Understanding The Code on Wages, 2019: A Comparative Study of Old and New Laws

This article on “Understanding The Code on Wages, 2019” is written by by Mercy Nkomo, 4^th year BA LLB student at Lovely Professional University.

The Code on Wages, 2019, is a landmark legislation in India that consolidates and modernizes the country’s labor laws related to wages and bonuses. Enacted on August 8, 2019, it replaces four older laws: the Payment of Wages Act, 1936; the Minimum Wages Act, 1948; the Payment of Bonus Act, 1965; and the Equal Remuneration Act, 1976. The new code aims to streamline compliance, ensure fair compensation, promote timely wage payments, and eliminate gender-based discrimination in remuneration. This blog provides a detailed comparison between the Code on Wages, 2019, and the repealed laws, focusing on three key pillars: minimum wage, timely payment, and equal remuneration. It also examines the legal accuracy, practical applications, and compliance requirements of the new framework , the Code on Wages, 2019 was also introduced to consolidate and simplify four major labour laws:

• The Payment of Wages Act, 1936,
• The Minimum Wages Act, 1948,
• The Payment of Bonus Act, 1965, and
• The Equal Remuneration Act, 1976.

These will be deeply analysed in this blog as well as pointing out the changes brought by the Code on Wages, 2019, compared to the old framework, particularly focusing on minimum wage, timely payment, and equal remuneration.

Background: The Need for Labour reform In India

India’s labor laws, prior to 2019, were fragmented and complex, with over 44 statutes governing various aspects of employment. The Payment of Wages Act, 1936, regulated wage payments for certain workers; the Minimum Wages Act, 1948, set minimum wage standards for scheduled employments; the Payment of Bonus Act, 1965, mandated bonus payments; and the Equal Remuneration Act, 1976, addressed gender-based wage disparities. These laws applied to specific sectors, wage ceilings, or employee categories, leaving gaps in coverage, especially for unorganized sector workers.

This patchwork system led to compliance challenges, inconsistent enforcement, and litigation due to varying definitions and interpretations. The Code on Wages, 2019, was introduced as part of the Narendra Modi administration’s initiative to consolidate 44 labor laws into four codes to enhance ease of doing business while protecting workers’ rights. By unifying wage-related provisions, the code extends coverage to all employees, standardizes definitions, and strengthens enforcement mechanisms.

Minimum Wage: Fragmentation vs Uniformity

Old System (Before 2019)

• Limited Scope: The Minimum Wages Act, 1948 only applied to specific “scheduled employments.”
• State-Level Discrepancies: Different states set different minimum wages even for the same type of work.
• Complexity: Employers operating in multiple states faced difficulties due to varying standards.

Example:
A construction worker in Maharashtra could legally earn a different minimum wage than a worker in Gujarat for similar tasks.

New System (Code on Wages, 2019)

• Universal Coverage: Applies to all workers across all sectors.
• Introduction of a Floor Wage: The Central Government will set a floor wage that states cannot undercut.
• Simplification: No need for scheduled employment lists.

Impact:
The new system protects vulnerable workers uniformly and simplifies compliance for businesses across India.

Key Features of the Code on Wages, 2019

The Code on Wages, 2019, introduces major reforms to earlier labor laws with three main objectives:

• Universal Minimum Wage: Mandatory minimum wage across all sectors.
• Timely Payment: Ensures prompt and regular payment of wages.
• Equal Remuneration: Prohibits gender-based wage discrimination.

Minimum Wage: Universal Coverage and Fair Compensation

Key Improvements:

• Broader coverage across all sectors.
• Standardised national floor wage.
• Stronger penalties for non-compliance.

Challenges:

• Ambiguity in “minimum living standards” definition.
• 3-unit consumption model may be outdated for modern needs.

Practical Impact:

• Employers: Must align wage structures with new minimum wage rules.
• Workers: Empowered to demand fair pay, especially in low-wage sectors.

Timely Payment: Ensuring Prompt Wage Disbursal

Key Improvements:

• Universal applicability across wage levels.
• Faster wage payment after termination.
• Higher penalties to ensure compliance.

Challenges:

• Small businesses might struggle with administrative burden in cash-based economies.

Practical Impact:

• Employers: Need to upgrade payroll systems and keep detailed wage records.
• Workers: Can seek quicker legal remedies for delayed payments.

