India is set to adopt a new labour code in the new financial year of 2022-2023. The four labour codes are expected to introduce sweeping changes that would affect both businesses and employees. A senior source within the government told the Press Trust of India that the codes on wages, social security, industrial relations, occupation safety, health and working conditions are likely to be introduced in the next financial year.
Here are six things to know about the labour codes that will be introduced in the next financial year of 2022-2023.
- Labour laws are in the concurrent list:
The labour laws in India fall in the concurrent list. It means that the labour laws in the country are different in every state and the laws of the Center may not apply in a state. The labour codes were set to be implemented in April 2021. Since labour falls in the concurrent list, both the Center and the state have to both notify the rules under these four codes to make them the laws of the land. The positive note is that many states are in the process of drafting policies in this regard.
- Impact on employees:
If the labour codes are implemented in the country, it will drastically affect the way industrial houses treat their employees. It will also have an impact on the working hours, the take-home salary and other rights of the employees. For example, once the code on wages is adopted and implemented, there will be a significant change in the way basic pay and provident fund of the employees are calculated.
- Change in the definition of the word ‘wage’:
The word ‘wage’ will have a key change in its definition. This change would impact the take-home pay while increasing the retirement savings. This is something that a section of employers are opposing as it may lead to an increase in their employee costs. Up till now, employers have been splitting wages into different allowances to keep the basic wages low so that the contribution to the provident fund remains low and to reduce income tax outgo. The new wage code provides for the provident fund contribution as a prescribed proportion of 50% of the gross pay.
- Would allow greater flexibility to employers:
The four labour codes are expected to introduce drastic changes in the labour sector that would affect both businesses and employees. Employers would have greater flexibility in rolling out short-term work contracts. However, industrial strikes are expected to become harder as the new national wage floor could benefit blue-collar workers. Moreover, informal workers and gig workers will have a new social security net.
- Would improve the ease of doing business:
The new industrial relation code would reportedly improve the ease of doing business by allowing firms with up to 300 workers to be laid off. It allows firms to retrench and close without government permission. Currently, the industries having up to 100 employees are exempted from government permission for lay-offs, retrenchment and closures.
- Four-day workweek:
The new labour codes have been defined for a four-day workweek. If these codes are implemented, the employees in India would have to only work for four days as opposed to the current five-day workweek. However, employees have to still meet the current 48-hour weekly work requirement. Therefore, they will have to work for 12 hours a day as opposed to the current 8 hours a day.
The new labour codes are revolutionary for a country like India. The new codes will empower both the employers and the employees. The new codes will give them direction to move forward and there will be a new safety net for the gig workers and the informal workers that were missing earlier.
Reference: The Mint.