Print this page

Letter to the Labour Ministry on the Proposed Draft Labour Code on Wages

26 May 2015
Going all out to satisfy big businesses and corporates and attempting to ease compliance burden for employers in tandem with the "Make in India" campaign, the labour ministry plans to streamline the definition of wages across labour laws by amalgamating four wage related statutes into a single code. The Ministry of Labour & Employment has proposed to come out with a Labour Code on Wages by amalgamating the relevant provisions of the Minimum Wages Act 1948, The Payment of Wages Act 1936, The Payment of Bonus Act 1965, and The Equal Remuneration Act 1976. Responding to the Ministry's invitation to trade unions to come up with suggestions and comments on the Draft Labour Code on Wages by April 20, 2015, the Trade Union Centre of India (TUCI) prepared and submitted a note. We are publishing the same. – Red Star Editorial Board


Ministry of Labour and Employment,

We are writing this in response to your invitation of suggestions / comments on the draft Labour Code on Wages. We are sending this on 20th April, in the first instance by email to the email of Mr. S. K. Tripathi, Under Secretary, as required by the notice put up on the website of your Ministry. The hard copy of these suggestions / comments will follow in the normal course by mail and by hand-delivery.

At the outset, we have to comment on the generality of the exercise. Though the objective may seem to be laudable, it is, in fact, misconceived and ill thought out. The objectives behind the four Acts sought to be amalgamated are quite different. Therefore, the necessity of different definitions, for the same word, in these acts, was felt. For example, "wage" has now been defined to not include travel allowance. This was the definition in all the Acts to be consolidated except for the Equal Remuneration Act, 1976, where the definition of "remuneration" included travel allowance and every other conceivable allowance or payment also. The Equal Remuneration Act prohibited discrimination in the payment of "remuneration". The proposed new "Labour Code of Wages" (hereinafter referred to as the "new Code") only requires payment of equal "wage". This means that the employer can discriminate, for instance, in the matter of travel allowance. Similar problems exist in respect of other matters. For example, Bonus is paid as a percentage of wages. The definition of "wage" in the new code includes retrenchment compensation and gratuity. The result of the new code will be that Bonus will also be payable on retrenchment compensation and gratuity at least at the minimum rate of 8 and 1/3 per cent. Similarly, the employer will be enabled under the new Code to deduct up to 50% of the retrenchment compensation and gratuity due to any worker (though this would, of course, be hit by the provisions of the Gratuity Act, 1972 and the Industrial Disputes Act, 1947).

The above instances are merely in the nature of examples. The four Acts mentioned have different objectives to achieve. The objective of the Equal Remuneration Act requires the definition of wage (remuneration) to be exhaustive. The definition of wage under the Bonus Act has a restrictive meaning so that the worker may not get Bonus on Bonus, etc. The definition of wage under the Minimum Wages Act is designed to stop the employer from escaping the mandate of that Act so that no worker is exploited by being made to work at wages less than minimum wages by fictitious methods. The definition of wage under the Payment of Wages Act was to stop arbitrary deductions and to see that the wages are paid in cash and in proper time.

A better result could be obtained by making some changes in the existing Acts. For example, the Equal Remuneration Act could be amended to prohibit discrimination not only among men and women but also transgenders or others. The Payment of Wages Act could easily be amended to provide for the payment of wages by depositing in the bank accounts of the workers.

One further overall comment which has to be made is that the problem is not with the language or definitions of the Acts. The problem, as is well recognized, is in the implementation of these Acts which are meant for the protection of the poorest sections amongst the workers. It is welcome that the penalties are being enhanced. However, these enhancements are totally insufficient. It is also not correct that all first offences are subject to a mere fine and imprisonment is only to be imposed on repeat offenders. This is by way of amelioration of the lot of the employers who exploit these poorest sections.

One further opening comment is that many of the substantive provisions such as the procedure for levying penalties, the amount of such penalties, etc. are left to the prescriptions of the appropriate governments. In this situation it is difficult to comment on such provisions without seeing the rules or at least model rules. We therefore reserve our comments upon such rules.

With these opening comments, we will now point out the following glaring problems with the new Code.

1. In Section 2 (f) the words "consumer price index number" have been defined. However, the said words have not been used anywhere in the said Act other than in the definition. The words "cost of living index" have been used in the portion dealing with minimum wages. However these words are not defined. This definition is therefore meaningless.

2. In section 2 (j) "employee" excludes an "apprentice". The Bonus Act does not apply to an apprentice. However, the Payment of Wages Act, the Minimum Wages Act and the Equal Remuneration Act do apply also to apprentices. Under this definition, an "apprentice" could be deprived of the minimum wage. Her / his rights under the Payment of Wages Act and the Equal Remuneration Act will be taken away. This is clearly unfair.

