Labour Codes - All You Need To Know About
Labour & Employment

Labour Codes - All You Need To Know About

Almost 90% of the India’s workers amounting to 50 crores are in the unorganized sector which previously had 44 central labor codes to protect their rights like minimum wages and social security. These 44 central labor codes will be replaced by these four labor codes: Code on wages, Industrial relations code, social security code and occupational safety and health and working conditions code. On important thing to note is that labor is a part of concurrent list implying that both centre and the state can make laws on this topic, the centre had already notified these rules in September 2020 but just 12 states have published the draft rules so far and no state has notified the requisite rules under these codes. Thus, the centre aims to implement these rules by the next financial year 2022-23.

New Labour Codes

The new labour codes will change certain aspects relating to work culture and employment in the country, first there will be a significant in the take home salaries of the employees and that will be contributed towards provident fund. This means that the employees' contribution in their PF will increase every month and the in-hand salary would reduce.This restriction would be 50% of the allowances which means half of the salary would be basic wages and contribution to the provident fund is to be calculated as a part per cent of the basic pay and DA (dearness allowance). Here, DA refers to the allowance which is a calculation on inflation and allowance paid to government employees and pensioners in India, Bangladesh and Pakistan and is calculated as a percentage of an Indian citizen's basic salary to mitigate the impact of inflation on people. Second, the labor ministry has made it clear that the 4 day work week will be implemented mandatorily instead of the 5 day work week currently in practice.

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The Code of Wages

The Code of Wages applies to all establishments whether organized or not and aims to ensure timely payment of wages and guarantees minimum wages to all workers. Additionally, it also introduces the concept of floor wage which will be decided by the government after taking into account the minimum standard of living of the workers and will vary according to the geographical areas. Thus, a state under no case is allowed to fix a minimum guarantee which is lower than the floor wage rate determined by the centre.

The Code on Social Security

The Code on Social Security specifically empowers the centre to frame any schemes like EPF, EPS etc for the self employed, unorganized, gig and platform workers and their families for improving their living conditions. Also, this code places an obligation on the firms with more than 20 employees to mandatorily place their vacancies online. Additionally, the central government will setup a ‘social security fund’ for the unorganized workers which will require contributions from the employer companies (called aggregators) and these contributions will be about 1-2% of their annual turnover.

The Code on Industrial Relations

The Code on Industrial relations seeks to expand the definition of worker, thus including persons employed in skilled, unskilled, manual, technical, operational, and clerical capacity. This code also introduced a new provision of fixed term employment, thus now the employers can engage a worker based on a written contract. These fixed term employees will get the same benefits as the permanent employees. Furthermore, these codes also improve the ease of doing business by allowing the firms with up to 300 workers to lay off some of the employees and go for retrenchment and closure without the government’s permission.

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The Occupational Safety, Health and Working Conditions Code

The Occupational Safety, Health and Working Conditions code applies to factories having at least 20 workers if the manufacturing process is being carried out with the aid of power and 40 if the process is being carried out without power. This code places some obligations on the employers. For example, make sure that the workplace is free from hazards that may cause injury or occupational disease to the employees, provide free annual health examinations, etc. It also contains a provision wherein the employers must provide the allowance to the inter-state migrant workers to cover his travel expenses. Moreover, this code provides a very important provision wherein under the One Nation One Ration Card, an inter-state migrant worker would get the ration facility in the state in which he is working and the remaining family members can get the ration in the countries in which they reside.

These codes have been welcomed by the employers so far with the hopes that they will make the business atmosphere more competitive. Still, many unions and groups have criticized these codes for putting the workers at the mercy of the employers, especially in the new Industrial Relations Code. Most of the provisions remain same as before. However, the biggest change is the inclusion of gig workers in employment protection.