Centre to fix a single mandatory floor on minimum wages for states

Overhaul in salary structures of private sector firms on cards

The central government has dropped the idea of fixing “national minimum wages” for various states and will instead fix a single mandatory floor for minimum wages to be followed by state governments.

This will be part of the Code on Wages Bill, 2019, likely to be introduced by Labour and Employment Minister Santosh Kumar Gangwar in the Lok Sabha on Tuesday.

In a major push to the National Democratic Alliance government’s labour law reforms agenda, Gangwar may also introduce the Code on Occupational Safety, Health and Working Conditions, 2019, in the lower House of Parliament on the same day.

The government is set to provide a uniform definition of “wages” in the 36-odd labour laws of the country. 

To begin with, the Bill will propose that salaries of workers be structured in such a way that various allowances — house rent, leave travel, overtime — are capped at 50 per cent of the “wages”, which will include the basic pay, dearness allowance, and retention pay.

This will ensure that companies do not fix the basic components of  salary at lower levels — a practice adopted by various quarters of industry so that statutory deductions towards various social security schemes, including provident fund, are lower.

A key proposal in the Bill will include a national floor for minimum wages, which will be compulsory for state governments to implement, against a non-statutory national minimum wage floor in place at present.

This is a major change from a “national minimum wage” proposed by the central government in the previous version of the Code on Wages Bill — introduced in the Lok Sabha in August 2017.

“The Centre will not infringe upon the rights of the state governments to fix minimum wages,” a senior government official said, requesting anonymity.

The central government will incorporate 17 out of 24 suggestions made by the Standing Committee on Labour which had examined the previous version of the Bill between 2017 and 2018.

In a way, state governments will retain the powers to fix minimum wages but will not be able to set the minimum wage below the floor, which will be fixed by the Centre aimed at removing “regional disparity”, the official said.

The minimum wages levels vary drastically across states in India, ranging from Rs 55 a day in Puducherry to Rs 538 a day in Delhi for unskilled workers.

“A significant move in the proposed Bill is the simplification of the definition of ‘wages’, which is different in 12 out of 19 Acts. This will ensure that labour laws are easy to implement. This has been a major area of concern for the industry,” said another government official.

Streamlining wages
 

What the Code on Wages Bill, 2019, will propose

| The government will fix a mandatory floor on minimum wages to be implemented by the states

| Minimum wage proposed to be fixed on skill set and geography, for all kinds of occupations

| The government will drop the move to fix the national minimum wage level for various states

| The government will propose various allowances be capped at 50% of the basic income

| The aim is to reduce minimum wages across country from 2,000 variants to 10