Labour Codes: #7 Decoding the Universal Definition of Wage Under the New Labour Codes
The Code on Wages, 2019, (“Code”) has introduced significant changes to the definition of “Wages.” This redefined universal understanding of wages aims to streamline various provisions across multiple labour laws and ensure consistency in the interpretation and enforcement of wage-related regulations.
Key Features
- Universal Definition of Wage: The new definition encompasses all remuneration, including basic salary, allowances, and bonuses. However, certain components like statutory deductions (e.g., provident fund, gratuity) and specific benefits (e.g., housing, medical allowances) are excluded.
- 50% Wage Ceiling: The Code specifies that Wages should not be less than 50% of the total CTC and shall be compliant with the minimum wage capped by the respective state governments.
- Clear Exclusions: The new definition excludes Gratuity, contributions to retirement benefits, reimbursements, and any perks provided by the employer that do not contribute directly to the worker’s livelihood.
- Conditional Inclusions: The new definition provides room for conditionally including the excluded components to bring in equal pay across all genders and for ease of meeting the 50% wage ceiling for calculation of statutory and social security components.
Conclusion:
The redefined definition of wages under the new labour codes is a significant step towards harmonizing India’s wage-related policies across different industries and sectors. However, the implementation of these changes may require adjustments in current business practices, leading to a changed landscape of compliances for both the Employer and the Employee.