A Comparative Analysis of the Code on Wages, 2019 and Pre-existing Labour Laws: Advancing Minimum Wages, Timely Payments, and Equal Remuneration in India
1.Abstract:
The Code on Wages, 2019 represents a transformative shift in India’s labour legislative framework. Consolidating four archaic laws, it aims to create a more transparent, inclusive, and equitable wage system. This paper delves into a comparative analysis between the Code and previous labour laws—namely, the Minimum Wages Act, 1948; Payment of Wages Act, 1936; Payment of Bonus Act, 1965; and Equal Remuneration Act, 1976. Special emphasis is placed on the progressive developments in minimum wage standards, enforcement of timely payments, and equal remuneration irrespective of gender or identity. The paper also critically examines implementation challenges, legal interpretations, and implications for labour welfare in India.
2.Introduction:
India’s labour laws were long criticized for being voluminous, overlapping, and sector-specific, leading to compliance difficulties and lack of effective enforcement. To resolve these issues and align with the changing dynamics of the workforce, the Government introduced four consolidated Labour Codes. Among these, the Code on Wages, 2019 was the first to receive Presidential assent on August 8, 2019. It subsumes and rationalizes provisions from four statutes into a single legislation to ensure equitable wage practices across sectors.
This research investigates the salient features and reforms introduced by the Code, comparing them with the older statutes, with specific reference to minimum wages, timely wage payments, and equal remuneration. The analysis aims to assess whether the new framework effectively addresses the shortcomings of the earlier regime.
3.Objectives of the Study
The primary objective of this study is to evaluate the transformative impact of the Code on Wages, 2019 on India’s wage-related legal framework. By consolidating multiple labour laws, the Code aims to simplify regulatory compliance while expanding the scope of worker protection. This paper seeks to analyze whether the Code successfully addresses the limitations of the pre-existing legislations with respect to minimum wage standards, the timeliness of wage disbursal, and the principle of equal remuneration. It also aims to compare and contrast the provisions of the earlier laws and the new Code, identifying key changes in scope, applicability, and implementation mechanisms. Furthermore, this study endeavors to highlight the advancements brought about by the Code in terms of legal clarity, administrative efficiency, and inclusivity. Finally, it aims to offer practical suggestions and policy recommendations for enhancing the implementation and effectiveness of the Code, thereby empowering workers and promoting equitable labour practices in India.
4.Legal Framework: Then and Now
The evolution of India’s wage-related legislation has been marked by a gradual but significant shift from fragmented and sector-specific laws to a unified and comprehensive Code. Historically, the regulation of wages was governed by four separate legislations: the Minimum Wages Act, 1948; the Payment of Wages Act, 1936; the Payment of Bonus Act, 1965; and the Equal Remuneration Act, 1976. Each of these laws addressed specific aspects of wage governance, but they also created overlaps, inconsistencies, and gaps in protection, particularly for workers in the unorganized sector. The Minimum Wages Act, 1948, for example, was limited to scheduled employments, leaving many vulnerable workers outside its ambit. Similarly, the Payment of Wages Act, 1936 applied only to those earning below a certain threshold, and the Equal Remuneration Act, 1976 lacked comprehensive definitions and inclusivity.
In contrast, the Code on Wages, 2019 integrates these provisions into a singular statute that is applicable to all employees, regardless of wage levels, sector, or type of employment. It establishes a uniform legal framework that introduces a nationally determined floor wage, ensures timely and transparent payment mechanisms, and enshrines the principle of equal remuneration across all genders, explicitly including transgender persons. The Code emphasizes the modernization of compliance systems through digitization, introduces Inspector-cum-Facilitators to encourage cooperative enforcement, and mandates periodic reviews to maintain the relevance of wage standards.
Through this comparative lens, it becomes evident that the Code not only simplifies the legal landscape but also significantly broadens the scope of worker protections. It marks a pivotal transition from outdated laws tailored for an industrial economy to a holistic, progressive framework designed for a dynamic and diverse workforce. In doing so, the Code aims to foster equity, reduce wage disparities, and uphold the dignity of labour in a rapidly evolving economic environment.
