The Code on Wages Bill, 2017

Labour and labour reforms come under the concurrent list except exceptional matters related to labour in safety mines and oil fields (which come under union list). Since the subject is concurrent, both states and centre are able to make laws on labour related matters.

The Four Labour Codes

The legislative framework around labour law is thus complex and full of duplicity. There has been always a need to rationalize and simplify these laws. The Second National Commission on Labour had recommended to broadly group the existing labour laws into four or five labour codes. It recommends simplification, amalgamation and rationalisation of the relevant provisions of the existing central labour laws. This has led the central government to undertake the task of rationalizing 38 labour acts by framing four labour codes. These are as follows:

  • Labour Code on Wages: This law will supersede four existing laws viz. Minimum Wages Act, 1948; Payment of Wages Act, 1936; Payment of Bonus Act, 1965; and Equal Remuneration Act, 1976.
  • Labour Code on Industrial Relations: This law will supersede three existing laws viz. Trade Union Act, 1926; Industrial Employment (Standing Order) Act, 1946; and Industrial Disputes Act, 1947
  • Labour Code on Social Security: This law will supersede fifteen existing laws such as EPF Act, ESI Act, Maternity Benefit Act, Payment of Gratuity Act, Employees Compensation Act, Unorganised Social Security Act etc.
  • Labour Code on occupational safety, health and working conditions: This law will supersede remaining 16 acts to be listed later.

The codification will also help in removing the multiplicity of definitions and authorities. This in turn will lead to ease of compliance without making compromise on wage and social security of workers.

Code on Wages Bill, 2017

Out of the four codes mentioned above, the government had drafted two bills on wages and labour so far. Out of these two, the Code on Wages Bill 2017 has been introduced in the parliament and will now proceed to be passed in both houses to become a law. As mentioned above, the Code on Wages Act will subsume four existing laws viz. Minimum Wages Act, 1948; Payment of Wages Act, 1936; Payment of Bonus Act, 1965 and Equal Remuneration Act, 1976.

Salient Features

Authority of centre and states
  • The Code on Wages Act will be applicable to all industry, trade, business, and manufacturing or occupation establishments – including government as well as private ones.
  • The central government will make wage related decisions / rules for central government bodies, railways, mines, oil fields etc. For other establishments, state governments will make rules.
National minimum wage
  • The bill provides that the central government can notify a national minimum wage for the country; or it may fix different national wages for different states or geographical areas. The wages decided by centre or states will not be less than the national minimum wage.
  • Employers will need to pay at least national minimum wage to employees as notified by central or state governments.
  • The wages defined by centre or states will be revised every five years.
Working Hours
  • Central or state governments will fix the number of hours that will constitute the working day; and will provide a day of rest in a week.
  • Employee will be paid overtime, which shall be at least twice the normal wage.
Payment and deduction Wages
  • Wages can be paid in coins, currency, cheques or in digital transfer mode. The wage period will be defined as daily, weekly, fortnightly or monthly.
  • The wages can be deducted on certain grounds such as fines, absence from duty, accommodation, advances etc. Deduction should not exceed 50% of total wage.
Payment of Bonus
  • The employer is required to pay an annual bonus as 8.33% of the wages or Rs. 100 whichever is higher. Employers will also be required to distribute part of gross profits amongst all employees.
  • An employee can receive maximum 20% of his wages as bonus.
Advisory boards
  • Central and state governments will need to constitute their respective advisory boards having representation from employees, employers and independent persons.
  • One third of the total members of advisory boards will be women.
  • The advisory boards will advise the respective government regarding fixation of minimum wages; increasing employment opportunities for women.
  • Thus, the code provides for the consultative mechanism for determining the national minimum wage.
  • The code on wages bill specifies penalties for offences committed by an employer. Such offenses include – paying less than the due wages or contravening any provision of the Code.
  • Penalties vary depending on the nature of offence, with the maximum penalty being imprisonment for three months along with a fine of up to one lakh rupees.

Benefits and Concerns


As of now, the provisions related to the Minimum Wages Act and the Payment of Wages Act do not cover a significant number of workers as these laws are applicable only to the Scheduled Employments / Establishments. But the new bill will ensure minimum wages to all besides ensuring timely payment of wages to all employees irrespective of the sector in which they are employed, without any wage ceiling. This would ensure a universal minimum wage for all industries and workers.

  • The bill is expected to benefit over 4 crore employees across the country.
  • The bill has chosen digital mode/cheques as the mode of payment of wages. This would promote digitization and extend wage and social security to the worker.

The bill has provided for an Appellate Authority between the Claim Authority and the Judicial Forum also. This provision will help in faster, cheaper and efficient redressal of grievances.


The provision for minimum wages is expected to hamper formal job creation and hiring across the country. It is also feared that the industries will start automation at a faster rate to avoid hiring employees. Hence, the critics argue that the new bill should focus more on formal job creation rather than focusing on minimum wage agenda.

No doubt the new bill will help in improving the standard of living of the employees. But at the same time, steep hikes might have a negative impact on hiring in tier II and tier III markets. Many people-centric sectors like Business Process Management (BPM) have moved to tier II and tier III cities due to availability of talent and infrastructure at significantly lower costs. If this cost advantage is taken away, these sectors will find it difficult to sustain their business.

It is also feared that the expansion of minimum wage regulation to non-formal jobs will increase the scope of intervention by government inspectors – leading to inspector raj.


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  • Nand Birpali

    Very nice site.