Code on Wages 2019: Soon, you will get Full & Final Payment just 2 days after you Leave Job

It usually takes about a month to get your full & final payment after you leave a job. However, this could change soon. According to the Code on Wages, 2019, notified on Aug 8, your employer will have to pay all your wages within 2 days after your last working day.

What the Code says on making the full & final payment
Wages under the Code is defined as all remuneration whether by way of salaries, allowances or otherwise. This includes - basic pay, dearness allowance & retaining allowance, if any. However, it excludes certain specified compensation items such as value of housing accommodation, conveyance allowance, leave travel allowance etc. If the specified exclusions other than gratuity payable, retrenchment compensation, other retirement benefits, ex-gratia paid on termination exceeds 50 per cent of the total remuneration, then the same will be added to the wages, according to the Code.

The value of remuneration in kind, for example employee stock option plan (ESOP) payable to employee, will be included up to 15 per cent of total wages. With regards to payment of full & final payment after an employee quits, the Code on Wages, 2019 says, "Where an employee has been - (i) removed or dismissed from service; or (ii) retrenched or has resigned from service, or became unemployed due to closure of establishment, the wages payable to him shall be paid within 2 working days of his removal, dismissal, retrenchment or, as the case may be, his resignation." Let us say your last working day in an organisation is Nov 20, 2019. Your employer would have to pay wages payable to you as mentioned by Nov 22, 2019.

What are the current rules?
Wages in the current Act is defined as follows. Puneet Gupta, Director, People Advisory Services, EY India explains, "Wages under the Payment of Wages Act, 1936 means total remuneration paid except for the specified exclusions under the Act. These exclusions are bonus paid which isn't the part of the terms of employment, value of any-house accommodation or supply of light, water, medical attendance, or any service excluded from computation of wages, any contribution paid by the employer to provident fund or pension fund, any travelling allowance or value of travelling concession, gratuity payable on termination of employment."

At present, since there is no clarity regarding the time line for settlement of full & final payments, companies have their own policies. "Under the current Payment of Wages Act, 1936 there is no specific time limit for making full & final settlement payment on resignation of an employee," explains Gupta. However, for cases such as dismissal & retrenchments, the deadline to make final payment are governed under the Payment of Wages Act, 1936. "The current Act covers only the specified nature of termination of employees whose earning wages does not exceed Rs 24,000 per month. This wage amount is revised by the govt on the basis of Consumer Expenditure Survey published by the National Sample Survey Organisation", says Gupta.

Saraswathi Kasturirangan, Partner, Deloitte India says, "Under the payment of Wages Act, 1936, the settlement of wages will be made within 2 working days only if the services are terminated by the employer or are terminated due to closure of establishment. It is silent on timeline for making payment in case of resignation by the employee."

The timeline to make payment of wages under the Act is as follows:

What Code on Wages, 2019 means for employees
The Payment of Wages Act, which is in force now, is silent on many issues like the settlement of the full & final amount in case of resignation. Once the Code on Wages is implemented it is likely to bring in more clarity & better compliance.

Gupta says, "Code on Wages, 2019 seeks to universalise the laws related to payment of minimum wages & timely payment of wages to the employees. The previous labour laws were silent on various issues such as time limit on making final payment in case of resignation, removal & so on."

Other than quicker settlements, the Code will also bring under it a wider class of employees. "Code on Wages, 2019 has widened the applicability to a wider class of employees. With stringent provisions on penalties, compliance on labour matters by employers is expected to be high. In short, the provision of early settlement of dues (within 2 days on resignation), increased coverage by extending the provisions to the unorganised sector, disclosure requirement for specified cases of domestic workers & increase in penalties for non-compliance by employers will all go a long way in providing a conducive labour regime," says Ms. Kasturirangan.

The catch
However, one must remember that though the Code has been passed by the Parliament, the date from which it will become applicable is yet to be notified by the govt. Ms. Kasturirangan says, "Do keep in mind that though the Code on Wages, 2019 has been passed by the parliament, various procedural rules, forms, necessary for its implementation haven't been notified yet. The preliminary draft rules have been uploaded on the website of Ministry of Labour & Employment on Nov 1, 2019 for inputs of various stakeholders & public. The date of actual implementation of code is likely to be notified once the rules for the code & other details such as floor wages are finalised & notified to ensure smooth implementation of the Code."

Source Link

Picture Source :