CODE ON WAGES 2019

AND DRAFT CENTRAL

RULE
BY
RAJAN VERMA
EX. CHIEF LABOUR COMMISSIONER
GOVT. OF INDIA
 LABOUR LAWS REFORMS

• Substantial impact of 2nd National

Commission on labour report
• To suggest rationalization of existing laws
relating to organized workers
• In view of the emerging economic scenario
• Rationalization of 44 no. of central labour
laws
NEED OF A WAGE POLICY
• Wages have most direct and tangible effect
• SDG 2030 by UNGA 2015 to be achieved by
having appropriate wage policy
• To overcome poverty by means of full and
productive employment and reduce inequalities
• Decent work and economic growth
• Overcome gender inequality
• Buttress consumption as a key pillar of
sustainable economies
 APPROPRIATE WAGE POLICY
• Growth matter but income matter more
• The preamble to the ILO constitution mentions
about the provision of an adequate living wage
• ILO in its 97th session in 2008 called for wage
policies that ensures a just share of the fruits of
progress to all- hence need of a minimum living wage
• The G-20 countries in 2016 also emphasized a
sustainable wage policy ensuring wage growth in
proportion to the labour productivity
 CODE ON WAGES 2019

• Subsumed 4 no. of central labour laws

• Minimum Wages Act 1948
• Payment of Wages Act 1936
• Equal Remuneration Act 1976
• Payment of Bonus Act 1965
 BROAD COVERAGE

• Applicable on all types of employments

and occupations
• Concept of scheduled employment is
gone
• Covers all class/categories of
employees- Irrespective of wage ceiling
 APPLICABILITY ON
UNORGANIZED WORK FORCE
• Whether applicable on unorganized workers
when there is no established employer –
employee relationship ?
• Govt. may fix minimum rate of wages for the
wage period
• By the hour
• By the day
• By the month ( Section 6(4) )
JURISDICTION- CENTRAL AND STATE
GOVT.
• Clarified in its finality
• No ambiguity left in division of sphere- central & states
• Central govt. appropriate govt. for establishments
• Carried on by or under the authority of central govt.
• Specific establishments like railways, mines, major ports ATS,
oilfield, telecommunication, banking & insurance etc.
• Corporation created by Act of parliament
• CPSU and subsidiaries
• Contractors working there under (Section 2(d))
 WHY DEFINITION OF BOTH
EMPLOYEE AND WORKER

• Workers( Section 2(z))- persons employed in industry

to do manual, unskilled, skilled, operational,
technical, clerical or supervisory work but excludes
supervisor getting wages exceeding Rs 15000/
• Employee( Section 2(k))- persons employed in
establishments to do manual, unskilled, skilled,
operational, technical, clerical, supervisory,
managerial and administrative work
 EQUAL REMUNERATION

