THE CODE ON WAGES, 2019

PRESENTATION BY

VASANTKUMAR N HITTANAGI

RETD JOINT LABOUR COMMISSIONER

1
• CODE RECEIVED ASSENT OF PRESIDENT OF INDIA ON 8 th
AUGUST 2019

• PUBLISHED IN GAZETTE OF INDIA ON 8 th AUGUST 2019

• CODE WILL COME INTO FORCE ON THE APPOINTED

DATE BY CENTRAL GOVERNMENT.

• IT HAS NOT YET COME INTO EFFECT.

2
THIS CODE CONSOLIDATES THE PROVISIONS OF:

1. PAYMENT OF WAGES ACT, 1936

2. MINIMUM WAGES ACT, 1948
3. PAYMENT OF BONUS ACT, 1965
4. EQUAL REMUNERATION ACT, 1976

3
THESE ACTS WILL BE REPEALED ONCE THE CODE
COMES INTO FORCE [S.69]

ANY ACTION INITIATED UNDER REPEALED ACTS,

SHALL BE DEEMED TO HAVE BEEN TAKEN UNDER
THIS CODE & SHALL BE IN FORCE
[S.69(2)]
4
DEFINITION OF ‘CONTRACTOR’ & ‘CONTRACT
LABOUR’ IS RETAINED AND IS SAME AS GIVEN
UNDER CLRA ACT, 1970

5
THE INTER-STATE MIGRANT WORKER IS
TREATED AS CONTRACT LABOUR.
[S.2(g)]

6
IN THIS CODE ‘EMPLOYEE’ AND ‘WORKER’
HAVE BEEN DEFINED.

7
 ‘EMPLOYEE’ INCLUDES :
• SKILLED,
• SEMI-SKILLED OR UNSKILLED,
• MANUAL,
• OPERATIONAL,
• SUPERVISORY,
• MANAGERIAL,
• ADMINISTRATIVE,
• TECHNICAL OR CLERICAL WORK. [S.2(k)]
8
 ‘WORKER’ INCLUDES A PERSON DOING :

• ANY MANUAL, • BUT DOES NOT INCLUDE

• UNSKILLED, APPRENTICE OR
• TECHNICAL, • PERSONS EMPLOYED IN A
• OPERATIONAL, MANAGERIAL ,
• CLERICAL OR SUPERVISORY ADMINISTRATIVE CAPACITY ,
WORK EMPLOYED IN A SUPERVISORY
CAPACITY DRAWING WAGE
EXCEEDING FIFTEEN
THOUSAND RUPEES PER
MONTH 9
ESTABLISHMENT MEANS ANY PLACE WHERE
ANY INDUSTRY, TRADE , BUSINESS, MANUFACTURE
OR OCCUPATION IS CARRIED ON
[S.2(m)]

10
WAGES MEANS ALL REMUNERATION BY
WAY OF SALARY, ALLOWANCES INCLUDES BASIC
PAY, DA, RETAINING ALLOWANCE
[S.2(y)]

11
BUT DOES NOT INCLUDE :
BONUS, CONTRIBUTION PAID TO PENSION, PF,
VALUE OF HOUSE ACCOMMODATION OR SUPPLY
OF LIGHT, WATER, MEDICAL ATTENDANCE,

12
CONVEYANCE ALLOWANCE, HRA, OT,
COMMISSION, GRATUITY, RETRENCHMENT
COMPENSATION, RETIREMENT BENEFIT,
EX-GRATIA ON THE TERMINATION OF
EMPLOYMENT

13
FOR CALCULATING WAGES IF PAYMENTS
MADE TO THE EMPLOYEE WHICH ARE EXCLUDED
FROM THE TERM ‘WAGES’ EXCEEDES ONE-HALF
OF ALL REMUNERATION CALCULATED UNDER
THIS CLAUSE,

14
THE AMOUNT WHICH EXCEEDS SUCH
ONE-HALF, SHALL BE DEEMED AS
REMUNERATION AND SHALL BE ADDED IN WAGES
UNDER THIS CLAUSE,

15
NO EMPLOYER SHALL PAY TO ANY EMPLOYEE
WAGES LESS THAN THE MINIMUM RATE OF WAGES
NOTIFIED BY THE APPROPRIATE GOVERNMENT
[S.5]

16
THE CENTRAL GOVT. SHALL FIX FLOOR
WAGES AND DIFFERENT FLOOR WAGE MAY BE
FIXED FOR DIFFERENT GEOGRAPHICAL AREAS.
[S.9]

17
BEFORE FIXING THE FLOOR WAGE THE
CENTRAL GOVT. TO CONSULT STATE GOVT.

THE STATE GOVT SHALL FIX M.W. [S.6]

THIS SHALL NOT BE LESS THAN THE FLOOR WAGES

& IF MW IS MORE, SHALL NOT BE REDUCED [S.9(2)]
18
THE MONTHLY WAGES SHALL BE PAID
BEFORE EXPIRY OF SEVENTH DAY OF THE
SUCCEEDING MONTH (BEFORE TENTH DAY IS
REMOVED)
[S.17(1)(iv)]

19
 BONUS APPLICABILITY :

TWENTY OR MORE PERSONS ARE EMPLOYED OR

WERE EMPLOYED ON ANY DAY DURING AN
ACCOUNTING YEAR.
[S.41(2)]

20
BONUS PAYMENT:
ON WAGES HIGHER THAN THE CEILING WAGE
FIXED BY THE APPROPRIATE GOVT.,

Cont. in next slide.

