India: Labor & Employment Laws – Updates (September 2017)

The Code on Wages 2017

To begin with, wages include salary, allowance, or any other component expressed in monetary terms and generally does not include bonus payable to employees or any travelling allowance, among others.

The Code on Wages, 2017 ('Wages Code')1 was introduced in Lok Sabha by the Minister of Labour on August 10, 2017 seeking consolidation of laws relating to wages by replacing: (i) the Payment of Wages Act, 1936, (ii) the Minimum Wages Act, 1949, (iii) the Payment of Bonus Act, 1965, and (iv) the Equal Remuneration Act, 1976.

The Wages Code shall be extended to establishments, including government establishments, where any industry, trade, business, manufacturing or occupation is carried out. The central government will make wage-related decisions for its authorities, and establishments related to railways, mines, and oil fields, among others whereas the state governments will make decisions for any other establishments.

Minimum Wage

Currently, due to restriction pertaining to scheduled employments / establishments, the provisions of the Minimum Wages Act and the Payment of Wages Act do not cover substantial number of workers. Keeping this in view the Wages Code shall ensure minimum wages to one and all and timely payment of wages to all employees irrespective of the sector of employment without any wage ceiling. In this regard, concept of statutory National Minimum Wage for different geographical areas has been introduced under the Wages Code which aims that no State Government fixes the minimum wage below the National Minimum Wages for that particular area as notified by the Central Government. The central government may fix different national minimum wage for different states or geographical areas. The central or state governments will not reduce the minimum wages fixed by them, if these wages are higher than the national minimum wage.

The Wages Code requires employers to pay at least the minimum wages to employees, as notified by the central or state governments based on time, or number of pieces produced, among others. The Wages Code specifies that the central or state governments will review or revise the minimum wage every five years.

The Wages Code also provides for the central or state governments to fix the number of hours that will constitute a working day, providing for a day of rest for employees every week, overtime (at least twice the normal wage of the employee) for working beyond these working hours on any day.

Recently, some news reports published fixation of minimum wage as Rs. 18000/- per month by the Central Government. It was clarified by the Central Government that it did not fix or mention any amount as "national minimum wage" in the Code on Wages Bill 2017. It is to be borne in mind that the minimum wages will vary from place to place depending upon skill required, arduousness of the work assigned and geographical location. Further, the Wages Code on Wages Bill 2017, in the clause 9 (3), clearly states that the Central Government, before fixing the national minimum wage, may obtain the advice of the Central Advisory Board, having representatives from employers and employees. Notably, the Wages Code provides for a consultative mechanism before determining the national minimum wage.

Payment of Wages

Wages will be paid in (i) coins, (ii) currency notes, (iii) by cheque, or (iv) through digital or electronic mode. The wage period will be fixed by the employer as either: (i) daily, (ii) weekly, (iii) fortnightly, or (iv) monthly.

The Wages Code stresses upon payment of wages through cheque or digital/ electronic mode which would not only promote digitization but also extend wage and social security to the worker. There is also introduction of provision of an Appellate Authority between the Claim Authority and the Judicial Forum which should address the issue of speedy, cheaper and efficient redressal of grievances and settlement of claims.

As per the Wages Code, an employee's wages may be deducted on certain grounds including: (i) fines, (ii) absence from duty, (iii) accommodation given by the employer, or (iv) recovery of advances given to the employee, among others. These deductions should not exceed 50% of the employee's total wage.

Payment of Bonus

For determination of bonus, the Wages Code provides that the employer will pay each employee an annual bonus of at least: (i) 8.33% of his wages, or (ii) Rs 100, whichever is higher. Also, the employer will distribute a part of the gross profits amongst the employees (allocable surplus) which will be distributed in proportion to the wages earned by an employee during the year.

The Wages Code also envisages provision for maximum bonus payable which is a maximum bonus of 20% of wages of an employee (inclusive of any amount distributed as allocable surplus). It has been clarified and provided that in case the surplus exceeds the maximum bonus payable to all employees in a year; a certain amount will be carried forward to the following years (up to four years). And that the amount carried forward will not exceed 20% of the total wages payable to all employees during the year.

Other key features

Advisory Boards: Such Boards will be constituted by the central and state governments at both central and state levels and will have representation from: (i) employees, (ii) employers, and (iii) independent persons. Further, one-third of the total members will be women. These advisory boards will be entrusted with the obligation to advise the respective governments on aspects such as fixation of minimum wages, increasing employment opportunities for women, etc.

Offences & Penalties: Further, penalties for different types of violations have been rationalized under the Wages Code, with the amount of fines varying as per the gravity of violations and repeat of the offences. Provision of compounding of offences has been made for those which are not punishable by a penalty of imprisonment. The Wages Code specifies penalties for offences committed by an employer, such as (i) paying less than the due wages, or (ii) for contravening any provision of the Code. Penalties vary depending on the nature of offence, with the maximum penalty being imprisonment for three months along with a fine of up to one lakh rupees.


Amendment to Rule 69 of the Contract Labour (Regulation and Abolition) Central Rules, 1971

The Ministry of Labour and Employment through its Notification dated September 5, 2017 being G.S.R. 1128(E) amended rule 69 of the Contract Labour (Regulation and Abolition) Central Rules, 1971 (as required by section 35 of the Contract Labour (Regulation and Abolition) Act, 1970).

Below is the tabular representation of the amended provision before and after the amendment

Rule 69 (before amendment) Rule 69 (after amendment
All wages shall be paid in current coin or currency or in both. All wages shall be paid in current coin or currency notes or by cheque or by crediting the wages in the bank account of the workman:

Provided that the appropriate Government may, by notification in the Official Gazette, specify the establishment or class of establishments, the employer of which shall pay to every workman employed in such establishment or class of establishments, the wages only by cheque or by crediting the wages in his bank account.

Notably, the amendment has been brought about to include option of paying wages to the employee/ workmen by cheque or by crediting the wages directly in the bank account of the workman.

This seems to have been done to bring about transparency in payment of wages to the workmen as this will put a check on any deviation from minimum wages payable.

Vide notification of the Government of India in the Ministry of Labour and Employment, published in the Gazette of India, Extraordinary, Part II, section 3, subsection (i), vide number G.S.R. 257 (E), dated, the 17.03.17, invited objections and suggestions from all persons likely to be affected thereby before the expiry of thirty days from the date on which the copies of the Official Gazette containing the said notification were made available to the public. However, no comments/ objections/suggestions were reported to have been received.


1. As part of labor law reforms, the Government has undertaken the exercise of rationalization of the 38 Labour Acts by framing 4 labor codes viz Code on Wages, Code on Industrial Relations, Code on Social Security and Code on occupational safety, health and working conditions.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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