Code on Wages: Absence of written contract makes enforcement difficult

At present there are around 40 state and central laws regulating different aspects of labour, such as resolution of industrial disputes, working conditions in factories and wage and bonus payments. The Code on Wages was introduced in the Lok Sabha in August 2017. The Code consolidates four laws related to minimum wages, payment of wages and bonus and equal remuneration. The Code is currently being examined by the Parliamentary Standing Committee on Labour. Vinayak Krishnan, analyst with PRS Legislative Research, explains the Code, in light of the recent demand by some labour unions to raise the minimum wages. Edited excerpts:

Who will be entitled to minimum wages? 

Currently, the Minimum Wages Act, 1948, lists the employments where employers will have to pay minimum wages to workers. The Act applies to the organised sector as well as certain workers in the unorganised sector, such as agricultural workers. The Centre and states can add more employments to this list and mandate that minimum wages be paid for those jobs as well. At present, there are over 1,700 employments covered under the law.  

The Code proposes that minimum wages will now be paid to all workers in the organised and the unorganised sectors. Since a large proportion of the total workforce in the country currently works in the unorganised sector, they are not covered under the Act.  The absence of a written contract has made it difficult to cover these workers under the Act and enforce various other labour laws.   

Will minimum wages be uniform across the country?

No, different states will set their respective minimum wages. In addition, the Code introduces a national minimum wage which will be set by the central government.  This will act as a floor for state governments to set their respective minimum wages. The central government may set different national minimum wages for different states or regions. For example, the Centre can set a national minimum wage of Rs 10,000 for Uttar Pradesh and Rs 12,000 for Tamil Nadu. Both of these states would then have to set their minimum wages either equal to or more than the national minimum wage applicable in that state.  In the past, experts have suggested that a single national minimum wage should be introduced for the entire country. It would ensure that workers receive a minimum income regardless of the region or sector in which they are employed.  

The concept of setting a national minimum wage exists in various countries across the world. For instance, in the UK, one wage rate is set by the central government for the entire country. On the other hand, the federal government in the US sets a single minimum wage and states are free to set their wages equal to or above this floor.

On what basis will the minimum wages be calculated and fixed? 

Currently, the central government sets the minimum wage for certain employments, such as mines, railways or ports. The state governments set the minimum wage for all other employments. These wages can be fixed on the basis of different criteria such as type of industry or skill level. For example, Kerala requires that workers in oil mills be paid minimum wages at the rate of Rs 370 per day if they are unskilled, Rs 400 if they are semi-skilled and Rs 430 if they are skilled.

The Code also specifies that the Centre or states will fix minimum wages taking into account factors such as skills required and difficulty of work.  

Will workers be entitled to overtime for working beyond regular hours?

Currently, the Centre or states define the number of hours that constitute a working day. In case an employee works beyond these hours, he is entitled to an overtime rate fixed by the government. The Centre has fixed the overtime rate at 1.5 times normal wages for agriculture and twice for other employments.

The Code proposes to fix this overtime rate at twice the prevailing wage rate.

Does the Code prohibit gender discrimination between workers?

Currently, the Equal Remuneration Act, 1976, prohibits employers from discriminating in wage payments as well as recruitment of workers on the basis of gender. Further, it prevents discrimination after recruitment in promotion, training or transfer. The Code subsumes the 1976 Act, and includes provisions which prohibit gender discrimination in relation to wages. However, the Code does not include provisions regarding discrimination in matters related to recruitment and promotion.


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