The Code of Wages Bill 2017

The Code on Wages Bill, 2017 was introduced in the Lok Sabha on 10 August 2017 by the Modi government. The new bill is to replace the Payment of Wages Act -1936, the Minimum Wages Act – 1949, the Payment of Bonus Act – 1965 and the Equal Remuneration Act, 1976. The Wage Code Bill is a part of the so called labour law reforms that the government has undertaken by “rationalisation” of 38 Labour Acts. This is being done by framing them into four comprehensive labour codes viz., Code on Wages, Code on Industrial Relations, Code on Social Security and Code on Occupational Safety, Health and Working Conditions. The Code on Wages will apply to establishments where any industry, trade, business, manufacturing or occupation is carried out. This will also include government establishments.

The government claims that the main aim of the Code on Wages Bill is to ensure a statutory national minimum wage for all wage workers in the country. No state government will be allowed to fix state-level minimum wage less than the national minimum wage. The Bill proposes that the minimum wage fixed by the central government be applicable to all employments covering both organized and unorganized sector all over the country. As of April 2017, at least 11 states including Gujarat, Andhra Pradesh and Tamil Nadu had fixed minimum wages below the national level wage specified by the central government. This itself was pitifully low at Rs. 160 per day, i.e., less than Rs. 4200 per month.

A close study of the Code, however, shows that not only is the claim of the government misleading, but also that the Code is full of anti-workers measures. Section 9(1) of the Bill states that “different national minimum wage may be fixed for different states or different geographical areas”. Thus, the “national minimum wage” – even as the phrase is repeatedly used – is reduced to a “state-level minimum wage”. Further, the central government has not fixed or mentioned any amount as “national minimum wage” in the Code on Wages. The formulation of minimum wage has been kept under the sole discretion of the government. The Seventh Pay Commission recommended Rs. 18,000 as the minimum monthly wage. The government accepted this for central government employees but the Code does not provide for that. In fact, the government was quick to deny that it had any intention to fix Rs. 18,000 as minimum monthly wage.

Trade unions have been demanding the minimum wage of Rs 18,000 per month for all workers. Further, for revision of the minimum wages, the Code sets five years as the standard time, while currently five years is the maximum period for the revision of wages. This would mean the real minimum wage would keep falling year after year and it would be adjusted for inflation, if at all, only after five years.

The Bill is understandably drawing strong opposition from trade unions across the country, which point out that it is actually diluting whatever pro-labour elements existed in the four earlier legislations. The trade unions are concerned that the Code has removed the Schedule of Employment, which lists the industries governed by labour laws. “Now industry-specific wage setting is shifted to standardized minimum wages for time and piece-work. This will result in minimum wage thresholds fixed according to the wages paid to the poorest workers”, said one of the unions. Another union asked, “Does it mean that the minimum wages, to be decided by either the state or the central government, will be the same for all industries? There is no answer. Rather this is a ploy to empower employers to suppress the wages in the establishments/industries in the erstwhile schedules where wage level was higher than the others. All for ensuring ‘ease of doing business’ in an unscrupulous manner.”

Significantly, the Code seeks to render trade unions toothless in a number of ways. For one, the Code does away with the right of trade unions to legally access the audits of the establishment’s accounts. The section 31(2) of the Code states that “Audited accounts of companies shall not normally be questioned”. The right of the workers or their unions to question the accuracy of the balance sheet of the company or demand clarifications, to ascertain “allocable surplus” while bargaining for bonus above the minimum level, is available in the present Bonus Act but has been taken away in the Code.

The Code does not specify the maximum working hours. As per the Code, the central or state governments will fix the number of hours that will constitute a working day. 

The Code also attacks the right of workers to strike by considering workers who are participating in a strike as absent.

The Code provides for payment of wages through cheque or digital/ electronic mode to promote “cashless economy”, the agenda the Modi government has been pursuing since demonetisation.

The Code significantly weakens the Equal Remuneration Act, one of the four laws it is replacing. The Equal Remuneration Act has been completely diluted by restricting it to gender discrimination only in respect of payment of wages and has done away with other types of discriminations related to recruitment, conditions of service such as promotion, vocational training, transfer etc.

The Code seeks to keep all disputes relating to wages to be outside the purview of the courts. Section 52 of the Code stipulates that “No court shall take cognizance of any offence punishable under this Code, save on a complaint made by or under the authority of the appropriate government or an officer authorised in this behalf, or by an employee or a registered Trade Union registered under the Trade Unions Act, 1926 or a Facilitator.”

The Code is being presented by the Modi government as a step in the direction of “labour reforms”, which capitalists have been persistently demanding. Capitalists are, however, disappointed with the proposed Code as it still provides for fixation of minimum wage by the government. They want wages to be fixed by “the economics of demand and supply of workers”, without any interference by the government. They in any case do not want the minimum wage to be raised to the level of Rs 18,000 per month. The Chairman of Apparel Export Promotion Council (AEPC), declared that the apparel sector, one of the large employers, would be savagely hit if the minimum wages for his sector were to be pegged at Rs. 18,000 per month. The sector currently pays at best Rs. 9,000 per month.

Capitalists have threatened that if the Code is passed as a Bill, it will hinder creation of new jobs, especially at the entry level, and encourage lower-paid informal employment due to increased cost to companies on account of minimum wages. According to them, “India needs more formal jobs, not protection.” So, capitalists want a Code without any clauses to protect workers and their rights.


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