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Editorials/Opinions Analyses For UPSC 22 December 2021


  1. How the Code on Wages ‘legalises’ bonded labour?

How the Code on Wages ‘legalises’ bonded labour?


  • Debt bondage is a form of slavery that exists when a worker is induced to accept advances on wages, of a size, or at a level of interest, such that the advance will never be repaid.
  • Some argue that the Code on Wages, 2019 — gives legal sanction to this horrifically repressive, inhuman practice, by allowing employers to extend limitless credit advances to their workers, and charge an unspecified (and hence, usurious) interest rate on them.


GS-II: Social Justice and Governance (Government Interventions and Policies, Issues arising out of the design and implementation of Government Policies), GS-III: Indian Economy (Human Resource)

Dimensions of the Article:

  1. Code on Wages Act, 2019
  2. What is Bonded labour?
  3. Bonded Labour in the Indian Constitution
  4. Supreme Court on bonded Labour
  5. Concerns and challenges regarding bonded labour
  6. Concerns regarding the implementation of the codes (labour law reforms)
  7. How does the Labour Code legalise bonded labour?
  8. What are the implications of the Labour Code on bonded labour?
  9. Way Forward

Code on Wages Act, 2019

  • The new wage code removes the multiplicity of wage definitions, which can significantly reduce litigation as well as compliance cost for employers.
  • It links minimum wage across the country to the skills of the employee and the place of employment.
  • It seeks to universalise the provisions of minimum wages and their timely payment to all employees irrespective of the sector and wage ceiling.
  • It seeks to ensure Right to Sustenance for every worker and intends to increase the legislative protection of minimum wage.
  • A National Floor Level Minimum Wage will be set by the Centre and will be revised every five years, while states will fix minimum wages for their regions, which cannot be lower than the floor wage.
  • It subsumes the following four labour laws:
    • Payment of Wages Act, 1936
    • Minimum Wages Act, 1948
    • Payment of Bonus Act, 1965
    • Equal Remuneration Act, 1976

What is Bonded labour?

  • Bonded labour, often known as debt bondage, is perhaps the least known kind of slavery today, while being the most common technique of enslaving individuals.
  • When a person’s labour is required as payback for a loan, they become a bound labourer.
  • The individual is then duped or forced into working for little or no remuneration.

Bonded Labour in the Indian Constitution

  • Bonded labour is illegal in India under Articles 21 and 23 of the Constitution.
  • Human trafficking and forced labour are expressly outlawed under Article 23 of the Indian Constitution. Furthermore, Article 21 protects the right to life and the right to personal liberty.
  • The Bonded Labour System (Abolition) Act, enacted in 1976, was the first to abolish the practice.
  • The Bonded Labour System (Abolition) Act of 1976 established a legislative framework to combat bonded labour.

Supreme Court on bonded Labour

  • The Supreme Court interpreted Article 23 to declare that “a person who has been forced to work as bonded labour and a person who is working as labour at a rate less than the minimum wage shall be treated similarly” in Peoples’ Union for Democratic Rights vs. Union of India (1982).
  • The Supreme Court stated in its decision in Badhua Mukti Morcha vs. Union of India (1997) that the right to live in dignity, inherent in Article 21, derives its lifeblood from Part IV of the Constitution, which prescribes the Directive Principles of State Policy, particularly Articles 39(e) and (f), 41 and 42.

Concerns and challenges regarding bonded labour

  • The identification and release of bound labourers is a laborious process, with officials downplaying the scope of forced labour.
  • Training and compensation supplied as part of rehabilitation packages were insufficient to fulfil the demands of freed bonded labourers. Furthermore, the State failed to recognise the bonded status of family members.
  • Women were refused release certificates and state benefits since labourer-employer contracts had been arranged with the head of the household, the husband.
  • This demonstrates the State’s inability to implement a systematic and long-term plan to end bonded labour, which begins with identifying bonded labourers and continues until efforts are made to guarantee that those who are released are not re-enslaved.
  • Furthermore, governments’ hesitation to act aggressively against bonded labour in recent years has been exacerbated by the trend of decreasing labour protection in the face of globalisation.
  • As a result, safeguards are reduced, providing unscrupulous employers with additional opportunities to limit and eliminate impoverished workers’ freedom through debt, monitoring, and intimidation.
  • Because governmental forces have access to money and authority, and civil society groups have grassroots connections and a greater understanding of the gravity of the problem, they must work together to eliminate the threat of bonded labour.
  • Despite previously existing legislative safeguards, disadvantaged agricultural, informal sector, and migrant workers were already caught in a vicious cycle of increasing debt and diminishing income, depriving them, their families, and future generations of their most fundamental rights.

