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Asia Briefing

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India’s Code on Wages Bill

By Dezan Shira & Associates

In late July, the parliament of India passed the Code on Wages Bill, 2019 (“the Bill”). The Bill will enable the federal government to fix minimum statutory wage for millions of workers.

The Bill is the first in the series of four labor codes that the government is working on to rationalize its 44 labor laws and improve the ease of doing business in the country.

The Bill seeks to include relevant provisions of the previous laws pertaining to workers’ wages, equal remuneration for men and women, its payment, and bonus. The other three codes will deal with social security, industrial safety and welfare, and industrial relations.

While the Bill is not yet law, employers should familiarize themselves with the Bill now to understand how it may impact their operations. Large-scale employers in particular should watch the Bill’s development to understand its potential business impact.

Key Provisions of the Bill

There are several key provisions of the Bill, which include the following:

  • A simplified definition of wages—The new wage code will remove the multiplicity of wage definitions, which may significantly reduce litigation as well as compliance cost for employers. Currently, 12 different labor laws define wages differently leading to litigation in addition to difficulty in implementation.
  • Uniformity in coverage and payment—The Bill allows provisions of minimum wages, as well as timely payment of wages, to cover all employees in both the organized as well as unorganized sectors. The unorganized sector, in general, includes labor-intensive industries and small businesses employing fewer than 10 workers in total.

Currently, the provisions of the Minimum Wages Act, 1948 and the Payment of Wages Act, 1936 apply to workers employed in certain kinds of jobs and below a particular wage ceiling only.

  • Fewer factors to determine minimum wage—The Bill links minimum wage across the country to the skills of the employee and the place of employment. Currently, laws fix minimum wages based on multiple factors, ranging from the level of skill set to the type of employment.
  • State wages to be higher than the national floor rates—The Bill says that the federal government will set the national floor rates for wages, as well as the minimum wage in certain sectors (such as railways and mining). The state government will fix the minimum wages for their regions, which cannot be lower than the national floor wage set by the federal government. However, the federal government may set different national minimum wages for different parts of the country.

The Bill also specifies that the minimum wages must be revised every five years, and the overtime rate must be set at twice the standard wage rate across the country.

What to Do Next

As labor laws in India continue to evolve, it is important for established businesses, or those looking to set up in the country, to monitor the Bill’s progress.

Once the Bill becomes law after the President’s assent, businesses should seek to obtain assistance with regards to labor contracts and employment terms of services to ensure their policies are HR friendly and legally compliant.

For inquiries, please email us at [email protected]. Further information about our firm can be found at: www.dezshira.com.