The 2019 Code on Wages: Truth versus Hype.

AuthorSarkar, Santanu


Keeping in line with the unfinished 'reforms agenda' of merging several labor laws into four distinct codes for boosting ease of doing business, the present NDA government in its 2nd term stubbornly enacted the Code on Wages (Wage Code' in short). The government designed the Wage Code, one of the four codes that subsumed the existing four wage laws. As per government sources, the Wage Code has been examined, reviewed, and revised several times since August 2017 when the government tabled it in Parliament for the first time. To iron out the differences between stakeholders from different segments including the trade unions and rescind the gaffes in the previous versions, the government at breakneck speed with the Parliamentary Standing Committee's help straightened out some of its ill-advised attempts whimsically made in the earlier drafts of the Wage Code. Those attempts were found unfitting by the Committee given the amorphous federalism that was expected to uphold them. In 2019, the government tabled the final draft, and upon receiving the Presidential assent, the Ministry notified the first among the four Codes on 8 August 2019. As per the government, the Wage Code that it enacted is way ahead of the first draft in inclusivity and responsiveness. However, with the enforcement of stringent labor laws a country from the Newly Industrialized Economies did witness an upsurge in outflows of investment over a period where domestic firms began investing abroad instead of concentrating in the home country (Lai & Sarkar, 2019). From that point of view, ease of doing business could be perhaps achieved with the new Codes.

Nevertheless, the codification that has been masqueraded by the government as a simplification and rationalization of antiquated laws has remained a point of debate for labor researchers and scholars. Members in labor camp have vigorously contested the controversial codes. They argued against the much-celebrated 'labor laws reforms', which, according to them, is nothing less than a debilitating endeavor to amalgamate the existing laws (Sarkar, 2019). For example, the Wage Code replaced the Minimum Wages Act, 1948, the Payment of Wages Act, 1936, the Payment of Bonus Act, 1965, and the Equal Remuneration Act, 1976. However, from the initial reactions gathered, the promoters of the market economy also hold the Wage Code analogous to four laws except for minor cosmetic changes such as a single definition each for an employee, worker, employer, establishment, and wage. As if the softer stand of the government could not appease them, perhaps, they expected more flexibility especially given the declining union density in the country (Sarkar & Chakraborty, 2021) and changes introduced by employers since economic liberalization to counter collectivism at workplaces across sectors by adopting different approaches (Sarkar, 2008; 2009; Sarkar & Huang, 2012).

How different is the Wage Code of 2019 from the existing four wage laws? Is the reformed regulation a gift only to employers or will the labor benefit if they are different? By being soft on employers, is the consolidation one more step in the direction of liberalization or a measure of widening wage laws' applicability to bring more workers under its ambit? To those who defended rationalization and labelled the exercise as one that brings more than uniformity of definitions, the Wage Code has broadened the meaning of employer and employee, included informal sector workers, introduced a universal minimum wage, removed thresholds, and so on. All that has been the part of the government's partisan rhetoric is not a reliable sign of the true nature of the Code. Hence, we went all out to examine the Code to differentiate between truths and hypes.

We had reason to be skeptical. For instance, under the Equal Remuneration Act of 1976, any gender-based discrimination in recruitment, service conditions, and wages is forbidden. Leaving the first two crucial items, the government, by going against the Parliamentary Standing Committee's recommendation, decided at one point in time to retain only the wage (Shyam Sundar, 2019). The very 'wage' does not comprise certain components for certain benefits like a statutory bonus. Still, it will include them while regulating the timely payment of wages or non-discrimination in payment of wages across gender. This is pertinent as it has been found that large firms with longer working hours and higher wages have offered lesser employment opportunities to female workers post labor reforms (Lai & Sarkar, 2016).

Moreover, by enforcing a law to counter inequality, even if the state could narrow the gender pay gap, it had adverse employment implications (Lai & Sarkar, 2017a). Likewise, benefits to which workers are entitled to are not available to managers, administrators, officers, and supervisors with wage more than Rs. 15,000. So, "One Code for All" is a fallacy. Besides, the Wage Code has supposedly made four laws available to millions of workers from informal sectors. How the benefits will reach these workers, have not been rationalized. Rather, the government chose to dump the minutiae in the Rules to be made by the Central or State government, as the case may be. Thus, the ambivalence present in the Wage Code left us to critique the reformed legislation with an iota of skepticism. In this paper, we exactly do that while analyzing the Code to expose its 'fallacies'.

One Law, Two Beneficiaries

Typically, legislation has its own single set of beneficiaries. However, Wage Code is one of its kind that has two groups of beneficiaries. Besides, we should come to terms that every establishment, employee, worker, and employer will not benefit from the Wage Code equally and similarly, although lawmakers affirmed so. As said before, "One Code for All" is a fallacy concerning beneficiaries' entitlement to four benefits promised under Wage Code, viz., minimum wage, statutory bonus, equal pay, and timely payment of wages and deduction from wages as per stipulated limits.

The Code specifies independent definitions of two beneficiaries--one for an 'employee' and other for 'worker'. Upon reading Sec 2(k) that defines an 'employee' (1), prima facie, the Wage Code appears to be covering every employee. Notwithstanding the type of employment/ occupation that s/he is practicing, wage s/he is drawing, or the kind of establishment in which s/he is employed, the Code covers her/him.

But that is far from the truth. For example, Sec 26 of the Code reads that annual statutory bonus shall be paid by employers to every employee, drawing wages not exceeding such amount per month, as determined by the government. Therefore, a wage threshold does exist.

Similarly, while interpreting Code's provisions and reading Sec 2(z) that defines "worker", we get familiarized with the second beneficiary of the Code that categorically excludes a manager, officer, and supervisor (2), drawing more than...

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