Sir/Ma'm Would like to request seniors and experts for guidance on :
The first query is with respect to the definition of the wages where I request to explain the interpretation of the second provision which relates to equal remuneration and provides that "for the purpose of equality in wages for all genders, the emoluments specified under clauses-(d), (f), (g) and (h) as mentioned above shall be included in the computation of wage."
Secondly, we pay everything in cash so what could be possible remunerations in kind by the employer? What will be modalities for valuation for remuneration in kind considering that 15% of the total wages payable to him shall be deemed to form part of the wages of such employee?
Thirdly the definition of employee has been provided for safeguarding minimum wages, payment of wages, and bonus. Is the employee employed in managerial capacity would be entitled to overtime as well as per COW 2019? Request the experts on the forum to kindly guide on the above-said queries, please.
Thanks
From India, Calcutta
The first query is with respect to the definition of the wages where I request to explain the interpretation of the second provision which relates to equal remuneration and provides that "for the purpose of equality in wages for all genders, the emoluments specified under clauses-(d), (f), (g) and (h) as mentioned above shall be included in the computation of wage."
Secondly, we pay everything in cash so what could be possible remunerations in kind by the employer? What will be modalities for valuation for remuneration in kind considering that 15% of the total wages payable to him shall be deemed to form part of the wages of such employee?
Thirdly the definition of employee has been provided for safeguarding minimum wages, payment of wages, and bonus. Is the employee employed in managerial capacity would be entitled to overtime as well as per COW 2019? Request the experts on the forum to kindly guide on the above-said queries, please.
Thanks
From India, Calcutta
Dear friend,
1) Interpretation of the second proviso to Sec.2(y):
I think that it is imperative to discuss the general concept of wages before embarking upon the interpretation of the second proviso you have asked for. Universally, wages are determined by the employers and the employees by means of collective bargaining depending on the factors of demand and supply of labor. Therefore, the State has no role in this matter other than a regulatory one based on the principles of equity and justice. Though the definition of the term 'wages' means the entire pay out made to the employee by way of salary or remuneration under the contract of employment, the definition bifurcates such entire sum into two heads viz., inclusive components and excluded components.
The included components are (i) Basic pay (ii) Dearness Allowance and (iii) Retaining Allowance, if any.
The excluded items are a total of 11 in number from (a) to (k).
Thus this bifurcation enables the uniform application of the term under the Code for the purposes of timely payment of wages without any illegal deductions, fixation of statutory minimum wages and determination and payment of statutory bonus, elimination of disparity in wages based on gender bias and settlement of claims against non-payment. Moreover, certain fringe benefits pertaining to the future in the form of social security to the working class have also to be determined from the wages currently payable only. Hence, the first proviso to the definition mandates an equal proportion of the inclusive and excluded components in the wage structure and when the proportion of the sum of the inclusive components falls short of 50% of the gross, the short fall shall be made good by adjusting against the excluded components enumerated under (a) to (i).
If we analyze the nature of the components listed under clauses (d) Conveyance Allowance, (f) House Rent Allowance, (g) remuneration payable under any award, settlement between the parties or order of a court or tribunal, there cannot be any room for gender bias in respect of employees doing the same work or similar nature of work as contemplated u/s 3(1) of the Code. Therefore, in order to determine over all parity in terms of remuneration, these excluded components have also to be taken into consideration. That's what the second proviso to section 2(y) mandates.
2) Remuneration in kind restricted to 15% of the gross:
This is applicable to employments by the very nature of which food, accommodation, supply of electricity, water etc., are provided by the employer and adjusted against the gross wages payable. Eg - Plantation industry, Hotel industry. To know the scales and other guidelines in this regard, we have to await the notifications to be issued by the appropriate Governments under the Rules.
3) In my opinion, despite the definition of the term " employee" u/s 2(k), managerial cadre employees are not entitled to overtime wages in view of the definitions of the term "worker" u/s 2(zzl) of the OSH Code 2020 and u/s 2(z) of the CoW,2019 read with sec.27 of the OSH Code,2020 which deals with extra wages for overtime work.
