Wage code bill could increase salary costs, reduce compliance expenses

The Code of Wages Bill which is set to subsume four existing laws related to wages and compensation may increase the overall salary cost if a universal minimum wage provision is included in it. At present, different states pay different minimum wages based on the place and the cost of living, including food and rent.

If there is one universal minimum wage proposed, all states would have to pay the same set of wages.
Sonal Arora, Vice President, TeamLease Services said that the Code of Wages Bill that is likely to be tabled in the monsoon session of the Parliament will bring about a big change in compensation policies across industries.
“For the government, this is a low hanging fruit since the laws related to compensation are less controversial,” she said. The Minimum Wages Act, Payment of Wages Act, Payment of Bonus Act and Equal Remuneration Act are likely to be subsumed into the Code of Wages Bill to have one comprehensive policy related to payment of wages.
According to a report by Labour Ministry, about 44 different labour laws will be condensed into different bills including industrial relations, social security and safety, health and working conditions, apart from the one on wages.
Arora said that this bill, once passed, will make life a little easy for companies. She said that one of the challenges that companies face is that there are multiple definition of wages.
“This will standardise procedural aspects and the multiple returns that are required to be filed currently. Once the law comes into force, a company will have to only file one return,” she explained.
However, clarity is still being awaited on whether universal minimum wages would be included in the new bill and what the exact definition of it should be. She added that this could lead to wage-related costs going up for companies.
At present, there could be a difference of 10-30 percent in the wages paid in one region to the other. The level of development, economic prosperity, and standard of living apart from costs of rent, food and transport are considered to decide on the final compensation of a worker. For instance, average wages in Mumbai are almost 30 percent higher than that of Kolkata due to the higher cost of food and house rent in the former.
Wages paid to workers are based on the skill categorisation. While there is also the pay parity issue between male and female workers, Arora said that this bill may be unable to deal with the issue.
“Males and females usually start at the same salary but women lose out on the way and also may take breaks due to maternity and other family responsibilities. Bridging that gap is expected to take more time,” she added.
It is estimated that for the same kind of jobs, women are paid 20-30 percent less than their male counterparts.