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Code On Wages Bill

The Code on Wages Bill 2019 consolidates four labour laws regarding wages and bonuses into a single code. It will come into effect on April 1, 2021. Key changes include a uniform definition of wages, prohibiting gender-based wage discrimination, empowering a tripartite committee to set a national floor wage, and capping allowances at 50% of total compensation which will impact take-home pay and PF contributions. The bill aims to simplify wage-related laws and ensure timely payment of wages for all workers in India.

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129 views2 pages

Code On Wages Bill

The Code on Wages Bill 2019 consolidates four labour laws regarding wages and bonuses into a single code. It will come into effect on April 1, 2021. Key changes include a uniform definition of wages, prohibiting gender-based wage discrimination, empowering a tripartite committee to set a national floor wage, and capping allowances at 50% of total compensation which will impact take-home pay and PF contributions. The bill aims to simplify wage-related laws and ensure timely payment of wages for all workers in India.

Uploaded by

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We take content rights seriously. If you suspect this is your content, claim it here.
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Code on Wages Bill, 2019

The Code on Wages Bill 2019, also referred to as Wage Code, consolidates provisions of four
labour laws concerning wages and bonuses, while allowing for timely payment of wages for
workers in India.
After undergoing many changes and amendments in the Parliament of India, the new bill will
come into effect on April 1st, 2021.
This article will give further details about the Code on Wages Bill 2019, within the context of
the IAS Exams.

Overview of Code on Wages Bill 2019


The government of India began considering a plan in 2015 to consolidate India’s 44 labour laws
into four codes in order to rationalize labour laws and improve ease of doing business. The other
three are the Occupational Safety, Health and Working Conditions Code, the Industrial Relations
Code, and the Code on Social Security.
The Code on Wages Bill, in turn, will subsume four laws:
1 . Minimum Wages Act (MWA)\
2. Payment of Wages Act (PWA
3. Payment of Bonus Act  (PBA)
4. Equal Remuneration Act.(ERA)
The bill was passed by the Rajya Sabha on 2 August 2019. 
The bill received assent from President Ram Nath Kovind on 8 August. The bill is a series of
many labour reforms undertaken by the Government of India

What changes will the Code on Wages Bill bring?


As per Labour Minister Santosh Kumar Gangwara, the new law will benefit about 50 crore
workers in the country.
In addition, other changes will also become available:

 As per the bill, a committee of trade unions, employers and the state government will fix
a floor wage for workers throughout the country.
 Provident fund (PF) and gratuity components and take-home pay of employees will be
impacted. The new definition of wages caps allowances at 50% of total compensation.
 The basic pay will be 50% or more of total pay as per the new code. This will change the
salary structure of most employees as the non-allowance part is usually lower than 50%.
 As provident funds (PF) are based around basic salary, it will go up, which means that the
take-home pay will come down.
 Post-retirement pay-out will go higher due to higher contributions due to provident funds
 Companies will also see their cost rise as the contribution towards PF and gratuity
increases.
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importance.

Salient Features of Code on Wages Bill


The following are some of the features of the Code on Wages Bill, 2019:

 Uniform Applicability: The Wage Code now will ensure uniform applicability of the
timely payment of wages. Irrespective of wage ceilings and different industrial sectors
when previous laws like the Payment of Wages Act, Minimum Wages Act had placed
restrictions.
 Uniform Definition of Wages: The definition of ‘wages’ slightly varied across PWA,
MWA, PBA and this has resulted in numerous litigations. Therefore, the Wage Code
seeks to provide a single uniform definition of ‘wages’ for the purposes of computation
and payment of wages to the employees. As per Wage Code, the term ‘wages’ means all
remuneration whether, by way of salaries, allowances or otherwise, expressed in terms of
money and includes basic pay; dearness allowance; and retaining allowance if any.
 The distinction between Employee and Worker: The Wage Code provides separate
definitions of ‘worker’ and ‘employee’. The definition of ‘employee’ is broader than that
of ‘worker’.
 Equal Remuneration: The Wage Code prohibits discrimination on the ground of gender
with respect to wages by employers or for purpose of recruitment, with respect to the
same or work of similar nature of work.
 Payment of Bonus: There is no significant change from PBA and the provisions relating
to the payment of bonus are also consistent with the terms of PBA. Earlier, the
applicability was limited to employees drawing wages not exceeding INR 21,000 per
month. Now, under the Wage Code, the appropriate government is empowered to fix the
wage threshold for determining the applicability.

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