From India, Salem
60181) Interpretation of the second proviso to Sec.2(y):
I think that it is imperative to discuss the general concept of wages before embarking upon the interpretation of the second proviso you have asked for. Universally, wages are determined by the employers and the employees by means of collective bargaining depending on the factors of demand and supply of labor. Therefore, the State has no role in this matter other than a regulatory one based on the principles of equity and justice. Though the definition of the term 'wages' means the entire pay out made to the employee by way of salary or remuneration under the contract of employment, the definition bifurcates such entire sum into two heads viz., inclusive components and excluded components.
The included components are (i) Basic pay (ii) Dearness Allowance and (iii) Retaining Allowance, if any.
The excluded items are a total of 11 in number from (a) to (k).
Thus this bifurcation enables the uniform application of the term under the Code for the purposes of timely payment of wages without any illegal deductions, fixation of statutory minimum wages and determination and payment of statutory bonus, elimination of disparity in wages based on gender bias and settlement of claims against non-payment. Moreover, certain fringe benefits pertaining to the future in the form of social security to the working class have also to be determined from the wages currently payable only. Hence, the first proviso to the definition mandates an equal proportion of the inclusive and excluded components in the wage structure and when the proportion of the sum of the inclusive components falls short of 50% of the gross, the short fall shall be made good by adjusting against the excluded components enumerated under (a) to (i).
If we analyze the nature of the components listed under clauses (d) Conveyance Allowance, (f) House Rent Allowance, (g) remuneration payable under any award, settlement between the parties or order of a court or tribunal, there cannot be any room for gender bias in respect of employees doing the same work or similar nature of work as contemplated u/s 3(1) of the Code. Therefore, in order to determine over all parity in terms of remuneration, these excluded components have also to be taken into consideration. That's what the second proviso to section 2(y) mandates.
2) Remuneration in kind restricted to 15% of the gross:
This is applicable to employments by the very nature of which food, accommodation, supply of electricity, water etc., are provided by the employer and adjusted against the gross wages payable. Eg - Plantation industry, Hotel industry. To know the scales and other guidelines in this regard, we have to await the notifications to be issued by the appropriate Governments under the Rules.
3) In my opinion, despite the definition of the term " employee" u/s 2(k), managerial cadre employees are not entitled to overtime wages in view of the definitions of the term "worker" u/s 2(zzl) of the OSH Code 2020 and u/s 2(z) of the CoW,2019 read with sec.27 of the OSH Code,2020 which deals with extra wages for overtime work.
From India, Salem
Thanks a lot for your elucidated response Sir.
However, a query is coming to my mind out that as the term 'wages' means the entire pay out made to the employee by way of salary or remuneration under the contract of employment, which includes (i) Basic pay (ii) Dearness Allowance and (iii) Retaining Allowance, if any; Then there are certain exlcusions subject to the Provisos given thereof.
But on the same hand there may be many more components/allowances which are neither expressly included nor excluded and they are part of the remunerations. e.g. Children education allowance, refreshment allowance, Journals and periodical allowance, Professional Allowance etc.
Sir, request you to confirm the understanding that since all such allowances are part of remuneration, all these will be added up with the Basic Pay to arrive at Wages. Thereafter the provision of checking 50 % will be applied. If exceeding further the excess part will be added to wages.
Thanks and regards
From India, Calcutta
However, a query is coming to my mind out that as the term 'wages' means the entire pay out made to the employee by way of salary or remuneration under the contract of employment, which includes (i) Basic pay (ii) Dearness Allowance and (iii) Retaining Allowance, if any; Then there are certain exlcusions subject to the Provisos given thereof.
But on the same hand there may be many more components/allowances which are neither expressly included nor excluded and they are part of the remunerations. e.g. Children education allowance, refreshment allowance, Journals and periodical allowance, Professional Allowance etc.
