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INDIA’S NEW LABOUR CODES- BY FAR THE BIGGEST CHANGE TO LABOUR LAWS IN INDIAN HISTORY?

Date | Version June 29 2022, | 1.0
Keywords ‘Labour  law’, ‘Labour Codes’
List of Legislation(s) Referred i. The Code on Wages, 2019

ii. The Industrial Relations Code, 2020

iii. Code on Social Security, 2020

iv.The Occupational Safety, Health, and Working Conditions Code, 2020

Jurisdiction India

 

Abstract- This write-up gives an overview of the provisions of the new labour codes introduced in India and the status of implementation.

INTRODUCTION

In India, several legislations have been enacted to promote the condition of labour. There are 44 labour-related statutes promulgated by the Central Government, of which 29 legislations are being amalgamated into four new labour codes. The four new labour codes are:

  • Code on Social Security, 2020,
  • Code on Wages, 2019
  • Industrial Relation Code, 2020,
  • Occupational Safety, Health, and Working Conditions Code, 2020

The Codes deal with, among other things, minimum wages, accidental and social security benefits, occupational safety and health, conditions of employment, disciplinary actions, formation of trade unions, and industrial relations.

To date, the provisions of Section 142 of the Code on Social Security, 2020 and the provisions related to the Central Advisory Board as specified under Section 42 and 67 of the Code on Wages, 2019 have come into effect[1]. The President has given his assent to the Central Government for all the four Codes, but the Central Government has not yet announced an ‘Effective date’ for their implementation. However, since legislation concerning ‘welfare of labour including conditions of work, provident funds, employers’ liability, workmen’s compensation, invalidity and old-age pensions and maternity benefits is in the concurrent list, rules are required to be framed by the Central Government as well as by the State Governments. An overview of the applicability and objectives of the codes is as under:

 

THE FOUR LABOUR CODES
Code on Wages, 2019

The Code on Wages seeks to regulate wage and bonus payments in all employments where any industry, trade, business, or manufacture is carried out. It incorporates four legislations: the Payment of Wages Act, the Minimum Wage Act, the Payment of Bonus Act, 1965, and the Equal Remuneration Act.

Coverage: The Code will apply to all employees. The Central Government will make wage-related decisions for employment, such as railways, mines, and oil fields. State Governments will make decisions for all other employments[2].

The main features of the Code are:

  1. The State or Central Government shall not exceed five years to revise minimum wages.
  2. The definition of ’employers’ includes any person who directly or indirectly employs one or more persons at an establishment.
  3. The Payment of Wages Act applies only to employees under wages below Rs. 24,000 per month. This threshold limit is now being removed under the Code on Wages. Hence, the Code shall apply to all employees irrespective of monthly wages.
  4. The Code provides a standard definition of the term ‘Wages’, as opposed to the different definitions given under the Payment of Wages Act, 1936, the Minimum Wages Act, 1948 and the Payment of Bonus Act, 1965.
  5. According to the conditions applicable in the Code, the employer shall pay wages not less than 50% of total remuneration. The computation of wages will include basic pay, dearness allowance, and retaining allowance, and it excludes house rent allowance, conveyance, statutory bonus, overtime allowance, and commissions. Minimum 50% of Cost-to-Company shall comprise basic pay and dearness allowance.
  6. It prohibits employers from paying wages less than the minimum wage. The Central or State Governments, as the case may be, are required to notify minimum wages based on (i) the time or number of pieces produced, (ii) skill of workers and (iii) work difficulty.
  7. The Central and State Government shall constitute Advisory Boards per the Code’s provisions. Central Advisory Board shall comprise members representing employers and employees, including independent persons and five state government representatives. State Advisory Board shall comprise representative members of employers and employees, including an independent person.
  8. State Advisory Boards will consist of employers, employees, and independent persons. Further, one-third of the total members of the central and state Boards will be women. The Boards will advise the respective governments on various issues, including: (i) fixation of minimum wages and (ii) increasing employment opportunities for women.
  9. As per the Code, the Central Government will fix the floor wage, considering workers’ living standards. It is to be noted that the floor wages will be different for different geographical locations.
  10. The minimum wages decided by the Central or State Governments must be higher than the floor wage. If the minimum wages fixed by the Central or State Governments are higher than the floor wage, they cannot reduce the minimum wages.
  11. The employer has the right to deduct wageson the grounds including fines, absence from duty, accommodation provided by the employer or the advance payment made to the employee. It is to be noted that the deductions should not be more than 50% of the employee’s total wage.
  12. The employees whose wages do not exceed a specific monthly amount are entitled to an annual bonus of at least 8.35% of their wages or Rs. 100/-, whichever is higher. As per the Code, an employee can receive a maximum bonus of 20% of his annual wages.

Code on Social Security, 2020

The Code on Social Security seeks to amend and consolidate the laws relating to social security to extend social security to all employees and workers either in the organized or unorganized or any other sectors.

