Salient Features of Code on Wages, 2019 and Draft Central Rules, 2020 – Lets Talk Compliance


Salient Features:

  • Certain expressions used in the Code have not so far been used in any of these four Acts, i.e., the terms Contractor, Contract Labour, Establishments, Inspector-cum-Facilitator, Minimum Wage, etc., (Definition under Section 2)
  • Now, the appropriate Government for Insurance, Banking and Telecommunication, is Central for the Minimum Wages aspect too.
  • The definition for ‘factory’ under this code is referred as Section 2(m) of the Factories Act, 1948. Since, this Act is getting amalgamated in Code on OHSC, 2019, the definition for ‘Factory’ would be reframed with reference to the section 2(1) (v) of the Code on OHSC, while it is getting enforced.  Similarly, the term ‘Employer’ includes Occupier of the Factory, as defined in Section 2(n) of the Factories Act, 1948.
  • The definition for ‘Contractor’ is similar as specified in the Contract Labour Act, now.
  • The definition for ‘Contract Labour’ is the same as in Contract Labour Act but it includes inter-state migrant workmen too. But, the workers regularly/permanently employed by the contractors are excluded from the definition of Contract Labour.
  • The term ‘Employee’ includes manager, administrative and supervisory capacity and whereas, the term ‘Worker’, excludes managers, administrative and the supervisory capacity who is drawing wages exceeding Rs.15000/- .
  • Employers are mandated to fix a 50% of wages as Basic, Dearness Allowance and Retaining Allowance, if any. Remaining may be fixed as various allowances.
  • For equal wages to all gender and for the purpose of payment of wages, apart from Basic, DA and Retaining Allowances, if any, the following allowances are also included as wages – Conveyance allowance, HRA, OT & remuneration under any order/ award / settlement.
  • Minimum Wages shall be revised/reviewed at the interval of not exceeding 5 years.
  • Given a statutory force, the National Floor Level Minimum Wages (NFLMW) which only to be fixed by Central Government but there is no clear mandate to the employers asking them to pay at least the Floor Wages
  • Floor wages shall be fixed by the Central Government only after consultation with the State Governments.
  • Code is applicable even for the employees employed in agriculture and domestic works. But, need not to maintain any register, to submit any return and to issue wages slip in case of employment of less than 5 employees.
  • Code will apply automatically to the commercial establishments. Whereas in the current Payment of Wages Act, 1936 would apply only if there is a specific notification.
  • Time limit for payment wages
    • on daily basis -at the end of the shift,
    • on weekly basis – at the end of last working day of the week,
    • on fortnightly basis – within 2 days after end of the fortnight
    • on monthly basis – within 7 days of succeeding month
  • In case of removal, dismissal, retrenchment, resignation from the services or in the case of un-employment due to closure of the establishment, the wages payable to an employee shall be paid within two working days.
  • All the provisions of payment of wages Act are retained except wages ceiling i.e., the current wages ceiling of Rs. 24000/- is not specified in the Code. Hence, it is applicable to all employees irrespective of their salary.
  • The provisions of the Payment of Bonus Act are applicable to an establishment in which 20 or more persons are or were employed on any day during an account year. Whereas, in the Payment of Bonus Act, the applicable strength may be reduced by the State Government. Based on which, the States like Tamil Nadu, Maharashtra and Uttar Pradesh had reduced the applicability strength to 10.  Now, this power to alter the numbers, is not specified in the Code.
  • Moreover, once the payment of Bonus provision is applied to the establishment in any accounting year, may not be continued to apply in subsequent accounting year, if the persons employed therein falls below 20.
  • With regard to payment of bonus, the Wages Ceiling and the Wages to be considered for calculation shall be notified by the Appropriate Government. Currently, the Central Government alone decides the same.
  • Bonus can be forfeited on dismissal of service in the event on conviction of sexual harassment.
  • In case if an employer has paid any advance amount before the bonus becomes payable, he shall deduct the advance amount paid earlier and employee is entitled to receive only the balance.
