New Labor Codes: So What?.

#labourlaw #hr #learning #india #reform

New Labor Codes: So What?.

We already knew that 29 labor laws have been reformed and consolidated into 4 labor codes as Code on wages, The industrial relations code, The code on social security, and The Occupational Safety, Health, and working conditions Code. 4 labor laws about wages and bonuses clubbed in Code on wages, 3 laws focusing on industrial relations clubbed in The industrial relations code, 9 social security laws had been clubbed in the code on social security, and the rest 13 laws focused on safety, health had been clubbed in Occupational safety code.

For an honest evaluation of these labor reforms in terms of compliance, I decided to write this article. Furthermore, for any manufacturing facility having no salesperson on board, there are only 15 laws out of 29 to be considered and should be evaluated. Hence, I am focusing my article on these 15 laws only. For the rest of the article all laws should be read as these 15 labor laws only: Employee compensation act, Trade Union Act, Payment of Wages Act, Standing Orders act, Industrial Dispute act, Minimum wages act, ESI act, Factory Act, EPF act, Employment exchange act, Maternity benefit act, Bonus act, Contract labor act, gratuity act, and equal remuneration act.?

The labor codes are not truly consolidated, as separate old laws are included as separate chapters mostly independent of each other; however, the definition clause is common and forms the basis for deciding which laws to be clubbed together. Against a common narrative of drastic changes happening in the labor laws, there is no fundamental change except a few notable and important changes like the common definition of the wage for all laws.?Some redundant provisions had been omitted, and a few changes in the industrial relations act and labor laws are made to widen its scope in terms of employees. You must be wondering so what is changing for me? To answer the question let’s explore the codes a little bit more.

There are three important changes in the definition of Wages, Employee, and Employer for all laws and this will have a direct impact on financials. Wage definition has been formalized and made life simpler for compliance HR managers as it is common for all calculation purposes. However, now gratuity and bonus will not be calculated on just basic wage. The whole concept of bifurcating salary into various components is going to change.

Wage includes basic and such allowances except for conveyance allowance, HRA, and special expenses. Moreover, whatever amount exceeds by calculating the bonus, Employer EPF share, conveyance allowance, HRA, special expenses, OT allowance, amenities payment viz. house accommodation, medical, etc., and commission by 50% is to be considered as wage only. You can follow the following guidelines to bifurcate wages, remember basic + DA should be at least minimum wages.

Monthly Gross Wage Basic + DA %

>=90K 51.0%

>=45K to 90K 52.0%

>=36K to 45K 52.5%

>=30K to 36K 53.0%

<30K 53.2%

Overtime, Bonus, ESI, EPF, and gratuity will be calculated on basic + DA, hence some employees will get less overtime payment, ESI deductions will be less, and in the same way, the employer will also get some benefit. Employee definition will widen its scope to include all workers and staff up to the managerial position. This will have a direct impact on eligibility decisions in terms of benefits as already stated in old laws. Employer includes contractor which clarify the responsibility of contractors and removed some of the ambiguities.

First Law: Code on wages: this code includes the Wages act, minimum wages act, Bonus, and equal remuneration. If you are complying with these laws, nothing drastic changes for you except already discussed above. However these important changes must be considered, as far as compliance is concerned, are time limit to pay the wages as 7th of the following month instead of the 7th or 10th, the deductions are capped at 50% instead of 75%, Full & final of employees should be done within 2 working days, and bonus eligibility limit to be decided by the state government.

The impact of the implementation of the first law: Slight increase in bonus amount due to a slight increase in basic wages. Moreover, cash will be required immediately for any kind of separation, or else a penalty of Rs. 20K will be paid extra for delaying the payments for the first time and be ready for imprisonment and /or fine up to 40K for subsequent offenses.

Questions remain unanswered: Who is liable to pay the bonus to contractual labor??The employee definition includes all employees; however, the code is also defining contractual labor creating confusion.?

Second Law: Industrial Relations Code: This code includes the standing order act, Trade Union Act, and Industrial Dispute Act. If you are complying with these laws, nothing drastic changes except already discussed above. However important changes for consideration, as far as compliance is concerned, are the Standing orders act provision and prior permission to layoff or retrenchment is made mandatory for industries having 300 or more employees, earlier it used to be 100 or more. It is worth mentioning here that for calculating the number of employees all part-timers and contractual employees must be included.

The impact of the implementation of the second law: Some relief is given to industries having employees between 100 and 300, but I advise implementing standing orders as soon as you touch 100 employees for ease of operations and maintaining healthy relations with the employees. Apart from it, the subsistence amount will be reduced, and notice for days duration for strikes/lockdown will be changed from 14-42 days to 14-60 days.

Third Law: Code on social security: this code includes the employee compensation act, ESI act, EPF Act, Employment exchange act, Maternity benefit act, and Gratuity Act. If you are complying with these laws, nothing drastic changes except already discussed above. However important changes for consideration, as far as compliance is concerned, is for fixed-term employees gratuity is payable even if the contractual term is less than 5 years.

The impact of the implementation of the Third law: Fixed-term employment cost will be increased.

Fourth Law: Occupational Safety, Health, and working conditions: This code includes the Factory act and The Contract labor act. If you are complying with these laws, nothing drastic changes except already discussed above. However important changes for consideration, as far as compliance is concerned, is that women are allowed to work at odd hours basis some fulfillment of conditions.

The impact from the implementation of Fourth law: Increase in women empowerment.

My Views: Recent changes in these laws seem to be an eye wash only, no labor reforms as such but must be welcomed also as these will reduce some ambiguities and it's easy to say we have 4 labor laws, not 29, right? So what is your take on this?