Sir, request you to confirm the understanding that since all such allowances are part of remuneration, all these will be added up with the Basic Pay to arrive at Wages. Thereafter the provision of checking 50 % will be applied. If exceeding further the excess part will be added to wages.
Thanks and regards
From India, Calcutta
Dear AKM,
Your assumption as to the entire pay outs made to an employee in return for his services rendered under the contract of employmenpt should be considered as wages is correct in the general context.
On the contrary, any definition you find in every law always coincides or syncs with the purpose and objectives of that particular law only. That's why the definition part of any law commences with a rider phrase " Unless the context otherwise requires ".
The preamble of the Code on Wages,2019 states that this Code is an act to amend and consolidate the laws relating to wages and bonus and matters connected therewith or incidental thereto. ' WAGES ' as set out supra would, therefore, take under its mantle all aspects such as mode and time of payment, deductions, fixation of minimum wages with different scales and components and their effective implementation, equal wages for works of same or similar nature without gender bias, disposal of claims arising out of non-compliance, providing for harmonious interpretation of the term in respect of other benefits of employment like social security.
Besides introduction of the same or similar components into every wage structure is not possible as industries and employments differ in nature. Hence the definition making clear cut division of all the pay outs.
From India, Salem
Your assumption as to the entire pay outs made to an employee in return for his services rendered under the contract of employmenpt should be considered as wages is correct in the general context.
On the contrary, any definition you find in every law always coincides or syncs with the purpose and objectives of that particular law only. That's why the definition part of any law commences with a rider phrase " Unless the context otherwise requires ".
The preamble of the Code on Wages,2019 states that this Code is an act to amend and consolidate the laws relating to wages and bonus and matters connected therewith or incidental thereto. ' WAGES ' as set out supra would, therefore, take under its mantle all aspects such as mode and time of payment, deductions, fixation of minimum wages with different scales and components and their effective implementation, equal wages for works of same or similar nature without gender bias, disposal of claims arising out of non-compliance, providing for harmonious interpretation of the term in respect of other benefits of employment like social security.
Besides introduction of the same or similar components into every wage structure is not possible as industries and employments differ in nature. Hence the definition making clear cut division of all the pay outs.
From India, Salem
For convenience of calculation it may be started as follows:-
1. Decide the category of the employee first ( US, SSK, SK, HSK ) other than Management staff.
2. Check the minimum wages of that category which will be minimum basic.
3. Decide other allowances and add all payable allowance other than ESIC, Premium to insurance - Mediclaim, Group personal accident insurance, Group LIC etc.
4. Take 50% of that as basic. If it is more than minimum wage no issue, but if it is less than minimum wage - fix the basic as minimum wage.
5. Let us take an example of any employee CTC 5,00,000/- per annum . CTC consisting of Monthly gross, employer portion of PF, Statutory Bonus, LTA, Leave encashment & insurance premium to Mediclaim, GPAI, GROUP LIC .
6.Insurance premium amount is 20,000/- per annum - not to be considered for calculation.
7. 5,00,000 - 20,000 = 4,80,000/-. 50% of 4,80,000 = 2,40,000/- i.e 20,000/- per month basic.
8. 2,40,000/- is therefore other items as mentioned above. Monthly value- 20,000/-.
9. Less co's contribution to PF 1800/- or 2400/- ( as the case may be), statutory bonus @8.33% say 12,000/- per annum i.e 1000/- per month, LTA @ 12,000/- per annum i.e 1000/- per month, Leave encashment say 15 days i.e 10,000/- per annum i.e 833/- per month etc.
10. Therefore , monthly other allowances - HRA, CCA, CEA, Periodicals etc.etc. will be in this case 20,000 - (1800/2400) - 1000 - 1000 - 833 = (15367/14767) as the case may be.
11. In this above example if any employee will have OT earning in a specific month that will disturb 50% condition as it will add back to other side of basic. In that case it may be considered 60% of OT amount add back to basic and 40% to other side. It will be required as the Co's PF contribution, bonus , leave encashment etc. value will change and add back to other side.