21
THE BONUS PAYABLE TO SUCH
EMPLOYEES SHALL BE CALCULATED AS IF HIS
WAGES WERE SUCH AMOUNT SO DETERMINED BY
THE APPROPRIATE GOVT. OR THE MINIMUM
WAGES FIXED BY THE GOVT.
WHICHEVERE IS HIGHER.
[S.26(2)]
22
THE TOTAL BONUS INCLUDING PRODUCTIVITY
BONUS SHALL NOT EXCEED TWENTY PER CENT OF
THE WAGES EARNED BY THE EMPLOYEE IN THE
ACCOUNTING YEAR. [S.26(5)]

23
CONVICTION FOR SEXUAL HARASSMENT,
FRAUD, RIOTOUS OR VIOLENT BEHAVIOUR ON THE
EMPLOYER’S PREMISES, THEFT,
MISAPPROPRIATION OR,
Cont. in next slide.

24
SABOTAGE OF EMPLOYER’S PROPERTY
WILL DISQUALIFY AN EMPLOYEE FROM
RECEIVING THE BONUS IF HE IS DISMISSED
FORM SERVICE FOR THESE MISDEMEANOURS.
[S.29].

25
BONUS PAYMENT TO BE MADE BY
CREDITING THE BONUS IN THE BANK ACCOUNT OF
THE EMPLOYEE.
[S.39(1)]

26
IN CASE OF DEATH OF AN EMPLOYEE,
THE WAGES SHALL BE PAID TO THE PERSON
NOMINATED BY THE DECEASED.
[S.44(1)(a)]

27
IF THERE IS NO NOMINATION, THEN
THE AMOUNT TO BE DEPOSITED WITH
AUTHORITY AS MAY BE PRESCRIBED WHO WILL
DEAL WITH THE AMOUNT IN THE MANNER
PRESCRIBED.
[S.44(1)(b)

28
AUTHORITIES TO BE APPOINTED,
TO HEAR AND DETERMINE THE CLAIMS VIZ.
PAYMENT WHICH IS LESS THAN M.W.,
UNAUTHORISED DEDUCTION FROM WAGES,
DISCRIMINATION IN WAGES, BONUS [S.45(1)]

29
CLAIMS TO BE DECIDED WITHIN
THREE MONTHS.
IF A CLAIM IS ALLOWED, THE AUTHORITY CAN
ORDER PAYMENT OF COMPENSATION WHICH MAY
EXTEND TO TEN TIMES OF THE CLAIM AMOUNT.
[S.45(2)]

30
THE AMOUNT ORDERED IS TO BE RECOVERED
BY THE COLLECTOR AS IF IT WERE TO BE ARREARS
OF LAND REVENUE.[S.45(3)]

THREE YEARS LIMITATION TO FILE CLAIM.

[S.45(6)]
31
APPEALS AGAINST THE ORDER OF THE
CLAIMS AUTHORITY TO BE FILED WITHIN NINTY
DAYS BEFORE THE APPELLATE AUTHORITY.
HE SHALL DISPOSE OF THE APPEAL WITHIN THREE
MONTHS.
THE POWERS OF THE A.A. ARE NOT SPECIFIED.
[S.49]
32
MAINTENANCE OF REGISTER CONTAINING
DETAILS OF PERSONS EMPLOYED, MUSTER ROLL,
WAGES,
EMPLOYER TO DISPLAY ABSTRACT OF CODE,
CATEGORY-WISE RATE OF WAGES OF EMPLOYEES,
WAGE PERIOD, DAY OR DATE OF PAYMENT.
[S50(1)]
33
WAGE SLIPS SHALL BE ISSUED.
[S.50(3)]
INSPECTOR-CUM-FACILITATOR TO BE APPOINTED.
[S.51(1)]
GOVT TO LAY DOWN INSPECTION SCHEME WHICH WILL PROVIDE FOR
GENERATION OF BE WEB-BASED INSPECTION AND CALLING OF INFORMATION
RELATING TO INSPECTION,
[S.50(2)
OR CONFER SUCH JURISDICTION OF RANDOMISED SELECTION OF INSPECTION
TO THE INSPECTOR-CUM-FACILITATOR.
[S.51(3)]
34
THE INSPECTOR-CUM-FACILITATOR
MAY ADVICE TO EMPLOYERS AND WORKERS
RELATIING TO COMPLIANCE WITH THE
PROVISIONS OF THIS CODE.
[S.51(5)(a)]

35
COMPLAINT FOR CONTRAVENTION OF
THE CODE OR RULES CAN BE FILED BY OR
UNDER THE AUTHORITY OF THE APPROPRIATE GOVT. OR
AN OFFICER AUTHORISED IN THIS BEHALF
OR BY AN EMPLOYEE
OR A REGISTERED TRADE UNION
OR AN INSPECTOR-CUM-FACILITATOR
[S.52(1)]
36
 PENALTIES

LESS PAYMENT : FINE UP TO FIFTY THOUSAND

RUPEES.
[S.54(1)(a)]

37
CONTRAVENTION OF ANY PROVISIONS
OF THE CODE OR RULES OR ORDER MADE THEREUNDER:
PENALTY : TWENTY THOUSAND RUPEES.
[s.54(1)(c)]

NON MAINTAINANCE OR IMPROPER MAINTAINANCE OF RECORDS

PENALTY : UP TO TEN THOUSAND RUPEES.
[S.54(2)

38
COMPOUNDING OF OFFENCES
BY A GAZETTED OFFICER SPECIFIED BY
THE GOVT.
MAY COMPOUND FOR A SUM FIFTY PER CENT OF THE
MAXIMUM FINE PROVIDED FOR SUCH OFFENCE.