It incorporates nine legislations: The Employees’ Compensation Act, 1923, The Employees’ State Insurance Act, 1948, The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, The Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959, The Maternity Benefit Act, 1961, The Payment of Gratuity Act, 1972, The Cine Workers Welfare Fund Act, 1981, The Building and Other Construction Workers Welfare Cess Act, 1996 and the Unorganized Workers’ Social Security Act 2008.

Coverage: The Code shall apply to any establishment by notification of the Central Government subject to the threshold specified[2].

The main features of the Code are:

  1. Definitions for fixed-term employment, home-based worker, self-employed worker, platform worker and gig worker have been provided.
  2. The definition of ‘employee’ was introduced and is applicable across all parts of the Code.
  3. As per Section 3 of the Code, it is not mandatory to obtain registration if the industry establishment is already registered under any other Central labour law.
  4. Section 4 of the Code provides the enforceability of social security organizations and their constitution. It is required for fund administration for different types of workers.
  5. As per Section 125 of the Code, a fixed limitation period of 5 years will be set, including proceedings and inquiries for the determination of the money dues of an employee.
  6. Aggregators have been introduced in the Code as a digital intermediary or a marketplace for a buyer or user of a service to connect with the seller or the service provider. As mentioned in Schedule 7 of the Code, the list of aggregators shall contribute 1%-2% of their annual turnover to the social security fund.
  7. Fixed-term employees shall be subjected to payment of gratuity on a pro-rata basis by the employer. The gratuity period has been reduced from 5 years to 3 years for working journalists.
  8. The Code specifies penalties for certain offences such as:
    1. Maximum imprisonment for obstructing an inspector from performing his duty has been reduced from one year to six months.
    2. Unlawfully deducting the employer’s contribution from the employee’s wages has been changed from imprisonment of one year or a fine of Rs 50,000 to only a fine of Rs 50,000.
  9. The Central Government may defer or reduce the employer’s or employee’s contributions (under PF and ESI) for up to three months in the case of a pandemic, endemic, or national disaster.

Industrial Relation Code, 2020

The Code on Industrial Relation seeks to simplify the compliance process and promotes ease of doing business in an establishment. It incorporates three legislations: The Industrial Disputes Act, 1947, The Industrial Employment (Standing Orders) Act, 1946 and The Trade Unions Act, 1926.

Coverage: The Code applies to establishments as per the formation of committees and unions:

  1. The Appropriate Government may order to constitute a Works Committee by the employer having an industrial establishment where 100 or more workers are employed or have been employed on any day in the preceding 12 months.
  2. Industrial Establishments with 20 or more workers shall have one or more Grievance Redressal Committees to resolve disputes arising from individual grievances.
  3. Any trade union having seven or more members may register under the Code electronically or otherwise.
  4. The Standing Orders apply to every industrial establishment where 300 or more workers are employed or were employed on any day of the preceding 12 months.

The main features of the Code are:

    1. Introduces definitions of both ‘employee’ and ‘fixed-term employment.’
    2. The term ‘workmen’ is replaced and renamed ‘worker’ in the Code.
    3. Definition of the term ‘strike’ is now denoted as ‘mass casual leave’ by more than 50% of workers on a given day.
    4. It is now mandatory under the Code to approach the grievance redressal committee in case of any grievance.An inquiry, along with its investigation, needs to be completed within 90 days. The time limitation starts from the date of the worker’s suspension.
    5. The standing orders only applied to a threshold above 100 or more workers as per the Industrial Establishment Standing Order Act, 1946. The threshold of standing order has now been increased from 100 to 300 workers.
    6. The Code has introduced a ‘sole negotiating union’ in establishments with more than one trade union. Such sole negotiating union must have 51% or more workers as members per Section 14 of the Code. Only a sole negotiating union shall be permitted to negotiate terms with the employer. If there’s no eligible sole negotiating union, a negotiating council will be formed, having at least 20% of the workers as members.
    7. The Code provides provisions for workers to secure employment after being laid off. A fund shall be initiated consisting of contributions from the employer and the Appropriate Government.
    8. The mechanism for resolving industrial disputes shall be constituted by the Central Government comprising a national industrial tribunal and one or more industrial tribunals.
    9. No person shall go on strikes and lockouts in breach of contract:
  • without giving to the employer notice of strike/lockout, as hereinafter provided, within sixty days before striking; or
  • within fourteen days of giving such notice; or
  • before the expiry of the date of strike/lockout specified in any such notice; or
  • during the pendency of any conciliation proceedings before a conciliation officer and seven days after the conclusion of such proceedings; or
  • during the pendency of proceedings before a Tribunal or a National Industrial Tribunal and sixty days after the conclusion of such proceedings; or
  • during the pendency of arbitration proceedings before an arbitrator and sixty days after the conclusion of such proceedings

during any period in which a settlement or award is in operation, in respect of any of the matters covered by the settlement or award.