Timely Payment of Wages

Earlier Law: Payment of Wages Act, 1936

The Payment of Wages Act, 1936, governed employees earning below a wage cap (last updated to ₹24,000/month in 2017). It required employers to disburse wages within specific timelines: by the 7th of the next month for establishments with fewer than 1,000 workers, and by the 10th for larger establishments. Wages could be paid via cash, cheque, or bank transfer, and certain deductions (for fines, absences, or salary advances) were allowed. Unauthorised deductions were prohibited, and employers had to keep wage records. However, the act only covered workers within the wage limit and excluded managerial staff, making its coverage limited. Additionally, enforcement was weak, especially in the informal sector, and penalties were minimal ranging from ₹500 to ₹1,500 leading to frequent wage delays.

New Framework: Code on Wages, 2019

removing wage ceilings and sector-specific limitations. It mandates that wages must be paid within two days after an employee’s dismissal, resignation, or termination, and for ongoing employment, typically by the 7th day after the wage period ends.

Key Highlights:

• Payment Methods: Wages may be paid through cash, cheque, bank transfer, or electronic modes, offering more flexibility.
• Permissible Deductions: Employers can deduct amounts for fines, absences, employee-caused damages, and contributions to funds like provident funds, but total deductions cannot exceed 50% of the wages.
• Record-Keeping: Employers must maintain wage registers and publicly display details like wage rates, payment dates, and contact information of inspectors.
• Penalties: Non-compliance can lead to fines up to ₹50,000, and repeat violations may result in imprisonment of up to three months or a fine of up to ₹1,00,000.

Code on Wages, 2019: Mandatory Timely Payments The Code on Wages, 2019,

This universalises timely wage payment provisions, removing wage ceilings and sectoral restrictions. It mandates that wages be paid within two days of termination, dismissal, or resignation, and regularly for ongoing employment, typically within the 7th day of the wage period. Key provisions include: Modes of Payment – wages can be paid in coins, currency notes, cheques, bank transfers, or electronic modes, offering flexibility. Deductions – permissible deductions include fines, absences, damages or losses caused by the employee, and contributions to provident funds, with total deductions not exceeding 50% of wages. Records and Notices – employers must maintain wage registers and display notices indicating wage rates, payment dates, and inspector contact details. Penalties – violations attract fines up to ₹50,000, and repeat offences may result in imprisonment of up to three months or fines up to ₹1,00,000.

Comparison and Improvements: The Code ensures universal applicability by eliminating the wage ceiling, thus covering all employees including managerial staff, unlike the 1936 Act. It also imposes stricter timelines, with the two-day rule for termination-related payments significantly addressing delays for departing workers. Additionally, enhanced penalties serve as a stronger deterrent compared to the earlier Act’s minor fines. However, challenges remain – particularly for small businesses, which may struggle with the administrative burden of timely payments and record maintenance, especially in economies still reliant on cash transactions.

practical application: for employers: companies must adopt digital payroll systems to ensure compliance with payment timelines and record-keeping requirements. regular audits and training for hr teams are essential. for workers: the code empowers workers to seek legal recourse through labor inspectors or authorities if payments are delayed. awareness of rights and access to grievance mechanisms are critical.

Equal Pay: Moving Toward Gender-Neutral Remuneration

Earlier Law: Equal Remuneration Act, 1976

The Equal Remuneration Act, 1976, required employers to provide equal pay to men and women performing the same or similar work. Applicable to all workplaces, it prohibited discrimination in wages, hiring, and promotions based on gender. It defined “same work or work of a similar nature” in terms of skill, effort, and responsibility, but lacked clear guidelines for implementation. Enforcement was weak, with low worker awareness and minimal oversight by authorities. Penalties for violations were relatively minor, involving fines up to ₹10,000 or imprisonment for up to one month. Moreover, the Act only addressed binary gender categories, leaving out non-binary individuals and evolving workplace realities.

New Law: Code on Wages, 2019

The Code on Wages, 2019, reinforces and modernizes equal pay requirements by introducing a gender-neutral framework. It prohibits discrimination based on gender in both wage payments and hiring for identical or similar roles.
Key Features:

• Non-Discrimination: Employers are barred from discriminating based on gender in salary payments and recruitment for comparable positions.
• Advisory Boards: Central and state advisory boards, comprising at least one-third women members, provide guidance on wage policies and women’s employment opportunities.
• Penalties: Offenders can face fines up to ₹50,000, with repeat violations resulting in imprisonment up to three months or fines up to ₹1,00,000.
• Record Maintenance: Employers are required to keep detailed wage records to prove adherence to non-discriminatory practices.