OFFENCES PUNISHABLE WITH IMPRISONMENT ARE NOT

COVERED BY THIS.
[S.56(1)] 39
BURDEN OF HAVING PAID
THE DUES OF WAGES, MW, BONUS
LIES ON EMPLOYER.
[S.59]

40
 KEY CHANGES IN THE
CODE ON WAGES, 2019

COMPARISION WITH THE EXISTING LAWS

MINIMUM WAGES ACT, 1948

41
M.W. ACT :
MW ARE FIXED TO THE SCHEDULED
EMPLOYMENTS IN WHICH MORE THAN 1000
EMPLOYEES ARE WORKING

42
 CODE
NO SUCH NUMERICAL CEILING IS MENTIONED.
UNIVERSAL APPLICABLITY TO ALL.
THE SCHEDULED EMPLOYMENTS HAVE BEEN
ABOLISHED

43
M.W. ACT : WAGE DEFN INCLUDES HRA

CODE : HRA EXCLUDED FROM THE DEFN OF WAGE

44
MW ACT : DOES NOT SPECIFY RETAINING
ALLOWANCE.

CODE : INCLUDES RETAINING ALLOWANCE UNDER

THE DEFN OF WAGE

45
CODE
EXCLUDES ALLOWANCES LIKE
CONVEYANCE ALLOWANCES, HRA, OT.
FROM THE DEFINITION OF WAGE.

46
BOTH THE MW ACT & THE CODE
PRESCRIBE THAT THE MW TO BE REVISED
ONCE IN FIVE YEARS

47
CODE PROPOSES NATIONAL FLOOR
WAGE CONCEPT AND REGIONWISE FIXATION
OF MW
THE STATES CANNOT FIX MW LESS THAN THE
NATIONAL FLOOR WAGE
M.W. ACT DOES NOT HAVE SUCH PROVISION

48
CODE :
OT : PAYMENT AT THE RATE TWO TIMES THE
NORMAL WAGE IS SPECIFIED

M.W. ACT :
NO SUCH RATE OF OT HAS BEEN SPECIFIED

49
MW ACT : PRESCRIBES LIMITATION OF
SIX MONTHS FOR FILING THE CLAIMS

CODE : PROPOSES THREE YEARS LIMITATION FOR

FILING THE CLAIMS

50
CODE: PRESCRIBE FOUR TYPES
OF CLAIMS.THE LIMITATION THREE YEARS
MW ACT: PRESCRIBES THREE TYPES OF CLAIMS. THE
LIMITATION IS SIX MONTHS.

51
MW ACT: DOES NOT PRESCRIBE ANY
TIME LIMIT FOR DISPOSAL OF THE CLAIMS
BY THE AUTHORITY

CODE: PRESCRIBES THREE MONTHS TIME FOR THE

AUTHORITY TO DECIDE THE CLAIM

52
MW ACT : PRESCRIBES PAYMENT OF TEN
TIMES THE DIFFERENCE OF MINIMUM
WAGES CLAIMED AS COMPENSATION
PAYABLE BY THE EMPLOYER AND FOR TWO OTHER TYPES
OF CLAIMS, COMPENSATION OF TEN RUPEES.

CODE PRESCRIBES TEN TIMES AS COMPENSATION OF THE

CLAIM AMOUNT FOR ALL CLAIMS

53
MW ACT : PRESCRIBES THE RECOVERY OF
THE ORDERED AMOUNT BY THE JMFC COURT
AS THOUGH IT IS A FINE IMPOSED BY IT.

CODE : PRESCRIBES THE RECOVERY BY THE

COLLECTOR AS ARREARS OF LAND REVENUE.

54
MW ACT : THE MALICIOUS CLAIMS ARE
PUNISHABLE

CODE : NO SUCH PROVISION

55
MW ACT :
PRESCRIBES THAT FOR THE OFFENSE OF
NON-PAYMENT OF MINIMUM WAGES, FIRST
A CLAIM HAS TO BE FILED AND CLAIM SHOULD BE
ALLOWED AND SANCTION HAS TO BE OBTAINED FROM
THE GOVT. TO FILE PROSECUTION.

NO SUCH CONDITIONS UNDER THE CODE.

56
PAYMENT OF WAGES ACT, 1936 : COMPARISON

WITH THE CODE.

PW ACT: APPLIES TO EMPLOYEES DRAWING LESS THAN RUPEES

TWENTY-FOUR THOUSAND SALARY P.M.

CODE: HAS NO SUCH WAGE CEILING. IT IS APPLICABLE TO ALL

EMPLOYEES/WORKERS REGARDLESS OF THE SALARY DRAWN BY

THEM
57
P.W. ACT : TIME LIMIT FOR PAYMENT OF
WAGES IS 7TH & 10TH DAY

CODE : IT IS ONLY 7TH

58
P.W. ACT: SALARY CAN BE PAID THROUGH
CHEQUE OR BY CREDITING IN THE BANK ACCOUNT OF
THE EMPLOYEE AFTER OBTAINING WRITTEN
AUTHORISATION FROM HIM OR THROUGH CASH.

CODE: NO AUTHORISATION IS REQUIRED FROM THE

EMPLOYEE. THE SALARY CAN BE PAID THROUGH CHEQUE
OR ELECTRONICALLY CREDITED TO HIS BANK ACCOUNT.
59
CODE : THE SALARY DUES OF THE EMPLOYEE
WHO HAS RESIGNED OR RETRENCHED HAS
TO BE PAID WITHIN TWO DAYS

NO SUCH PROVISION UNDER THE P.W. ACT.

