New wage code bill will hamper formal job creation in the country and impact the overall hiring scenario, say experts.
The Union Cabinet on July 26 approved the new wage code Bill which will ensure a minimum wage across all sectors by integrating four labour related laws.
To apply a universal minimum wage across different states with varying demographics and across different roles is unfair, experts say.
"The idea of the wage code Bill was to comprehensively rationalise four different laws into one and bring about uniformity in definitions. The fact that the wage code Bill got high jacked into universal minimum wage agenda is confusing. Formal Job creation should be the only agenda that drives any labour reform in this country," said Rituparna Chakraborty, executive vice-president and co-founder at TeamLease Services.
Chakraborty who is the President of Indian Staffing Federation, further said, "This could mean that industries will start automating at a faster rate thereby further impacting job creation".
The new minimum wage norms would be applicable for all workers irrespective of their pay. At present, the minimum wages fixed by the Centre and states are applicable to workers getting up to Rs 18,000 pay monthly.
This would ensure a universal minimum wage for all industries and workers, including those getting monthly pay higher than Rs 18,000.
"The new minimum wage code bill will help improve the standard of living. However, if the hikes are steep, they might have a negative impact on hiring in Tier-II and Tier-III markets," said Ramesh Gopalan, President - Healthcare and Head of India Business, Hinduja Global Solutions.
Gapalan further noted that people-centric sectors like Business Process Management (BPM) have largely invested in semi-urban cities for domestic business due to the availability of talent and infrastructure at significantly lower costs. If this cost advantage goes away, it may become difficult to sustain business in these centres.