Hi,

Dear Colleagues,

Navigating the complexities of the new labour laws can be a challenge for any organisation.

Here are the key takeaways from the first lecture of the Viaco Legal Service,Training series on the Code on Wages, 2019, focusing on essential definitions and the law’s expanded scope.

The New Landscape: Broad Applicability

The Code on Wages, 2019, represents a significant shift by subsuming four existing labour laws into a single unified code. One of the most critical changes is the removal of employee limits for applicability. The code now applies to all establishments, including factories and shops, regardless of the employees’ category or status.

Key Definitions You Need to Know

Worker (Section 2z): The definition now includes contract labour, working journalists, and sales promotion employees. However, it explicitly excludes apprentices and supervisory staff earning more than ₹15,000 per month.

Employer: This term now covers occupiers of factories, managers, and anyone with ultimate control over the affairs of an establishment.

Wages (Section 2y): “Wages” includes basic pay, dearness allowance (DA), and retaining allowance. Notably, items like bonuses, pension contributions, HRA, and overtime allowances are excluded.

Contract Labour: Workers hired through a contractor, including interstate migrant workers. It does not include those regularly employed by an employer, or by a contractor under standard conditions with regular benefits.

Major Compliance Shifts

Full and Final Settlement: Employers are now required to complete full and final wage settlements within two working days.

Gender Neutrality: Section 3 of the code prohibits discrimination based on gender for work of the same or similar nature.

Expanded Protections: All employees, including managers and supervisors, can now seek legal protection against illegal deductions or delays in wage payments.

A revised method for calculating “wages” under Section 2(y) to ensure uniformity across various labor laws.

Revised Wage Formula Components

Under the new code, “wages” are defined as all remuneration payable to an employed person, specifically including the following three items:

Basic Pay

Dearness Allowance (DA).

Retaining Allowance, if any.

The 50% Threshold Rule

The code includes a critical proviso to prevent employers from over-allocating pay to excluded components (like HRA or travel allowances) to reduce their social security liability.

Calculation: If the total of all excluded components (such as bonus, HRA, and employer pension contributions) exceeds one-half (50%) of the total remuneration, the excess amount will be deemed “wages”.

Example: If an employee’s total remuneration is ₹100 and excluded components total ₹56 (which is more than half), the excess ₹6 will be added back to the wages for calculating benefits.

Common Exclusions from Wages

The following components are generally excluded from the wage definition, provided they do not exceed the 50% threshold:

Bonuses payable under any law or term of employment.

Employer contributions to any pension or provident fund (including interest).

House Rent Allowance (HRA) and the value of house accommodations.

Conveyance or Traveling Allowances.

Overtime Allowances and commissions.

Retirement benefits such as gratuity and retrenchment compensation.

Remuneration In Kind

If remuneration is provided in kind instead of cash for all or part of the wages, the value of such benefits must not exceed 15% of the total wages.

Staying compliant with these new definitions is vital for organisational health. For a deeper dive into wage restructuring and compliance audits, follow the Viaco Legal series on our YouTube channel, @VIACOVIEW, or

https://www.youtube.com/@ViacoLegalCompliance

https://www.youtube.com/@Edu_FactsTalk_Vijay

https://www.linkedin.com/in/vspundir?

Drafted by:

Senior Law Consultant

Viaco Legal Service

Vijay S Pundir

MS LLB LLM MBA

Law & HR Consultant

www.viacovoice.com

 

 

 

For  consulting taje appointments at 9881633611 for expert advisory services.

 

 

 

#LaborLaw #CodeOnWages2019 #HRCompliance #LegalUpdate #VakoLegal #IndiaLaborLaw #EmployeeRights

https://www.linkedin.com/in/vspundir?