4.1. Minimum Wages:
The concept of minimum wages in India has undergone a fundamental transformation with the enactment of the Code on Wages, 2019. Under the previous Minimum Wages Act, 1948, the framework was fragmented and only applied to scheduled employments as notified by the appropriate government. This left a large section of the workforce—especially those engaged in unorganized or informal sectors—outside the protective ambit of the law. Moreover, there was no provision for a nationally fixed minimum wage, which resulted in wide regional disparities and often sub-standard compensation.
In contrast, the Code on Wages, 2019 establishes a more inclusive and standardized approach. It is universally applicable to all employees, irrespective of the sector or the nature of their employment. One of the most significant features of the Code is the introduction of a “floor wage” set by the Central Government, taking into account the minimum living standards across different geographical regions. States are mandated to fix their minimum wages above this floor wage, ensuring a basic uniformity in the minimum standards of living for workers across the country. Additionally, the Code mandates regular revision and review of minimum wages to reflect inflationary trends and changing economic conditions.
This shift from a selective to a universal approach ensures broader coverage and stronger protection for vulnerable workers. The legal clarity and centralized oversight under the Code provide a robust framework for maintaining fair wage practices. It reduces inter-state wage disparities, introduces predictability in wage-setting, and fosters a more equitable labour market. Overall, the Code’s provisions represent a progressive departure from outdated practices and align more closely with international labour standards and constitutional mandates aimed at ensuring the right to a decent livelihood.
4.2. Timely Payment of Wages:
The timely payment of wages is crucial to safeguarding the economic security and dignity of workers. Under the earlier Payment of Wages Act, 1936, the applicability was restricted to employees drawing wages below a certain monetary ceiling, thereby excluding a significant portion of the workforce from legal protection. Additionally, the Act did not adequately address modern employment practices and lacked strong enforcement mechanisms. Payment timelines were not standardized across all forms of employment, leading to delays and uncertainties in wage disbursal.
The Code on Wages, 2019 addresses these gaps by applying uniformly to all employees, irrespective of their wage levels. It clearly stipulates deadlines for wage payment: daily wage workers must be paid the next day, weekly wage earners within the seventh day of the week’s end, and monthly salaried employees by the seventh day of the succeeding month. This uniformity across employment types ensures that all workers are entitled to prompt compensation, reducing the potential for exploitation and undue financial stress.
Another major advancement under the Code is its emphasis on digital and formal payment mechanisms. This shift enhances transparency, minimizes the risk of wage theft or tampering, and facilitates better grievance redressal. By integrating technology and promoting accountability, the Code modernizes wage administration to suit the contemporary economy. This transformation from a selective, outdated regime to a universally applicable, digitally empowered structure ensures fairer and faster wage distribution, reflecting the principles of equity and justice embedded in the Constitution of India.
4.3. Equal Remuneration:
The principle of equal remuneration has been a cornerstone of India’s wage-related legislation, but its application and enforcement have evolved significantly over time. Under the Equal Remuneration Act, 1976, the primary aim was to address gender-based wage discrimination in the workplace. It prohibited employers from paying employees differently based on their gender for the same or similar work, thereby aiming to reduce the gender pay gap. However, the law had limitations. It primarily focused on male and female workers and did not address other forms of discrimination, such as those based on sexual orientation or gender identity. Additionally, the definitions within the Act were often criticized for being vague, leading to challenges in enforcement. Moreover, the law lacked robust mechanisms for ensuring compliance, and gender stereotyping in job roles remained a persistent issue.
The Code on Wages, 2019 significantly expands the scope of the principle of equal remuneration. Not only does it retain the central tenet of “equal pay for equal work” for men and women, but it also explicitly prohibits discrimination based on gender in recruitment, employment terms, and conditions. A major breakthrough under the Code is the inclusion of transgender persons within the scope of the “equal remuneration” principle, aligning the Code with progressive judicial rulings and social justice movements in India. This expansion reflects a growing recognition of the diversity of gender identities in the workforce, ensuring that transgender workers are afforded the same rights and protections as other employees. The Code’s provisions also reinforce the constitutional guarantees of equality and non-discrimination, creating a more inclusive and equitable legal environment.