Concerns regarding the implementation of the codes (labour law reforms)

  • The Government announced its intentions of implementing the Codes from April 2021 even as State governments were completely unprepared with the rules. Further, the major political parties reallocated their energies to regional elections rather than the implementation of codes.
  • The central government has deferred the possible date of implementation to October 2021, while the Supreme Court of India has exerted pressure on both the central and the State governments to implement a ‘one nation, one ration card’ (ONOR) scheme (which is essential alongside the implementation of the labour law reforms) and register all the unorganised workers under the National Database for Unorganized Workers (NDUW), which was to have been done by July 2021. Hence, Government agencies are rushing to comply with both the directives.

Concerns with the Code on Wages, 2019

  • The Code on Wages, 2019 seeks to consolidate and simplify four pieces of legislation into a single code. However, while the previous four pieces of legislation had a total of 119 sections, the new Code has 69 sections.
  • The central government will have the power to fix a “floor wage”. Once it is fixed, State governments cannot fix any minimum wage less than the “floor wage”.  The concept should be for a binding minimum wage and not have dual wage rates — a binding floor wage and a non-binding minimum wage.
  • Neither the Code nor the Rules (presently, draft Rules) prescribe the qualifications and experience required for appointment of competent authority.

How does the Labour Code legalise bonded labour?

  • The Labour Code – the Code on Wages, 2019 — legalises this horrifyingly authoritarian, inhuman practice by permitting companies to provide unrestricted credit extensions to their employees and charge them an undetermined interest rate.
  • The government appears to actively support the practice by repealing even the most lax restrictions previously in place under the Minimum Wage Act of 1948. (now subsumed in the Code).
  • Rule 21 of the Minimum Earnings (Central) Rules, 1950 specified specific “deductions” from workers’ wages.
  • The sub-rule (2)(vi) permitted “deductions for recovery of advances or correction of overpayment of wages, provided that such advances do not exceed an amount equivalent to the employed person’s earnings for two calendar months.”
  • Furthermore, it noted that “the monthly instalment of deduction should in no event exceed one-fourth of the salary earned in that month.”
  • Wage deductions are permitted under the Wage Code for the recovery of “advances of whatever sort, and the interest due in respect thereof, or for correction of overpayment of wages.”

What are the implications of the Labour Code on bonded labour?

  • It has repealed the former Act’s restriction of ‘not more than two months’ of a worker’s earnings that an employer might offer as advance. Employers can now make limitless advances to their employees, increasing their hold.
  • It has legalised the charging of an interest rate by the employer on such advances by including an interest clause with no details on what may be charged. The cumulative result is an open invitation for the bonded labour system to thrive.
  • Furthermore, the Code raises the permitted monthly deduction for such recovery to one-half of the worker’s monthly pay, up from one-fourth under the previous Act.
  • The government has intervened by sustaining and growing economic inequality to the benefit of certain castes and classes, thus preventing workers from achieving full political independence.

Way Forward

  • In India, bonded labour results from poverty, social marginalisation, and the government’s unwillingness to address the practice and its underlying causes.
  • Economic servitude nullifies political freedom, and democracy itself needs governmental action in the economic system to avoid such practices.
  • While a full recast of rural and agricultural land arrangements is required, and state ownership of land is critical to this, defined democracy should be founded on the presence of economic rights.
  • An individual’s constitutional rights must not be forfeited as a condition previous to receiving any privilege.

-Source: The Hindu

July 2024