Sir/Ma'am,
Would like to request seniors and experts for guidance on:
The first query is with respect to the definition of wages where I request an explanation of the interpretation of the second provision relating to equal remuneration. It states 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. What could be the possible remunerations in kind provided by the employer? What will be the modalities for valuation for remuneration in kind, given that 15% of the total wages payable to him shall be deemed to form part of the wages of such an employee?
Thirdly, the definition of an employee has been provided to safeguard minimum wages, payment of wages, and bonuses. Would an employee employed in a managerial capacity be entitled to overtime as per COW 2019? Requesting the experts on the forum to kindly guide on the aforementioned queries, please.
Thanks
From India, Calcutta
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Would like to request seniors and experts for guidance on:
The first query is with respect to the definition of wages where I request an explanation of the interpretation of the second provision relating to equal remuneration. It states 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. What could be the possible remunerations in kind provided by the employer? What will be the modalities for valuation for remuneration in kind, given that 15% of the total wages payable to him shall be deemed to form part of the wages of such an employee?
Thirdly, the definition of an employee has been provided to safeguard minimum wages, payment of wages, and bonuses. Would an employee employed in a managerial capacity be entitled to overtime as per COW 2019? Requesting the experts on the forum to kindly guide on the aforementioned queries, please.
Thanks
From India, Calcutta
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Dear friend,
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 shortfall 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 overall 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.
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. For example - 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.
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
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6185Interpretation 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 shortfall 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 overall 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.
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. For example - 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.
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
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Thank you very much for your detailed response, Sir.
I have a question regarding the term 'wages,' which typically refers to the total compensation paid to an employee, including Basic pay, Dearness Allowance, Retaining Allowance, and other specified components as per the employment contract. However, there are certain exclusions outlined in the provided Provisos.
Additionally, there are numerous components and allowances, such as Children education allowance, refreshment allowance, Journals and periodical allowance, Professional Allowance, that are neither explicitly included nor excluded but form part of the overall remuneration.
I would like to seek clarification on whether all these allowances should be added to the Basic Pay to calculate the total Wages, following which the 50% threshold check would be applied. Any amount exceeding the threshold would then be added to the Wages.
Thank you for your assistance and guidance on this matter.
Best regards
From India, Calcutta
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I have a question regarding the term 'wages,' which typically refers to the total compensation paid to an employee, including Basic pay, Dearness Allowance, Retaining Allowance, and other specified components as per the employment contract. However, there are certain exclusions outlined in the provided Provisos.
Additionally, there are numerous components and allowances, such as Children education allowance, refreshment allowance, Journals and periodical allowance, Professional Allowance, that are neither explicitly included nor excluded but form part of the overall remuneration.
I would like to seek clarification on whether all these allowances should be added to the Basic Pay to calculate the total Wages, following which the 50% threshold check would be applied. Any amount exceeding the threshold would then be added to the Wages.
Thank you for your assistance and guidance on this matter.
Best regards
From India, Calcutta
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Dear AKM,
Your assumption regarding the entire payouts made to an employee in return for his services rendered under the contract of employment should be considered as wages is correct in the general context.
On the contrary, any definition found 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 above would, therefore, encompass 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 the same or similar nature without gender bias, disposal of claims arising out of non-compliance, providing for harmonious interpretation of the term concerning other benefits of employment like social security.
Furthermore, introducing the same or similar components into every wage structure is not feasible as industries and employments differ in nature. Hence, the definition should make a clear-cut division of all the payouts.
Kind regards,
[Your Name]
From India, Salem
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Your assumption regarding the entire payouts made to an employee in return for his services rendered under the contract of employment should be considered as wages is correct in the general context.
On the contrary, any definition found 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 above would, therefore, encompass 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 the same or similar nature without gender bias, disposal of claims arising out of non-compliance, providing for harmonious interpretation of the term concerning other benefits of employment like social security.
Furthermore, introducing the same or similar components into every wage structure is not feasible as industries and employments differ in nature. Hence, the definition should make a clear-cut division of all the payouts.
Kind regards,
[Your Name]
From India, Salem
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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 the minimum basic.
3. Decide other allowances and add all payable allowances 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 the minimum wage, no issue, but if it is less than the minimum wage, fix the basic as the minimum wage.
