Labour Compliance

Key Highlights of New Labour Codes in India

Amendments in labour legislation have become necessary in order to adapt to the changing dynamics of the nation. In lieu of the same, the Government of India has introduced four new labour codes to ensure the welfare of the industrial workers and boost the country’s economic growth, intending to promote a prosperous, empowered and Aatmanirbhar India.

This article focusses the Key Highlights of the New Labour Codes in India to provide a clear view of the various features of the four legislations.

What are the New Labour Codes in India?

There are four new Labour Codes in India that are –

• The Code on Wages, 2019
• The Code on Social Security, 2020^[1]
• The Occupational Safety, Health and Working Conditions Code, 2020 (OSHWC Code)
• The Industrial Relations Code, 2020 (IR Code)

What are the objectives of the New Labour Codes?

The new labour laws are formulated with the following objectives –

• Consolidating, amending and simplifying the labour regulations in India
• Providing flexibility to employers with regard to the hiring/mix employees
• Streaming and enhancing clarity on matters related to contract labour
• Rationalising wages and addressing the inappropriate practices in the sectors
• Systemizing the matters related to union recognition and negotiating agents

What are the Key Highlights of the New Labour Codes in India

The key highlights of the New Labour Codes in enumerated below –

Minimum Wages Code 2019

This legislation deals with the regulation of payments and bonuses in all employments wherein any trade, business, industry or manufacturing is carried out. The four legislations incorporated in this Code are The Minimum Wage Act, Payment of Wages Act, Equal Remuneration Act, and Payment of Wages Act.

Applicability of the Code 

The code is applicable to all employees employed in any sector or industry, and the Central Government would make the wage-related decisions of the employment, which would include mines, oil fields and railways. The State Government will make all other employment decisions.

The key highlights of Minimum wages Code 2019 are –

• Review the minimum wages of the workers after every 5 years
• The definition of ’employers’ involves any person who directly or indirectly employs one or more persons at an establishment.
• Guarantee of timely payment of wages to the workers
• The employer is mandated to pay wages not less than 50 % of the actual remuneration.
• The wages shall be computed, including basic pay, dearness allowance, retaining allowance, and excluding house rent allowance, conveyance, statutory bonus, overtime allowance, and commissions.
• Equal wages irrespective of the gender
• Elimination of regional disparity through the provision of floor wage under the Act
• Constitution of advisory boards by the State and Central Government. Central Advisory Board must comprise members representing employees and employers, including independent persons and 5 state government representatives.
• State Advisory Board shall comprise representatives of employers and employees, including an independent person.
• State Advisory Boards shall comprise employees, employers, and independent persons. Further, 1/3 of the total members of the central and state Boards must be women. The Boards would advise the respective governments on various issues, including (i) fixation on minimum wages and (ii) increasing employment opportunities for women.
• The annual bonus of 8.35% of the wages or Rs 100, whichever is higher if their wages do not exceed a specific monthly wage, can receive a maximum bonus of 20%.
• Determination of the minimum wages based on the skills and geographical area of the workers
• Increase in the wage ceiling from 18000 to 24000 in the Payment of Wages Act that came into effect on 28 September 2017
• The minimum wages determined by the State and Central Government must be higher than the floor wage. In case the minimum wages are higher than the floor wage, the Government cannot reduce the same.
• The employer reserves the right to deduct wages based on absence from duty or fines.
• We are providing health, social, and wage security to over 50 Cr. workers in the organised and unorganised sector.

Occupational, Safety, Health and Working Conditions Code

The Occupational, Safety, Health and Working Conditions Code, 2020, aims to provide a safe working environment for workers. It consolidates 13 labour laws ensuring occupational health and safety at the workplace.

Applicability of the Code

• The code applies to establishments employing a minimum of 10 workers and workers in docks and mines, irrespective of the number of employees in these areas.
• Workers and all other persons involved in administrative, supervisory or managerial roles earn a monthly wage of at least Rs15000.
• The health and safety provision applies to all employees except apprentices.
• Contract Labours engaged through contractors in the office of the State or Central Government irrespective of the Government being the principal employer

The features of this Act are –

• Registration of inter-state migrant workers on the national portal for the creation of legal identities that can help them in availing the social security schemes and benefits
• Special provisions specifying the leave requirements and working hours for the workers engaged in sales, journalism or transport.
• Encashment of leaves at the time of dismissal/discharge, superannuation or death is prescribed under Section 32 of the Code.
• Encashment of leaves can be availed at the end of the calendar year, and the leaves allowed to be carried forward must not exceed thirty days. The leave with wages refused by the employer can be carried forward without limit.
• Annual travelling allowances to the inter-state migrant works which the employer would sponsor
• Employer-sponsored free and mandatory health checkups.
• A benefit to the building and construction worker from the Building and other Construction Workers Cess Fund in case of migrating between states 
• The benefit of ration facilities to the workers residing in one state and their dependants in other states under the One Nation One Ration Card Scheme
• Addressing the grievances of the migrant workers through a dedicated helpline
• Creation of a national inter-state migrant worker database
• No working days for the workers have been cut down from 240 to 180 days together with 1 off for every 20 days of work.
• Liberty to women workers to work in any establishment
• Women workers are to work at night with their consent, followed by necessary facilities and arrangements to be made employer to ensure the safety of those women. 
• Facilities of bathing rooms, washrooms and locker rooms to women, males as well as transgender employees
• Obtainment of consent from the employees for overtime together with providing twice the regular wages for the same 
• Increase in the paid maternity leave from 12 to 26 weeks for the pregnant women 
• Duty of the employer to provide a letter of appointment to enhance the formalisation of employment
• The organisation’s obligation is to set up a crèche facility wherein the number of women workers is 50 or more than the said number.
• Prohibition of contract labourer in core activities except –
• The normal operations of the establishment are such that the activities are ordinarily done through contractors. 
• The activities carried on in the establishment do not require full-time workers for a significant portion of the day. 
• A sudden increase in the number of core activities needed to be completed within a specific time.

