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Wage Code and Rules
The minimum wage policy is regarded as an essential tool for improving the welfare of low-paid workers, reducing inequality and poverty within the labour market. The Government of India recently reformed the country’s wage policy and enacted the Code on Wages in August 2019. To give effect to the code, the government has now outlined the implementation mechanism by notifying the draft Code on Wages (Central) Rules in July 2020. This paper examines some of the key reform measures undertaken in the wage code and the implementation mechanism, as provided in the draft wage rules, identifies shortcomings therein, and provides suggestions for improvement.
The authors would like to thank Anup Karan, Patrick Belser and Dagmar Walter for their insightful comments and suggestions on an earlier version of the paper published as an International Labour Organization discussion paper. The views expressed in this paper are those of the authors and do not reflect the opinion or views of the organisation they are affiliated with.
The Government of India (GoI) has published the draft Wage Code (Central) Rules (hereafter referred to as the wage rules) in the form of a gazette notification issued on 7 July 2020 (GoI 2020). The publication of the wage rules in the gazette is the second step taken by the government, after the enactment of the Code on Wages (hereafter referred to as the wage code) on 8 August 2019 (GoI 2019d). Arguably, this development potentially takes us closer to the final notification of the wage rules. The implementation of the code and rules will also witness the beginning of a new phase in the wage policy of India, with a concomitant repealing of the existing four wage-related regulations on the payment of wages, minimum wages, payment of bonus and equal remuneration.
The long-standing wage-related regulations—the first being on payment of wages, enacted way back in 1936, and the second, on minimum wages, in 1948—made India a wage policy pioneer amongst developing countries. However, wage policy has not produced the desired redistributive outcomes. Instead, as pointed out in numerous empirical studies, and most importantly in the India Wage Report, there is overwhelming evidence around pervasive low wages, high wage inequality, working poverty and high gender pay gap, compared to international standards (ILO 2018). These findings bolstered the call for wage policy reform and the establishment of a statutory national minimum wage for India.
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