Occupational Safety, Health and Working Conditions Code, 2020

The Code on Occupational Safety, Health and Working Conditions seeks to regulate workers’ health and safety conditions in establishments with ten or more workers and all mines and docks

It incorporates thirteen legislations: Factories Act, 1948, Mines Act, 1952, Dock Workers Act, 1986, Contract Labour Act, 1970,  Inter-State Migrant Workers Act, 1979, The Plantations Labor Act, 1951, The Working Journalist and Other News Paper Employees (Conditions of Service and Miscellaneous Provision) Act, 1955, The Working Journalist (Fixation of Rates of Wages) Act, 1958, The Motor Transport Workers Act, 1961, The Sales Promotion Employees (Conditions of Service) Act, 1976 and The Beedi and Cigar Workers (Conditions of Employment) Act, 1966.

Coverage: The Code applies to the following:

  1. Establishments employing at least ten workers, and irrespective of the number of workers in all mines and docks.
  2. Workers and all other persons engaged in a managerial, administrative, or supervisory role (with a monthly wage of at least Rs 15,000/-).
  3. Further, specific provisions of the Code, such as health and working conditions, apply to all employees, excluding apprentices.
  4. Contract labour engaged through a contractor in the offices of the Central and State Governments (where the respective Government is the principal employer).

The main features of the Code are:

  1. Special provisions specify leave requirements and working hours for workers employed in transport, journalism, and sales.
  2. Leave encashment at the time of discharge/dismissal, death or superannuation during employment are laid out under Section 32 of the Code. Provisions relating to leave encashment are laid out for availing at the end of the calendar year. Most notably, the Code provides for carry-forward of leaves in case a worker does not avail the whole of the leave allowed to him in any calendar year. However, the total number of leave days that may be carried forward cannot exceed 30 days, and any leave with wages that have been refused can be carried forward without limit.
  3. Provisions are included regarding the employment of women between 7 pm to 6 am with conditions related to their consent and safety, working hours, and holidays. If the employment of women is dangerous for their health and safety, the employer will provide adequate safeguards to them before their employment.
  4. All the establishments must provide washrooms, bathing places and locker rooms for male, female and transgender employees.
  5. Provision has been introduced for the employer to take consent from the employee for overtime work. It will also apply to a small establishment with up to 10 workers. Further, the workers shall receive twice the wages for their overtime work.
  6. Employers are required to organize annual health check-upsfor the employee at their own cost and expense.
  7. The employer shall mandatorily issue an appointment letter to the employee to promote formalization at the workplace.
  8. The Code prohibits contract labour in core activities except where:
    1. The normal functioning of the establishment is such that the activity is ordinarily done through a contractor,
    2. The activities are such that they do not require full-time workers for a significant portion of the day,
    3. There is a sudden increase in the volume of work in the core activity, which needs to be completed in a specified time.

9.Any person who goes to another state and obtains employment there will be regarded as an inter-state migrant worker. A person drawing wages notexceeding the amount of rupees eighteen thousand per month or such higher amount as may be notified by the Central Government from time to time will be considered inter-state migrants. The inter-state migrant workers are entitled to certain benefits such as:

    1. Option to avail the benefits of the public distribution system either in the native state or the state of employment,
    2. Availability of benefits available under the building and other construction cess fund in the state of employment,
    3. Insurance and provident fund benefits are available to other workers in the same establishment.

IMPLEMENTATION

As a step towards implementation of the four Labour Codes out of the 30 States and 8 Union Territories (UTs),the following number of States/ UTs have pre-published draft Rules for the Codes:

  • 27States/UTs under the Code on Wages, 2019;
  • 23 States/UTs under the Industrial Relations Code, 2020;
  • 21 States/UTs under the Code on Social Security, 2020; and
  • 18 States/UTs under the Occupational Safety, Health and Working Conditions Code, 2020[1].

Implementation of the new labour codes in India appears to have been delayed. A press release issued by the (Indian) Ministry of Labour and Employment on March 21, 2022, provides an update on the progress of the new labour codes but does not contain information regarding their ‘Effective date.

The delayed implementation may be viewed as ‘preparatory time’ for the industry to:

  1. Bring about an attitudinal shift towards employee welfare
  2. Re-work their human resource policies
  3. Plan the consequential impact on operating costs.

It is time to recognize that the issue of ’employee welfare’ is closely connected to the nation’s health. Undue delay in implementation of the Codes and uncertainty about the ‘Effective dates’ will defer the gains for the employees and very likely make it difficult for the industries to adopt the same in a timely manner.

Disclaimer: The content of this article is intended to provide a general guide to the subject matter. Specialist professional advice should be sought about your specific circumstances. The views expressed in this article are solely of the authors of this article.