New definition of “wage” – The Code on Wages-2019.

Before enactment of four Labour Codes, namely The Code on Wages, 2019; Industrial Relations Code, 2020; Code of Social Security, 2020 and Occupational Safety, Health & Working Conditions Code, 2020, there were several definitions of wage drafted in different language. It has posed several issues relating to applicability & interpretation of the different terms used therein. Though all four Labour Codes have been enacted by Parliament yet the date of enforcement has not been notified so far. Industries, Commercial Establishments, Trade Unions, Workers & Labour Law Professionals are eagerly awaiting the date of enforcement and discussing about the pros & cons of industrial scenario after enforcement of the four Labour Codes. Apart from other changes brought about by four Labour Codes, the impact of definition of “wage” has been the focus of discussion among persons having interest in Labour Laws & Industrial Relation.

Under the Code on Wages, 2019 (in short Wage Code), following four enactments have been consolidated:

1. Payment of Wages Act, 1936 (4 of 1936)
2. Minimum Wages Act, 1948 (11 of 1948)
3. Payment of Bonus Act, 1965 (21 of 1965)
4. Equal Remuneration Act, 1976 (25 of 1976).

Under the Industrial Relation Code, 2020 (in short IR Code) three enactments have been consolidated:

1. Trade Union Act, 1926,
2. The Industrial Employment (Standing Order) Act, 1946; and
3. The Industrial Disputes Act, 1947

Under the Code on Social Security, 2020 (in short Social Security Code) nine enactments have been consolidated:

1. Employees’ Compensation Act, 1923
2. The Employees' State Insurance Act, 1948;
3. The Employees' Provident Funds and Miscellaneous Provisions Act, 1952;
4. The Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959;
5. The Maternity Benefit Act, 1961;
6. The Payment of Gratuity Act, 1972;
7. The Cine-Workers Welfare Fund Act, 1981;
8. The Building and Other Construction Workers' Welfare Cess Act, 1996;
9. The Unorganised Workers' Social Security Act, 2008.

Under Occupational Safety, Health & Working Conditions Code, 2020 (in short OSHW Code) thirteen enactments have been consolidated:

1. The Factories Act, 1948;
2. The Plantations Labour Act, 1951;
3. The Mines Act, 1952;
4. The Working Journalists and other Newspaper Employees (Conditions of Service) and Miscellaneous Provisions Act, 1955;
5. The Working Journalists (Fixation of Rates of Wages) Act, 1958;
6. The Motor Transport Workers Act, 1961;
7. The Beedi and Cigar Workers (Conditions of Employment) Act, 1966;
8. The Contract Labour (Regulation and Abolition) Act, 1970;
9. The Sales Promotion Employees (Conditions of Service) Act, 1976;
10. The Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979;
11. The Cine-Workers and Cinema Theatre Workers (Regulation of Employment) Act, 1981;
12. The Dock Workers (Safety, Health and Welfare) Act, 1986;
13. The Building and Other Construction Workers (Regulation of Employmentand Conditions of Service) Act, 1996.

Lesser the dispute, healthier the industrial peace-From the discussions it can be safely concluded that by express exclusion of 11 components from the definition of wages, grey areas relating to definition of “wage” would be reduced which will ultimately lead to lesser number of dispute and healthier industrial relation and ensuring industrial peace. Clarity in the mind of litigating parties due to express exclusion of 11 components from the definition of “wage” as to what comes within the purview of wage and what does not come, would greatly reduce the possibility of litigation. Thus clear concept regarding boundaries of wage eliminating all grey areas, has made the definition of wage as panacea for all disputes relating to wage.

Multiple definition of wage-There are as many definitions of wage under the 29 enactments which have been consolidated under the four Codes mentioned hereinabove. Understanding of scope of applicability of twenty nine definitions of wage defined under twenty nine enactments has been cumbersome exercise for employers, trade unions & the authorities dealing with the dispute which has led to much confusion. By enactment of four codes Parliament has tried to minimize the dispute arising out of multiple definition of wages under twenty nine Acts. After enactment of four codes only four definitions under the four codes have to be studied. Perusal of the definition of wage under the four codes, clarify that the definition of “wage” under four codes are similar in many respects. In order to understand the definition, it would be proper to study the similarity & differences, if any, among these four definitions.

Similarity in the definition of “wage” under four codes-

The Code on Wages - Definition of wage u/s. 2(y) of the Wage Code is both inclusive & exclusive. In the inclusive clause three basic components of wage have been enumerated as under:

1. Basic Pay;
2. Dearness Allowance;
3. Retaining Allowance.

After inclusive clause in the definition, 11 components of the wage starting from (a) to (k) have been expressly excluded from the purview of wage. At the end of the definition there are two proviso & one explanation clause in the definition. Similar pattern of definition of wage has been adopted in IR Code, Social Security Code & OSHW Code.

