Labor Regulations, Welfare & Social Security

Wages10

The Payment of Wages Act, 1936, regulates the payment of wages11 to workers employed in a factory and earning up to INR 24,000 per month. This Act ensures that wages payable to employed persons covered by the Payment of Wages Act were not withheld by the employer and were disbursed within the prescribed time limit without any unauthorized deductions.12 The Payment of Wages (Amendment) Act, 2017, has made it mandatory for the employers to remit wages of the employees either through check or by direct transfer of wages in the employees' bank account.

The Minimum Wages Act, 1948 (Minimum Wages Act), provides for fixing minimum wages in certain employments and reviewing and revising the rates at appropriate intervals, not exceeding five years. The Act covers the norms and procedures for fixing and revising minimum wages, fixing hours for a normal working day, fixing an overtime rate, etc.

The Payment of Bonus Act, 1965 (Bonus Act), provides provides for the payment of bonuses (linked with profit or productivity) to persons employed in certain establishments. It applies to all factories and establishments that employ 20 or more persons on any day during an accounting year. Every employee receiving salary or wages up to INR 21,00013 per month and engaged in any kind of work – whether skilled, unskilled, managerial, supervisory, etc. - is entitled to a bonus for every accounting year if if he/she has worked for more than 30 working days in that year.

The Bonus Act covers factors such as the bonus payable, the time limit for payment, calculation of bonus, etc. This Act provides that every employer is bound to pay a minimum bonus of 8.33% of the salary earned by the employee during the accounting year or INR 100, whichever is higher. The maximum bonus payable under this Act is 20% of the annual salary, which has to be determined on the basis of the profits of the establishment.

For calculation of the bonus, the salary of the employee is to be considered as INR 7,000 per month even if his/her salary is more than INR 7,000.

The Equal Remuneration Act, 1976 (Equal Remuneration Act) provides for the payment of equal remuneration to men and women workers, and for the prevention of discrimination on the grounds of sex, against women in relation to matters of employment, and for matters connected therewith or incidental thereto. The Equal Remuneration Act is applicable to all employers covered under the Bonus Act.

The Code on Wage, 2019 (Wage Code) was passed by the parliament and received the assent of President on 8 August 2019. It will come into force upon notification by the Central Government to this effect. The Wage Code enables the Central Government to set minimum statutory wages based on skills and geography rather than on employment, which will benefit millions of workers across the country. The Act ensures timely payment of minimum wages to all employees and workers, including but not limited to workers of the unorganized sector who were outside the ambit of the minimum wages.

Once the Wage Code is enforced, it is enforced, it will repeal four acts as follows:

  • The Payment of Wages Act, 1936,
  • The Minimum Wages Act, 1948,
  • The Payment of Bonus Act, 1965; and
  • The Equal Remuneration Act, 1976.
  • 10.Acts and Rules, Chief Labor Commissioner, https://clc.gov.in/clc/acts-rules/acts-and-rules-0, as accessed on 13 May 2022
  • 11.Excludes bonus, the value of house accommodation, the contribution made by employer to pension fund/provident fund, travel allowance, special expenses, and gratuity
  • 12.Payment of Wages Act, 1936, Chief Labor Commissioner, https://clc.gov.in/clc/acts-rules/payment-wages, as accessed on 13 May 2022
  • 13.As per the Payment of Bonus (Amendment) Act, 2015, with effect from 1 April 2014
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Manik Abbott
Director
Strategic Initiatives Management
(Greenfield, Market Research and Special Projects)

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