Home » THE CODE OF WAGES – THE NEW COAT INTERWOVEN FROM THE OLD SEVERAL COATS TO MAKE IT BUSINESS FRIENDLY WHICH MUST BE ACCEPTED WHOLEHEARTEDLY!
THE CODE OF WAGES – THE NEW COAT INTERWOVEN FROM THE OLD SEVERAL COATS TO MAKE IT BUSINESS FRIENDLY WHICH MUST BE ACCEPTED WHOLEHEARTEDLY!
Karma which was earlier a PF & ESI consultancy firm way back, established during the good old days of 1979, changed its fabric in the year 2004 to become Karma Management Consultants Pvt. Limited and then again with the fabric becoming small due to its growing stature and size, again changed its fabric in the year 2021 to become Karma Management Global Consulting Solutions Private Limited by inter-twining for collaboration in foreign countries like Canada, US, USA, UAE, Philippines, and Asia with local and regional setup for rendering services in the field of payroll and payroll compliances, outsourcing and fulfilling regulatory obligations under statutory laws.
It has hundreds of elite clients on its excellent service dispensing list. The expert staff on its roll deals with thousands of regulatory compliance acts on Pan India basis, some of the acts being state-specific while others are enacted by the Central Government.
Karma, in its day-to-day compliance service operations, has to deal with several issues raised by clients who are unable to tackle, and the onus of dispensing with quick solutions and /or customized solutions rests solely with Karma because it is the service provider to these clients in terms of all labour and court-related services, be it notices, summons, arrest warrants, or jail.
What is this new fabric called “labour codes” and where did it come from?
Most of us are aware of this new terminology called “labour codes” and those who are late in grasping this new fabric called “Labour Codes” may know that the “The four labour codes — (1) the Code on Wages, (2) Industrial Relations Code, (3) Social Security Code and the (4) Occupational Safety, Health and Working Conditions Code — are set to replace 29 labour laws.
Over 90% of India’s 50 crore workers are in the unorganized sector. And through these codes, the government wants to ensure that all of them enjoy the benefits of labour laws related to minimum wages and social security.
However, with the labour reforms carried out by the Government from the year 2019, many of these above acts have been subsumed into the 4 labour codes for which the assent is already given by the president, but pending execution due to some States not yet having framed the rules. This is so because the Centre is of the opinion that execution will happen uniformly across all the States and not piecemeal.
As one of the four factors of production and running of businesses, labour plays a crucial role in determining the economic growth of a country. Unfortunately, India has been operating with an outdated and asynchronous legal framework for a very very long time which was a deterrent to bringing in large-scale efficiency. The colonial-era labour laws designed to address the socio-economic exigencies of the time have outlived their welcome in the new era of development.
PM addresses the National Labour Conference of Labour Ministers of all States and UTs on 25th August, the two-day Conference organized at Tirupati, Andhra Pradesh
The PM pushing hard towards acceptance of the new “Labour Codes” by respective States and UTs, this conference was inescapable as it contained a lot of depth to create synergy amongst the Centre and State Governments on labour issues and matters related to workers’ welfare
The Prime Minister addressed the National Conference of Labour Ministers of all States and Union Territories on 25th August 2022 at 4:30 PM via video conferencing with the support of the Union Ministry of Labour & Employment.
The Conference was convened in the spirit of cooperative federalism to discuss various significant labour-related issues, to help create further synergy amongst the Centre and State Governments in formulating better policies and ensuring effective implementation of schemes for the welfare of workers.
The Conference contained four thematic sessions on
l integrating e-Shram portal for onboarding social security schemes to universalize social protection;
l Swasthya se Samriddhi for improving medical care through ESI hospitals run by State Governments and integration with PMJAY;
l framing of rules under four Labour Codes and modalities for their implementation;
l Vision Shramev Jayate @ 2047 with focus on just and equitable conditions of work, social protection to all workers, including gig & platform workers, and gender equality at work, among other issues.
The Code on Wages, notified in August 2019, subsumes the provisions of four laws — The payment of Wages Act, the Minimum Wages Act, the Payment of Bonus Act, 1965, and the Equal Remuneration Act. It applies to all establishments and to all employees in both organized and unorganized sectors.
This code envisages uniform applicability of the provisions of timely payment of wages and minimum wages to all employees. It introduces the concept of a floor wage, which is to be determined by the Centre after taking into account the minimum living standards of workers which may be different for different geographical areas.
The state government can, under no circumstance, fix a minimum wage rate that is lower than the floor rate determined by the Centre. The code also prohibits discrimination between wages payable to a male and a female for the same work done.
