The Federal government has consolidated 29 federal labour laws and condensed them into four codes. The purpose of this is to make it easier to do business in India while creating more uniformity in labour laws across different states. India will soon start enforcing these and companies must take steps to prepare for them.
What do you need to prepare for when these codes are finally implemented? Let’s discuss.
Code on Wages
New Meaning of ‘Wages’:Companies must pay heed to the new definition of remuneration. Wages are now defined to be at least 50% of an employee’s gross remuneration. At the moment, 25% to 50% of gross pay is basic wage, with the rest as allowances. Companies will save on gratuities and PF. If wages are higher, these payments will increase. Many companies will have to overhaul their entire compensation structure to fit this new definition.
Set Rate for Minimum Wage:India has hundreds of minimum wages. That is because each state sets a different rate. This was based on the nature of the job and its industry, the worker’s skill set, the cost of living in that state, and more. But it was extremely tough to keep a track of these, especially for companies that have offices in different states. This list is now much shorter as the concept of ‘floor wages’ has been introduced. That means states cannot set a minimum wage below this amount. This will assure a basic income for employees across the country and ease migration.
Equal Pay:Another new and welcome change is the provisions for equal pay for both men and women for the same or similar amount of work. This has been included in the Equal Remuneration Act and this new code extends this to people of any gender, including transgender employees. Companies will have to assess how to efficiently implement this.
Industrial Relations Code
Code on Hiring Fixed Term Workers and Contract Labours:Till now, companies used third-party staffing agencies to hire workers for a fixed project. The new code mandates that fixed-term workers are now eligible for benefits such as gratuity payments on a prorated basis. This will lead to a restructuring of the workforce for many companies. This is also similar to contract labour. Currently, many companies in the IT and automobile industries hire contract labourers for their core work. They don’t pay these employees benefits. The new code reiterates the previous law that didn’t allow companies to hire contract labour for their ‘core’ activities. But now, there are exceptions to this. Similarly, gig and platform workers will be eligible for social security. The government will create a fund for the same and companies will have to contribute towards this.
Standing Orders:These were traditionally only followed by factories, plantations, and mines, but now they will cover any company that has over 300 employees. Any exception required approval from the government. Companies must be alert as to whether this applies to them or not.
Worker Termination:The new law dictates that any mine, factory, or plantation with over 300 employees needs government permission to terminate workers. The old law had the threshold set to 100. This should make it easier for smaller companies to manage their employees.
Redressing Grievances:The new code requires that any company with 20 workers must create a grievance redressal committee to address issues. This is an important code that should be implemented as soon as possible.
Occupational Safety, Health, and Working Conditions Code
Night Shift for Women:The new code allows companies to hire women workers for the night shift, i.e., between 7 pm to 6 am. This is possible if the companies fulfill certain safety and security conditions for the workers.Companies who have night shifts must pay heed to these conditions if they plan on strengthening their workforce with women workers.
Encashing Leaves:Company policies needed workers to preserve unused leaves until their employment ended. But the new code lets employees encash unused leaves at the end of any year. This could create a financial burden for many companies. Companies must account for this in their annual budgets.
Code on Social Security
Provident Fund Compliance:Until now, there’s no limitation to how far back authorities can check a company’s compliance with EPF rules. Any investigation would take years to finish. But now, authorities will only look back 5 years to check compliance. It also stipulates that all investigations must be completed within 2 years. This will make this process easier for companies and they should take note of this development.
These are the codes that companies have to be aware of henceforth. The government will start implementing these as soon as possible. Before being left behind, it’s better if you take measures to start preparing for these changes. Failing to do so can lead to fines and unrest. It’s always better to be ready! If you have any doubts regarding these, you can reach out to us for a discussion on how to manage labour law compliance in such dynamic times.