Delhi’s controversial minimum wage: A law in flux Delhi’s controversial minimum wage: A law in flux

Delhi’s controversial minimum wage: A law in flux
06 Sep 2018

Proposed minimum wage increases in Delhi, which would affect about 5.5 million unskilled, semi-skilled, and skilled workers, were struck down by the city’s High Court earlier this month and are to be referred to the Supreme Court.

Meanwhile, Delhi’s Labour department is considering aligning the city’s minimum wage rates with those set at federal level. Federal wage levels are slightly higher than the hikes initially proposed in the Minimum Wages (Delhi) Amendment Act 2017, which came into force on 5 May 2018. The Amendment Act introduced key changes to The Minimum Wages Act 1948, including much harsher penalties than was formerly the case for non-compliance.

Managing minimum wage levels

The Minimum Wages (Delhi) Amendment Act, 2017 requires that the government of the day take the following conditions into consideration when fixing and revising minimum rates:

  • Skills required;
  • How difficult an individual worker’s assigned work is;
  • Workers’ cost of living;
  • Other such considerations.

Cashless payment of wages

Employers are required to pay wages electronically, except in situations such as natural disasters, fire or the death of the employer or director of the organisation. Also not covered are daily wage earners who depend mainly on cash transactions - as long as the stipulated minimum wage has been paid.

Overtime

Employers must pay their employees for every hour or part of an hour that they work in excess of normal hours, at the overtime rate fixed under the Amendment Act. The minimum for calculating the overtime rate is not less than twice the normal rate of wages set under the Act or under any other appropriate law that is in force, whichever is higher.

Penalties for non-compliance

If an employer is found guilty of paying wages that are less than the stipulated minimum, they can be imprisoned for three years, up from six months in the past. The maximum fine that may be imposed has also risen from Rs 500 (US$7.15) under the amended Act to Rs 50,000 (US$715). In certain circumstances, employers may be subject to both imprisonment and the maximum fine.

The Act also describes a general punishment if a specific penalty is not prescribed for the offence committed. In such cases, penalties include imprisonment for one year and/or a fine of up to Rs 20,000 (US$286).

Speedy handling of cases

The Courts is required to deal with any complaints made under Section 22 of the Act within three months of a complaint being filed.

Maintaining digital records

Employers in Delhi must now upload all of their employee data to either a website or web portal.

New minimum wage rates for Delhi

In March 2017, the Delhi government, led by the Aam Aadmi Party, announced a hike in the city’s minimum wages for unskilled, semi-skilled, and skilled workers. The move was immediately challenged by the business community and opposition parties, including Prime Minister Narendra Modi’s Bharatya Janata Party.

On August 11, the Delhi High Court ruled that the local government’s decision to raise minimum wages by 37% was undertaken arbitrarily without consulting employers or employees. The verdict will now be challenged in the Supreme Court, according to Gopal Rai, Delhi’s Labour Minister.

As per the new legislation, Delhi’s minimum wages for unskilled workers were to increase from Rs 9,724 (US$139) to Rs 13,350 (US$191) per month; for semi-skilled workers from Rs 10,764 (US$154) to Rs 14,698 (US$210); and for skilled labourers from Rs 11,830 (US$169) to Rs 16,182 (US$231). 

But since the High Court struck down the Delhi government’s proposal, the Delhi Labour department has proposed implementing the federal minimum wage structure, which would mean the minimum wage increase in the city would be higher than originally proposed.

Federal minimum wage rates as of 1 April 2018 were Rs 14,378 (US$205.73), Rs 15,912 (US$227.68) and Rs 17,498 (US$250.38) for unskilled, semi-skilled, and skilled workers respectively.

The Labour department is expected to issue a two-month period of consultation in relation to implementing federal rates, after which time a committee will be constituted and a proposal placed before the Delhi Cabinet. The entire process could take up to six months.

 

This article was first published on India Briefing

Since its establishment in 1992, Dezan Shira & Associates has been guiding foreign clients through Asia’s complex regulatory environment and assisting them with all aspects of legal, accounting, tax, internal control, HR, payroll and audit matters. As a full-service consultancy with operational offices across China, Hong Kong, India and ASEAN, we are your reliable partner for business expansion in this region and beyond. For inquiries, please email us at info@dezshira.com. Further information about our firm can be found at: www.dezshira.com.