60
P.W. ACT: PRESCRIBES FINES UP TO 7,000 RUPEES
FOR NON-PAYMENT OF SALARY.
FOR THIS OFFENSE FIRST A CLAIM HAS TO BE FILED, IT SHOULD
BE ALLOWED, SANCTION TO BE OBTAINED FROM THE CLAIMS
AUTHORITY, ONLY THEN PROSECUTION CAN BE LAUNCHED

CODE: PRESCRIBES FINE UP TO 50,000 RUPEES AND NO CLAIM

NEED BE FILED AND NO SANCTION TO BE OBTAINED FOR
PROSECUTION OF NON-PAYMENT OFFENCE.
61
PAYMENT OF BONUS ACT,1965 : COMPARISION
WITH CODE

62
P.B. ACT : HAS SALARY CEILING LIMIT OF
RUPEES TWENTYONE THOUSAND

CODE : AS OF NOW NO SUCH CEILING LIMIT.

IT HAS TO BE NOTIFIED.

63
CODE : PRESCRIBES THAT EMPLOYEES
GUILTY OF SEXUAL HARASSMENT WILL NOT
GET BONUS

P.B. ACT : DOES NOT HAVE SUCH PROVISION

64
CODE : PRESCRIBES BONUS PAYMENT
THROUGH BANK ONLY

P.B. ACT : DOES NOT HAVE SUCH PROVISION

65
P.B. ACT : PROVIDES A PENALTY OF
RUPEES ONE THOUSAND

CODE : PRESCRIBES PENALTY OF RUPEES

TWENTY THOUSAND

66
EQUAL REMUNERATION ACT ,1976
COMPARISION WITH CODE

E.R. ACT : PROHIBITS GENDER DISCRIMINATION IN WAGE

PAYMENT

CODE : ALSO HAS THIS PROVISION BUT PROHIBITS GENDER

DISCRIMINATION IN RECRUITMENT OF EMPLOYEES FOR THE SAME
WORK OR WORK OF SIMILAR NATURE
67
E.R. ACT: PROHIBITS GENDER DISCRIMINATION IN
TRANSFERS AND PROMOTION

CODE : HAS NO SUCH PROVISION

68
CODE EMPOWERS AN EMPLOYEE OR A
REGISTERED TRADE UNION TO FILE
PROSECUTIONS

NONE OF THE FOUR ACTS HAS ANY SUCH

PROVISION

69
CODE HAS DONE AWAY WITH THE TIME
LIMIT OF PRESERVATION OF REGISTERS
AND RECORDS OF THREE YEARS.

70
UNDER THE CODE THE OFFENSES WHICH
ARE NOT PUNISHABLE WITH IMPRISONMENT
CAN BE COMPOUNDED.
THE COMPOUNDING MONEY SHALL BE A SUM OF
FIFTY PERCENT OF THE MAXIMUM FINE
THIS PROVISION ACTS DON’T HAVE.

71
 LET US UNDERSTAND IN DETAIL

THE DEFINITION OF WAGE GIVEN UNDER

CODE ON WAGES , 2019

72
DEFINITION OF WAGE GIVEN UNDER THE WAGE CODE

“WAGES” MEANS ALL REMUNERATION WHETHER BY WAY

OF SALARIES, ALLOWANCES OR OTHERWISE, EXPRESSED

IN TERMS OF MONEY OR CAPABLE OF BEING SO

EXPRESSED WHICH WOULD,

Contd in the next slide

73
IF THE TERMS OF EMPLOYMENT, EXPRESS OR IMPLIED,

WERE FULFILLED, BE PAYABLE TO A PERSON EMPLOYED

IN RESPECT OF HIS EMPLOYMENT OR OF WORK DONE IN

SUCH EMPLOYMENT, AND INCLUDES :

[i] BASIC PAY;

[ii] DEARNESS ALLOWANCE; AND

[iii] RETAINING ALLOWANCE, IF ANY

Contd in next slide. 74

 BUT DOES NOT INCLUDE :

[a] ANY BONUS PAYABLE UNDER ANY LAW FOR THE TIME

BEING IN FORCE, WHICH DOES NOT FORM PART OF THE

REMUNERATION PAYABLE UNDER THE TERMS OF

EMPLOYMENT

Contd. in next slide

75
[b] THE VALUE OF ANY HOUSE-ACCOMMODATION, OR OF THE SUPPLY OF

LIGHT, WATER, MEDICAL ATTENDANCE OR OTHER AMENITY OR OF ANY

SERVICE EXCLUDED FROM THE COMPUTATION OF WAGES BY A GENERAL OR

SPECIAL ORDER OF THE APPROPRIATE GOVERNMENT;

[c] ANY CONTRIBUTION PAID BY THE EMPLOYER TO ANY PENSION OR

PROVIDENT FUND AND THE INTEREST WHICH MAY HAVE ACCRUED

THEREON;

Contd. in next slide.

76
[d] ANY CONVEYANCE ALLOWANCE OR THE VALUE OF ANY TRAVELLING
CONCESSION;

[e] ANY SUM PAID TO THE EMPLOYED PERSON TO DEFRAY

SPECIAL EXPENSES ENTAILED ON HIM BY THE NATURE OF

HIS EMPLOYMENT

Contd. in next slide.

77
[f] HOUSE RENT ALLOWANCE;

[g] REMUNERATION PAYABLE UNDER ANY AWARD OR SETTLEMENT

BETWEEN THE PARTIES OR ORDER OF A COURT OR TRIBUNAL;

[h] ANY OVERTIME ALLOWANCE;

[i] ANY COMMISSION PAYABLE TO THE EMPLOYEE;

Contd.in next slide.

