Govt withdraws order on compulsory wage payment by firms during lockdown

Trade unions slam decision, employers welcome it, saying it was absolutely necessary especially in absence of grants from govt to industry for wage payment

In what may come as a major relief to businesses, the Union government has withdrawn its order directing employers to pay wages to workers, even with units remaining shut during lockdown.

On Sunday, the Ministry of Home Affairs (MHA) had issued a fresh set of guidelines which will be applicable from Monday. It has repealed the order dated March 29, 2020 which had talked about compulsory wage payment to workers during lockdown.

“Save as otherwise provided in the guidelines annexed to this order, all order issued by the NEC [national executive committee] under Section 10(2)(I) of the Disaster Management (DM) Act, 2005, shall cease to have effect from 18.05.2020.”

The annexure attached to the order mentions six sets of standard operating procedures – mostly related to movement of persons – that will continue to remain in force. But it does not include the March 29 order.

The MHA had on March 29 issued an order under Section 10(2)(I) of the DM Act asking all employers to pay wages to workers on due date without any deduction even if the establishment was closed during the lockdown period.

“All employers, be it in the industry or in the shops and commercial establishments, shall make payment of wages of their workers, at their workplaces, on the due date, without any deduction, for the period their establishments are under closure during the lockdown,” the March 29 order had said.

Over the past few days, the industry had petitioned the government to withdraw its order on compulsory wage payment as they were themselves facing cash crunch issues. Some industrial bodies had also asked the government to foot the wage bills of companies through payment of grants but it was not agreed to due to fiscal constraints.

The constitutional validity of the government’s order on wages was challenged by several companies who had moved the Supreme Court. On Friday, the apex court asked the government not to take any coercive action against private companies who were unable to pay wages to workers. The SC was to hear the petition this week. The court, terming it as an “omnibus order”, had asked the government to re-examine it.

The trade union leaders have criticised the government’s step to withdraw the order. “The order for lockdown 4.0, by a slight of hand, allows employers to get away without paying wages during the lockdown. So no payment of wages and no wage subsidy just where do workers go?  Who is responsible for a worker in a containment or red zone or for that matter even in an orange or green zone where full public transport has not been resumed?” Gautam Mody, General Secretary, New Trade Union Initiative said. 

But employers have welcome the step, saying it was absolutely necessary especially in absence of grants from the government to the industry towards wage payment. "We have to work on the principles of 'no work no pay'. Our opinion is that organisations should be considerate towards employees and in a difficult situation like this, minimum sustenance pay should be given but where will they get the income to pay? In many countries, the government have shared the wage bill but it didn't happen in India," M.S. Unnikrishnan, chairman of Confederation of Indian Industry's committee for industrial relations said.

In its petition to the SC, Nagareeka Exports Limited had said that the payment of full salary to workers during the lockdown period when production was zero or “very minimal” would lead to closure of many micro, small and medium scale enterprises and “permanent unemployment of many people, directly affecting the economy.”

Before the MHA’s March 29 directive, the labour and employment ministry had issued multiple advisories to the industry to not lay-off or retrench workers during the lockdown and asking them to deter from deducting wages. Notably, the MHA order, which was issued under the DM Act, had said the state governments have to issue their separate orders to implement the diktat. Any contravention of the order was punishable under the DM Act.