Section 2(y) - “Wages” means all remuneration whether by way of salaries, allowances or otherwise, expressed in terms of money or capable of being so expressed which would, if the terms of employment, express or implied, were fulfilled, be payable to a person employed in respect of his employment or of work done in such employment, and
includes—

1. Basic Pay;
2. Dearness Allowance;
3. Retaining Allowance.

but does not include––

1. any bonus payable under any law for the time being in force, which does not form part of the remuneration payable under the terms of employment;
2. the value of any house-accommodation, or of the supply of light, water, medical attendance or other amenity or of any service excluded from the computation of wages by a general or special order of the appropriate Government;
3. any contribution paid by the employer to any pension or provident fund, and the interest which may have accrued thereon;
4. any conveyance allowance or the value of any travelling concession;
5. any sum paid to the employed person to defray special expenses entailed on him by the nature of his employment;
6. house rent allowance;
7. remuneration payable under any award or settlement between the parties or order of a court or Tribunal;
8. any overtime allowance;
9. any commission payable to the employee;
10. any gratuity payable on the termination of employment;
11. any retrenchment compensation or other retirement benefit payable to the employee or any ex gratia payment made to him on the termination of employment:

Provided that, for calculating the wages under this clause, if payments made by the employer to the employee under clauses (a) to (i) exceeds one-half, or such other per cent, as may be notified by the Central Government, of the all remuneration calculated under this clause, the amount which exceeds such one half, or the percent so notified, shall be deemed as remuneration and shall be accordingly added in the wage under this clause.

Provided further that for the purpose of equal wages to all genders and for the purpose of payment of wages, the emoluments specified in clauses (d), (f), (g) and (h) shall be taken for computation of wage.

Explanation – Where an employee is given in lieu of the whole or part of the wages payable to him, any remuneration in kind by his employer, the value of such remuneration in kind which does not exceed fifteen percent of the total wages payable to him, shall be deemed to form part of the wages of such employee;

Difference & similarity among definition of wage under four codes - Definition of “Wage” under Wage Code has been reproduced hereinabove. After comparison of definition of four codes, it is apparent that the four definitions under the four codes are almost same & similar except minor differences which are highlighted hereunder:

IR Code. In IR Code “wage” has been defined u/s. 2(zq) of the Code. By comparing the definition of “wage” under Wage Code with definition of “wage” under IR Code, it appears that there is no difference between the language used in two sections. Two provisos and one explanation of the definition of “wage” in the IR Code are almost similar to the definition of “wage” under the Wage Code.

Social Security Code - In Social Security Code “wage” has been defined u/s. 2(88) of the Code which differs from the definition of “wage” under Wage Code in following respect. Both the provisos and one explanation of the definition of “wage” in Social Security Code are exactly similar to the definition of “wage” under the Wage Code. Difference in language is apparent in component (k) of exclusion clause whereby retrenchment compensation or other retirement benefits have been excluded from the purview of wage. Phrase shown in bold letters in the definition of wage u/s. 2(88) (k) of Social Security Code have been added in the definition.

Section 2(y) (k) of Wage Code	Section 2(88) (k) of Social Security Code
(k) any retrenchment compensation or other retirement benefit payable to the employee or any ex gratia payment made to him on the termination of employment:	(k) any retrenchment compensation or other retirement benefit payable to the employee or any ex gratia payment made to him on the termination of employment under any law for the time being in force.

Addition of the phrase “under any law for the time being in force” in the definition of wageu/s. 2(88)(k) of the Social Security Code in fact refers to provisions relating to retrenchment under the Industrial Disputes Act, 1947 or U.P. Industrial Disputes Act, 1947. The concept of retrenchment has been defined u/s. 2(zh) of the IR Code. Procedures for retrenchment have been explained in section 65, 66, 70, 71 & 72 of Chapter-IX and section 77 & 79 of Chapter- X of the IR Code.

OSHW Code- In OSHW Code “wage” has been defined u/s. 2(zzj) of the Code. By comparing the definition of “wage” under Wage Code with definition of “wage” under OSHW Code, it appears that there is no difference between the language used in two sections. Two proviso and one explanation of the definition of “wage” in OSHW Code are exactly similar to the definition of wage under the Wage Code.

Similar definition of wage under four Labour Codes:

Thus by comparing four definitions of wage under the four Labour Codes, it is apparent thatthere is no difference in the definition of wage under the four Labour Codes. After declaration of the date of enforcement of four Labour Codes, we would have to study the one definition of wage instead of studying 29 definitions of wage, salary & basic wage given under 29 enactments which have been subsumed under the four Codes.

Single definition of wage- Prior to enforcement of four Labour Codes, definition of wages has been defined differently under 29 Acts subsumed under the four Labour Codes i.e. Wage Code, Industrial Relation Code, Social Security Code & OSHW Code. With enforcement of four Labour Codes, a single definition of “wage” has been given whereby the work of officers responsible for compliance in the establishment, Enforcement Officer & Trade Unions have been made easy by reducing the number of legislations and by applying same definition under the four Labour Codes.

