Now, The government has come out with a new and universal definition of “wages” to bring in parity amongst the four new Labour Codes as against the varied definitions under the extant laws. The new Labour Codes are likely to be effective from 1st April 2021.
The new definition now has three parts to it :
An inclusion part, specified exclusions and conditions which limit the quantum of exclusions. There is an exhaustive list of components which are specifically excluded under the definition. The specified exclusions, however, shall not exceed 50% of all remuneration and in the event of exceeding, such excess amount shall be deemed as remuneration and will be considered as “wages”.
In case an employee is given remuneration in kind, the value of such remuneration upto 15% of total wages payable to him shall also be deemed to form part of wages of such employee. Thus, “under the new definition, 50% of total emoluments will now be regarded as wages even where the specified exclusions, such as HRA, overtime, commission, conveyance, employer contribution to PF, etc. are greater than 50% of such total.
Besides this, the new Code also provides for gender neutrality, early payment of salary, guidance towards working hours, days of rest, payment of overtime, minimum wages, statutory bonus etc. It is important to note that some of the wage thresholds for the coverage of employees under existing social security benefit schemes such as Bonus, PF, Employee State Insurance (ESI) have not yet been notified by the Appropriate Government in the new Codes.
Due to the wide encompassing definition of wages, the liability of gratuity/ leave encashment etc. is also potentially likely to see an upward trend.
Let’s take a sneak peek into some of the aspects of the new Code on Wages that would be of interest to the salaried class:
- The new definition of wage could expand the base for computing the retiral benefits like gratuity, PF and other benefits like leave encashment etc.
- Employees joining an organization during the month will now receive salary by the 7th of succeeding month without having to wait until the next pay cycle. Also, employees leaving an organization would be able to receive salary within two working days from the date of resignation.
- Employees are entitled to a substituted rest day in the event they are required or allowed to work on the rest day along with a pay calculated at double the regular wages.
- Employees will be assured of non discrimination on the ground of gender at the time of recruitment and also for the purposes of pay for work of same or similar nature.
- Deduction from the salary like recovery of housing rent, loans or towards absence from duty or fines etc. cannot exceed 50% of wages.
Thus, as the Wage Code regulates the wages and bonus payments in all employments and has a broad based applicability, it is important for both employers and employees to understand the nuances and impact of the new law.