• Gender neutral
• Viz-a-Viz Section 4&5 of Equal
Remuneration Act, 1976
• Employee word replaces the word
worker used earlier (Section 3)
 SAME WORK AND WORK OF
SIMILAR NATURE
• Work in respect of which the skill, efforts, experience and
responsibility required are the same when performed
under similar working condition (Section 2(v))
• Sandara Fredman of Oxford University has endeavored
to define
• Skill- Degree from higher educational institutions as well
as techniques acquired through previous experience
• Efforts- Intensity of work i.e. physical and mental effort
required to accomplish task with in time constraint
• Responsibility- Scope of work, its complexity and to the
extent employer is dependent
 CONTD.
• MacKinnon Mackenzie & co. ltd. Vs. Audrey D’ Costa &
Anr, 1987, SC
• It was case of a lady stenographer who was terminated
• Authority should look at the duties actually and generally
performed not those theoretically possible for both men
and women
• If both men and women work at inconvenient time i.e.
night shift
• Men do work like loading, unloading, carrying and lifting
heavier things
 UNIFORMITY IN THE
DEFINITION OF WAGES
• Component of wages means salary, allowances or
otherwise payable in respect of terms of
employment and will include
• Basic wage
• Dearness Allowance
• Retaining Allowance
• If other allowances exceeds 50% of total
remuneration then will be considered part of basic
wage (Section 2(y))
 SALARY COMPONENT
• A - CTC ELEMENT INR • B- RETIREMENT BENEFITS
INR
• A1- BASIC- 21,100
• A2- TRAINEE ALLOWANCE-
• B1-PROVIDENT FUND- 2,532
14,438 • B2- SUPRANNUATION- 3,165
• A3- SITE ALLOWANCE- 3,300 • B3- GRATUITY-1,015
• A4- MEDICAL- 1,250 • TOTAL B- 6,712
• A5- TRANSPORT- 1,600
• A6- EDUCATION- 200
• A7- LTA- 900 • TOTAL CTC INR
• A8- UNIFORM- 500 • A+B= 50000
• TOTAL A - 43,288
 Procedure for fixing or revising
minimum rate of wages
• Minimum wage fixation machinery convention,
1928
• By constituting a tripartite committee
• By publishing notification for persons likely to be
effected to receive suggestions but consultation
with Central Advisory Board will be necessary in
this method
• Obligation of revision after every 5 years
(Section 8)
 CRITERIA IN FIXING MINIMUM
RATE OF WAGES
• Criteria evolved in 15th ILC, 1957
• One family of 3 consumption units
• Calorie requirement per unit-2700 calories- study of Dr
Wallace Ruddel Akroyed
• 72 yards of clothing- Modified to 66 yards
• 10% for housing
• 20% on fuel, electricity
• 25% on education, medical requirements etc.- was
recommended by Hon’ SC in Reptakos Bret & co vs.
Workmen through its Secretary1991 (Rule 3)
 COCEPT OF FLOOR LEVEL
WAGES

• Central Govt. to fix floor level wages

• On the basis of geographical area
• To minimize disparities in rate of minimum
rates of wages fixed by state governments
• Consultations before fixing floor level wages
by Central Govt. (Section 9)
 NORMAL WORKING HOURS
ISSUES
• Minimum wages Central Rules, 1950
• Rule 24 lays down that number of hours that will
constitute a normal working day will be 9 hours
for an adult
• Rule 25 says about entitlement for overtime in
case working hours exceeds 9 hours a day or 48
hours a week
 FIXING HOURS OF WORK
• What will be normal working hour
• Govt. is empowered to fix normal working hours
including period of intervals (Section 13)
• Normal working hours will comprise of 8 hrs. and
interval for rest not exceeding I hour with spread
over not exceeding 12 hrs.(Rule 6)
• A day of rest in every period of 7 days if not given
then substituted day of rest with in preceding or
subsequent 5 days but no work to be allowed for
more than 10 consecutive days (Rule 7)
 RELAXATIONS IN CERTAIN
CIRCUMSTANCES
• In fixing normal working hours and spread over
flexibility has been provided in case of
emergency, essentially intermittent work,
preparatory & complimentary work etc.
(Section 13)
• Subject to maximum 9 hrs. excluding interval for
rest and 16 hrs. spread over(Rule 9)
MODE OF AND MODIFIED TIME
LIMIT FOR PAYMENT OF WAGES
• Payment to be made either in currency, cheque or
bank A/C credit
• Before expiry of 7th day of succeeding month in
case of monthly wage period
• Special attention to be paid towards payment of
wages due in case of termination, dismissal of
employees/workers
• Govt. is empowered to prescribe other time limit
having regard to circumstances(Section 17)
 DEDUCTIONS
• Fines
• Other deductions for damage or loss, absence,
advances, loans etc.
• Deductions not to exceed 50% of wage in a wage
period (Section 18, 19)
• For deductions relating to housing
accommodations and other amenities, services
provided, consent of employee is necessary
(Section 22)
 ISSUES UNDER DEDUCTION