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Proposed minimum wage increases in Delhi, which would affect about 5.5 million unskilled, semi-skilled, and skilled workers, were struck down by the city’s High Court earlier this month and are to be referred to the Supreme Court.

Meanwhile, Delhi’s Labour department is considering aligning the city’s minimum wage rates with those set at federal level. Federal wage levels are slightly higher than the hikes initially proposed in the Minimum Wages (Delhi) Amendment Act 2017, which came into force on 5 May 2018. The Amendment Act introduced key changes to The Minimum Wages Act 1948, including much harsher penalties than was formerly the case for non-compliance.

Managing minimum wage levels

The Minimum Wages (Delhi) Amendment Act, 2017 requires that the government of the day take the following conditions into consideration when fixing and revising minimum rates:

  • Skills required;
  • How difficult an individual worker’s assigned work is;
  • Workers’ cost of living;
  • Other such considerations.

Cashless payment of wages

Employers are required to pay wages electronically, except in situations such as natural disasters, fire or the death of the employer or director of the organisation. Also not covered are daily wage earners who depend mainly on cash transactions - as long as the stipulated minimum wage has been paid.

Overtime

Employers must pay their employees for every hour or part of an hour that they work in excess of normal hours, at the overtime rate fixed under the Amendment Act. The minimum for calculating the overtime rate is not less than twice the normal rate of wages set under the Act or under any other appropriate law that is in force, whichever is higher.

Penalties for non-compliance

If an employer is found guilty of paying wages that are less than the stipulated minimum, they can be imprisoned for three years, up from six months in the past. The maximum fine that may be imposed has also risen from Rs 500 (US$7.15) under the amended Act to Rs 50,000 (US$715). In certain circumstances, employers may be subject to both imprisonment and the maximum fine.

The Act also describes a general punishment if a specific penalty is not prescribed for the offence committed. In such cases, penalties include imprisonment for one year and/or a fine of up to Rs 20,000 (US$286).

Speedy handling of cases

The Courts is required to deal with any complaints made under Section 22 of the Act within three months of a complaint being filed.

Maintaining digital records

Employers in Delhi must now upload all of their employee data to either a website or web portal.

New minimum wage rates for Delhi

In March 2017, the Delhi government, led by the Aam Aadmi Party, announced a hike in the city’s minimum wages for unskilled, semi-skilled, and skilled workers. The move was immediately challenged by the business community and opposition parties, including Prime Minister Narendra Modi’s Bharatya Janata Party.

On August 11, the Delhi High Court ruled that the local government’s decision to raise minimum wages by 37% was undertaken arbitrarily without consulting employers or employees. The verdict will now be challenged in the Supreme Court, according to Gopal Rai, Delhi’s Labour Minister.

As per the new legislation, Delhi’s minimum wages for unskilled workers were to increase from Rs 9,724 (US$139) to Rs 13,350 (US$191) per month; for semi-skilled workers from Rs 10,764 (US$154) to Rs 14,698 (US$210); and for skilled labourers from Rs 11,830 (US$169) to Rs 16,182 (US$231). 

But since the High Court struck down the Delhi government’s proposal, the Delhi Labour department has proposed implementing the federal minimum wage structure, which would mean the minimum wage increase in the city would be higher than originally proposed.

Federal minimum wage rates as of 1 April 2018 were Rs 14,378 (US$205.73), Rs 15,912 (US$227.68) and Rs 17,498 (US$250.38) for unskilled, semi-skilled, and skilled workers respectively.

The Labour department is expected to issue a two-month period of consultation in relation to implementing federal rates, after which time a committee will be constituted and a proposal placed before the Delhi Cabinet. The entire process could take up to six months.

 

This article was first published on India Briefing

Since its establishment in 1992, Dezan Shira & Associates has been guiding foreign clients through Asia’s complex regulatory environment and assisting them with all aspects of legal, accounting, tax, internal control, HR, payroll and audit matters. As a full-service consultancy with operational offices across China, Hong Kong, India and ASEAN, we are your reliable partner for business expansion in this region and beyond. For inquiries, please email us at info@dezshira.com. Further information about our firm can be found at: www.dezshira.com.

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