The Union government has made the first step towards amalgamating more than 40 labour laws into four codes by presenting the first one, the Code on Wages, 2019, in the Lok Sabha. While it would eliminate some outdated statutes, it also triggers fears that the labour force stands to lose.
Labour is the real source of energy behind the immense growth potential of India. With a huge young and energetic population under its sleeve India is thriving to achieve the goal of $5 tn economy by 2024. The present day labour laws are somewhat redundant and rusted due to its repugnancy with new age job creating avenues. Many of the provisions of those old age statutes are contradictory to one another and often lead to disputes and end up in complicated legal tangle with no use to anyone.
Rather than doing patch works on the existing statutes the move of Central government to completely redesign and consolidate the labour laws in the country into four labour codes is a bold and appreciable move.
Out of the four labour codes, the first one, the Code on Wages, 2019 was introduced in the Lok Sabha by minister of labour Santosh Gangwar on July 23, 2019. The Code seeks to regulate wage and bonus payments in all employments where an industry, trade, business, or manufacture is carried out. It replaces the following four laws (i) the Payment of Wages Act, 1936, (ii) the Minimum Wages Act, 1948, (iii) the Payment of Bonus Act, 1965, and (iv) the Equal Remuneration Act, 1976 by amalgamating, simplifying and rationalising the provisions of the same acts.
Unlike the existing statues which give protection of minimum wages only to the employees in scheduled employment, the new wage code extends the legislative coverage to all the employees of the country and thereby ensures protection of minimum wages to them. This upholds the dignity and right of sustenance of more than 48 crore workforce of the country and abolishes the difference between the scheduled employees and the employees in unorganised sectors. Unorganised sector forms the major chuck of the work force in the country, and the code is expected to benefit them.
The code gives prominence to gender equality and offers equal remuneration to all who are carrying out the works of same and similar nature. The power of fixation of minimum wages shall remain with appropriate government with the right to central government to fix minimum floor wages. The Central government shall in consultation with the state government and after taking into account the minimum living standards of workers set different floor wages for different geographical areas. The minimum wages shall be fixed on the basis of categories such as unskilled, skilled, geographical area, arduousness such as humidity, temperature, hazardous working conditions etc.
The code lists the various deductions that an employer is allowed to make from the wages of an employee. It adds that if an employer has made deductions but has not deposited them in any trust or government fund, the employee will not be held responsible.
Concerns and grey areas
All the above are positive sides of the code but every coin has another side for sure. Let us try to understand the negatives also. Though the code is designed to bring parity in wages among employees across the nation there are certain grey areas which need to be addressed.
First and foremost is the ambiguity in the definition of the term “worker” and “employee”. Worker is defined as a person employed in an industry who does work including manual, unskilled, skilled, or technical work. Employee is defined as a person employed on wages who does work including skilled, semi-skilled unskilled, technical, managerial, and administrative work. Lack of consistency in definitions within the code may lead to employers discriminating between workers and employees. Since minimum wage is a matter of right for every working person, a common and the broad definition ofemployee/worker should be given in the code.
The ambiguous and intertwined definitions will give undue advantage to the employer to discriminate and differentiate between worker and employee by manipulating the terminologies and there by torpedo the very intention of the Act. Moreover, this will lead to litigations and unrest in the organisation and end up in the legal tangles.
The code states that provisions related to bonus payments will not apply to establishments in which 20 or more persons are employed. The threshold for application of bonus payments should be reduced to establishments in which 10 or more persons are employed. Similarly, the central or state governments can fix factors by which minimum wages will be determined for different types of work including skills required, difficulty of work assigned, and geographical location. However, the experience and length of service of worker/ employee in an organisation is not taken into account when fixing minimum wages. By this, the code fails to create a level playing field to the experienced workforce and thereby put them into straight competition with less experienced work force.
Under the code, the minimum rate of wages is being fixed on the basis of the number of working hours in a day. Neither the rate of minimum wages nor the minimum number of working hours is explicitly mentioned in the code, and hence it gives arbitrary freedom to the government to fix the number of hours in a working day. Though the code ensures one day of rest out of the seven working days, the employer can compel the worker/employee to work on the rest day also by offering the overtime wages. Similarly, the Union government can bring out the rules for fixing the floor wages after taking into account the minimum living standards of a worker and different floor wage may be fixed for different geographical areas. The upper hand given to the government machinery to fix the floor wages depending of such ifs and buts may invite unnecessary bewilderment to the labour platform and may ultimately lead to unrest. As per the provisions of the code, frequent bureaucratic intervention may be needed to fix the number of hours, minimum rate of wages, minimum floor wages etc, which may eventually lead the entire system into chaos and confusion.
The code prohibits discrimination on the basis of gender in matters related to wages as well as during recruitment and in the conditions of employment. However, the term “gender” is not defined anywhere in the code. As per legal dictionary “gender” meaning in all acts “unless the contrary intention appears, words importing the masculine gender shall include females”. As the Supreme Court had already upheld the rights of trans-genders in all walks of life and employment, the non-inclusion of the term “transgender” within the definition of “gender” shall deprive them from enjoying the benefits of this act.
The code provides penalties for offences by employers which vary from Rs 10,000 to one lakh rupees. The said penalty is not adequate enough to the arrest the malpractices in the industry. The government may think to increase the same to higher amount along with other stringent penal provisions.
Negative impact on MSME sector
As per the Union budget presented in July, 2019, the economy is aiming for an 8 per cent GDP growth level, the unilateral application of minimum wages to all employees of all industries across the country may harm the prospects of the upcoming entrepreneurs in MSME sector and start-ups. The government has to sympathetically as well as emphatically consider the plight of entrepreneurs in MSME sectors who are already struggling due to low rate of industrial activity in the country. The imposing of minimum wages on all the employers irrespective of their economic sustainability may hamper their growth prospects in long run and negatively affect the industrial outlook of the nation. The Code should look for a balanced approach conforming the sustainable economic growth of the Country coupled with labour welfare. Proper systems to be devised to incentivize the employers in MSME sector to reduce the impact being created on their financials due to the introduction of minimum wages. The start-ups may be given relaxation from the requirement of compliance till then become self-sustainable.
(The author is an insolvency professional and can be reached at bijoy@artismc.com)