• Rule 21(2)(vi) of MW Central Rules 1950

prescribed certain conditions in case of the
recovery for advances
• Limit for the recovery for the advances is not
exceeding 1/4th of the wages earned in a month
 BONUS
• Applicability of bonus
• Eligibility of bonus
• Accounting year
• Rate of minimum bonus 8.33% and maximum bonus 20%
after adjusting set on and set off of allocable surplus
• Flexibility clause in respect of coverage of employee
and
• Wages for calculation of bonus (Section 26)
• In the year 2015 the wage ceiling and wage limit were
revised through Payment of Bonus Act(Amendment) Act
2015 w.e.f April 2014(Section 2(13)& Section 12)
 APPLICABILITY
• Bonus part of Code on Wages 2019 has been made
applicable on establishment employing 20 or more
employees on any day in an accounting year
(Section 41(2))
• Under PB Act which was applicable on factories and
establishments employing 20 or more employees on any
day during accounting year but Govt. was empowered to
make its applicability on factories and establishments
employing not less than 10 employees (Section 1(3))
 ACCOUNTING YEAR

• Under Labour law reforms it says accounting year

as year commencing on the first day of
April(Section 2(a))
• PB Act provides three different options- a)
Corporation b) Company c) Others & then also
option of employers(Section 2(1))
 DEPARTMENT , UNDERTAKINGS
AND BRANCHES
• Department, undertaking and branches of an
establishment will be considered as part of the same for
the purpose of computation of bonus
• If separate balance sheet and profit and loss account are
prepared then will be considered separate establishment
• Unless before accounting year it was considered as part
of main establishment for the purpose of computation of
bonus
(Section 3 of the PB Act) (Section 26(9)&30 of the Code)
 PRODUCTION AND
PRODUCTIVITY BONUS
• Section 31-A of PB Act says that there can be agreement
or settlement for bonus on the basis of production and
productivity subject to 8.33%-20% in lieu of bonus on the
basis of profit under the Act
• Section 26(5) of the code says that employees can
demand bonus in excess of minimum bonus on the basis
of production and productivity subject to maximum 20%
• Section 2(21) of PB Act excludes any bonus including
incentive, production and attendance bonus from wages
• Section 2(y) of the code excludes bonus payable under
any law in force which does not form part of
remuneration as per terms of employment
 ALLOCABALE SURPLUS
• Section 2(4) of PB Act defines it as 67% of available
surplus in case of company(other than banking
company) which has not made arrangement for
payment of dividend out of its profit with in India
as per Section 194 of Income Tax Act
• For others and banking company 60% of available
surplus
• Where as under Section 31(1) of the Code it says
that allocable surplus will be 60% of the available
surplus in case of a banking company and 67% of
the available surplus in case of other
establishments
 CALCULATION OF ALLOCABLE
SURPLUS
• Form A to be maintained by employer
• Gross profit for the accounting year (Schedule B&C)
• Deduction- Depreciation, Development allowances
or rebate, Direct Taxes
• Further sum like dividend payable on pref. share
capital and equity share capital etc.(Schedule D)
• Available surplus
• Allocable surplus 60% or 67% of Available surplus
 SET-ON AND SET-OFF OF
ALLOCABLE SURPLUS
• Form B
• Amount allocable as bonus i.e. 60% or
67% of available surplus
• Amount payable as bonus
• Amount of set-on and set-off
• Amount carried forward
 DETAILS OF EMPLOYEES TO
WHOM BONUS PAID
• Form C
• Amount of bonus paid to each employee
• After adjustment of any puja or interim bonus
• Any deduction on account of misconduct
causing financial loss
• Date of payment
 CONFIDENTIALITY OF THE
BALANCE SHEET
• In case of any dispute regarding quantum of
bonus if has been filed before prescribed
authority
• In the course of proceeding if balance sheet is
asked to be produced then information
contained in it should not be disclosed without
the consent of the employer
(Section 31(2) of the Code)
 DISQULIFICATION FOR BONUS
• If dismissed from service for
• Fraud or,
• Riotous or violent behavior or,
• Theft, misappropriation or sabotage of
property in the establishment
• Conviction for sexual harassment
(Section 29)
 DEDUCTION FOR MISCONDUCT

