The code on wages is a proposed legislation to amend & consolidate laws relating to wages & bonus.
“Wages” is defined in the section 2(y) of the code. Wages are paid to a person employed for their work or services rendered in that employment. Specifically, this includes all remuneration provided in the form of salary, allowances, or other benefits, whether paid in money or capable of being calculated in monetary terms. Moreover, wages become payable when the terms of employment—whether express or implied—are fulfilled.
Chapter 3 of The Code on Wages, 2019 talks about the payment of wages – the manner in which they should be paid & the allowed deductions. As per this chapter, the wages have to be paid based on the wage period fixed by the employer. It can be either daily, weekly, fortnightly or monthly wage period which is the longest form of the wage period.
Employer will pay in the form of cash, cheque, bank transfer or any other electronic mode of payment. Appropriate government can make it mandatory for any establishment to pay only in the form of cheque or directly to the bank account. Employer shall pay the wages based on the wage period as mentioned :
- Daily basis wage period : Employer shall pay by the end of the shift.
- Weekly basis wage period : Employer shall pay on the last working day of the week, i.e before weekly holiday.
- Fortnightly basis wage period : Employer shall pay by the end of 2nd day after the fortnight.
- Monthly basis wage period : Employer shall before the 7th of the next month.
If the employer has removed, retrenched or dismissed the employee from the service, he has to pay the wages payable within 2 working days of such event. Even if employee resigns from the service or if he becomes unemployed due to closure of establishment, the same timelines has to be followed.
Employer should not make any deductions during the payment of wages. Any payment done by employee to the employer will be deemed to be a deduction. But if the employer holds the increment or promotion, or reduces the employee to a lower post or suspends him, it will not be deemed as deduction if all requirements are satisfied by the employer for such purposes.
The code authorises certain deductions mentioned in Sec 18 (2). The total amount of these deductions shall not exceed 50% of the wages. These deductions can be categorised as :
- Fines (Sec 19)
- Deductions for absence from duty (Sec 20)
- Deductions for damage or loss (Sec 21)
- Amenities or services supplied (Sec 22)
- Deductions for recovery of advances (Sec 23)
- Deductions for recovery of loans (Sec 24)
- Income Tax, Social Security Funds, PF, Health Insurance, Trade Union, PM National Relief Funds – Deductions
Fines : Employer shall exhibit a notice specifying acts & omissions which can lead to penalties. The notice is a prerequisite for an employer to impose a fine on the employee. The fine such imposed cannot be more than 3% of the wages and can also not be charged in instalments. He should also give an opportunity to the employee to explain the actions.
Employer cannot levy a fine on employee who is less than 15 years of age. The code also prohibits the imposition of fine if done after 90 days of the act or omission. Employer shall maintain a register of fines and realisations which should be used only for the purposes beneficial to the employees.
Deductions for absence from duty : This form of deduction is allowed if the employee is absent from the place where he is required to work as per the terms of his employment. The deduction has to be in the proportion of the absence.
The proviso and the explanation of Sec 20, talk about the cases of mass absence without notice, in which the employer can deduct any amount due to him in lieu of the notice with a cap of wages of 8 days. It also includes cases of stay-in strike.
Deductions for damage or loss : In cases of damage or losses, the deduction cannot be more than the loss caused due to negligence or default of the employee. In this kind of deduction too, employer shall give an opportunity to the employee asking for explanations or justifications. Employer shall record such deductions and realisations in a register.
Deductions for services rendered : If an employee accepts house accommodation amenity or service as a term of employment or otherwise, the employer can deduct the amount not more than the value of amenity or service from the wages.
Deductions for recovery of advances : Employer can deduct any amount paid in advance of money or wages paid to the employee. If the money is paid before the employment began, employer shall deduct it from the first payment of complete wage-period. Traveling expenses paid to the employee as advance cannot be recovered.
Deductions for recovery of loans : The extent of loan which can be granted & the interest rates along with the recovery process will be as prescribed.
Deductions for Income Tax, Social Security Funds, PF, Health Insurance, Trade Union, PM National Relief Funds : For deductions related to Trade Union, employee shall authorize in writing. Employer can also deduct Income tax or other statutory charges levied by Central or state government which are payable by the employee. It also includes deductions required by court orders or any other competent authority.
The provisions of this chapter in the code is not applicable to Government establishments. However, Appropriate government is empowered to apply the provisions to any such establishment by notification.
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