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Code on Wages 2019: A universal minimum wage is fine but can it be enforced?

Code on Wages 2019: While the idea is good, the real challenge is in implementing it. The enforcement mechanism has proved inadequate in the presentation situation and little attention has been paid to this aspect in the bill which widens the scope of coverage.

twitter-logoPrasanna Mohanty | July 25, 2019 | Updated 14:42 IST
Code on Wages 2019: A universal minimum wage is fine but can it be enforced?
Code on Wages 2019: After years of trying, the central government has made a fresh bid to universalise provision of minimum wages to all workers, both in organised and unorganised sector, through the Code of Wages, 2019.

Code on Wages 2019: After years of trying, the central government has made a fresh bid to universalise provision of minimum wages to all workers, both in organised and unorganised sector, through the Code of Wages, 2019. The last attempt was made in 2017 when a bill for the purpose was introduced in the Lok Sabha and referred to a Parliamentary Standing Committee but could not be passed.

What the Bill says

The Bill amalgamates four labour laws relating to wages and bonus and related matters - the Payment of Wages Act of 1936, Minimum Wages Act of 1948, Payment of Bonus Act of 1965 and Equal Remuneration Act of 1976 - into a single code and provides for a national minimum wages for all workers.

It provides for all essential elements related to wages, equal remuneration, its timely payment and bonus. The minimum wage would include basic rate of wage, cost of living allowance and the cash value of concessions etc. and take into account skills, arduousness of work, geographical locations and other aspects to fix it. Both the central and state governments will fix minimum wages in their respective sphere.

The provision relating to timely payment and authorised deductions (applicable until now for employees drawing Rs 24,000 per month) will be applicable to "all employees irrespective of wage ceiling", including those in the government establishments.

To remove arbitrariness and malpractices, there would be Inspectors-cum-Facilitators in place of Inspectors. The Parliamentary panel had objected to replacing Inspector with Facilitator on the ground that the latter seemed to suggest dilution of the implementation mechanism and hence the hyphenated arrangement.

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The bill also provides for the appointment of one or more authorities, instead of multiple ones at present, to decide claims and an appellate authority for speedy, cheaper and efficient redressal of grievances.

In case of claims relating to non-payment or less payment of wages or bonus or unauthorised deductions, the burden of proof would be on the employer. The period of limitation for filing claims has been extended to three years (from six months to two years).

The Bill also provides for revising minimum wages every five years and emphasises on the use of technology for enforcement, along with payment of wages by cheque or through digital modes.

Why the change

The statement of object and reasons of the bill says that the purpose is to widen the scope to ensure equity and ease of compliance of labour laws. This would lead to setting up more industries and create more jobs. It further says the endeavour is to remove multiplicity of definitions and authorities without compromising on the basic concepts of welfare and benefits to workers and to bring transparency and accountability into the system.

The amalgamation is in line with the recommendation of the second National Commission on Labour of 2002 and tripartite consultations (among government, industry and employee representatives) held earlier.

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The Economic Survey of 2018-19 had highlighted the complexity in the minimum wage system in India by pointing out that there were nearly 429 scheduled employments and 1,915 scheduled job categories for unskilled workers across India covered by the Minimum Wages Act of 1948. The bill removes the concept of 'scheduled employments' - declared as such by the central and state governments.

Implementation and other challenges

The industry welcomes the move. MS Unnikrishnan, chairman of the CII National Committee on Industrial Relations, says this will help in addressing violation of minimum wage provisions and exploitation of labour. However, he cautions that the state governments should desist from competitive populism to inflate minimum wages to an extent that it would make industry unviable and uncompetitive. "We have to be competitive and viable as business enterprises and should not lose sight of that", he warns.

The labour unions are divided

The RSS-affiliated Bharatiya Mazdoor Sangh (BMS) views the bill as a historical and revolutionary step. The BMS president CK Sajinarayanan says with this the last worker would now be covered with the minimum wages, instead of just those in the scheduled employment.

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The Left-backed Centre of Indian Trade Unions (CITU) however has several objections. Its general secretary Tapan Sen says the formula for fixing minimum wage has been kept out of the Bill despite the fact that there is unanimity on this and which was also reiterated at the 46th Indian Labour Conference in 2015 attended by Prime Minister Narendra Modi. By not putting the formula in place, the bill leaves it at the government's complete discretion, he reasons.

Besides, he says the definition of 'wage' is confusing, too long (42 lines) and too difficult to determine what wage is as per this definition. He questions different floor rates for different geographical areas, saying that makes the concept of a national rate "a deceptive ploy to mislead people".

Sen further points out that the Bill defines 'worker' and 'employee' differently in a deliberate attempt to leave room for exploitation of workers. This is in spite of the Parliamentary panel's recommendation for a common and comprehensive definition of employee/worker to avoid discrimination between employees and workers for the purpose of minimum wages. That would have also brought clarity for implementation.

Economist Prof KR Shyam Sundar of the XLRI's Xavier School of Management, Jamshedpur, says the bill is aspirational, symbolic and lacks credibility because the government simply does not have the enforcement wherewithal to implement it on such a big scale.

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The Economic Survey of 2018-19 had pointed out that one-third of workers covered under the Minimum Wages Act of 1948 (meant only for only the scheduled employments) have "fallen through the cracks and is not protected by the minimum wage law". Sundar points out that the bill would cover a much larger number of workers, which would become even tougher now that it has diluted enforcement by removing power of entry of the labour inspectors.

His other bigger concern is multiplicity of minimum wage rates to be fixed on the basis of skill, arduousness and hazardousness of work, geographical regions and other norms as may be prescribed by the governments. "There should be a single statutory minimum wage applicable to all sectors of workers and regional differences can be taken care of by adjusting the cost of living allowance. This will make it simple", he suggests, adding that keeping the door open for creating numerous minimum wage rates would make the system complex and tough for implementation.

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