By admin July 4, 2019 11:29

The Big Picture – Labour Codes

The Union Cabinet approved the introduction of a bill that will codify relevant provisions of four existing laws and intends to increase the legislative protection of minimum wage to the entire workforce. Media reports suggested the Codes on Wages Bill, 2019 will be introduced in the ongoing Budget Session of parliament and would benefit about 50 crore workers. According to the media reports, the codification proposes to simplify 32 central labour laws into four codes to bring them in sync with the emerging economic situation, facilitate easier compliance by establishments, promote ease of living and ensure labour welfare and wage and social security for workers. However, the Code of Wages Bill is the first in the series of four labour codes. It seeks to subsume relevant provisions of The Minimum Wages Act, 1948, Payment of Wages Act 1936, Payment of Bonus Act Act, 1965 and Equal Remuneration Act 1976.

Problems faced by the labour industry

  • Factories have to maintain a large amount of paperwork and compliance when they have a large workforce.
  • As labour is a subject in the concurrent list, both the centre and the states are empowered to make laws on the same.
  • Almost 1700 types of labour/professions were covered under the Minimum Wages Act having different wages varying from state to state.
  • Under the existing labour laws, bonus which 1.2-1.5% of the salary of a person is required to be given by an organisation having 20-25 employees and whose salary is less than Rs. 21000.


  • The question for reforming labour laws came up in 1991 along with the LPG reforms but was postponed for a later date.
  • The recommendations of the Second National Commission on Labour (2002) have been include in the Wage code bill.
  • The Wage Bill was introduced in the Lok Sabha in August 2017 but lapsed at the end of the 16th Lok Sabha.


  • The Labour code seeks to codify 44 labour laws, some of which date back to 1910 and 1920s.
  • The National Minimum Wage set by the centre under the labour law would require states to set the minimum wage higher than that set by the Centre but not below that. This would ensure a kind of uniformity in the country.
  • The centre/state/ union territory or any employer would not be able to discriminate based on gender on the payment of wages/remuneration.
  • The new labour code stipulates bonus to be given to every employee having a national minimum wage and employees receiving a salary below that will have a bonus of 8.33% subject to a maximum of 20% of the salary.
  • India needs to amend its labour laws to become a $5 trillion economy.
  • It also eases the compliance that is required for India to become a manufacturing hub and improve the ease of business ranking.
  • Labour rights have also been dealt with by the new labour code.


  • It is known whether the minimum wage set by the labour code would distort the already existing wage market in a state where the current wages would be below that of the national minimum wage.
  • It is also not known whether a state which sets a minimum wage above that mandated by the national wage would be able to reduce that set wage, even adhering to the minimum wage, at a later stage. For eg., if the centre has set the national minimum wage at X and a state government sets it at 5X in 2019. The code does not mention whether the state would be able to reduce the wage to 2X at a later stage if the economy slows down.
  • Also, even though the centre reduces the minimum wage for a particular industry, the states can adapt to the changed wage only after some fixed years.
  • As labour is a subject in the concurrent list, it will lead to conflict between the centre and the states on the subject of wages in the states.
  • The labour code has not made it specific on what rationale the minimum wage has been set in a country which is so diverse in nature in terms of economy.
  • It has also not specified whether state governments would be able to give their inputs for determining a wage in a state or a particular region.
  • The bill talks about eliminating the discrimination on pay between men and women but it does not talk about the gender based discrimination at the time of recruitment.
  • It does not specify how the minimum wage would be decided in a gig economy.
  • It is also a challenge for the MSMEs to cope up with the new cost.
  • It is also an upcoming task to convince the trade unions about the advantages of the labour code and maintain a balance between the wage the trade unions would want and that the industry would want.
  • The states have already implemented labour laws and established statutory bodies for implementing the same. Also such reforms in laws have been done with the approval of the President as such bills require the assent of the President.

Way forward

  • The state governments should be incentivised for adhering to the new labour code as 92% of the population is in the unorganized sector.
  • There should be a smooth implementation of the new labour code in states which already has statutory bodies and laws in place for dealing with labour.
  • The bill should undergo detailed deliberation and scrutiny in the Parliament and under the Standing Committees.

The bill should address the gender based discrimination at the recruitment level also which will become an implementation of Article 14 – Right to equality.

By admin July 4, 2019 11:29