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Important Things to Know About the Labour Reform Bills Passed in September 2020

On 28th September 2020, the Parliament passed three Labour Law Codes to make necessary changes to the age-old Labour Laws in India.

These three codes namely, the Social Security Code, Industrial Relations (IR) Code, and the Occupational Safety, Health and Working Conditions Code, aim to reform the 29 labour laws currently in effect. The new codes are simplified, comprehensive and transparent enough to help employers and HR departments maintain compliance without any hassle.

From recognising the latest classes of workers to changing wage thresholds, these codes have made remarkable changes for the benefit of both employers and employees. Although it will take time for the new codes to be 100% effective, some of their key points need to be highlighted to help the establishments prepare for the changes.

Let us know what all have been introduced, eliminated and altered in the new codes

Social Security Code 2020
The Social Security Code replaces a series of acts about existing labour laws, like the Employees State Insurance Act 1948, Employee’s Compensation Act 1923, Employees Provident Fund Act and Miscellaneous Provisions Act 1952, Maternity Benefits Act 1961, Payment of Gratuity Act 1972, Unorganised Workers Social Security Act 2008, and more.

Under the new code, the basic pay of employees needs to be 50% of the total remuneration. Contractual labour will be included in the definition of ’employees’ in an establishment, which is a drastic move by the government to recognise gig workers and independent contractors.

Earlier, an employee needed to complete the minimum tenure of 4 years and 240 days in an organisation to receive payment of gratuity while exiting the company. But under the new code, this requirement has been eliminated. Voluntary opting out of EPF contributions have also been allowed, but not for individual employees. However, reduction in the contribution rates for ESI coverage has been encouraged based on the different classes of workers and their respective earnings, so that the employees can receive more cash in hand. It will help in situations like the current pandemic when people think to focus on their present more than the future. Last but not least, the upper limit of INR 20,000 for maternity benefit has been removed.

Industrial Relations Code 2020
This code has replaced the extant statutes of the Trade Unions Act 1926, The Industrial Employment Act 1946, and the Industrial Disputes Act 1947. One of the important features of this code is the change of definition of ‘strikes’, which will now require the nod of at least 50% of workers to be taken forward. Further, no trade union or group will now be allowed to hold strikes or lockouts without prior notice. A 14-days cooling period should also be offered to help the employers come up with an effective solution before a strike takes place.

The definition of ‘industry’ has also been changed to exclude the establishments involved in social, charitable or philanthropic activities. Fixed-term employment has been reduced to one year to qualify for the payment of gratuity. Under the new IR code, ‘workers’ will also exclude employees at the supervisory levels, earning more than INR 18,000 monthly.

While the trade unions will be recognised officially at the central level for the first time in history, negotiating or bargaining agents will be appointed to discuss salient matters with the employer in the case of a dispute.

All employers also need to now contribute to a re-skilling fund organised by the government to ensure future growth and career development of industrial workers.

Occupational Safety, Health and Working Conditions Code 2020
Like the two previous codes, this one too has replaced a series of old labour laws under the Factories Act 1948, Contract labour Act 1970, Mines Act 1952, Plantations Labour Act 1951, Dock Workers Act 1956, and eight more.

While the definition of ‘workers’ has included everyone, except the supervisory members, earning more than INR 18,000 in an establishment, ‘core activities’ of the factory have excluded the involvement of contractual labour. The definition of ‘migrant workers’, however, has been changed to include everyone recruited directly by the employer from another state.

Some other exciting alterations have been made regarding overtime duty and night shifts for women workers. Under the new code, prior consent has been mandated in the case of such changes to regular work schedules. For the maternity benefits provision, the requirements for availing crèche facilities have been relaxed a bit. Now, any establishment with more than 50 workers (not 30 women workers) will need to provide the mothers with this facility. Further, employers have been barred from recruiting unlicensed contractors.

While closing an establishment, a 30-day notice should be sent to the registration officer, and the payment of dues and retrenchment compensation need to be cleared within the period.

Wrapping it up
In all the three new codes, focus towards increasing digitisation of procedures has been recommended. Gig and platform workers have also been recognised as essential contributors to the nation’s economy. Hence, you can see that these new codes are on par with the current and future trends in the industrial sphere to simplify compliance processes.

It will help the new generation of entrepreneurs, full-time, and gig workers to contribute towards economic growth seamlessly.

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