The Code on Wages introduces stronger enforcement mechanisms, including greater transparency in wage determination and reporting, as well as the establishment of robust grievance redressal systems. These provisions aim to combat both overt and covert discrimination, ensuring that workers are paid fairly regardless of gender, gender identity, or sexual orientation. In comparison to the Equal Remuneration Act, the Code provides a more comprehensive and modern framework for preventing wage discrimination, ensuring that employers cannot exploit any worker based on discriminatory grounds. As a result, the Code on Wages, 2019 represents a significant step toward achieving not only wage equity but also a broader cultural shift towards inclusivity and non-discrimination in Indian workplaces.
5. Enforcement and Compliance Mechanism:
The enforcement and compliance mechanisms under the Code on Wages, 2019 represent a significant departure from the traditional, often cumbersome, systems found in earlier wage-related legislation. Under previous laws, such as the Minimum Wages Act, 1948, and the Payment of Wages Act, 1936, the enforcement relied heavily on inspectors who were tasked with monitoring compliance across various sectors. However, this system was criticized for its inefficiency, lack of transparency, and inconsistency in its application. The traditional inspectorate system often led to delays, poor monitoring, and a lack of adequate follow-up, especially in the informal sector where compliance was particularly challenging.
In contrast, the Code on Wages, 2019 introduces a more modern and proactive approach to enforcement through the establishment of “Inspector-cum-Facilitators.” These officers not only have the authority to inspect but are also empowered to help employers comply with the law by offering guidance and support. This dual role aims to foster a cooperative rather than punitive relationship between employers and the authorities, encouraging voluntary compliance and reducing the need for adversarial legal processes. The idea is to create a more facilitative environment where businesses, particularly smaller ones, are supported in understanding and adhering to wage-related regulations.
The Code emphasizes digitization and the use of technology to streamline compliance processes. It encourages self-assessment mechanisms, where employers can proactively check and verify their adherence to wage laws. The introduction of web-based platforms for inspections and grievance redressal further improves transparency, making it easier for workers to report violations and track the progress of their complaints. This digital shift reduces the chances of corruption and human error, as all transactions and reports are recorded electronically, providing a clear audit trail.
The Code also introduces a tiered penalty system for non-compliance, with penalties graded based on the severity of the violation. This allows for a more nuanced and fair approach to enforcement, where minor infractions are dealt with through warnings or less severe penalties, while more serious breaches result in stricter consequences. This graded approach ensures that enforcement actions are proportional to the nature and extent of the non-compliance, while still maintaining a strong deterrent effect.
Ultimately, the enhanced enforcement and compliance mechanisms under the Code on Wages, 2019 seek to ensure that wage laws are not only respected but are also accessible and understandable to both employers and employees. By modernizing the inspection system, incorporating technology, and fostering cooperation, the Code aims to address the challenges faced by previous laws and create a more efficient, transparent, and worker-friendly enforcement framework.
6. Judicial and Policy Developments:
The judicial and policy landscape surrounding wage laws in India has played a crucial role in shaping the direction of labour reforms, particularly in the areas of equal remuneration, wage protection, and worker rights. The judiciary has significantly influenced the interpretation and enforcement of wage laws, often stepping in to fill gaps where legislative frameworks were either ambiguous or insufficient. Key Supreme Court rulings, such as Randhir Singh v. Union of India (1982) and Air India v. Nargesh Meerza (1981), have solidified the principle of “equal pay for equal work,” reinforcing that employees performing the same work should receive the same wage irrespective of their gender. These landmark cases laid the foundation for the legal recognition of gender-based wage discrimination and have been pivotal in shaping labour law reforms, including the provisions under the Code on Wages, 2019.
