Draft Rules for Code on Wages Act 2019 | 10 Jul 2020

Why in News

Recently, the Ministry of Labour and Employment has published the draft rules framed for the implementation of the Code on Wages Act, 2019.

  • The new draft rules have been circulated afresh for public comments and suggestions for a period of 45 days from the date of publishing, 7th July 2020.

Key Points

  • The latest draft rules are similar to the preliminary draft published in November 2019 with one major change.
    • The Ministry has changed the work requirement for eligibility for minimum wages and other benefits from nine hours to eight.
    • The latest draft clarified the issue as the nine hours mentioned earlier included one hour of rest, which has now been mentioned separately from the eight working hours.

Code on Wages Act 2019

  • Aims to transform the old and obsolete labour laws into more accountable and transparent ones and seeks to pave the way for the introduction of minimum wages and labour reforms in the country.
  • Removes the multiplicity of wage definitions, which can significantly reduce litigation as well as compliance cost for employers.
  • Regulates the wages and bonus payments in all employments where any industry, trade, business, or manufacturing is being carried out.
  • Links minimum wage across the country to the skills of the employee and the place of employment.
    • It simplifies the methodology to fix minimum wage by doing away with the ‘type of employment’.
  • It seeks to universalise the provisions of minimum wages and timely payment of wages to all employees irrespective of the sector and wage ceiling.
    • It seeks to ensure ‘Right to Sustenance’ for every worker and intends to increase the legislative protection of minimum wage.
    • Employees getting monthly salary shall get the salary by 7th of next month, those working on a weekly basis shall get the salary on the last day of the week and daily wagers should get it on the same day.
  • The Central Government is empowered to fix the floor wages by taking into account the living standards of workers. It may set different floor wages for different geographical areas.
    • The minimum wages decided by the central or state governments must be higher than the floor wage.
    • Under the Constitution of India, labour is a subject in the Concurrent List of the Seventh Schedule where both the Central and State Governments are competent to enact legislation.
  • Calculation of Minimum Wage:
    • According to the draft rules, the basis for calculating the minimum wage would be a standard working-class family of one earning worker, a spouse and two children, a net intake of 2,700 calories per day each, 66 metres of cloth per year, rent expenditure equal to 10% of the food and clothing expenditure, fuel, electricity and other miscellaneous expenses of 20% of minimum wage and expenditure on children’s education, medical care, recreation and contingencies amounting to 25% of the minimum wage.
  • It subsumes the following four labour laws:
    • The Payment of Wages Act, 1936.
    • The Minimum Wages Act, 1948.
    • The Payment of Bonus Act, 1965.
    • The Equal Remuneration Act, 1976.
  • The Centre shall constitute a technical committee which would advise on the skill categories, while an advisory board may recommend the minimum wage.

Types of Wages

  • Minimum Wage: International Labour Organisation defines it as “the minimum amount of remuneration that an employer is required to pay wage earners for the work performed during a given period, which cannot be reduced by collective agreement or an individual contract”.
    • The minimum wage includes the bare needs of life like food, shelter and clothing.
  • Living Wage: It is the wage needed to provide the minimum income necessary to pay for basic needs based on the cost of living in a specific community.
    • In addition to bare needs, a ‘living wage’ includes education, health, insurance, etc.
  • Fair Wage: A ‘fair wage’ is a mean between ‘living wage’ and ‘minimum wage’.
  • Starvation Wage: It refers to the wages which are insufficient to provide the ordinary necessities of life.

Source: TH