3. The same section also does not include persons who do operational or some other kind of work (other than manual, clerical, supervisory, technical, managerial or administrative work). They will also be deprived of their rights which they have under the existing Acts.

4. The definition also does not include "out workers" (like beedi workers) who are explicitly now included in the definition of employee under the Minimum Wages Act at present and only include those employed "in any establishment". It also does not include persons whose services have been terminated, who have been retrenched, etc. who are also explicitly now included in the definition of employee under the Minimum Wages Act at present.

5. Section 2 (w) contemplates rules being made by the Central and the State Governments. However, there is only provision under Section 58 for rules to be made by the Central Government. There is no provision for rules to be made by the State Government though many procedures are required to be prescribed by the State Governments.

6. In Section 2 (x) though the earlier part of the definition included transgenders, they are not included in the latter part of the definition;

7. The definition of "wage" under Section 2 (z) has already been commented upon above. However, there are many internal contradictions in this definition also. For example, there is no clarity at all about whether Bonus payable under this new Code would be included in the definition of wage. There are other internal contradictions also.

8. Comment has also already been made about Section 3. The prohibition in this section is restricted to discrimination in "wage". The earlier prohibition against discrimination in "remuneration" was much wider.

9. Section 6 gives the authority to fix the minimum wage solely to the State Governments. In the case of industries like the railways this will lead to arbitrariness as different states may fix different minimum wages.

10. Section 14 of this Act corresponds to Section 14 of the Minimum Wages Act. However, while the Minimum Wages Act protects the rights under the Factories Act, 1948, wherever applicable, and allows for payment of higher than double rate of overtime where applicable, the new Code omits this. Further, it is not clear if the double rate of minimum wage is payable for overtime work only to workers getting the minimum wage or to all workers.

11. With regard to section 15 of the new Code, provision has been made for the constitution of Advisory Boards both at the Central and State levels. Each will advise the respective Governments constituting them. Provision has also been made allowing the Central Government to issue directions to State Governments. However, it is not defined as to what is the relation between the Central and State Governments. It is not provided whether the directions of the Central Government will be binding on the State Governments and whether such directions would be restricted to those establishments for which the Central Government is the appropriate Government or for all establishments.

12. With regard to section 15, it is provided that the Board shall appoint committees / sub-committees. These committees are therefore different from the committees / sub-committees appointed under Section 8 which are appointed by the State Governments. This will lead to a plethora of committees with no clarity as to their relationship inter se and no clear demarcation of their authority and responsibility.

13. In this context it may be mentioned that committees consisting of persons nominated by Government have proved to be unsuccessful. It is high time that we should be looking at committees which are elected. The growth of IT technology has now made such elections by employees and by employers feasible.

14. With regard to section 15 (3), it is not provided whether the Central Advisory Board will consist of persons representing employers and employees or not and what will be their proportion.

15. With regard to section 16, though the motive is laudable, the reality that many of the workers, especially in rural areas, do not have bank accounts has been lost sight of.

16. Section 17, allowing the employer to fix the wage period is vague. It does not specify as to when the wage period is to be fixed by the employer and whether the wage period has to be the same for the whole establishment or can vary from employee to employee. As it stands this section fall foul of Section 9A of the Industrial Disputes Act, 1947 which provides that the employer can only alter any condition of service by giving a particular form of notice or by settlement with the workers.

17. As regards section 18, the sub-section 2 of this section allows the employer to pay the worker his "wages" which includes retrenchment compensation and notice pay within 48 hours of such retrenchment. This contradicts Section 25F of the Industrial Disputes Act which states that the payment of notice pay and retrenchment compensation are conditions precedent to retrenchment of any workers. Further, if a worker is dismissed while an industrial dispute is pending, there is a requirement of making an approval application and of paying one month's wages in the same transaction as the dismissal. This will also stand contradicted by section 18 of the new code.

18. As regards section 19,there is a repetition in the second sub-section of what is already provided in the first. Sub-section (4) of this section is in direct contradiction to sub-section (1). Whereas sub-section 1 provides that even deductions under any other law are prohibited, sub-section 4 provides that deductions will be limited to 50% of the wages subject to any other law. We suggest that sub-section 4 of this section may be amended so as to remove the words "subject to the provisions of any other law for the time being in force". This will ensure that the total deductions from any workers wages should not go above 50% in any case.

19. Though Section 21 is a mere reproduction of an earlier section it is suggested that the provision allowing for deduction of eight days wages for concerted absence may be removed. It goes against the earlier sub-section 2 of this same section. This is an antiquated law when strike was seen as a crime. Today the law on industrial disputes has developed and the Industrial Tribunal has the authority to decide not only the legality but also the justifiability of any strike. It has been held that partial wages may be paid for a justified strike even if it may be illegal. In this situation, the present provision must be deleted.

