INTRODUCTION
The unorganised sector largely dominates India’s workforce. According to government estimates, nearly 90% of Indian workers are engaged in informal employment, including agricultural labourers, construction workers, domestic workers, street vendors, gig workers, and casual labourers. These workers have historically faced problems such as low wages, delayed payments, lack of legal protection, and exploitation by employers. In this context, the enactment of the Code on Wages, 2019, marks a significant step towards reforming labour laws and enhancing wage security, particularly for unorganised workers. The Code on Wages, 2019 consolidates and replaces four earlier labour laws: the Minimum Wages Act, 1948; the Payment of Wages Act, 1936; the Payment of Bonus Act, 1965; and the Equal Remuneration Act, 1976. One of the main objectives of the Code is to simplify wage-related laws and ensure uniform protection to all workers, including those in the unorganised sector.
Extension of Minimum Wage Protection
One of the most significant impacts of the Code on unorganised workers is the universal application of minimum wages. Under the earlier Minimum Wages Act, minimum wages were applicable only to employments listed in the schedule. Many informal and unorganised workers were excluded because their work was not classified as “scheduled employment.” This resulted in widespread wage exploitation. The Code on Wages removes this limitation and provides that minimum wages shall be applicable to all workers, irrespective of sector, skill level, or type of employment. This change is especially beneficial for unorganised workers, as it legally guarantees a basic level of income and reduces the possibility of underpayment. It also strengthens the bargaining position of workers who earlier had little legal backing to demand fair wages.
National Floor Wage and Reduction of Wage Inequality
The introduction of a National Floor Wage is another important feature of the Code. The Central Government is empowered to fix a floor wage considering living standards across regions. States are required to ensure that the minimum wages fixed by them are not below this floor wage. For unorganised workers, this provision helps in reducing regional wage disparities, particularly in economically backward states where wages are traditionally low. It ensures a minimum standard of living and prevents states from competing by offering extremely low wages to attract industries, which often harms informal workers.
Timely Payment of Wages
Delayed or irregular payment of wages is a common problem faced by unorganised workers. Earlier, the Payment of Wages Act applied only to workers earning below a certain wage ceiling, leaving many informal workers without protection. The Code on Wages removes the wage ceiling and mandates timely payment of wages to all employees. It clearly specifies wage payment periods such as daily, weekly, fortnightly, or monthly, depending on the nature of employment. This provision is particularly beneficial for daily wage labourers and casual workers, who depend on regular income for survival. The Code also places a limit on deductions, stating that total deductions cannot exceed 50% of wages. This prevents employers from making arbitrary deductions, which was a common practice in informal employment.
Uniform Definition of Wages
Another major reform under the Code is the introduction of a uniform definition of “wages.” Earlier, different labour laws had different definitions, which created confusion and allowed employers to manipulate wage structures by categorising income as allowances instead of wages. Under the Code, wages are clearly defined, and only specific exclusions such as bonuses or house rent allowance are permitted within limits. This helps unorganised workers by ensuring transparency in wage calculation and preventing artificial reduction of wages through allowances. It also has long-term benefits as several labour entitlements are linked to wage calculation.
Gender Equality in Wages
The Code on Wages incorporates the principle of equal remuneration for men and women for the same or similar work. This provision is especially important for unorganised sectors where women workers, such as domestic workers, agricultural labourers, and home-based workers, are often paid less than men. By making wage discrimination illegal, the Code aims to promote gender equality and economic empowerment of women in the unorganised sector. Although enforcement remains a challenge, the legal recognition itself is a positive step.
Grievance Redressal and Inspector-cum-Facilitator System
The Code introduces a simplified grievance redressal mechanism, allowing workers to file claims regarding non-payment or underpayment of wages. It also replaces the traditional inspector system with an Inspector-cum-Facilitator, whose role includes advising employers and workers on compliance rather than only penal action. For unorganised workers, this approach is beneficial because it reduces fear of harassment and promotes voluntary compliance. However, the effectiveness of this system depends on awareness among workers and adequate staffing by the government.
Challenges in Implementation
Despite its progressive provisions, the Code on Wages faces several challenges in benefiting unorganised workers fully. A major issue is lack of awareness. Many unorganised workers are illiterate or unaware of legal rights, making it difficult for them to claim benefits. Another challenge is weak enforcement. Labour departments in many states suffer from shortage of staff and infrastructure, which limits effective monitoring. Additionally, since labour is a concurrent subject, states play a key role in implementation, and delays in notifying rules can reduce the impact of the Code.
Relationship with Social Security
While the Code on Wages improves wage protection, it does not by itself guarantee social security benefits such as health insurance or pensions. These aspects are covered under the Code on Social Security, 2020. For unorganised workers, wage security without social security provides only partial protection. Therefore, the real improvement in their living conditions depends on coordinated implementation of all labour codes.
Conclusion
The Code on Wages, 2019 represents a significant reform in India’s labour law framework and has the potential to positively impact unorganised workers. By extending minimum wage coverage to all workers, ensuring timely payment, promoting gender equality, and simplifying wage definitions, the Code addresses many long-standing issues faced by informal labour. However, the success of the Code depends largely on effective implementation, worker awareness, and strong enforcement mechanisms. If supported by active state participation and complementary social security measures, the Code on Wages can play a crucial role in improving the economic dignity and livelihood security of unorganised workers in India.