12. The calculation will vary from Org to Org and in different category basis.
13. HR professionals must be very careful before restructuring their org's remuneration structure in future.
S K Bandyopadhyay ( WB, Howrah)
From India, New Delhi
1. Decide the category of the employee first ( US, SSK, SK, HSK ) other than Management staff.
2. Check the minimum wages of that category which will be minimum basic.
3. Decide other allowances and add all payable allowance other than ESIC, Premium to insurance - Mediclaim, Group personal accident insurance, Group LIC etc.
4. Take 50% of that as basic. If it is more than minimum wage no issue, but if it is less than minimum wage - fix the basic as minimum wage.
5. Let us take an example of any employee CTC 5,00,000/- per annum . CTC consisting of Monthly gross, employer portion of PF, Statutory Bonus, LTA, Leave encashment & insurance premium to Mediclaim, GPAI, GROUP LIC .
6.Insurance premium amount is 20,000/- per annum - not to be considered for calculation.
7. 5,00,000 - 20,000 = 4,80,000/-. 50% of 4,80,000 = 2,40,000/- i.e 20,000/- per month basic.
8. 2,40,000/- is therefore other items as mentioned above. Monthly value- 20,000/-.
9. Less co's contribution to PF 1800/- or 2400/- ( as the case may be), statutory bonus @8.33% say 12,000/- per annum i.e 1000/- per month, LTA @ 12,000/- per annum i.e 1000/- per month, Leave encashment say 15 days i.e 10,000/- per annum i.e 833/- per month etc.
10. Therefore , monthly other allowances - HRA, CCA, CEA, Periodicals etc.etc. will be in this case 20,000 - (1800/2400) - 1000 - 1000 - 833 = (15367/14767) as the case may be.
11. In this above example if any employee will have OT earning in a specific month that will disturb 50% condition as it will add back to other side of basic. In that case it may be considered 60% of OT amount add back to basic and 40% to other side. It will be required as the Co's PF contribution, bonus , leave encashment etc. value will change and add back to other side.
12. The calculation will vary from Org to Org and in different category basis.
13. HR professionals must be very careful before restructuring their org's remuneration structure in future.
S K Bandyopadhyay ( WB, Howrah)
From India, New Delhi
Thanks a lot Mr. Umakanthan & Mr. Bandopadhyay
The clarifications are enriching and helpful towards understanding the new laws.
Mr. Bandopadhyay hsa advised the chronological steps to arrive at the wages. To start with
"Decide the category of the employee first ( US, SSK, SK, HSK ) other than Management staff."
However, the definition of the employee includes those employed in managerial capacity. Further, except for the purpose of overtime where the code "specifies that it is to be paid at twice the rate for the employees for whom minimum wages are fixed under the code", there is nothing which says that the managerial staff are outside the purview of the wage as far as the payment of wages are concerned.
Request to kindly clarify the understanding and throw some light on the same.
Thanks and regards
From India, Calcutta
The clarifications are enriching and helpful towards understanding the new laws.
Mr. Bandopadhyay hsa advised the chronological steps to arrive at the wages. To start with
"Decide the category of the employee first ( US, SSK, SK, HSK ) other than Management staff."
However, the definition of the employee includes those employed in managerial capacity. Further, except for the purpose of overtime where the code "specifies that it is to be paid at twice the rate for the employees for whom minimum wages are fixed under the code", there is nothing which says that the managerial staff are outside the purview of the wage as far as the payment of wages are concerned.
Request to kindly clarify the understanding and throw some light on the same.
Thanks and regards
From India, Calcutta
As per Code on Wages (Central) Rules sec 2 (j), (t), (u) & (v) have been defined HSK, SSK, SK & USK respectively. In rule 4(3) and Schedule E provided exhaustive list of jobs at different skill level. Management staff are not falling in this category. Managerial staff are obviously part and parcel of wage code and also in other labor codes in different capacity as the case may be.
