New Labour Codes: Big Community Of Employers And Employees Still Seeking Clarity From Govt

Currently, there are over 100 state laws and 40 central laws which lay down and regulate various aspects of labour

The manner in which the implementation of codes is drafted, it may not be possible for a common all-India rollout as there are dependencies on the states. ( Image Source :Getty )

India has always had robust employment and social benefit laws to facilitate a harmonious working relationship between the employer and employee. Currently, there are over 100 state laws and 40 central laws which lay down and regulate various aspects of labour. With the government formulating the new four labour codes, passed by Parliament in September 2020 and as many as 26 states pre-publishing the draft rules for review and comments by relevant stakeholders, as of December 2022, the industry is awaiting guidelines on implementation and roll out dates for quite some time now. While the consolidation and simplification of labour laws by the government is a welcome move, it would have an impact on the employer and employee community.

The new labour codes in the following:

• Wages and Remuneration related

The Payment of Wages Act, 1936, Minimum Wages Act, 1948, Payment of Bonus Act, 1965 and Equal Remuneration Act, 1976 which define various important terms such as employer, employee, category of employees, contractor, wages, mandatory inclusions and permissible deductions from wages, wage period, time of payment of wages, insurance coverage, overtime, retrenchment, death benefits, bonus, how minimum wages are to be fixed, working hours, attendance, and leave, records to be maintained by the employer and dispute management.

Code on Wages, 2019 consolidates the said four Acts.

• Social Security

Other than wages and remuneration, there are benefits to be provided to Employees in order to secure them during employment, their future and that of their nominees in the event of death or accident. Such benefits include Provident Fund, Insurance under ESIC, maternity benefit, gratuity, specific benefits for building and other construction workers, and unorganised workers.

Eight Acts which currently govern the above mentioned are consolidated into the Code on Social Security, 2020.

• Industrial relations

The Trade Unions Act, 1926, The Industrial Employment (Standing Orders) Act, 1946 and The Industrial Disputes Act, 1947 lay down rules and procedures which safeguard Employees from unfair labour practices, operations of a trade union, strikes/lockouts, layoffs, retrenchment, closures and grievance redressal mechanism for Employer and Employee.

The above said three Acts are being consolidated under The Industrial Relations Code, 2020.

• Working conditions, Health and Safety of Employees

The laws and rules about ensuring appropriate working conditions, maintenance of safety and health of employees while on the premises of the employer. Currently, there are about thirteen Acts which define registration requirements, working hours, issuance of appointment letters, mandatory free health check-ups, benefits to inter-state migrant workers, flexibilities to be offered to women employees, appointment of safety officer, record keeping, and reporting of any hazards.

These thirteen Acts are being consolidated into the Occupational Safety, Health and Working Conditions Code, 2020.

In my assessment, with the general elections coming next year, it is possible that the government may prefer to defer the implementation of the labour codes after the elections. The Ministry of Labour and Employment has in the past tried to build consensus on the codes but there were certain factions of employee and employer community which were not in favour of the implementation due to impact that it may have on wages for the employee and additional costs for the employer.

The manner in which the implementation of codes is drafted, it may not be possible for a common all-India rollout as there are dependencies on the states, hence, there could be a probability of state-wise roll out as well.

The draft new labour codes require clarity on many elements especially the definition of wages which is the basis for calculation of various employee benefits. The Codes define components to be included, excluded, limits on certain excluded components and inclusion of remuneration in kind. As on date different social security and labour laws have different definitions of wages and the introduction of a common definition of wages is a positive step. This is one of the key aspects of the new codes that the employer and employee community is awaiting clarity on since this could have a direct impact on the net wages of employees and increase in the wage bill and administrative costs for the employer.

While there are pros and cons of the New Wage Code, this is definitely a matter where the entire employer and employee community is keeping a keen eye on and looking forward to every move that the state and central government takes in this regard. As of now, it seems any discussions and any clarifications will be initiated only towards the end of 2024.

The writer, Mahesh Krishnamoorthy, is the managing director of Core Integra.

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