The new definition of wages, as part of the Code on Wages, 2019 will put more burden on employers and at the same time see workers taking home reduced salaries, feel lobbyists.
Representatives of the Confederation of Indian Industry (CII) and the Federation of Indian Chambers of Commerce & Industry (FICCI) will be discussing the issue and the new definition with the Labour Ministry soon in the presence of trade union representatives. The industry bodies do not want the new definition to be implemented.
The Code on Wages is to be implemented with effect from April 1, 2021 along with the codes on social security, industrial relations and occupational health safety and working conditions.
If the new definition of wages is retained, the allowances of any employee cannot exceed half of the total salary. This means, there will be more cuts in the salary towards social security, primarily provident fund.
As of now, the employers and employees contribute 12 per cent each towards provident fund. Most organisations divide the allowances of their employees in such a way that their social security contribution is reduced. This ensures that employees have a better salary to take home and the burden of the employers in terms of contributing to PF is also reduced. However, if the allowance is restricted to 50 per cent of the total pay, the gratuity for employees will increase but take-home will reduce.
The industry bodies feel that amidst the economic slump induced by the pandemic, this restriction should not be implemented right now and the new definition of wage should be put on hold.