FAQ ON CODE ON WAGES

1. What is the applicability of the Code?

It applies to all employees and establishments unless specifically exempted in the Code.

The Code does not have any application clause. Hence the application of the Code has to be inferred from the definitions – employee, employer, establishment and other relevant definitions and other provisions. However, there are specific exemptions provided in the Code which needs to be identified and utilized.

2. What is the effective/application date of the Code?

The effective date is not notified yet.

There is something called appointed date in most of the statutes. The appointed date has to be notified to make the Code effective. As per section 1(3) of the Code the Central Government has to appoint the date and notify in the official gazette to make the Code effective. Currently, the Central Government is yet to appoint the date and notify.

3. A supervisor employed in an establishment is a ‘worker’ under the Code or not?

He is a worker if he is drawing wages not exceeding fifteen thousand rupees per month or an amount as may be notified by the Central Government.

Section 2(z) of the Code defines worker. The worker definition includes the supervisors if the criteria is met. There is a similar provision in the ID Act 1947 under the worker definition. The same criteria is retained with a higher wage ceiling.

4. Identify the wage components which are excluded in the Wage definition under the Code.

HRA, Conveyance Allowance, Overtime Allowance, Statutory Bonus are excluded from the wage definition.

5. Identify the role of Advisory Boards under the Code.

Advise on matters related to Minimum wages, Advise on employment opportunities for women & Advise on any other matters relating to the Code

6. A Manager employed in an establishment has not been paid wages for three months by his employer. Can this manager file a claim before the notified authority under the Code?

Manager can file a claim before the notified authority under the Code.

Manager is very well covered under the definition of employee under section 2(k) of the Code. A manager being an employee, can file a claim before the authority under section 45(4) of the Code.

7. If the employer is unable to pay wages to an employee working in his establishment due to the death of a worker or traceability issues or whereabouts not being known, what is to be done with the unpaid wages and dues under the Code?

To be deposited with the prescribed/notified authority under the Code.

This is not new to the law. There was a similar provision in the Payment of Wages Act 1936 under section 25(A) and moreover such unpaid wages are normally covered and to be paid to Labour Welfare Fund under State Labour Welfare Fund Acts.

8. Can an employee who has not been paid the wages or received reduced wages compared to the minimum wages fixed under the Code file a recovery suit in the jurisdictional civil court?

Employee cannot file a recovery suit in the jurisdictional civil court.

This matter is subject of the Code on Wages and the authorities will be notified to redress or decide such claims. Therefore, it cannot be taken to civil court by way of recovery suit. The section related to Bar of Suits prohibits such suits by any employee. Refer section 57 of the Code for more details.

9. Is it possible to fix a wage period as 45 days as per the provisions of Code?

No, it is not allowed.

Maximum wage period can only be one month. It is not new to the law. There were similar provisions in the Payment of Wages and Payment of Minimum Wages Acts earlier. Refer section 16 of the Code for more details.

10. Identify the provision related to the date of payment of wages (Time limit) for a monthly rated employee as per the Code?

Before the expiry of the 7th day of the succeeding month.

There were two dates earlier as per PW Act 1936 i.e. if the establishment has more than 1000 or more employees, then the date is before the expiry of 10th of the month, In other cases the date was before the expiry of 7th of the month. This flexibility is withdrawn now. Refer section 17 of the Code for more details.

11. What is this ‘Set on’ Concept as per the provisions of the Code? Identify the correct answer.

When the allocable surplus is higher than the maximum bonus of 20% payable to employees, the amount not exceeding 20% of employees’ wages needs to be carried forward to the next 4 years to utilize to pay a bonus when no allocable surplus or shortage of allocable surplus.The existing provision in the Payment of Bonus Act 1965 is retained without any change. Refer section 36 of the Code.

12. Is there any exemption available for a new establishment from the provisions of payment of bonus under the Code?

There is no requirement of payment of bonus for the first five accounting years following the accounting year in which the employer sells the goods produced/manufactures or renders services. However, if the profit is made in any of these five years, the bonus to be paid after calculating the same as per the provisions of the Code.

The existing provision in the Payment of Bonus Act 1965 is retained without any change. Refer section 26 (6) of the Code for more details.

13. What is the applicable wage ceiling to apply the provisions of Payment of Wages under the Code?

There is no such wage ceiling.

The earlier Payment of Wages Act 1936 had a monthly wage ceiling of Rs.24000 to cover under the Act. The Code has done away with this provision and all employees irrespective of the quantum of wages will come under the Code.

14. What is the applicable monthly wage ceiling for calculation of bonus as per the provisions of the Code?

Amount as determined by appropriate Government or minimum wages whichever is higher.

The similar provision which was available in the Payment of Bonus Act 1965 is retained in the Code. However, by virtue of rule making power of only Central Government, the Central Government used to decide this ceiling. Now the Code gives the power to appropriate Government. There is a possibility that every State Government can bring its own ceiling. Refer 26(2) of the Code. We will have to wait and watch whether any amendment or clarification comes in this regard or not.

15. An establishment had more than 20 employees in the accounting year 2019. In the accounting year 2020, it did not cross more than 15 employees on any day. Is the establishment liable to pay a bonus for the accounting year 2020 as per the provisions of the Code?

The Code does not mandate the coverage if less than 20 persons are employed. The Payment of Bonus Act 1965 had a provision that even if the number of employees reduced to less than 20, the applicability will continue if once made applicable. Moreover, the Government could have covered any establishment which has less than 20 employees. This provision is withdrawn in the Code. Another key change in the Code is employment of 20 or more persons on any day during the accounting year is the matter. However, due to the saving clause in the Code, the existing establishments which have less than 20 employees and who have extended the benefit have to continue the privilege.