It
usually takes about a month to get your full and final payment after you leave
a job. However, this could change soon. According to the Code on Wages, 2019,
notified on August 8, your employer will have to pay all your wages within two
days after your last working day.
What the Code says on making the full and 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 and
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 and 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 two 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 November 20, 2019. Your employer would have to pay wages
payable to you as mentioned by November 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 is not 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."
Saraswathi
Kasturirangan, Partner, Deloitte India says, "Under the payment of Wages
Act, 1936, the settlement of wages will be made within two 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:
|
Nature of termination
|
Timeline
|
|
Termination
of employment by the employer
|
Before
expiry of second working day from the date of termination of employment
|
|
Termination
due to closure of establishment
|
Before
expiry of second working day from the date of termination of employment
|
|
Any
railway, factory and industrial or other establishment having less than
1000 persons employed
|
Before
expiry of seventh day from the last day of wage period
|
|
Any
railway, factory and industrial or other establishment having 1000 or more
persons employed.
|
Before
expiry of tenth day from the last day of wage period
|
|
(Source: Deloitte India)
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 and final amount in
case of resignation. Once the Code on Wages is implemented it is likely to
bring in more clarity and better compliance.
Gupta says, "Code on Wages, 2019 seeks to
universalise the laws related to payment of minimum wages and timely payment of
wages to the employees. The previous labour laws silent on various issues such as time limit on
making final payment in case of resignation, removal and 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 two days on
resignation), increased coverage by extending the provisions to the unorganised
sector, disclosure requirement for specified cases of domestic workers and
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
government. 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 have not been notified yet. The
preliminary draft rules have been uploaded on the website of Ministry of Labour
and Employment on November 1, 2019 for inputs of various stakeholders and
public. The date of actual implementation of code is likely to be notified once
the rules for the code and other details such as floor wages are finalised and
notified to ensure smooth implementation of the Code."
