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New legislation governing minimum wages for Indian workers

New legislation governing minimum wages for Indian workers

India is the second most populated country in the world, with a huge working-class consisting of national and international workers. This implies that fairness for these workers must be made paramount by the government, as they contribute to the economic growth of the country. Wages relating to minimum wage in India can be traced back to the early ’90s with Minimum Wages Act 1948 as a starting point. The 1948 Act laid out minimum wage for both skilled and unskilled labors. The minimum wage set was to be ‘fair’ enough to enable the standard of living of an individual with dignity. This Act, which gave both the State and Central Government power to amend laws regionally in accordance with the circumstances, has been remedied plenty of times in different states. As a result, there is no unified minimum wage nationally. However, research shows that 42% of the working-class receives lesser than the fixed minimum wage in India.

With the view of stabilizing wage law across the country, the Rajya Sabha passed legislation on 2nd August 2019. The bill is known as the Code on Wages, 2019, and was first presented by the minister of labor in the Lok Sabha on 23rd July 2019. The Code effectively amends and replaces four legislations, namely:

  1. the Payment of Wages Act, 1936,
  2. the Minimum Wages Act, 1948,
  3. the Payment of Bonus Act, 1965, and
  4. the Equal Remuneration Act, 1976.

The Code on Wages 2019:

In a nutshell, the Code gives the Central Government power to make wage-related decisions for specified industries such as railways, mines and oil fields, etc. The State Government, on the other hand, is given power to make decisions for other industry employment. There exists a concept of ‘floor wage’ which is decided by the Central Government depending on the industry and living standards of the employees in question. The floor wage acts as a base wage, and the Code strictly prohibits minimum wage from falling under it. The State Government uses the floor wage to decide on regional minimum wages. There are different factors considered while fixing the minimum wage. General factors are the skill and difficulty of the worker.The Code also covers the working hours of the employees; their overtime pay, hours of employment, method of payment (coins/notes/bank credit/electronic transfers/cheques), so on, and so forth.

With regards to deduction of salary of the employees, the Code states that the employer can deduct salary due to absences or entitlement (and similar reasons), however, the deduction should not fall below 50% of the total wage of the employee. Furthermore, the Code also states that of the wages do not exceed a particular amount of Indian Rupees, the Central and/or State Government should be notified and they would consider if the employee is eligible for a bonus. Such a bonus would be a minimum of 8.33% or a sum of hundred Indian Rupees whichever is higher. The maximum amount of bonus is capped at 20% of the annual wages of the employee.

The Code also strictly observes policies against gender discrimination and reinstates that wages and recruitment are to be decided on the factors contributed by the employee and not his/her gender. The Code also contains sections for how the advisory board of members relating to minimum wage is to be structured and lists out offense penalties for employers who fail to follow and uphold the Code.

There is yet to be a law passed to unify minimum wages all across the country due to the difference in the standard of living in each state. It is important to note and appreciate that the Government of India is taking an effort to pass new legislation regarding minimum wages in par with the economic conditions of the country.