78
[j] ANY GRATUITY PAYABLE ON THE TERMINATION OF

EMPLOYMENT;

[k] ANY RETRENCHMENT COMPENSATION OR OTHER RETIREMENT

BENEFIT PAYABLE TO THE EMPLOYEE OR ANY EX-GRATIA

PAYMENT MADE TO HIM ON THE TERMINATION OF EMPLOYMENT:

Contd.in next slide.

79
 PROVIDED THAT,

FOR CALCULATING THE WAGES UNDER THE CLAUSE,

IF PAYMENTS MADE BY THE EMPLOYER TO THE EMPLOYEE

UNDER CLAUSE [a] TO [i]

EXCEEDS ONE-HALF OF ALL REMUNERATION CALCULATED

UNDER THIS CLAUSE,

Contd.in next slide.

80
THE AMOUNT WHICH EXCEEDS SUCH ONE-HALF,

SHALL BE DEEMED AS REMUNERATION

AND SHALL BE ACCORDINGLY ADDED IN THE WAGES

UNDER THIS CLAUSE.

81
LET US CLASSIFY THE COMPONENTS OF WAGE IN
AS:

INCLUSIVE AND EXCLUSIVE

82
 INCLUDED COMPONENTS AS PER WAGE CODE DEFN

• REMUNERATION BY WAY OF SALARIES, ALLOWANCE OR

EXPRESSED IN TERMS OF MONEY OR CAPABLE OF BEING SO

EXPRESSED

• BASIC PAY: INCLUDED

• DA: INCLUDED

• CITY COMPENSATORY ALLOWANCE: INCLUDED 83

• EDUCATIONAL ALLOWANCE: INCLUDED

• WASHING ALLOWING: INCLUDED

• CASH HANDLING ALLOWANCE: INCLUDED

• LUNCH ALLOWANCE: INCLUDED

• SERVANT ALLOWANCE: INCLUDED

• NEWSPAPER/ MAGAZINE ALLOWANCE: INCLUDED

84
• LAY-OFF COMPENSATION: INCLUDED

• DISABILITY PAY: INCLUDED

• SPECIAL ALLOWANCE: INCLUDED

• ACTING ALLOWANCE: INCLUDED

• COMPENSATORY ALLOWANCE: INCLUDED

• MOBILE ALLOWANCE: INCLUDED

• TIFFIN ALLOWANCE: INCLUDED

85
 EXCLUDED COMPONENTS IN THE WAGE:

• ANNUAL BONUS: EXCLUDED [a]

• VALUE OF HOUSE ACCOMMODATION: EXCLUDED [b]

• VALUE OF SUPPLY OF LIGHT: EXCLUDED [b]

• VALUE OF SUPPLY OF WATER: EXCLUDED [b]

• VALUE OF MEDICAL ATTENDANCE: EXCLUDED [b]

86
• CONTRIBUTION PAID TO PENSION FUND: EXCLUDED [c]

• CONTRIBUTION PAID TO P.F.: EXCLUDED [c]

• INTEREST ON ACCUMULATIONS ON PF: EXCLUDED [c]

• CONVEYANCE ALLOWANCE: EXCLUDED [d]

• VALUE OF TRAVELLING CONCESSION: EXCLUDED [d]

87
• SUM PAID TO DEFRAY SPECIAL EXPENSES ENTAILED ON THE

EMPLOYEE: EXCLUDED [e]

• H.R.A.: EXCLUDED [f]

• REMUNERATION PAYABLE UNDER ANY AWARD OR SETTLEMENT

BETWEEN THE PARTIES OR ORDER OF COURT OR TRIBUNAL: EXCLUDED

[g]
88
• O.T. ALLOWANCE: EXCLUDED [h]

• COMMISSION PAYABLE: EXCLUDED [i]

• THESE PAYMENTS LISTED IN SUB-CLAUSE [a] to [i] ARE EXCLUDED

FROM THE WAGES. THAT MEANS THEY ARE NOT TO BE CONSIDERED

AS WAGE. THEY ARE NOT REMUNERATIONS

89
APART FROM THE COMPONENTS LISTED IN SUB-CLAUSE

[a] to [i]

LET US NOW LIST OUT WHAT TYPE OF OTHER

PAYMENTS MADE BY THE COMPANIES WHICH MAY FALL

IN TO THE CATEGORY OF EXCLUSION FROM THE WAGES.

90
• GROUP INSURANCE: EXCLUDED

• LTC: EXCLUDED

• FAMILY PLANNING CASH INCENTIVE: EXCLUDED

• SERVICE AWARDS: EXCLUDED

• SUGGESTION AWARDS: EXCLUDED

• CLIENT ENTERTAINMENT AMOUNT: EXCLUDED

91
• MEAL COUPONS: EXCLUDED

• GIFT VOUCHERS: EXCLUDED

• DISCOUNT ON COMPANY GOODS: EXCLUDED

92
 ILLUSTRATION
ON HOW TO CALCULATE WAGE UNDER THIS CODE:

• A COMPANY’S SALARY STRUCTURE IS GIVEN BELOW TAKING INTO

CONSIDERATION THE WAGE CODE DEFINITION OF WAGE:

