Section 2: Definitions

Overview

Section 2 of the Code on Wages, 2019 is foundational. It defines the core terms used throughout the Code, which governs all aspects of wage-related matters – including minimum wages, payment frequency, calculation of wages, deductions, and more. Understanding these definitions is crucial for both employers and employees to correctly interpret and apply the law.

Scope and Coverage

• This section applies to all employees, regardless of their skill level or the type of work they do. This includes workers in both the organized and unorganized sectors.
• It covers all establishments where employees are engaged for work.
• There are generally no thresholds based on the number of employees or the size of the establishment for the application of these definitions. The definitions themselves apply universally within the scope of the Code.

Key Obligations and Rights

• Employers have a duty to understand and correctly apply these definitions when determining wages, making payments, and complying with other provisions of the Code. Misinterpreting these definitions can lead to non-compliance.
• Employees have the right to have their wages calculated and paid based on the definitions provided in this section. They can challenge any incorrect application of these definitions by their employer.
• The definitions clarify what constitutes ‘wages’ – ensuring employees receive the correct amount for their work.

Compliance and Penalties

Incorrectly applying the definitions in Section 2 can lead to violations of the Code on Wages, 2019. This can result in inspections by labour authorities, show-cause notices, and ultimately, penalties. Penalties can include fines and, in some cases, imprisonment for employers. Ensuring accurate understanding and implementation of these definitions is a key step towards compliance.

Practical Examples

• Example 1: A factory worker is paid a basic salary plus allowances for food and travel. The definition of ‘wages’ clarifies which components are included in the calculation of their total earnings for purposes of minimum wage and other benefits.
• Example 2: A software engineer receives stock options as part of their compensation. The definition of ‘wages’ will determine whether the value of these stock options is included in their wage calculation, which may depend on when they are exercised and their actual value.