• Deduction of bonus amount can be made

• For misconduct causing financial loss to
employer to the extent of loss
• Only balance amount to be payable
(Section 38)
FORFIETURE AND DEDUCTION OF
BONUS
• Section 9 of PB Act and Section 29 0f the Code both
prescribed same conditions for disqualification of bonus
except one addition i.e. conviction for sexual harassment
• Misconduct committed in a particular accounting year
whether bonus can be forfeited in reference to same
accounting year or to any preceding or succeeding
accounting year
• Section 18 of PB Act and Section 38 of the Code
deduction of amount from bonus in case of misconduct
causing financial loss to the employer but this provision is
accounting year specific
MODE OF PAYMENT AND TIME
LIMIT
• Bonus to be paid only by crediting in bank account
of employee
• Within 8 months after end of accounting year
• Period can be extended for sufficient reasons by
Govt. on application
• If dispute is pending then with in 1 month of award
or settlement
• If dispute for higher bonus is pending then with in 8
months minimum bonus to be paid(Section 39)
• Timely payment of bonus by employers
(Section 43)
MINIMUM BONUS TO CONTRACT
LABOURS
• If contractor fails to pay the minimum bonus to
the contract workers
• And same is referred to the employer, company,
firms etc. by the aggrieve workers or their union
• Then minimum bonus to be paid by the employer
directly to the contract labours deployed in their
premises through contractor (Rule 57)
 DEALING WITH UNDISBURSED
DUES
• Any undisbursed amount payable under the code
• Not feasible to pay
• On account of death or whereabouts not known
• And also not feasible to pay to nominee
• Then to be deposited with prescribed authority
• After deposit discharge of liability
(Section 44&Rule 46,47,48)
LIMITATION PERIOD FOR CLAIMS
• Claims in respect of any amount payable
under the code
• For filing the same before claim authority
limitation period has been enhanced to 3
years and endeavor shall be made to dispose
off the claim with in 3 months (Section 45)
• Appeal can be filed with in 90 days which
should be disposed off ordinarily with in 3
months (Section 49)
 DEALING WITH THE CLAIMS
UNDER THE CODE
• Condonation of delay for filing claims and
appeals(Section 45(6) & Section 49)
• Claims can be filed within 3 years and appeal can be
filed with in 90 days
• Can be entertained after 3 years or 90 days on
sufficient and reasonable grounds
• Brahampal @ Swamy & Anr. Vs. National
Insurance company,2020,SC
• Section 173 of Motor Vehicle Act, 1988
 CONTD.

• Asst. Commissioner(CT), Kakinada & others Vs.

Glaxo Smith Kline Consumer Health Care Ltd.,
2020, SC
• Assessment order by appellant under AP Value
Added Tax,2005 was challenged
• It was held that Section 31 provided for filing
appeal within maximum 60 days
 CLAIM APPLICATIONS
• Section 45 of the code and Rule 49 of Draft Central Rules
provide procedure and proforma for filing claim and
appeal
• Form II and Form III for filing claim and appeal under draft
central rules have been prescribed
• Form VI has been prescribed for composition of
offence(Section 56 and Rule 54 of draft rules)
• What to do when you as claim Authority receive
applications not in prescribed proforma
 SIGNIFICANCE OF MODIFIED
NOMENCLATURE OF INSPECTOR

• Provision for Inspector –cum- facilitator

• Article 3 of Labour Inspection Convention,
1947 of ILO
• Reservations expressed by Trade Unions
in contexts of Article 12 of Labour
Inspection Convention, 1947(Section 51)
 OFFENCES AND PENALTIES
• Payment of less than the amount due
• Fine which may extend to Rs 50000/
• In case of repetition within 5 years imprisonment of 3
months or fine which may extend to Rs 100000/ or with
both
• For other offences fine which may extend to Rs 20000/
• In case of repetition with in 5 years imprisonment of 1
month or fine up to Rs 40000/ or with both
• Fine of Rs 10000/ to be imposed in case of violation of non
maintenance of registers and records(Section 54)
DICRIMINALIZATION OF OFFENCE

• For first time violator

• For the violations punishable only with fine
• Can be tried by an nominated govt. officer
• After hearing penalties as per provision of
the code can be imposed (Section 53)
 COMPOSITION OF OFFENCE
• Either before institution of prosecution
• Or after institution of prosecution
• Only for first time offender
• For violations punishable with fine only
• Can be compounded by a nominated govt. officer
to the 50% of the maximum fine prescribed under
the code
• No trial outside court or no composition of offence
if offence is repeated with in 5 years (Section 56)
THANKS