Code on Wages lacks clear policy outcome

Code on Wages lacks clear policy outcome

India is recognised to be one of the first developing countries to have introduced minimum wage policies through the Minimum Wages Act in 1948. Several more Bills and Acts contributed to refining the policies aimed at wage workers. However, due to diverse socio-economic conditions across several states, the implementation process was complicated and led to the existence of 1709 rates in India.

The Code on Wages 2019 (Bill No. 184) introduced in the Lok Sabha by the Minister of Labour, Mr. Santosh Gangwar, acts as a ray of hope for the 195 million wage workers in India. The Bill seeks to regulate wage and bonus payments in all employment where any activity of trade, business or manufacturing is carried out. The Government has acknowledged and accepted 17 out of 24 recommendations presented by the Standing Committee which had previously scrutinised the Code on Wages introduced in the Lok Sabha in 2017. 

The Code on Wages subsumes four previously existing laws: the Payment of Wages Act (1936), Minimum Wages Act (1984), Payment of Bonus Act (1965), and, Equal Remuneration Act (1976). It is set to be applicable for all employees across different industries. While the Centre will be responsible for making decisions for employments such as Railways and Mines among others, the State Governments will make decisions for all other employments. There has been a debate on what qualifies as ‘wage’ and what does not as this grey area has given employers an upper hand and caused them to treat employees unfairly.

This Code of Wages specifies that wages include salary, allowance or any other element expressed in monetary terms. It would not include any bonuses owed to employees or travelling allowance among others. Furthermore, the Code on Wages also specifies penalties for offences committed by employers like paying less than the set wages or for breaching any provision of the Code. The penalties differ depending on the nature of offence with the maximum penalty being sentenced to jail for three months along with a fine of Rs.1 lakh.

We can appreciate the Standing Committee as well as the Lok Sabha for being conscious of the loopholes and grey areas that are used by employers to exploit workers, and therefore drawing up a Bill that enforces laws to strengthen employees. Two specific clauses, moreover, focus on gender equality and inclusiveness. The Code forbids gender discrimination in matters concerning wages and recruitment of employees for the same or similar sort of work. Work of similar nature is characterised by the skill, effort, experience and responsibility required for the same work regardless of the gender.

Another aspect that the Code of Wages indirectly addresses is the sustainability of this project. It proposed that a tripartite committee comprising of representatives of employers, trade unions and state governments would be included and given the responsibility to fix a floor wage for workers throughout the country. The representation of diverse groups brings stability into the decision that is being made which will affect all employees at large.

While the Code on Wages is a step towards the right direction, it comes with its own pitfalls and unanswered questions. In India, it is estimated that small and unorganised businesses employ around 500 million people. While the new Bill seeks to cover all employees, there would be issues of compliance. Firstly, implementing and maintaining surveillance over small and unorganised businesses across different States is a task that would not only require great planning but also the investment of resources and energy by the Centre and States. Secondly, in a situation where businesses are reeling under the bearing of a speedily passed Goods and Services Tax (GST) system, the implementation of this new requirement will impose higher costs for businesses to bear.

Furthermore, on the one hand, the Code on Wages Bill is hoping to correct a diverse range of issues for the employees. However, scholars have argued that in a public policy setting, an instrument must have one clear goal. The Code ambitiously seeks to resolve issues related to all essential elements related to wages, equal remuneration, timely payments and bonuses and brings together the four aforementioned Acts together into one. To add to that, the Centre is to fix a floor wage, somehow factoring in the differing living standards of workers across the country.

While the Centre is processing and tackling the task of implementation, businesses and the general public need to start understanding the complicated system of wages set by the Code that will depend on facets like geographical areas. Industry bodies such as CII continue to argue in favour of States having the power to decide minimum wages. However, this would contribute to the complexities of the wage structure. The International Labour Organization argues that greater institutional capacity is the foremost requirement for more complex structures to be implemented.

It is difficult to comprehend the major agenda of this Bill as it fails to focus on one issue and explain what the government wishes to do. Is the code supposed to tackle increasing inequality? Can we expect the code to improve living conditions through increased wages and increased employability? It appears that only time will tell.

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