  • The guiding schedules on computation of Gross Profits (1st and 2nd Schedule), sums deductible from gross profits (3rd Schedule) and set on and set off (4th Schedule) under the Payment of Bonus Act, 1965, has not been included in the Code. Hence, the manner of arriving bonus percentage may be prescribed only by the Central Government.
  • Bonus shall be credited only in the bank account of the employees. Whereas, wages can also be paid in current coin or currency note.
  • Every employer shall display a notice on the notice board at a prominent place of the establishment containing the abstract of this Code, category-wise wage rates of employees, wage period, day or date and time of payment of wages, and the name and address of the Inspector-cum-Facilitator having jurisdiction.
  • Provision for Web-based inspection Scheme is encouraged under this code.
  • The role of inspector is modified as Inspector-cum-Facilitator
  • Inspector-Cum-Facilitator has the power vested in IPC and CRPC to ask documents and to issue notices against employer
  • Court can take cognizance only upon complaint received from Inspector-cum-Facilitator, an employee or Registered Trade Union or Officials appointed by the appropriate Government.
  • In case of complaint with reference to the non-payment of remuneration or bonus or less payment of wages or bonus or on account of making deductions not authorised by this Code from the wages of an employee, burden of proof shall lies with employer.
  • Provision for compounding of offence is introduced
  • Enhanced penalties
    • for non-payment /less payment of wages – first offence: maximum fine upto Rs. 50000/- & subsequent offence – imprisonment & fine upto Rs. 1 Lakh
    • for non-maintenance of records: Fine upto Rs. 20000/- and on subsequent: Fine upto Rs. 40000/-“
  • In case of any claim under this code, 10 time the amount of such excess is not only rest with Minimum wages but also claims in Bonus too (10 time excess claim is only under the Minimum Wages Act, now). Also, the claim period will be within 3 years (whereas in MW Act, it is within 6 months)
  • If offence committed by company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence
  • Rules can be framed by both Central as well as State Governments.
  • The Rules framed by the Central and State Governments, shall be laid before each house of the Parliament and legislatures respectively.
  • Some more features based on Central (draft) Rules:
    • Definitions of Unskilled, Semiskilled, Skilled and Highly Skilled Occupations are introduced in the Rules [Rule 2 (j), (t) (u) & (v)]
    • Geographical Areas classified as metropolitan, non-metropolitan and rural areas (Rule 4)
      • ‘Metropolitan’  means 40 lakhs and above population  area – Rule 2(m)
      • ‘Non-metropolitan’ means above 10 lakhs but below 40 lakhs  – Rule 2(n)
      • ‘Rural area’ means other than metro and non-metro – Rule 2(q).
      • Daily hours shall be maximum of 9 hours (Rule 6)
    • Spread over in normal circumstances 12 hours and in case of overtime shall not exceed 16 hours. (Rule 9)
    • One day weekly holiday to be given after end of 6 working days. (Rule 7).
    • Overtime shall be allowed or required, only in case of sudden spurt of business (Rule 9).
    • Recovery of advance can be done without any stipulated time but with one condition ie. Recovery can’t go more than 50% on any wage period (Rule 19).  (Currently in TN – 12 months)
    • Deduction for damage or loss shall be done only with specified procedure. Explain personally and intimate in writing  within 15 days from the date of such deduction (Rule 18)
    • Undisbursed due ( unpaid accumulation) period is 6 months in case of no nomination or otherwise – Rule 47
      • Amount to be settled within 15 days from the date of last day of due period. (Rule 47(1))
      • Amount to be deposited through bank transfer or DD – Rule 47 (2)
    • If the undisbursed amount remains unclaimed for a period of seven years, the same shall be dealt in the manner as directed by the Central Government – Rule 48(4)
    • Contractor’s payment shall be ensured by Company before the contractor makes the payment of wages to his employees – Rule 55
    • In case of non-payment of minimum bonus to the contract worker, company should pay the same.  But no specification about recovery from contractor – Rule 57.


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Mathusoodhanan T



Disclaimer:  The article represents the opinions of the author and the author is solely responsible for the facts, cases, and legal or otherwise reproduced in the article.



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