• BASIC: 15,000/- VDA: 7000/- CCA: 2,700/- EDUCATION

ALLOWANCE: 1000/- SPECIAL ALLOWANCE: 4500/-

TOTAL: 30,200/-

THIS IS AS PER THE INCLUDED COMPONENTS OF WAGE

93
NOW LET SEE WHAT ARE THE EXCLUDED COMPONENTS THAT ARE PAID

• HRA: 6100/-,

• OT: 4300/-,

• BONUS: 2000/- LTC: 3640/- CONVEYANCE ALLOWANCE: 2100/-

TOTAL: 18,140/-

NOW LET US WORK OUT THE ACTUAL WAGE AS PER THE PROVISO:

94
 • ONE-HALF OF THE WAGE i.e. INCLUDED WAGE: 30,200/2 = 15,100/-

• LET US SEE WHETHER THE EXCLUDED COMPONENTS EXCEED THE WAGE:

• EXCLUDED WAGE COMPONENTS TOTAL: 18,140/- MINUS ONE-HALF OF THE

WAGE [INCLUSIVE] i.e. 15,100 = 3040/- THIS IS THE EXCEEDED AMOUNT
WHICH
HAS TO BE ADDED TO THE WAGE[INCLUSIVE]: 30,200/- + 3040/- = 33,240/-

• AS PER WAGE DEFINITION THE ACTUAL

WAGE IS NOT THE INCLUSIVE WAGE i.e. 30,200/- BUT IT IS 33,240/-
95
 NOW LET US CALCULATE THE IMPACT OF THIS NEW DEFINITION OF
WAGE IN TERMS OF THE COST TO THE COMPANY

GRATUITY:

• IN THE EXISTING PROVISIONS OF THE PAYMENT OF GRATUITY

ACT,1972 THE GRATUITY IS PAID ON BASIC AND DA.

96
IN THE ABOVE ILLUSTRATION THE BASIC IS 15,000/- & DA IS 7000/-
THE
TOTAL COMES TO 22,000/-

LET US SAY THIS IS THE LAST DRAWN SALARY. TO ARRIVE AT THE

DAILY RATE THE AMOUNT 22,000/- HAS TO BE DIVIDED BY 26 DAYS
WHICH COMES TO 846/- PER DAY

TO GET 15 DAYS SALARY, THIS 846/- HAS TO BE MULTIPLIED BY 15

WHICH COMES TO 12,692/-
97
 THIS IS MULTIPLIED BY NUMBER OF YEARS OF SERVICE.

IN THIS CASE LET US SAY THE EMPLOYEE HAS RENDERED 30

YEARS OF SERVICE.

12,692 X 30 = 3,80,769/-

IS THE GRATUITY PAYABLE AS PER P.G.ACT,1972

98
AS PER THE CODE ON SOCIAL SECURITY IN CHAPTER V DEALING WITH
GRATUITY IT IS STATED IN SECTION 53[2] AS UNDER

“FOR EVERY COMPLETED YEAR OF SERVICE, THE EMPLOYER SHALL

PAY GRATUITY TO AN EMPLOYEE AT THE RATE OF FIFTEEN DAYS

WAGES , BASED ON THE RATE OF WAGES LAST DRAWN BY THE

EMPLOYEE CONCERNED”

99
 IN SECTION 2[88] OF THE S.S.CODE, 2020 THE DEFINITION OF THE

WAGE IS THE SAME AS GIVEN UNDER THE WAGE CODE.

THAT MEANS THE LAST DRAWN WAGES FROM THE ILLUSTRATION

IS TO BE TAKEN AS:

33,240/- DIVIDED BY 26 = 1,278/- MULTIPLIED BY 15 = 19,176 MULTIPLIED BY 30 YEARS OF

SERVICE = 5,75,307/-

IS THE GRATUITY PAYABLE AS PER WAGE CODE DEFINITION

100
THE DIFFERENCE BETWEEN THE TWO AMOUNTS OF GRATUITY IS:

5,75,307/- MINUS 3,80,769/- = 1,94,538/-

THIS IS THE IMPACT OF THE NEW DEFINITION OF WAGE ON

GRATUITY CALCULATION.

THAT MEANS THE EMPLOYER HAS TO PAY MORE GRATUITY.

101
LET US SAY THERE ARE 50 WORKERS WHO ARE IN THE SAME
WAGE GRADE AND HAVE RENDERED 30 YEARS OF SERVICE.

THE FINANCIAL IMPACT OF GRATUITY WILL BE

1,94,538/- MULTIPLIED BY 50 = 97,26,900/-

102
NOW LET US CALCULATE THE IMPACT OF THIS NEW

DEFINITION OF WAGE ON

PF

103
 PROVIDENT FUND

CHAPTER III OF THE S.S. CODE, 2020 DEALS WITH THE

PROVIDENT FUND

104
 SECTION 16 OF THIS CODE SAYS AS FOLLOWS:

“ THE PF CONTRIBUTION OF EMPLOYER AND EMPLOYEE EACH IS

10% OF THE WAGES”

105
 LET US TAKE THE ABOVE ILLUSTRATION WHEREIN WE HAVE

CALCULATED THE WAGE AS PER THE DEFINITION OF WAGE UNDER

THE WAGE CODE.

IT IS 33,240/- 10% OF THIS MEANS 3,324/- IS THE EMPLOYER’S

CONTRIBUTION AND EQUAL AMOUNT i.e. 3,324/- WILL BE

EMPLOYEES’ CONTRIBUTION P.M. PER EMPLOYEE.

106
 WHEREAS AS PER THE PRESENT PROVISION OF THE EPF & MP ACT,

CONSIDERING THE SALARY AS 15,000 i.e. THE SALARY CEILING

LIMIT UNDER THE ACT, AT THE RATE OF 12% OF 15,000/- THE PF

CONTRIBUTION OF EMPLOYER & EMPLOYEE EACH COMES TO 1,800/-P.M.

