The Parliament passed four labour codes to the existing Labour Laws between 2019 and 2020. Initially, these reforms were to be implemented from 1 April 2021. The four codes are the Code on Wages, the Code on Social Security, the Occupational Safety, Health and Working Conditions Code and the Industrial Relations Code.
The introduction of these codes facilitates ease of doing business, safeguarding the employees and employers’ interests, and generating employment. These codes will repeal the existing laws to simplify and amalgamate the current Central Labour Laws.
The new rules will see changes in the in-hand salary and the working schedule. The Code on Wages, 2019, applies to all employees, both organised and the unorganised sectors. The Code aims to ensure timely payments and minimum wages. If an employee works for 12 hours a day, then the number of working days will be changed from the mandated five to four days a week.
There has been a revision in the definition of the term “wage”. Various social security and retirement benefit schemes like Provident Fund (PF), Gratuity, etc., will now be considered under wages, unlike the earlier basic salary and dearness allowance. If there is an increase in the basic pay, there will be an increase in the PF, ultimately reducing the in-hand salary. Allowances will have a cap of 50% after implementation. So, 50% of the payment will be wage, and 50% will be allowances. Employers will need to reassess how they structure the payments to employees.