For a country with a growing labour force and bright economic prospects, India has more than 44 Acts that together constitute the labour and employment laws. Making matters more complicated, each of these Acts has additional rules that define the various applicable procedures and differ from state to state. In a bid to simplify the existing legal structure for wages and provide a unified Law for organizations to follow, the Parliament of India passed the Code on Wages, 2019 (Code). The Code incorporates elements from four existing laws: The Payment of Wages Act of 1936, the Minimum Wage Act of 1948, the Payment of Bonus Act of 1965, and the Equal Remuneration Act, of 1976.

Ease of Business Compliance with Leading Transparency

When it comes to the Code’s applicability into different organizational levels, it encompasses the entire workforce, from blue-collared workers to the managing director, and addresses all their wage-related concerns. With the establishment of an Appellate Authority, any claims can be addressed to a single Authority rather than multiple regulatory bodies, as is the case under current labour laws. Furthermore, without jeopardizing employee rights or inconveniencing businesses, the Code requires that accounts audited by chartered accountants be fair and not require additional scrutiny. Finally, with an instructor-cum-facilitator allocated to every organization, proper guidance will be provided via a web-based system, and periodical inspections carried out to ensure compliance by the employer.

Fostering a Unified Wage Structure

Unlike the Minimum Wage Act of 1948, which provided for the scheduled employment, the Code applies minimum wages to all employees in an organization and establishes the lowest wage that can be paid in a given region. This floor wage, as determined by the government, will also be revised on a regular basis to reflect increases in the cost of living and will be applicable to both private and public sector organizations without distinction. However, because basic wages are capped at 50% of total remuneration under the Code, organizations anticipate an increase in Provident Fund contributions and higher gratuity payments as a result of a higher basic wage, when applied to existing pay structures prevalent across the various employee levels.

Gender Equality Promotion with equal Employment and Payment

The Equal Remuneration Act requires that both men and women be paid equally. Code on Wages goes a step further, removing the terms men and women to make it gender-neutral. Furthermore, the Code allows organizations to direct all payments related to wages, bonuses, and reimbursements directly into the employee’s bank account, eliminating the need for cash payments and the subsequent maintenance of manual records. An employee can also file a claim for any payment-related discrepancies within three years, with all proofs provided by the employer. This is a significant improvement over the previous provision of a 12-month filing period for such claims, and it relieves the complainant of the need to provide details or documents substantiating his/her claim.

Internal Organizational Process Restructuring Emergency

The Code not only combines four laws into a single holistic and comprehensive framework, but it also reduces the number of sections from 150 to 69. For HR managers, this means a more simplified structure to follow and the ability to gradually implement all provisions. There are still some issues, such as the lack of an overtime threshold limit and the lack of a well-defined compliance strategy to ensure that revised wage structures are in compliance with the Code. Employers, on the other hand, can always consult with the inspector-turned-facilitator and make a deliberate decision if they prefer a one-time restructuring over a piecemeal approach.

Conclusion

In comparison to the existing laborious and frequently confusing provisions, the Code will simplify internal processes involving payroll, employment, and management. With detailed descriptions of what is and is not included in the wage definition. The Code will assist India’s large formal sector in aligning with international best practices and making managing a large workforce more logical.

By Sayeed Anjum, Co-founder & CTO ‒ greytHR