5. Let us take an example of an employee with a CTC of 5,00,000/- per annum. CTC consists 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. 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 the 50% condition as it will add back to the other side of the basic. In that case, it may be considered 60% of the OT amount add back to basic and 40% to the other side. It will be required as the co's PF contribution, bonus, leave encashment, etc. value will change and add back to the 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 the future.
S K Bandyopadhyay (WB, Howrah)
From India, New Delhi
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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 the minimum basic.
3. Decide other allowances and add all payable allowances 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 the minimum wage, no issue, but if it is less than the minimum wage, fix the basic as the minimum wage.
5. Let us take an example of an employee with a CTC of 5,00,000/- per annum. CTC consists 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. 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 the 50% condition as it will add back to the other side of the basic. In that case, it may be considered 60% of the OT amount add back to basic and 40% to the other side. It will be required as the co's PF contribution, bonus, leave encashment, etc. value will change and add back to the 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 the future.
S K Bandyopadhyay (WB, Howrah)
From India, New Delhi
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Thank you very much, Mr. Umakanthan & Mr. Bandopadhyay.
The clarifications provided are enriching and helpful for understanding the new laws. Mr. Bandopadhyay has advised on the chronological steps to determine wages. To begin with, "Decide the category of the employee first (US, SSK, SK, HSK) other than Management staff."
However, the definition of an employee includes those employed in a managerial capacity. Apart from overtime, where the code specifies payment at twice the rate for employees with fixed minimum wages under the code, there is no indication that managerial staff are exempt from wage regulations.
Could you please clarify this understanding and shed some light on the matter?
Thank you and best regards.
From India, Calcutta
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The clarifications provided are enriching and helpful for understanding the new laws. Mr. Bandopadhyay has advised on the chronological steps to determine wages. To begin with, "Decide the category of the employee first (US, SSK, SK, HSK) other than Management staff."
However, the definition of an employee includes those employed in a managerial capacity. Apart from overtime, where the code specifies payment at twice the rate for employees with fixed minimum wages under the code, there is no indication that managerial staff are exempt from wage regulations.
Could you please clarify this understanding and shed some light on the matter?
Thank you and best regards.
From India, Calcutta
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As per the Code on Wages (Central) Rules, Section 2 (j), (t), (u), and (v) have been defined as HSK, SSK, SK, and USK respectively. In Rule 4(3) and Schedule E, an exhaustive list of jobs at different skill levels is provided. Management staff do not fall into this category. Managerial staff are obviously a part and parcel of the wage code and are also included in other labor codes in different capacities as the case may be.
In every organization, there are workers and staff, with the maximum numbers needing to be restructured into skilled categories. This task/project itself is significant, and then fixing their wages (basic + DA) requires detailed study and knowledge on the subject. For management staff, this process will not be required.
S K Bandyopadhyay (WB, HOWRAH)
From India, New Delhi
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In every organization, there are workers and staff, with the maximum numbers needing to be restructured into skilled categories. This task/project itself is significant, and then fixing their wages (basic + DA) requires detailed study and knowledge on the subject. For management staff, this process will not be required.
S K Bandyopadhyay (WB, HOWRAH)
From India, New Delhi
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Sir,
Thank you for clarifying about the managerial staff. However, does it mean that we need not take cognizance of the definition for restructuring the wages (basic pay at 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
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Thank you for clarifying about the managerial staff. However, does it mean that we need not take cognizance of the definition for restructuring the wages (basic pay at 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
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Hi,
The list as per Schedule E is a major guideline. Every organization has different job names and skill categories depending on technology. There are experts who can study any system and are able to identify employees with different skills, even if they may not match the 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
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The list as per Schedule E is a major guideline. Every organization has different job names and skill categories depending on technology. There are experts who can study any system and are able to identify employees with different skills, even if they may not match the 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
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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: 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 to 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 framework or other similar framework for the time being formulated to identify occupations."
From the above, it is understood that the technical committee will categorize the jobs, and at the organizational level, only those workers with job profiles matching 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 organization will classify its jobs under various skill categories.
Could you shed some light on the same?
Thanks and regards
From India, Calcutta
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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: 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 to 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 framework or other similar framework for the time being formulated to identify occupations."
From the above, it is understood that the technical committee will categorize the jobs, and at the organizational level, only those workers with job profiles matching 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 organization will classify its jobs under various skill categories.
Could you shed some light on the same?
Thanks and regards
From India, Calcutta
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Code on wages (TN) rules 2022.pdf