20. About section 26, the problems caused by the definition of wage including terminal dues has already been discussed above. As regards sub-section 2 the word "minimum" may be replaced by the word "lower". Sub-section 3 is badly worded. The intention seems to be that all the allocable surplus should be utilised for paying bonus subject to a maximum of 20%. This is not clear. The words "which will utilise all the allocable surplus" may be added before the words "subject to a maximum of ...".

21. The wording of sub-section 5 is also defective. It seems to imply that there can be a settlement for bonus based on production or productivity in excess of the minimum bonus. However such Bonus along with the minimum bonus should not exceed 20%. No provision has been made for production or productivity bonus when the allocable surplus itself allows for 20% bonus. This is flawed. A settlement based bonus will have to be paid on the basis of production or productivity even if the allocable surplus allows for 20% bonus. It is therefore suggested that in place of the words "sub-section (1)" in sub-section 5 substitute the words "sub-section (1) or sub-section (3)". Further delete the words "subject to the an accounting year" (till the end of this sub-section). This is also in keeping with the reality where Bonus of over 20% is, in fact, being paid in certain establishments though under the name of 'ex gratia'.

22. Section 29 states that the information contained in the balance sheets shall not be disclosed. This is objectionable. The employees or their union are bound to see the balance sheets relied upon by the employer when calculating bonus. In any case the audited balance sheets of corporations are public documents.

23. In Section 43, sub-section 3 provides for recovery of outstanding dues as arrears of land revenue but not of the amount of compensation decided under sub-section 2. Therefore it is suggested that the words "or compensation" may be added after the words "...outstanding dues of an employee" in that sub-section. Further, an establishment may be located in more than one district. Therefore the certificate of recovery may be issued to the DM of the District where the establishment "or ay part thereof" is located. Sub-section 4 allows a Non-Governmental Organisation to file a claim. This is highly objectionable. Trade Unions have certain rights under the Trade Unions Act which the NGO will not have. They may be held responsible for any loss caused to an employer due to any trade dispute. They are not entitled to sign settlements under the Industrial Disputes Act for settling a dispute. If they do sign a settlement it will not be binding on all workers as a settlement signed by a union in the course of conciliation will be. They have not signed the Code of Discipline which every registered Trade Union is required to sign. Trade Unions are obliged to maintain a democratic structure which the NGO is not.

24. In Section 45 in sub-section 1 the last words, "or ten rupees per head as the case may be" may be deleted. They make no sense in this context. If the intention is to limit the compensation in the case of a joint application to Rupees Ten per head this is clearly unfair, unreasonable and unjust.

25. In Section 47 the term "Facilitator" is a misnomer. The work prescribed is that of an "Inspector" or "Enforcement Officer". It would be better to use such terms. Terms like "Facilitator" will dilute the importance and authority of the officers.

26. Section 48 allows a "recognised welfare institution" to make complaints. However such "recognised welfare institution" is nowhere defined. It is not clear as to who must recognise such an institution and as to what is the criterion for such recognition. The words may, therefore, be deleted.

27. Section 49 allows only fine for first offences. This is not fair. There may be reasons to justify a prison sentence even for a first offence. The first offence may have led to the death of a worker or his family member. A mere fine is not acceptable for such an offence. Further, though the amounts of fines have been enhanced, in view of the large corporations who may be offenders under the new Code, even these enhanced amounts are a pittance. It is suggested that the penalties may be put as percentage of gross income subject to a minimum of the amounts stated in the present draft.

28. Overall, it seems that there are some new concepts put forward which are laudable. The inclusion of transgenders in the concept of equal remuneration, the payment of Bonus to some public sector enterprises, the payment of wages by direct deposit in banks, etc. are cases in point. While we fully support such progressive changes in the law, the manner of their drafting leaves much to be desired. The new Code which has been put forward seems to have been hastily cobbled together with no concept of the overall picture and with vague and indifferent drafting. As pointed out earlier it is a mistake to bring together the Acts concerned here as they all have different objects which may not be achieved by a common hodge podge of drafting. There can be no objection if the machinery provided overlaps. The Labour Officers under the ID Act are often notified as Inspectors under other Acts also. However, to bring the definitions of terms like "wages" and "establishment" in different Acts with varied objectives into a common mould is not desirable. Overall we would suggest that the draft as proposed be scrapped and the progressive concepts sought to be introduced may be introduced in the individual Acts which they affect. We also request for a personal hearing so that we may be able to explain our objections including the ones contained hereinabove more clearly.
3262 K2_VIEWS
Super User

Latest from Super User