Additionally, the judicial approach has increasingly aligned with progressive policies that promote inclusivity and non-discrimination in the workforce. In recent years, India’s Supreme Court has recognized the rights of transgender individuals to equal protection and remuneration under the law. This shift in judicial thinking is reflected in the Code on Wages, 2019, which explicitly includes transgender persons within the scope of the “equal remuneration” provision. This legal recognition aligns with the wider human rights framework and addresses the systemic marginalization of transgender persons in the labour market.
On the policy front, the Indian government has made significant strides towards modernizing and digitizing labour law enforcement. Policies such as the introduction of the National Career Service Portal and the e-Shram Portal aim to create a more organized and accessible labour market, particularly for workers in the informal sector. These platforms facilitate digital registration, access to welfare schemes, and a smoother interface for grievance redressal. Such policy initiatives complement the Code on Wages, 2019, which leverages technology to streamline compliance and enforcement processes.
Moreover, the Transgender Persons (Protection of Rights) Act, 2019 also plays a crucial role in advancing the objectives of the Code by ensuring that the legal rights of transgender individuals are protected in the workplace. This Act, together with the Code, represents a significant policy commitment towards creating an inclusive labour environment where individuals of all gender identities are entitled to equal treatment and compensation.
Despite these positive judicial and policy developments, challenges remain in terms of implementation and awareness. While the Code on Wages aims to modernize and simplify wage laws, the real impact of these reforms depends heavily on the effective execution of these policies at the state and local levels. Additionally, continuous judicial oversight will be essential to ensure that these provisions are interpreted and enforced in line with evolving social norms and constitutional principles.
The combination of judicial precedents, progressive policies, and legislative reforms encapsulated in the Code on Wages, 2019, marks a pivotal moment in India’s labour law evolution. It reflects the country’s commitment to ensuring fair wages, eliminating discrimination, and promoting equity in the workforce.
7. Challenges in Implementation:
Despite the progressive nature of the Code on Wages, 2019, its implementation faces several significant challenges that could undermine its effectiveness in achieving its intended goals. One of the primary challenges is the absence of a clear formula or detailed guidelines for determining the floor wage, which is set by the central government. While the Code mandates that the central government establish a floor wage, the lack of specific criteria for calculating this wage can lead to inconsistencies and ambiguities in its application. The determination of the floor wage depends on various factors such as regional cost of living and socio-economic conditions, which can vary significantly across states. This leaves room for discrepancies between the wage standards set by different state governments, potentially defeating the purpose of having a uniform floor wage that ensures a basic standard of living for all workers.
Another major challenge is the variation in the preparedness and infrastructure of different states to enforce the Code. While the Code aims to create a more efficient and transparent system through the use of technology and Inspector-cum-Facilitators, the capacity of state-level enforcement agencies to adopt and effectively implement these reforms varies widely. States with limited resources or inadequate administrative infrastructure may struggle to meet the demands of digitization, monitoring, and compliance. Additionally, the informal sector, which constitutes over 80% of India’s workforce, remains a critical area of concern. Workers in this sector often lack awareness of their rights and face difficulties in accessing legal redress or formal grievance mechanisms. The informal nature of their employment further complicates the process of ensuring timely payment and equitable wages.
Moreover, there is a general lack of awareness among both workers and employers about the provisions of the Code. Many workers, especially in rural or less-developed areas, may not be fully aware of their rights under the new law, including the right to equal pay for equal work or timely payment of wages. This lack of awareness often leads to workers being unable to assert their rights effectively, which diminishes the overall impact of the Code. Similarly, employers may not be familiar with the changes introduced by the Code, leading to unintentional non-compliance or delays in adapting to new regulatory requirements.
Enforcement challenges also persist in the form of weak penalty structures. While the Code introduces a graded penalty system, the actual enforcement of penalties and the imposition of fines for non-compliance are not always consistent. The reluctance of some employers, especially in smaller and medium-sized enterprises, to comply with wage regulations due to concerns about cost implications or ignorance of the legal framework can further hinder the Code’s success.
