New labour codes will impact salary structure but when will they come into effect?


The four Labour Codes, subsuming 29 central labour regulations, aim to rationalise, consolidate and simplify these complex labour legislations. The rationalization is being done to improve the working conditions of workers, help companies to comply with rules through increased use of technology besides enhancing ease of doing business in India. The codes also seek to expand the coverage of social security (such as pension) to include the unorganised sector, the self-employed, migrant workers etc. within the legislative framework.

The four labour codes that had been approved by the President are the Code on Wages, 2019, the Industrial Relations Code, 2020, the Code on Social Security, 2020 and the Occupational Safety, Health and Working Conditions Code, 2020.

While presidential asset has been received for all the four codes, the central government is yet to notify the effective date of operationalising them. This being a concurrent subject, it is important for the states also to notify the relevant rules and regulations under the four labour codes. Over the last year, there has been significant progress on this front with many states issuing respective draft rules as listed out below:

Draft rules published for all the four codes Draft rules published for one or more of the codes Draft Rules still awaited

Draft rules published for all the four codes Draft rules published for one or more of the codes Draft Rules still awaited
STATES
Arunachal Pradesh Assam Andhra Pradesh
Bihar Maharashtra Meghalaya
Chhattisgarh Mizoram Nagaland
Goa Rajasthan West Bengal
Gujarat Sikkim
Haryana Tamil Nadu
Himachal Pradesh
Jharkhand
Karnataka
Kerala
Madhya Pradesh
Manipur
Odisha
Punjab
Telangana
Tripura
Uttar Pradesh
Uttarakhand
UNION TERRITORIES
Chandigarh Andaman & Nicobar Islands Dadra and Nagar Haveli & Daman and Diu
Jammu & Kashmir Delhi Ladakh
Puducherry Lakshadweep

Impact on employers

Over the past one year, the industry has been speculating on the likely date of implementation of the Labour Codes. The government has also been striving to keep the focus on this topic. Some of these include:

1. The Ministry of Labour & Employment updated their website with a document on the benefits of the new Labour Codes, named “New Labour Code For New India”

2. The government has been focused on getting more states to issue the draft rules under the Codes. As indicated earlier, as of April 2022, 29 States/ Union Territories (UTs) published the draft rules under the Code on Wages, 24 States/ UTs under Industrial Relations Code, 24 States/ UTs under Code on Social Security, and 21 States/ UTs under the Occupational Safety, Health and Working Conditions Code. States such as West Bengal, Andhra Pradesh, Nagaland and Meghalaya as well as union territories of Lakshadweep, Ladakh as well as Dadra and Nagar Haveli & Daman and Diu have not yet issued the draft rules under any of the Codes.

3. Certain provisions of the Code on Wages, 2019 (Section 42 and Section 67 pertaining to the central advisory board in relation to minimum wages) and the Code on Social Security, 2020 (Section 142 pertaining to identification of employees and their beneficiaries for provision of statutory benefits through Aadhaar Card,) have already been operationalised.

However, the broader provisions of the Code are awaiting notification. The labour codes aim to bring in uniformity in definition of various terms across all the four Codes, key being the definition of the term “Wages”. This could trigger significant financial impact on organisations, especially in respect of gratuity. The Codes also necessitate: realignment of various payroll processes, compensation and other policies, setting up of various safety and compliance procedures as well as specified committees etc. Organisations require reasonable time to implement these changes, and hence hope that at least 3 months of transition time would be provided once the effective date is announced to implement the provisions.

The Minister for Labour and Employment was recently quoted in news media as indicating that the Codes would be made effective in 2022. Clearly, it appears that the central government is keen to implement the labour codes soon and hence employers are well advised to study and understand the changes that would be triggered by the codes. Organisations may also assess the impact of the changes brought about by the labour codes, on their existing employee costs and policies, so that they are prepared irrespective of the transition time available once the new codes come into effect. Employers may need to realign their salary structures and human resource-related policies to conform to the provisions of the code. Given the far-reaching impact of the codes, it is important that the industry is provided adequate time to implement the new rules.

Impact on employees

With the ambit of ‘wages’ getting widened under the new codes, the retiral benefits of employees are expected to rise upon the implementation of these codes. The labour codes read with the draft rules lay down many beneficial provisions for welfare of employees such as – extension of social security cover to the unorganized sector workers, mandatory issuance of appointment letters to every employee, annual free health check-up for employees, stipulation of overtime payment at twice the wage to employees, establishment of social security fund for workers of unorganized sector, early settlement of full and final dues on resignation and removal of minimum service condition for gratuity in case of Fixed Term employees amongst others. Delay in implementation of labour codes has certainly deferred these benefits for the employees.

Information for the editor for reference purposes only

Saraswathi Kasturirangan is Partner, Deloitte India.
Tarun Garg, Senior Manager, Deloitte Haskins & Sells LLP



Source link