Comparison and Advancements:

• Gender-Inclusive Language: Unlike the 1976 Act, the Code uses inclusive terminology, covering all genders, not just men and women.
• Expanded Definition: By including “experience” along with skill, effort, and responsibility, the Code offers clearer standards to judge similar work, minimizing wage-related disputes.
• Stronger Enforcement: Higher penalties and the establishment of advisory boards promote better compliance compared to the earlier law’s weak enforcement.

Challenges

The Code does not provide clear criteria for evaluating “experience,” which could lead to varying interpretations and potential conflicts.

Practical Implications:

• For Employers: Businesses should perform regular wage audits, build transparent pay structures, and train hiring teams to avoid gender bias during recruitment.
• For Workers: Employees now have stronger legal support to challenge wage discrimination through labor authorities and advisory boards.

Code on Wages, 2019: Gender-Neutral Equal Pay

The Code on Wages, 2019, promotes gender-neutral equal pay by banning wage and recruitment discrimination based on gender for the same or similar work, considering skill, effort, responsibility, and experience.

Key Features

• Non-Discrimination: Employers must offer equal wages and recruitment without gender bias.
• Advisory Boards: Central and state boards (one-third women members) advise on wage policies and women’s employment.
• Penalties: Violations can result in fines up to ₹50,000; repeat offenses may lead to imprisonment or higher fines.
• Compliance: Employers must maintain wage records to prove non-discrimination.

Improvements Over Earlier Law

• Gender Neutrality: Inclusive language covering all genders, unlike the 1976 Act.
• Clearer Definitions: Broader criteria, including experience, for defining similar work.
• Stronger Enforcement: Higher penalties and advisory boards improve compliance.

Challenges:

• Lack of clear guidelines for evaluating “experience” could cause disputes.

Practical Application:

• Employers: Should conduct wage audits, maintain transparent pay structures, and train recruiters against bias.
• Workers: Can report discrimination to labor authorities, with stronger legal support.

Legal Alignment:

The Code supports constitutional rights (Articles 14 and 39(a)) and draws from ILO standards, though India hasn’t ratified all conventions.

Compliance Requirements:

• Record-Keeping: Maintain digital/physical wage records.
• Notices: Display wage rates and inspector details.
• Audits: Regular checks for compliance.
• Grievance Redressal: Workers can seek help from labor inspectors or unions.

Employer Impacts:

• Costs: Higher labor costs due to minimum wages and provident fund rules.
• Administration: Increased burden to maintain records and systems.
• Risks: Non-compliance can lead to fines and reputation damage.

Worker Benefits and Challenges:

• Protections: Minimum wages and better payment timelines boost security.
• Challenges: Low awareness and reduced take-home pay due to higher PF contributions.

Systemic Challenges:

• Delayed Implementation: State alignment issues and post-pandemic delays.
• Enforcement Gaps: Shortage of inspectors and reliance on manual systems.
• Ambiguities: Unclear terms like “minimum living standards” and “experience.”

Recommendations:

• Launch awareness campaigns.
• Use digital tools for transparency.
• Strengthen labor inspection capacity.
• Provide support for SMEs.
• Issue clear guidelines for key terms.

Conclusion

The Code on Wages, 2019, modernises India’s labor laws by merging four older statutes into a single, streamlined framework. It introduces universal minimum wages, stricter payment rules, and a gender-neutral approach to equal pay, strengthening worker protections and aligning with constitutional and international norms. However, to fully realise its goals, issues like delayed implementation, weak enforcement, and vague definitions must be addressed. With investments in awareness, digital tools, and inspector training, the Code can ensure fair wages, timely payments, and promote inclusive economic growth as India moves toward establishing a living wage by 2025.

Keywords

• Code on Wages
• Labor Law Reforms India
• Gender Neutral Pay
• Minimum Wages India
• Wage Equality
• Employment Laws 2019
• Worker Rights India
• Equal Remuneration Act
• Wage Compliance
• Living Wage India
• Labor Law Updates
• Fair Compensation
• Economic Growth India
• Wage Protection Laws
• Labor Code Consolidation