India: More Employees Brought Under Wage-Payment Protections

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By Madhur Singh

India's recent hike of the monthly salary threshold to extend coverage of the Payment of Wages Act to more employees may signal the government's intention to raise wage thresholds for other laws as well, labor attorneys say.

In an Aug. 28 notification, the Ministry of Labour and Employment announced that effective immediately the Payment of Wages Act would apply to employees earning up to 24,000 rupees ($375) per month, the highest threshold under any Indian statute. Previously, the law did not apply to anyone earning more than 18,000 rupees ($281) a month.

The Payment of Wages Act covers the frequency and timing of wage payment, allowable deductions from wages (for example, for absence from work, damage or loss of employer property, such employer-provided services as housing, and recovery of loans), payment due on termination, recordkeeping, and penalties for noncompliance.

Other Thresholds

“[T]his amendment could eventually pave the way for an increase in the salary limit in other labor laws,” Nishanth Ravindran and Vikram Shroff of Nishith Desai Associates said in an Aug. 31 analysis, noting that the wage threshold for the Employees' State Insurance Act and the Payment of Bonus Act were revised upward last year to 21,000 rupees per month from 15,000 and 10,000 rupees, respectively, and the Employees' Provident Funds and Miscellaneous Provisions Act to 15,000 rupees per month.

In August 2017, the labor ministry introduced in parliament a proposed Code on Wages that would consolidate such existing wage-related laws as the Payment of Wages Act, the Minimum Wages Act, the Payment of Bonus Act, and the Equal Remuneration Act. The legislation would also give the federal government the power to establish a national minimum wage that state governments would at least have to equal.

Since parliament is currently considering the revised wages code, “the reason for such an increase in the salary threshold to the Wages Act at this stage is unclear,” Ravindran and Shroff said, adding that the government should clarify its reasons and provide statistics on the number of workers likely to be covered under the increase.

Ravindran and Shroff expect the minimum wage set under the Code on Wages to be “far higher than the current rates of minimum wages in most states,” which could “substantially increase the labor cost in the country and may make India less competitive globally.”

To contact the reporter on this story: Madhur Singh in Chandigarh at correspondents@bna.com

To contact the editor responsible for this story: Rick Vollmar at rvollmar@bna.com

For More Information

The labor ministry notification is available here.

For more information on Indian HR law and regulation, see the India primer.

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