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Code on Wages Bill: What's the tussle between centre and states?

The Union Cabinet has already approved this bill which proposes to increase the national minimum wage by Rs 2 to Rs 178 per day despite an internal labour ministry committee's suggestion of Rs 375.

twitter-logoBusinessToday.In | July 23, 2019 | Updated 13:49 IST
Code on Wages Bill: What's the tussle between centre and states?
The Code on Wages Bill, 2019 which is going to be tabled in the Lok Sabha Tuesday has for long been a sticking point between the centre, states and the unions alike.

The Code on Wages Bill, 2019 which is going to be tabled in the Lok Sabha Tuesday has for long been a sticking point between the centre, states and the unions alike. The Bill seeks to subsume prevalent laws pertaining to workers' remuneration and enable the Centre to fix minimum wages for the entire country.

It proposes to fix a mandatory national wage floor (minimum wage) which is to be followed by the state governments. The Union Cabinet has already approved this bill which proposes to increase the national minimum wage by Rs 2 to Rs 178 per day despite an internal labour ministry committee's suggestion of Rs 375. Even the Economic Survey 2019 had said that a better national wage ceiling will alleviate disparity and poverty in India.

Although, this is a huge markup from the states' Rs 100 (a day) on an average or less, the various workers' unions are unhappy with the revised rates. The Central trade unions, except RSS-affiliate Bhartiya Mazdoor Sangh had in June asked the government to increase minimum wages to Rs 20,000 per month i.e. around Rs 666 a day and a universal pension of Rs 6,000 per month. The unions had also asked the government to do away with the fixed-term employment, emphasise on employment creation through labour-intensive sector and boost social sector spending to benefit around 500 million workers in India.

Also Read: Budget 2019: Five polices to redesign India's minimum wage system

Over 10 central trade unions had signed an exhaustive list of demands and presented it in pre-budget meetings scheduled with the finance minister Nirmala Sitharaman.

The Industry chambers too have expressed their reservations on the decision-making aspect of the proposed bill. The Confederation of Indian Industries (CII) in June had said that the states should have the power to determine minimum wages as the concept of a national minimum wage will affect job creation.

The industry body is of the opinion that the minimum wages fixed by states should be based on three criteria - geographic location, skill and occupation. "The concept of a national minimum wage will affect job creation, so it is necessary to give states power to fix their own minimum wages," CII had said.

Also Read:5 contentious issues holding up India's labour law reforms

The International Labour Organisation in its November 2018 report had said that nearly 41% of Indian employees feel they are poorly paid. In a salary satisfaction survey among the 22 countries of the Asia-Pacific region, India had stood fourth from the bottom, above only Bangladesh, Pakistan and Mongolia.

The Centre through this bill proposes to structure the salaries of workers in a way that caps several allowances- house rent, overtime and leave travel etc at 50% of the "wages" which comprises the basic pay, retention pay and dearness allowance, the Business Standard reported. This is to make sure that the companies do not limit the basic components of salary at lower levels.

Also Read: Labour Law reforms: Nobody knows who's a 'worker' under Indian laws! Do you?

The key proposal in the bill comprises a mandatory national wage floor (minimum wage) which will be binding on the states to implement. There is a discretionary national minimum wage floor in place at present.

This is a major deviation from a 'national minimum wage' suggested by the central government in the previous version of the Code on Wages Bill.

Also Read:Labour reforms: No one knows the size of India's informal workforce, not even the govt

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