THE PF FINANCIAL IMPACT AS PER THE WAGE CODE UPON THE

EMPLOYER WILL BE

3,324/- MINUS 1,800/- = 1,524/- PER EMPLOYEE P.M.

107
 IF THE COMPANY HAS 300 WORKERS,

THE ADDITIONAL FINANCIAL BURDEN OF PF ON THE COMPANY PER MONTH

AS PER WAGE CODE WILL BE

1,524 X 300 = 4,57,200 PM

EQUAL I.E. 4,57,200 WILL BE EMPLOYER’S ADDITIONAL BURDEN

TOTAL ADDITIONAL BURDEN P.M. = 10,55,400/-

PER ANNUM THE ADDITIONAL BURDEN OF PF WILL BE 1,26,64,800/-

108
 ESI IMPACT

CHAPTER IV OF THE SS CODE,2020 WHICH DEALS WITH ESI,

SECTION 29[2] SAYS THAT “ THE CONTRIBUTIONS OF THE

EMPLOYER AND THE EMPLOYEE’S SHALL BE PAID AT SUCH RATE

AS MAY BE PRESCRIBED BY THE CENTRAL GOVT.

SINCE IT IS NOT PRESCRIBED, THE FINANCIAL IMPACT CANNOT BE

CALCULATED

109
 MATERNITY BENEFIT IMPACT
AS PER THE MATERNITY BENEFIT ACT,1961 THE DEFINITION OF WAGE

INCLUDES; BASIC,VDA,CCA, HRA.

FROM THE ABOVE ILLUSTRATION THE BASIC IS 15,000/- VDA IS 7000/- CCA IS

2700/- HRA IS 5100 . TOTAL WAGE FOR THE PURPOSE OF CACULATION OF MB IS

29,800/-
THE MATERNITY BENEFIT PAYABLE WILL BE 29,800 X 6 MONTHS = 1,78,800/-

110
 FROM THE ABOVE ILLUSTRATION AS PER THE WAGE CODE THE WAGE IS

33,240/- THE MATERNITY BENEFIT PAYABLE WILL BE 33,240 X 6 MONTHS

= 1,99,440/-

THE DIFFERENCE OF MATERNITY BENEFIT WILL BE

1,99,440 MINUS 1,78,800/- = 20,640/-

IF THERE ARE TEN CASES OF MATERNITY IN A YEAR, THE TOTAL DIFFERENCE

OF PAYMENT WILL BE 20,640/- X 10 = 2,06,400/-

THE ADDITIONAL FINANCIAL BURDEN WILL BE 2,06,400/-

111
SIMILAR INCREASED FINANCIAL BURDEN WILL BE THERE AS PER THE WAGE CODE
IN RESPECT OF

EMPLOYEES COMPENSATION, LEAVE WITH WAGES, NATIONAL

FESTIVAL HOLIDAYS WAGES, OT WAGES, LAY-OFF

COMPENSATION, RETRENCHMENT COMPENSATION, CLOSURE

COMPENSATION

112
 IS THERE A POSSIBILITY TO RESTRUCTURE THE

WAGE?

THE WAGE CALCULATION AS PER THE WAGE CODE IS ONE HALF

OF THE INCLUDED WAGES :

FROM THE ILLUSTRATION GIVEN INCLUDED WAGE IS 30,200/- ONE HALF OF

THIS IS 15,100/-

113
 THE AMOUNT EXCLUDED FROM THE WAGES IN THE

ILLUSTRATION IS 18,140/-

THIS AMOUNT EXCEEDS THE ONE HALF i.e. 15,100/- BY 3040/-

WHICH HAS TO BE ADDED TO THE INCLUDED WAGE i.e.

30,200/- + 3040 = 33,240/-

114
 ALL THIS CALCULATION HAS ARISEN BECAUSE THE EXCLUDED

COMPONENTS I.E.18,140/- ARE HIGHER BY 3040/- THAN THE ONE-

HALF I.E.15,100/- OF THE

INCLUDED WAGE I.E.30,200/-.

IF THE EXCULDED COMPONENTS I.E. 18,140/- ARE REDUCED TO THE

EXTENT

OF 3040/- THEN THERE WILL BE NO EXTRA AMOUNT REQUIRED TO

115
 IN SUCH A CASE, IF RESTRUCTURING HAS TO BE MADE THEN THE

EXTRA COMPONENTS IN THE EXCLUDED CATEGORY OF THE WAGE WHICH

ARE EQUAL TO 3040/-

EITHER

HAVE TO BE ELIMINATED OR HAVE TO BE ACCOMMODATED IN

THE INCLUDED WAGES.

116
 CAN THIS BE DONE?

YOU CAN NOT ELIMINATE ANY FINANCIAL COMPONENT WHICH IS

PAID TO AN EMPLOYEE.

YOU CAN NOT ADD THOSE EXCLUDED COMPONENTS TO THE INCLUDED WAGES

BECAUSE AS PER THE DEFINITION OF WAGE GIVEN IN THE WAGE CODE,

THEY ARE EXCLUDED FROM THE WAGES. THEREFORE, THEY CAN NOT BE
SHIFTED.

117
THUS RESTRUCTURING OF THE WAGE SEEMS TO

BE IMPRACTICABLE.

118
 CHALLENGES
IN IMPLEMENTING THE WAGE AS PER THE WAGE CODE

1. THERE WILL BE VARIABLES IN THE WAGE OF WORKERS LIKE OT,

SHIFT ALLOWANCE, HARDSHIP ALLOWANCE, COMMISSION,

ATTENDANCE INCENTIVE, PRODUCTION INCENTIVE

THESE AND SIMILAR KIND OF VARIABLE COMPONENTS WHICH ARE

NOT PAID TO EVERY WORKER.