There is a need for stronger coordination between central and state governments to ensure smooth implementation. Disparities in policy execution across states, coupled with differences in the administrative capabilities of state governments, can lead to uneven enforcement. Effective collaboration between various levels of government, coupled with continuous monitoring, capacity-building for labour officials, and a focus on legal awareness campaigns, will be crucial to overcoming these implementation challenges.
8. Recommendations:
To ensure the successful implementation of the Code on Wages, 2019, several strategic recommendations must be considered. First, a uniform and transparent methodology should be developed for calculating the floor wage, with clear guidelines that can be consistently applied across states. This would help eliminate discrepancies in wage-setting and provide a baseline for fair compensation that all employers can adhere to, thus ensuring that workers across the country receive a minimum standard of living. The central government should also issue periodic reviews and updates to the floor wage to account for changes in inflation, cost of living, and regional economic variations.
Second, a robust capacity-building initiative for state governments and enforcement agencies is essential. While the introduction of Inspector-cum-Facilitators is a step in the right direction, state labour departments need greater resources and training to effectively enforce the Code. This includes improving digital infrastructure, providing training in using web-based inspection and grievance redressal platforms, and creating awareness about the Code’s provisions. Furthermore, state-level labour officers should be equipped with the knowledge and tools necessary to engage with the informal sector, which remains outside the formal system of wage regulation.
Third, to address the lack of awareness among workers and employers, comprehensive outreach programs are crucial. These programs should target workers in rural areas and informal sectors, educating them about their rights and the mechanisms available for grievance redressal. Employers, especially those in small and medium-sized enterprises, should also be provided with training on compliance with the Code, helping them understand their obligations and encouraging voluntary adherence to wage laws.
The enforcement framework should be strengthened by introducing stricter penalties for repeat offenders and a more streamlined system for the swift resolution of complaints. A dedicated labor court system, or specialized labor tribunals, could be established to expedite disputes related to wage violations and non-compliance. Moreover, the central government could consider offering incentives to companies that consistently adhere to the Code, creating a positive reinforcement mechanism for good practices.
Fostering stronger collaboration between the central and state governments, along with non-governmental organizations and trade unions, is critical to the Code’s success. By pooling resources, sharing best practices, and coordinating enforcement, these stakeholders can ensure that the Code reaches all workers, irrespective of their employment status or geographic location.
9. Conclusion:
The Code on Wages, 2019 marks a transformative shift in India’s labour law landscape, aiming to simplify and modernize the regulatory framework governing wages. By consolidating several outdated and fragmented laws, the Code offers a comprehensive and inclusive approach to wage regulation, extending protection to all workers, irrespective of their sector or employment type. The introduction of a floor wage, timely payment provisions, and the principle of equal remuneration represent significant advancements in ensuring fair compensation and reducing wage disparities.
However, the effectiveness of the Code depends heavily on overcoming implementation challenges, such as the lack of clarity in floor wage determination, variations in state preparedness, and the challenges of enforcing the law in the informal sector. Addressing these challenges through clear guidelines, enhanced training, awareness campaigns, and stronger enforcement mechanisms will be crucial to realizing the Code’s full potential.
Despite these challenges, the Code represents a progressive step towards equity and justice for workers in India. By laying a robust foundation for wage fairness, the Code has the potential to reduce disparities, promote inclusive growth, and protect the dignity of labor. It is now imperative that both the central and state governments, along with employers and workers, collaborate to ensure that the Code’s provisions are fully realized, making India’s labour market more equitable, transparent, and just for all.
10. References:
1. The Code on Wages, 2019
2. Minimum Wages Act, 1948
3. Payment of Wages Act, 1936
4. Payment of Bonus Act, 1965
5. Equal Remuneration Act, 1976
6. Randhir Singh v. Union of India, AIR 1982 SC 879
7. Air India v. Nargesh Meerza, AIR 1981 SC 1829
8. Ministry of Labour and Employment, Government of India Reports
9. International Labour Organization Wage Reports
10. Transgender Persons (Protection of Rights) Act, 2019
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Author: Zaeem Sajad is 4th year Law student of BALLB(Hons) at School of Law, Lovely Professional University.
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