Scope of wage- Before any payment may be brought within the purview of “wage” following conditions must be fulfilled before claiming any amount as wage:

1. All remunerations by way of salary, allowances or otherwise, payable to a person employed in respect of employment; and
2. Payable when terms of employment expressed or implied were fulfilled; and
3. Expressed in terms of money or capable of being so expressed.

Three components of wage- Wages may be paid under three heads namely (a) Basic Pay, (b) Dearness Allowance, & (c) Retaining allowance, if any. Retaining allowance is not payable in all employments. This component is prevalent in Sugar Industries.

Express exclusion of 11 components of wage leads to healthy industrial relation- By expressly excluding 11 components from the purview of wage under the four Labour Codes, the disputes which have been being raised as to whether these components are wage or not, have been ruled out and no such disputes would arise in future after implementation of four Labour Codes. As such with the implementation of four Labour Codes, cases & disputes relating to components of wages would be considerably curtailed resulting into healthy industrial relation. Following issues which have been arising earlier would not arise after implementation of four Labour Codes:

1. Whether Provident Fund & ESI shall be payable in respect of 11 components?
2. Whether Gratuity & Bonus shall be payable in respect of 11 components?
3. Whether Retrenchment/Closure compensation shall be payable in respect of 11 components?

Obligation to pay legal dues on at least 50% of the total wage 1 st proviso to definition of “wage” under four Labour Codes, speaks about calculation of wage. Though eleven components of wage have been excluded from the definition of wages but 1 st proviso to the definition says that if amount specified in Clause (a) to (i), mentioned in the exclusion clause, exceeds one-half or 50% or such other percent, as notified by Central Government of all the remuneration calculated under this clause, the amount which exceeds 50% or such percent, so notified, shall also be deemed as remuneration and such amount shall be added in wages under this clause. It means by virtue of 1 st proviso to definition of wage under four Labour Codes, if amount of excluded components exceeds 50% of the total emoluments, the amount in excess of 50% shall be added in wage for the purposes of legal liability. This provision on the one hand extends benefits to employees in several respects while on the other hand enhances financial obligation of employer.

Equal wages to all genders- Under Equal Remuneration Act, 1976 the provision of equality was made for ensuring equal pay for equal work for both man & woman. Under the four Labour Codes the principles of equal pay for equal work have been made available to all genders. This is the specific feature of four Labour Codes that for the first time, principles of equal pay for equal work has been formulated as law under this Code for all the three genders namely; (i) masculine, (ii) feminine & (iii) transgender.

15% of total wage payable in kind- Explanation to definition of wage u/s. 2(y) of WageCode, u/s. 2(zq) of IR Code, u/s. 2(88) of Social Security Code & u/s. 2(zzj) of OSHW Code clarify that upto 15% of the total wage may be paid in kind by employer. Value of such remuneration in kind should not exceed 15% of total wages payable to employee. Such remuneration paid in kind shall be deemed to form part of the wages of such employee. Thus under the four Labour Codes 15% of the total wages payable, may be paid in kind.

Focus on accumulation after retirement - Some of the trade unions have apprehension that by incorporating provision for payment of legal dues at least on 50% of the total remuneration, take-home salary shall be reduced. Amount so reduced on account of take-home salary would in fact be payable in the form of PF accumulation & gratuity etc. which will help the employee after retirement when a retired employee has no source of earning.

Elimination of grey area in the definition of wage- Time, money & precious manpower of law department, trade union, workers, authorities & courts have been vested in deciding the following issues which have been noticed as bone of contention between employer on the one hand and workers or trade unions on the other. Several cases have been filed u/s. 15 of the Payment of Wages Act, 1936 or u/s. 33-C(1) & C(2) of the Industrial Disputes Act, 1947 wherein parties were forced to undergo litigation upto High Court & Supreme Court of India to get the issue decided. By express exclusion of 11 components from the purview of wage relating to grey areas, possibility of dispute has considerably been curtailed.

1. Whether bonus is a wage u/s. 15 of the Payment of Wages Act, 1936 or u/s. 33- C(2) of the Industrial Disputes Act, 1947?
2. Whether value of house accommodation or supply of light, water, medical attendance or other amenities or HRA come within the purview of wage?
3. Whether conveyance allowance or value of travelling concession comes within the purview of wage?
4. Whether overtime allowance is wage for the purposes of payment of legal dues on account of Provident Fund, ESI, bonus & gratuity etc.
5. Whether commission payable to employee is wage?

Lesser the dispute, healthier the industrial peace- From the discussions made hereinabove it can be safely concluded that by express exclusion of 11 components from the definition of wages, grey areas relating to definition of “wage” would be reduced which will ultimately lead to lesser number of dispute and healthier industrial relation and ensuring industrial peace. Clarity in the mind of litigating parties due to express exclusion of 11 components from the definition of “wage” as to what comes within the purview of wage and what do not come, would greatly reduce possibility of litigation. Thus clear concept regarding boundaries of wage eliminating all grey areas, has made the definition of wage as panacea for all disputes relating to wage.