The many misses of the Wage Code

KR Shyam Sundar / Rahul S Sapkal Updated on March 14, 2018
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It leaves too much to the discretion of the administrators regarding minimum wages, and that’s not a good legal principle

The Government is committed to effecting significant changes in the labour laws despite protests by BMS and other trade unions. The Government has already released three Codes: on industrial relations, wages, and social security. The Wage Code replaces four existing laws, namely, the Payment of Wages Act 1936, the Minimum Wages Act 1948, the Payment of Bonus Act 1965, and the Equal Remuneration Act 1976. It was introduced in Parliament on August 10, 2017. It was referred to a select committee for scrutiny and is expected to be taken up during the monsoon session of Parliament.

The Code is both good and bad. But the problem is that endorsing principles inherent in law is different from realising them. This is the major problem with the Code. It has removed the existing concept of “scheduled employments” — which are occupations or industries added by the Centre or the State governments from time to time for payment of minimum wages under the law — and made it universal. Simply put, workers in both the organised and the unorganised sectors will have to be paid the stipulated minimum wage. Secondly, it is mandatory to revise minimum wages every five years, thus standardising the revision tenure. Further it has powers to direct the employers to make “formal” wage payments to workers. These are admirable and welcome clauses. But these are easier proclaimed than done.

Easier said

The Code does not define minimum wages apart from repeating its components (basic wage and cost of living allowance) and completely ignores the criteria for minimum wages spelt out by the tripartite body, the Indian Labour Conference (ILC) and the Supreme Court in the Reptakos Case in 1991. While it is reasonable to argue for revision of these norms as most of them were formed in 1957, consumption patterns and other aspects may need revision and inclusion with a net upward effect.

The Code stipulates that minimum wages will be determined by skill, arduousness at the workplace, and geographical peculiarities. Employers have been calling for fixing minimum wages on the basis of paying capacity of the industry and productivity of workers. A minimum wage is one that is required to maintain a worker and his/her family and hence should be common to all workers irrespective of any specific features.

The Code contemplates several minimum wages, that is, a National Minimum Wage (NMW), separate national minimum wages for different States or regions and State-level minimum wages. The principle is that the State governments’ wage fixation should not be lower than that of NMW. The Code leaves a lot to the discretion of the administrators to determine minimum wages: this is not a good legal principle as temporal or spatial differences will emerge.

Implementation, a challenge

The aspiration of the Government to universalise minimum wage poses challenges not only to its conception but most importantly to its implementation. The Office of the Commissioner of Maharashtra observed in 2011 that the multi-functioning, meagrely staffed labour inspectorate in the State would take three years for to make one visit per inspector of the 5,062 sites in the non-universalised minimum wage system! Minimum wage observance is enhanced when collective organisations of workers are involved and freedom of association is respected. But ruling dispensations seek to dismantle labour inspection and discourage freedom of association.

The Code labels inspectors as “facilitators” and provides for web-based transparent and accountable inspection and a responsive prosecution system. The organisational measures to reform inspection and prosecution prevent harassment, remove discretion at the lower levels and pave the way for a persuasive/educative system. But the reforms shift the probability of incidence of discretion to the higher officials in the hierarchy, hence abuse is still possible. More importantly, the Code dilutes their functions and powers by removing the time of entry of inspectors/facilitators and their power to make inquiries of inspection employers and their agents if necessary. These and other measures to liberalise labour inspection system are in utter violation of the ILO’s Labour Inspection Convention 1947 (C.081).

Similarly, a formal mode of payment is unlikely to be successful for several reasons, primarily the lack of adequate banking/digital infrastructure, awareness on the part of workers and inspection mechanisms. Envisaging digital payments to construction workers or even domestic workers in rural areas shows up its impracticality.

Having ratified ILO’s Discrimination (Employment and Occupation) Convention 1958 in 1960, India enacted the Equal Remuneration Act much later, in 1976 (ER Act), to prohibit discrimination in wages and recruitment against women. The Code carries forward the prohibition clause concerning wages and leaves out the one concerning recruitment. This is a serious blow to gender equality and needs to be addressed promptly by the Government. Credible research has revealed various acts of discrimination against flexi-category workers such as casual and contract, and caste/religion-based discrimination in the labour market. The Code could have laid the basis for many more historic proclamations concerning equal basic labour market rights such as equal employment opportunities and equal pay for work of equal value cutting across various identities. If the Wage Code is aspirational, why not fly high?

Sunder is a professor at the Xavier School of Management, Jamshedpur; Sapkal is an assistant professor at the Maharashtra National Law University, Mumbai

Published on March 14, 2018
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