New Labour Codes

In News

• India is likely to implement four new labour codes on wages, social security, industrial relations, and occupational safety by the next fiscal year beginning 2022. 

About

• Labour is a concurrent subject: States are required to frame regulations on their part as labour is a concurrent subject.

Major Highlights of the New Labour Code

• Code on Wages, 2019:
  • Applying to all the employees in organized as well as unorganized sectors. Under these new codes, a number of aspects related to employment and work culture, in general, might change including the take-home salary of employees, working hours, and the number of weekdays.
• Code on Industrial Relations, 2020
  • Employees in India may be able to enjoy a four-day workweek from next year, as opposed to the current five-day workweek.
  • In that case, however, employees will have to work for 12 hours on those four days since the labour ministry has made it clear that even if the proposal comes through, the 48-hour weekly work requirement has to be met.
• Code on Social Security, 2020:
  • The regulations restrict allowances to 50 per cent, which implies that half of the salary would be basic wages and contribution to provident fund is calculated as a percentage of basic wages that involves the basic pay and dearness allowance (DA).
  • Under the current labour regulations, the employer’s percentage-based contribution towards the PF balance depends on the employee’s basic pay and dearness allowance.
• 13 states have pre-published draft rules:
  • At least 13 states have pre-published draft rules on these laws. The Occupational Safety, Health and Working Conditions Code is the only code on which states have pre-published the draft rules.
  • The highest number of draft notifications has been pre-published on The Code on Wages by 24 states/UTs followed by The Industrial Relations Code (by 20 states) and The Code on Social Security (18) states.

Issues

• Impact take-home pay: A key change in the definition of “wage” would impact take-home pay, but increase retirement savings, something that a section employers are opposed to as it may increase their employee costs.
• Burden on firms: Firms will have to bear a higher provident fund liability.
• Strikes may become harder: Due to these new changes, industrial strikes may become harder which is a negative impact on the workers.

Significance

• Four-day workweek: it is likely that employees may be able to enjoy a four-day workweek from next year, as opposed to the current five-day workweek.
• Management: It will also drastically alter the way industrial houses treat their employees.
• Sweeping changes: These are expected to introduce sweeping changes that would affect both businesses and workers.
• Short-term work contracts: Employers would have greater flexibility in rolling out short-term work contracts
• New social security net: A new national wage floor could benefit workers, besides informal and gig workers will have a new social security net.
• Improve ease of doing business: The new industrial relation code would also improve ease of doing business by allowing firms with up to 300 workers to go ahead with lay-offs, retrenchment and closure without government permission.
  • At present all firms with up to 100 employees are exempted from government permission for lay-off, retrenchment and closure.

Source: LM