The Industrial Relations Code (IR Code, 2020)

This code subsumes 3 labour codes and aims to simplify the compliance procedure and promote ease of doing business together with safeguarding the interests of the trade unions and workers. It also ensures avoidance of any disputes between workers and industrial units in future.

Applicability of the Code

The code applies to establishments according to the formation of unions and committees.

The Appropriate Government may order for the constitution of a Works Committee by the employer in any industrial establishment having

•  100 or more workers employed or have been employed on any day in the preceding 12 months.
• There must be one or more Grievance Redressal Committees to resolve disputes arising from individual grievances in Industrial Establishments having 20 or more workers. 
• Any trade union with 7 or more members may register under the code either electronically or otherwise.
• The Standing Orders shall be applicable to every industrial establishment wherein 300 or more workers are employed or were employed on any day of the preceding 12 months.

 Key Features 

• The code introduces definitions for fixed-term employment and employee.
• The term worker has been replaced and renamed a worker.
• The term strike shall be denoted as mass casual leave by more than 50% of the workers on a given day.

It is mandatory to approach the grievance redressal committee in case of any grievance, and the inquiry and investigation for the same must be completed within 90 days. 

• Workers losing their jobs would be entitled to allowances under the Atal Bimit Vyakti Kalyan Yojna.
• Workers engaged in the organised sector will be entitled to unemployment allowances under this scheme. 
• Fifteen days of wages shall be credited to the bank account of the workers who are retrenched from their jobs for re-skilling
• Setting up two members industrial tribunal for the quick disposal of cases and disputes. 
• Trade unions having 51 % of the votes to be considered as the negotiating party for the workers.
• Setting up a council of trade unions for negotiation with the worker in case none of the trade unions gets 51% votes.
• No person shall be allowed to go on a strike in breach of contract. 
• Without providing notice to the employer at least 60 days before the strike
• within 14 days of giving such notice
•  before the expiration of the date of strike/lockout as specified in any such notice during the pendency of
• any conciliation proceedings before a conciliation officer and 7 days after the conclusion of such proceedings
•  before the National Industrial Tribunal or a Tribunal, and sixty days after the conclusion of the proceedings; or
• arbitration proceedings before an arbitrator and sixty days after the conclusion of such proceedings.

The Social Security Code 2020

The Social Security Code, 2020 is constituted after combining 9 of the previous legislation and seeks social security provides access to various security schemes, which include but are not restricted to pension, maternity benefit, gratuity, and insurance to all the employees and workers irrespective of whether them being in the organised or unorganised sector.

Key Highlights of the Social Security Code 2020

• Inclusion of definitions of home-based worker, platform worker, gig worker, self-employed worker, fixed-term employment
• Introduction of the definition of employees, which would be applicable to all codes.
• Registration of the establishment is unnecessary if the industry is already registered under any other central labour law.
• The fixed limitation period of 5 years for the, which would include the proceedings and inquiry on matters related to the determination of money dues from employees.
• Payment of gratuity on a pro-rata basis to the fixed term employees followed by a reduction in the gratuity period from 5 years to 3 years for working journalists 
• Introduction of Aggregators in the code as a digital intermediary or marketplace for a user or buyer to connect with the service provider or the seller
• The Aggregators shall contribute 1-2% of their turnover to the social security fund as per Rule 7 of the Code. 
• Specification of penalties for certain offences under the code, such as
• Reduction in the maximum term of imprisonment from one year to 6 months in case of obstructing an inspector from performing his duty.
• The provision of imprisonment in case of Unlawful deduction of the employer’s contribution from the employee’s wages have been waived off, and the offence only attracts a fine of Rs. 50,000.
• Access to free treatment at the dispensaries and hospitals run by ESIC through a small contribution.
• Access to the ESIC Hospitals to the workers irrespective of organised or unorganised sectors ESIC dispensaries, hospitals and branches for all 740 districts in India
• Workers involved in hazardous work shall be entitled to the benefits under the ESIC scheme.
• The ESIC access would be provided to the gig workers as well.
• Compulsory registration with ESIC for establishments engaged in hazardous work
• ESIC Benefits to Plantation workers
• EPFO (PF) scheme extended to self-employed individuals and workers in both organised and unorganised sectors
• Removal of minimum service clause for payment of gratuity to fixed terms in case of contractual employees along with the
• Full-time employees entitled to the same social security benefits  
• Registration on the e-shram portal to create a database of employees in the organised and unorganised sector
• Reporting for vacancies online by employers having more than 20 workers 
• Unorganised sector workers to get Aadhaar-based UAN for ESIC and PF scheme benefits.

Status of the Implementation of the New Labour Codes in India

The new Labour Codes were supposed to be implemented on 1 July 2022; however, the delay in implementation is considered a preparatory step for –

• Bringing about a shift in the attitude towards employee welfare
• Reworking the human resource policies
• Planning the consequential impact on operating costs

Conclusion 

The above article helps to conclude that the New Labour Laws are drafted meticulously to ensure the welfare of the employees. But it is essential to acknowledge that the subject of employee welfare’ is closely connected to the health of the nation. The unnecessary delay in implementation of the same and uncertainty about the ‘Effective dates’ can adversely impact the gains for the employees and most likely make it difficult to adopt the same by the industries in a well-timed manner.

Read our Article: Industrial Relations Code: New Labour Law Amendments