119
THAT MEANS THE WAGE OF EVERY SUCH WORKER WILL VARY
FORM OTHER WORKERS AS PER THE WAGE CODE.

IN SUCH CASE THE PAYROLL TEAM WILL HAVE TO WORK OUT

INDIVIDUAL WORKER’S WAGE AS PER THE WAGE CODE.

THIS WILL BE A STUPENDOUS TASK EVERY MONTH.

120
 2. THE STATUTORY BONUS IS PAID ONCE IN A YEAR.

THEN IN EVERY MONTH’S WAGE CALCULATION, HOW THE BONUS

PAYABLE SHOULD

BE ACCOUNTED FOR IS NOT CLEAR.

121
 3. SIMILARLY, HOW TO CALCULATE THE VALUE OF HOUSE

ACCOMMODATION? WHAT IS THE YARD STICK TO BE ADOPTED TO

ARRIVE AT THE VALUE?

4. SIMILARLY, HOW TO CALCULATE THE VALUE OF THE MEDICAL

ATTENDANCE? THIS IS NOT CLEAR.

122
 5. THE INTEREST PAID ON THE P.F. IS ONCE IN A YEAR. IS TO BE

APPORTIONED MONTHLY? THERE IS NO CLARITY ON THIS.

6. A NEGOTIATED SETTLEMENT WITH THE UNION WILL HAVE

SEVERAL COMPONENTS WHICH ACCORDING TO THE WAGE CODE

DEFINITION WILL NOT BE A WAGE.

123
THERE WILL BE SEVERAL ITEMS IN A SETTLEMENT LIKE WAGE
INCREASE,

VARIOUS TYPES OF ALLOWANCES, PERFORMANCE INCENTIVES ETC.

WILL IT BE CORRECT TO CLASSIFY THEM AS PER WAGE CODE

DEFINITION INTO THE EXCLUDED WAGE CATEGORY WHEN IN FACT
THEY ARE REMUNERATIONS WHICH ARE EXPRESSED IN TERMS OF
MONEY?

THIS MAY LEAD TO SERIOUS I R PROBLEM.

124
 OVERALL IMPACT OF THE IMPLEMENTATION OF WAGE CODE

1. THE TAKE HOME SALARY OF THE EMPLOYEE WILL BE

REDUCED DUE TO INCREASED CONTRIBUTION TOWARDS PF. ESI

NOT KNOWN.

2. HUGE RECURRING FINANCIAL BURDEN UPON THE EMPLOYER.

125
 THE FOLLOWING SLIDES WILL SHOW A

FEW EXAMPLES OF HOW WAGE DEFINITION HAS

BEEN MISINTERPRETED BY EXPERTS AND

COMPANIES

126
 DELOITTE

DEFINITION OF WAGE

EXCLUSIONS SPECIFICALLY LISTED TO BE LIMITTED TO 50% OF THE TOTAL

WAGES

127
 E&Y

WRONG CALCULATION

128
 LEGAL EXPERT FROM BENGALURU:

AGGREGATE OF EXCLUDED ALLOWANCE

EXCEEDS 50% OF THE EXCLUDED

ALLOWANCES TO BE INCLUDED IN WAGE.

129
 LEGAL EXPERT FROM BENGALURU:

BASIC SALARY HAS TO BE 50% OF

REMUNERATION

3 EXAMPLES GIVEN. WRONGLY CALCULATED.

INCLUDED PF 12% AND ESI 3.25%

130
 LEGAL EXPERT FROM BENGALURU:

50% OF THE GROSS WAGES SHOULD BE PAID

UNDER THE HEADS OF BASIC WAGES, DA AND

RETAINING ALLOWANCE.

131
 LEGAL EXPERT FROM BENGALURU:

ALL REMUNERATION MINUS EXCLUSION UNDER (a) TO (i)

PLUS CONDITIONAL INCLUSIONS = WAGES

IN THE REMUNERATION HRA, BONUS, CONVEYANCE

ALLOWANCE ADDED WHICH ARE EXCLUDED

132
 SUPREME COURT COUNSEL

WAGES SHOULD BE MORE THEN 51% GROSS WAGES.

EMPLOYER MAY FIX AT LEAST 51% AS BASIC WAGE

+ DA AND REST 49% CAN BE FIXED AS EXCLUDED

COMPONENTS
133
 GOVERNMENT OF INDIA

BOOKLET

NEW LABOR CODES FOR NEW INDIA

NO CLARIFICATION ON WAGE DEFINITION

134
 AEPC

TOTAL EXCLUDED COMPONENTS SHOULD NOT EXCEED 50% OF TOTAL REMUNERATION

135
 CHETTINAD CEMENTS

50% OF GROSS WAGE WILL

HENCE FOURTH BE DEEMED AS WAGE

136
 RELIANCE INDUSTRIES
BASIC PAY & VDA : 10,000 PLUS PF CONTRIBUTION :1,200 HRA :4,000 OT :3,100
TOTAL: 18,300
WAGE CALCULATION
TOTAL OF (a) TO (i) = 8,300
50% OF 10,000 = 5,000
AMOUNT WHICH EXCEED 50% OF THE REMUNERATION = 8,300 – 5,000= 3,300
WAGE AS PER THE DEFINITION: 10000 + 3300 = 13,300
THIS IS THE CORRECT WAY OF CALCULATION OF WAGE AS PER WAGE CODE
DEFINITION

137
THANK YOU

138