Code on Wages And Its Impact On Equal Remuneration

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The corporate world is attentive to the impact of Code on Wages on the Cost to the Company. Multiple articles are stating a perspective that it is going to increase the cost to the companies and could impact the net take-home salaries of the employees. Hope you have read mine on this topic highlighting the myths around the CTC increase!

Having said that, the corporate world is missing the real Tsunami! Is this hype? Seriously, No.
Code on Wages is going to impact the Equal Remuneration payable to the employees. Why is this a Tsunami?

If you read the Equal Remuneration Act, it speaks about wages payable to men and women and the definition of “employee” does not include managerial and supervisory personnel. It means, employees of this category do not come under the purview of this legislation and cannot seek remedy if there is discrimination in wages under the Equal Remuneration Act.

Code on Wages address this anomaly completely; employee definition includes managerial and supervisory personnel and there are provisions to seek remedy for equal remuneration of wages. Further, the scope has been extended to address the discrimination between any gender; men – women – third gender.

A common practice by the Corporate today is that fixation of salaries goes by CTC approach. When employees are recruited the salary fixation will be like CTC plus twenty to thirty-plus percent. Predominantly, your current CTC plus is the criteria and not based on the job description, roles & responsibilities, etc.

It is commonly noticed that employees performing the same role having the same responsibilities and delivering an equivalent outcome, operating out of the same region and with other same or similar criteria are paid different salaries because of the CTC approach. It is possible that a better performer having superior capabilities and qualifications may get a lesser salary due to this approach.

Now, all such managerial and supervisory personnel have the forum to represent and seek remedy by way of compensation and the compensation can go up to 10 times. If there is a difference in salary of Rs one lakh per month over five years period, simple math says that compensation entitlement can be up to Rs 6 crore.

Managerial and Supervisory personnel are smart guys and their awareness of legislative rights is expected to be superior. Will they not seek remedy? An Alarm bell to the Corporate World!

Wait, it is not over yet! Code on Wages further empowers them to seek remedy. Individual employees can approach the Statutory authority or the Trade union can approach the authority or the Court can take cognizance of the matter based on the petition received by them. The corporate can expect multiple petitions to reach the Court for remedy either for an individual or a group of employees. In such cases, Compensation can run into multiple crores for sure … Isn’t this a Tsunami?

The author, Nagaraj Krishnan, is Managing Director at Aparajitha Corporate Services.

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