The Code on Wages brings about two major changes through revised definitions and a few more through substantive provisions. We shall examine the new definitions and their impact first. The new critical definitions are as follows:
The above 2 definitions which were running contradictory in each of the existing several acts have been anointed to bring in more clarity along with uniformity as a single expression of truth and nothing but the truth, however, critics have observed some flaws in this clear-cut expression of truthful definition where they say it is not flexible and does not account for variables. There is clarity given on what should be the inclusion and exclusion in the fifty percent of wages. Under the new definition of wages, the specified exclusions are to be capped at 50% of the total remuneration. This means that for the purpose of social security contributions such as PF, gratuity (accrual and payout), etc. at least 50% of the ‘total remuneration shall be considered
The new definition of wages under the Code comprises of three elements- meaning & inclusion part, specified exclusions and conditional inclusions.
The basic pay should be 50 % of the total salary. The definition also provides that if an employee is given remuneration in kind, the value of such remuneration up to 15% of the total wages payable to the employee shall be deemed to be part of “Wages”.
It has been stipulated that the specified items shall not exceed the cap limit of 50%, and in case the limit exceeds, the such excess amount shall be deemed as remuneration and will be considered as “Wages”.
Conditional Inclusions: Conveyance allowance/ value of travel concession, house rent allowance, remuneration payable under award or settlement, and overtime allowance shall however be taken for computation of wages – for the purpose of equal wages to all genders.
The Code on Social Security subsumes nine laws and empowers the Centre to notify various social security schemes like the EPF, EPS, and ESI for the benefit of workers in all sectors. It also empowers the Centre to frame any other schemes for the self-employed, unorganized workers, gig workers, and platform workers, and the members of their families.
Firms employing more than 20 workers have to mandatorily report vacancies online under this code. The Code has provided for the creation of a social security fund for workers in the unorganized sector. According to some reports, employees may be able to enjoy a four-day workweek provided the total working hours in the entire week is not less than 48 hours.
The Code on Industrial Relations amalgamates three existing laws and expands the definition of worker to include persons employed in a skilled or unskilled, manual, technical, operational, and clerical capacity. Besides, persons employed in a supervisory capacity and earning less than Rs. 18,000 per month have been brought under the definition.
The code introduces a new provision for fixed-term employment, giving employers the flexibility to engage a worker on the basis of a written contract. Fixed-term employees will get the same benefits as permanent employees.
The new industrial relation code would also improve the ease of doing business by allowing firms with up to 300 workers to go ahead for lay-offs, retrenchment, and closure without government permission. At present all firms with up to 100 employees are exempted from government permission for lay-off, retrenchment, and closure.
The Occupational Safety, Health, And Working Conditions (OSH) Code amalgamates 13 existing labour laws and applies to factories having at least 20 workers if the manufacturing process is being carried on with the aid of power and 40 if the manufacturing process is being done without power.
Employers are required to ensure that the workplace is free from hazards that cause injury or occupational disease to the employees, and provide free annual health examinations or tests, free of cost to certain classes of employees.
A provision has been made for employers to provide a traveling allowance annually to an inter-state migrant worker for undertaking a to-and-fro journey to his native place. Further, providing appointment letters to the workers has been made mandatory.
Karma’s feel-good factor for its clients and supporting workers/employees
Karma has always maintained a feel-good factor for all its clients on board with Karma, for managing their compliances on a monthly basis. Employee safety, workplace equity, and the protection of human rights – each of these key components in any industry, it has always expressed to its clients to imbibe these commitments as a way to ethical and responsible practices.
Labour Law compliances measure the health of an organization and must be accepted as an ongoing process that indirectly protects the health, safety, and rights of employees everywhere.
Each industry has its goals set so as to achieve the objective which is the same for all, ultimately to make profits and gains from the various businesses but the path that gets us there can be quite different.
All that Karma believes in doing for its clients besides the services, is to keep on emphasizing understanding and adopt the best approach for balancing both acts, that is, producing or giving services for profits and at the same time, abiding by the laws of the land.
Overall, the Code on Wages and all other codes require the support of the industry and workers, both organized and unorganized in order to accept the changes which are likely to happen after decades of getting our freedom and should be understood by all as it is for our own good and conceptualized to be the best.
The intent is not to be suspected and we should not doubt the genuineness of the truth in the coding of these new laws since it is exemplified to bring in transformation as we march on into the 21st century, the quarter way through, hoping for a new regime in place of the old labour coats that weakened our momentum and took us backward as a developing nation.
Overall, we think and feel as a topmost one of the 5 leading labour law enterprises that this is a way forward in the right direction as far as we are concerned as a foremost compliance solution provider. However, it is now left to all our other colleagues, workers, industry experts, stakeholders, associations, chambers and fraternity members to consider the labour reforms as a kind of booster that perhaps will bring in substantial gains in the “ease of doing business” as well as for workers getting renewed benefits in the longer run.
It is for sure that the code will have an impact on the employer as well as the employees, however, to what an extent, it will be known only after the implementation of the codes in terms of its effectiveness and efficiency.
Proprietory blog of Karma Global Tech Management Firm
This blog has been compiled by the internal staff of Karma with the knowledge and expertise that they possess, for its monthly newsletter Issue 04 of October 2022 in case of specific or general information or compliance updates for that matter, kindly reach out to the