sabha on 23 July 2019.

What are the features of the bill?

Replaces redundant laws: This bill seeks to replace old and obsolete labour laws. About 17 labour laws are more than 50 years old or even older than the pre-independent era. The change in the labour laws are need of the hour as a majority in the population belong in the unorganised sectors and are vulnerable to exploitation and poor standards of living. The laws that the present Bill seeks to replace are old and redundant. Among them, the Payment of Wages Act, 1936 belong to the pre-independence era while the Minimum Wages Act, 1948 is 71 years old. The laws must be in par with the current times and this bill strives to do the same.
Universalization of the provision of minimum and timely payment of wages: The existing provisions of both the Minimum Wages Act and Payment of Wages Act apply to only workers below a particular wage ceiling in the Scheduled Employment. The new bill provides provisions for timely payment of the minimum wages apply to all, irrespective of the sector or the wage ceiling. This includes the unorganised sector also.
Right to Sustenance: Every worker is included in this bill to provide the right to sustenance for all. The existing laws provide legal protection of minimum wage to only 40% of the workforce. The new bill provides 100% coverage of the same.
Inclusion of quality of life in Statutory Floor Wage: Wage Floor means the lowest wage legally permitted by the Government. The new Bill seeks to provide minimum living conditions with the inclusion of the quality of life of the workers.
A simplified definition of wage: Currently, there are about 12 different definitions of wage in the existing labour laws, making it complex during the litigation. The new definition is simplified and can help reduce litigation and require a lesser cost of compliance for the employer.
Change in the methodology: The calculation of the minimum wage is simplified. The rationalization of fixing the minimum wages is primarily based on geography, hazardousness of the work and skills rather than too much focus on the type of employment.
Digitization to enforce the Labour laws: Change has been made to improve the efficiency of the inspection to develop the productivity of the labour laws. The changes include a computerized inspection scheme, jurisdiction free inspections, etc.
Limitation period: The limitation periods have been increased to 3 years, unlike the existing labour laws which have very short limitation period. This Bill proposes uniformity for filing claims on equal remuneration, bonus, etc., as opposed to varying periods of 6 months to 2 years.
Grounds to deduct wages: According to this Bill, the employee’s wages may be deducted if:

He/she absent from duty
Accommodation is given by the employer
He/she faces fine
Recovery of advances given to the employee

What are the concerns with regards to the Bill?

Rigidity: According to the new Bill, the Central Government determines the minimum wage. The States’ minimum wages must not be lower the limitation set by the Central government. If the State Government already has set a minimum wage higher than the Central Government’s minimum wage it is not allowed to be reduced. This creates rigidity in the procedures. Also, in the bill, the period for fixing and revising the national minimum wage is 5years. The existing law provides flexibility in this regard to the State government which can change the minimum wage within the 5 years.
Dilution of gender discrimination law: The Equal Remuneration Act, 1976 provides for banning of discrimination during the remuneration. The bill prohibits gender discrimination in wage payments. However, it does not include provisions to punish gender discrimination during the recruitment process.
Difficulty in the management of the organisation: As the wages are determined by the skills, it will be difficult to maintain uniformity within the labour force. Each individual has different capabilities and skills, it will be highly difficult to manage a large workforce and determine and differentiate the skills of the workers.
Industry’s perspective not considered: The paying capacity of the industry and the performance of the employee are not considered while determining the national minimum wage.
Implementation difficulty: This Bill, though admirable, is highly difficult to be practised. Many daily wage workers have no access to banks. They are either unaware or being exploited by the banks themselves because of their limited knowledge of the functioning of the same. Thus, the unorganised sector is indirectly being exploited.

Why this bill might be a game-changer:

Increase in the employment rate: According to a study conducted by the University of California Berkely in 2017, it was found that the unemployment rate has dropped in the city of Seattle from 4.3% to 3.3% due to minimum wage. The unemployment rate may decrease due to the employer’s transparency, accountability, consideration of employee’s living condition, etc.
Increasing the demand: With the increase in the wages and living conditions of the population, the demand for goods and services will also increase. This, in turn, contributes to the economic growth and development of the country.
Prevents labour exploitation: Majority of the population are being exploited within the unorganised sector. This Bill covers the unorganised sector also. If it is implemented, the employers, if they pay lesser wages than that of national minimum wages, they will face legal repercussion.
Reduce poverty: The main causes of poverty in India are unemployment and labour exploitation. This bill seeks to eliminate the above-mentioned problems.
Improves the standard of living of the population: This Bill assures improvement in the living conditions of the population.
Transparency and Accountability: The digitization of the inspection paves the way for transparency and accountability. Inspectors/facilitators of law don’t have legal jurisdiction enabling the efficient and wider implementation of the labour laws.
Formalization of the unorganised sector: The majority of the population belong to the unorganised sector. They were not considered under the Minimum Wages Act, 1948 which include only those working under scheduled employment. According to Economic Survey 2018-19, only one-third of the workers were included under the same. This new bill seeks to change the current trend.
Security for the unskilled labour force: The unskilled/uneducated labourers are the most vulnerable section of the Indian workforce. They are either exploited or fired without any justification. This Bill allows legal proceedings against those who exploit them.
Effective utilization of the human capital: This Bill seeks to make full use of India’s largest asset – the population. India is the second-most populous country in the world. It is of the essence to make use of the human resource to enable economic growth and development of the nation.

Way Forward

This bill has the potential to safeguard the population from being exploited and improve their standard of living.
However, some issues need to be resolved. According to the current Bill, the time period to revise the minimum wage is 5 years. This should be reduced to ensure that the wages are in par with the changing scenario.

Article by: K.G.Karishma