India is in process to implement new labour law reforms by:
- consolidating 29 existing legislations into 4 new Codes
- standardising, rationalising & updating the existing labour laws with contemporary relevance;
- covering employees from both organized and un-organised sector;
- emphasising on transparency, accountability and tech-based operations ensuring ease of operations and enforcement.
Biggest impacts of the New Labour Codes:
Payroll:
- Uniformity in definitions including that of ‘Wages’ across labour law;
- Requires ‘Wages’ to be 50 Percent of CTC[1];
- Gratuity Eligibility may be reduced to less than 5 years in some cases;
- May result in reduction of take-home salary of the employees due to change in salary structure;
- Increased statutory deductions which will now based on increased salary base;
- F&F payment to be made with 2 working days from LWD.
HR Admin:
- May require CTC restructuring at organization level;
- Single Registration; Single License; Single Statement; Minimum Forms;
- Fixed term employees after 1 year of service will be treated at par with permanent workforce.
Working Time & Attendance:
- 48 Hours Set Work Time for One Week;
- Overtime hours are capped at 40 hours per month and 200 hours per year, subject to exception;
- 15 minutes or more overtime will be attracting overtime payment;
- Leave eligibility time reduced from a minimum of 240 workdays to 180 days;
- Gradually increase in the retirement ages from 60 to 62 years of age for men by 2028, and from 55 to 60 years of age for women by 2035.
New Codes and corresponding subsumed legislation:
| New Codes | Subsumed Legislation |
| The Code on Wages, 2019 | The Minimum Wages Act, 1948The Payment of Wages Act, 1936The Payment of Bonus Act, 1965The Equal Remuneration Act, 1976 |
| The Code on Social Security, 2020 | The Employee’s Compensation Act, 1923The Employees’ Provident Funds and Misc. Provisions Act, 1952 (“existing PF Act”)The Employees’ State Insurance Act, 1948 (“existing ESI Act”)The Payment of Gratuity Act, 1972 (“existing Gratuity Act”)The Maternity Benefit Act, 1961The Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959The Cine-Workers Welfare Fund Act, 1981The Building and other Construction Worker’s Welfare Cess Act, 1996The Unorganised Worker’s Social Security Act, 2008 |
| The Industrial Relations Code, 2020 | The Industrial Disputes Act, 1947The Industrial Employment (Standing Orders) Act, 1946The Trade Unions Act, 1926 |
| The Occupational Safety, Health and Working Condition Code, 2020 | The Factories Act, 1948The Mines Act, 1952The Plantations Labour Act, 1951The Contract Labour (Regulations ad Abolition) Act, 1970The Dock Workers (Safety, Health and Welfare) Act, 1986The Building and Other Construction Workers (Regulations of Reemployment and Condition of service Act, 1996,The Inter-state migrant workmen (Regulation of Employment and Condition of Service) Act, 1979The Working Journalist and other News Paper Employees (Conditions of Service and Misc. Provision) Act, 1955The Working Journalist (Fixation of rates of Wages) Act, 1958The Motor Transport Workers Act, 1961Sales Promotion Employees (Condition of Service) Act, 1976The Cine Workers and Cinema Theatre Workers Act, 1981The Beedi and Cigar Workers (Condition of Employment) Act, 1966 |
Implementation Status:
The aforesaid all 4 new Labour Codes, being Central Laws, have already been notified in Official Gazette, however implementation thereof has so far been deferred multiple times due to some unresolved disagreements with some states.
Lately, the new codes were to be implemented from 1st July, 2022, however has now again been deferred.
Our Opinion:
The new labour codes come with lots of new welcoming changes and opportunities to streamline the current HR & Payroll Practices.
Though the implementation of new Codes are so far been deferred, they are expected to be reality soon, may be with some minor changes. We recommend organizations to be pro-actively ready for their implementation for smooth transitioning.
Disclaimer:
The above information is just meant for knowledge sharing and not for any promotion or advertising. The author disclaims any implication due to any inadvertent error or interpretation in same. Readers’ discretion advised.
[1] “Wages” has specifically been defined under section 2(y) of The Code of Wages, 2019 which contemplates certain specific inclusions and exclusions. The said “Wages” are to be used as base for statutory deductions such as PF, ESI, and Gratuity etc. Please contact your Law Consultants for more details.