Delhi’s Minimum Wage Law: What Employers Need to Know

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India Briefing-Delhi Minimum Wage Revisions What Employers Need to Know

The Minimum Wages (Delhi) Amendment Act, 2017 came into force on May 5, 2018, and has introduced key changes to The Minimum Wages Act, 1948.

In this article, we highlight important provisions under the amended minimum wage law that employers in Delhi must be aware of or face much harsher penalties than under the previous system in case of non-compliance.

Foreign employers should note that the increased minimum wage rates for Delhi has been struck down by the Delhi High Court; it will soon be referred to the Supreme Court.

Meanwhile, the Delhi labor department is considering aligning the city’s minimum wage rates with those fixed at the federal level; these will be slightly higher than the initial hikes proposed while amending the Minimum Wages Act.

About 5.5 million unskilled, semi-skilled, and skilled workers currently work in Delhi.

Managing the minimum rates of wages

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

  • Skill required;
  • Difficulty of the work assigned to the worker;
  • Cost of living of the worker; and,
  • Other such components.

Cashless payment of wages

It is mandatory for employers to pay wages electronically, except in exigent situations like natural disasters, fire, death of the employer, or director of the establishment.

Relaxation is also applicable for the daily wage labor class of people who predominantly depend on cash transactions, so long as the stipulated minimum wages have been paid.

Overtime

The employer must pay the employee for every hour or for part of an hour – worked in excess – at the overtime rate fixed under the Amendment Act.

The minimum limit for calculating the overtime rate will not be less than twice the normal rate of wages fixed under the Act or under any law of the appropriate government that is in force, whichever is higher.

Penalty for non-compliance

In case an employer is found guilty of paying wages less than the stipulated minimum rates, the term of punishment will be three years. Previously, non-compliance resulted in jail term of up to six months.

The maximum amount of fine that may be imposed under the amended Act is Rs 50,000 (US$715); previously, the amount was Rs 500 (US$7.15).

In certain instances, faulty employers may be subject to both imprisonment and the maximum fine.

The Act also describes general punishment – in cases where a specific penalty for the offence committed is not prescribed.

In such cases, the penalty will include imprisonment for a term of one year and / or a fine of up to Rs 20,000 (US$286).

Speedy disposal of cases

The Courts will have to dispose of the complaints made under Section 22 of the Act within three months of the date of filing the complaint.

Maintaining digital records

Employers in Delhi are now required to upload their employee data online – on a website or web portal.

New minimum wage rates for Delhi

In March 2017, the Delhi government, led by the Aam Aadmi Party (AAP), announced a hike in the city’s minimum wages for unskilled, semi-skilled, and skilled workers.

The move was then immediately challenged by the business community and opposition parties, including Prime Minister Narendra Modi’s Bharatya Janata Party (BJP).

Most recently, on August 11, the Delhi High Court’s verdict stated that the Delhi government’s decision to raise minimum wages by 37 percent was done arbitrarily, without consulting employers or employees.

The verdict will now be challenged at the Supreme Court, according to the Delhi labor minister, Gopal Rai.

As per the new legislation, Delhi’s minimum wages for unskilled workers was to be increased 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 laborers from Rs 11,830 (US$169) to Rs 16,182 (US$231). (US$1=Rs 69.94)

However, since the High Court struck down the Delhi government’s proposal and the case will be referred to the Supreme Court, the Delhi labor department has proposed implementing the federal structure of minimum wages. This would also mean that the minimum wage increase in Delhi would be higher than originally proposed.

The federal minimum wage rates as on April 1, 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 labor department will soon issue a notice seeking objections for a two month period – with respect to implementing the federal rates. Following this, a committee will be constituted and a proposal placed before the Delhi cabinet. The entire process could take up to six months.


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India Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia and maintains offices in ChinaHong KongIndonesiaSingaporeVietnam, and Russia. 

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