Every organization there are workers, staff maximum numbers need to restructured them skilled category wise which itself is a big task/project and then to fix their wages (basic +da) need detail study and knowledge on the subject. For management staff we will not be required to do this process.
S K Bandyopadhyay ( WB, HOWRAH )
From India, New Delhi
Every organization there are workers, staff maximum numbers need to restructured them skilled category wise which itself is a big task/project and then to fix their wages (basic +da) need detail study and knowledge on the subject. For management staff we will not be required to do this process.
S K Bandyopadhyay ( WB, HOWRAH )
From India, New Delhi
Sir
Thanks for clarifying about the managerial staff. However, does it mean then we need not take cognizance of the definition for restructuring the wages (basic pay @50% of allowances) even for workers (or employees other than management staff) in case the workers(employees other than management staff) are not falling/listed in skilled categories in schedule E?
Regards
From India, Calcutta
Thanks for clarifying about the managerial staff. However, does it mean then we need not take cognizance of the definition for restructuring the wages (basic pay @50% of allowances) even for workers (or employees other than management staff) in case the workers(employees other than management staff) are not falling/listed in skilled categories in schedule E?
Regards
From India, Calcutta
Hi,
The list as per schedule E is a major guide line. Every organization has different job name and skill category depending on technology. There are experts who can study any system and can able to identify the employees with different skills even it may not match with Schedule E list.
Therefore, the definition of wages will be applicable for both management staff and workers ( employees other than management staff ) irrespective of job description.
Thanks and regards,
S K Bandyopadhyay ( Howrah, WB)
From India, New Delhi
The list as per schedule E is a major guide line. Every organization has different job name and skill category depending on technology. There are experts who can study any system and can able to identify the employees with different skills even it may not match with Schedule E list.
Therefore, the definition of wages will be applicable for both management staff and workers ( employees other than management staff ) irrespective of job description.
Thanks and regards,
S K Bandyopadhyay ( Howrah, WB)
From India, New Delhi
Sir, as per the draft Rule 4:
"The Central Government shall constitute a technical committee for the purpose of advising the Central Government in respect of skill categorization, which shall consist of the following members, namely:-
.....
....
The Central Government shall, on the advice of the technical committee referred to in sub-rule (2), categorize the occupations of the employees into four categories that is to say unskilled, semi-skilled, skilled and highly skilled by modifying, deleting or adding any entry in the categorization of such occupations specified in Schedule E.
The technical committee referred in sub-rule (2) shall while advising the Central Government under sub-rule (3) take into account, to the possible extent, the national classification of occupation or national skills qualification frame work or other similar frame work for the time being formulated to identify occupations. "
From the above, it is understood that its the technical committee which will categorize the jobs and at organizational level only those workers with job profile matching with the job classification in Schedule E will be covered under the Code.
Sir, however, as per your clarification above, it appears to me that every organisation will classify its jobs under various skill categories.
May throw some light on the same.
Thanks and regards
From India, Calcutta
"The Central Government shall constitute a technical committee for the purpose of advising the Central Government in respect of skill categorization, which shall consist of the following members, namely:-
.....
....
The Central Government shall, on the advice of the technical committee referred to in sub-rule (2), categorize the occupations of the employees into four categories that is to say unskilled, semi-skilled, skilled and highly skilled by modifying, deleting or adding any entry in the categorization of such occupations specified in Schedule E.
The technical committee referred in sub-rule (2) shall while advising the Central Government under sub-rule (3) take into account, to the possible extent, the national classification of occupation or national skills qualification frame work or other similar frame work for the time being formulated to identify occupations. "
From the above, it is understood that its the technical committee which will categorize the jobs and at organizational level only those workers with job profile matching with the job classification in Schedule E will be covered under the Code.
Sir, however, as per your clarification above, it appears to me that every organisation will classify its jobs under various skill categories.
May throw some light on the same.
Thanks and regards
From India, Calcutta
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Code on wages (TN) rules 2022.pdf