The Code on Wages Bill, 2017 (the "Bill") has been recently approved by the Union Cabinet. This Bill seeks to unify and consolidate The Payment of Wages Act, 1936, The Minimum Wages Act, 1948, The Payment of Bonus Act, 1965, and Equal Remuneration Act, 1976.

The purpose of the Bill is to rationalize the existing labour laws relating to the organised sector and to ensure a minimum level of protection to the workers in the un-organised sector.  By consolidating these legislations, the Bill has become an umbrella legislation that facilitates easier compliances for establishments, promotes ease of doing business and ensures labour welfare, payment of wages and social security for employees.

Main Features:

Coverage: The Bill covers both the organised and un-organised sectors. It also focuses on the empowerment of women employees, by providing increased employment opportunities to women. The Bill also states that no employer shall discriminate on the basis of gender.

Definitions: The Bill provides for uniform definitions of "employee" and "employer". The definition of the term 'employee' bears resemblance to the term "workman" in the Industrial Disputes Act, 1947. However, the definition of the term 'employer' has been widened to include the occupier of a factory, the person who has ultimate control over the affairs of any establishment, and contractors.

Wages: The Bill provides for fixation of minimum wages by the government. Wages will be determined based the skill set, arduousness of the work, geographical location, etc. By doing so, the Bill will address problems faced by those employees who were not protected under the 4 legislations because of their occupation or the fact that their wages did not fall within the prescribed threshold. Employees cannot be paid below the prescribed minimum wage.  Wages need to be paid by the 7th of every month electronically or by crediting to the employee's bank account.  In case the employee has been dismissed or has resigned from services, he/she has to be paid within 2 working days from such dismissal or resignation.  Moreover, the minimum wages will be revised once in every 5 years.

Overtime: Employees are entitled to overtime calculated at twice the normal rate of wages.

Deductions: No deductions from wages are permitted under the Bill unless the deduction is a payment to the employer or its agent. Any loss of wages resulting from withholding increment or promotion, demotions, suspension is not considered as deduction, if the above is for "good and sufficient cause". However, the term good and sufficient cause has not been defined by the Bill. Deductions can be made on the following grounds, such as, absence from duty, damage to goods, deductions for house accommodation provided by the employer, for recovery of advances provided by the employer, etc.

Fines: Fines can be imposed on the employees for certain acts and omissions with the previous approval of the appropriate government. The total fine imposed in any wage period cannot exceed 3% of the total wages earned by the employee in that wage period. Prior to imposing any fine, the employee should be given an opportunity to show cause against the imposition of the fine.

Bonuses: The payment of bonus is to be made by any establishment which employs 20 or more employees.1 Employees who have worked for 30 days in a year are entitled to an annual minimum bonus calculated at 8.33% of his/her annual wages or Rs. 100 whichever is higher. If the allocable surplus exceeds the minimum bonus then the employer has to pay its employees, bonus in proportion to the wages earned by the employee. However, the maximum bonus payable is capped at 20% of the employee's wages. The employee is disentitled from receiving any bonus if he/she has been dismissed from service on grounds of fraud, violent behavior, theft or misappropriation of employer's property or conviction for sexual harassment.

Records: Employers need to maintain a register containing the details of the employees, muster rolls, wages, etc. The employer has to issue wage slips to the employees and display an extract of the Bill containing wage rates, wage period, date and time of payment of wages, etc.

Facilitators: The Bill empowers the appropriate government to appoint 'Facilitators' and to do away with the concept of 'Inspectors' under the 4 legislations2. Facilitators carry out inspections and ensure better compliance by employers. Employers will be given the opportunity to rectify any contravention prior to proceedings being initiated against them. The Bill also makes provision for transparent/ web based inspections to be carried out by the facilitators.

Penalties: The quantum of the penalties is much higher under the Bill. For non-payment or under payment of wages, the employer is liable to pay a fine of up to Rs. 50,000, for non-maintenance of the records, a fine of up to Rs. 10,000 can be imposed and for any other contraventions under the Bill, a fine of up to Rs. 20,000 can be imposed. The maximum fine has been set at Rs. 100,000. There is also a criminal penalty for a second and/or subsequent commission of the same offence. The Bill allows for compounding of offences that are not punishable with imprisonment. However, the onus is on the employer to refute any claim of contraventions under the Bill.

Limitation: The period of limitation for filing of claims under the bill has been increased to 3 years from the earlier period of 6 months to 2 years.

Speedy trials: The Bill provides for speedy trial by empowering the appointed authority to determine the claims within a period of 3 months and to appeal within a period of 3 months. The Bill also provides for efficient redressal of grievances and settlements of claims reducing the time and energy of the employers.

Conclusion: The Bill was aimed to promote ease of doing business and also to simultaneously improve the wage/ salary conditions of the employees. This is definitely a step in the right direction by the government to ensure that the worker class doesn't remain the underdog and that they get their due for the efforts and hard work they put in.


1 Employees of LIC, department of State or Central Governments, universities or other educational institutions or any other establishments as notified by the appropriate government are exempted from payment of bonus.

2 Provision for inspectors are in the Equal remuneration Act, 1976, The Payment of Wages Act, 1936, The Minimum Wages Act, 1948 and The Payment of Bonus Act, 1965.

Originally published 25 July 2019

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