Code on Wages (Code)—Part 1

By greytHR
2 minute read ● August 31, 2021
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Code on Wages (Code)—Part 1

What happens when sweeping changes happen to labor legislation?

Some might fret. Some will adapt. Others could play a waiting game. But the overall response will largely depend on the impact on the concerned organizations and the readiness of their people.

The Code on Wages, 2019 (Code), a case in point, is all set to make a marked change to businesses and employees across the country. Passed by the Parliament of India, the Code subsumes and simplifies these four labor laws on wages and bonuses:

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

  • Can this long-awaited Code simplify the obligations of employers without compromising the rights of workers?
  • Have all the salary components, including OT, ESOP, and variable pay, been considered in the new provisions?
  • How will all the employees/workers know the Code’s impact on their take-home salary and Provident Fund?
  • Will the Code be enforced in the blink of an eye and surprise employers, employees, and the industry?

The Code on Wages Webinar

We had the answers to most of the questions. But we were seeking an expert opinion. So we invited two senior professionals from the government and private sectors to discuss the implications of this reformatory Code. In a candid conversation, we asked them for their unbiased opinions. They not only revealed the pros and cons but also shared their pointers with a dash of humor.

The speakers of this edition of the Parichay webinar series were:

The webinar turned out to be an eye-opener. Here are our key takeaways:

  • Unique in many aspects, the Code on Wages amalgamates the essential elements of four existing laws
  • Unlike the Minimum Wages Act, this Code applies to everybody at every level ‒ workers, supervisors, and managerial personnel.
  • The new Code brought everything under a single authority and appointed an Appellate Authority.
  • It clearly defines the wage, inclusions, and exclusions while fixing the responsibility of the employer.
  • The Central Government will fix a Floor Wage, the lowest or minimum wage paid to employees across regions.
  • The Code makes a provision for equal pay and employment opportunities to all genders.
  • One can take up to three years to file any payment-related claim; it was just 12 months earlier.
  • The new provisions facilitate speedy disposal of cases and ensure that a law-abiding employer doesn’t face unnecessary hassles.

In Summary

The Code on Wages, a bold government step, will do more than amalgamate and simplify four existing laws. It’s expected to introduce more uniformity, accountability, and transparency to the system. The Code has its ambiguities and limitations but is certainly not a cause for concern. Enough time will be given to everybody to do all the homework, including a compliance strategy accepted and understood by both the employer and employees.

Stay tuned for the following posts from this three-part blog series.

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