Recently the government has brought up four new labor laws which entail 29 core labor codes regarding wages, social safety, occupational security, and commercial disputes. These new codes are in synchronization with the changing labor market developments and simultaneously have adopted the minimum wage needs and welfare requirements of the non-systematized sector employees, along with the self-employed and migrant people, within the structure of the legislation. About 90% of the states have already issued draft policies on these 4 labor laws that are expected to become operational soon.
Here are all the details about the modifications that will be introduced by the new labor codes in this financial year.
As per sources, the new labor laws will incorporate a 4-day workweek, instead of the existing 5-day workweek. With this, an employee will enjoy a 3-day holiday per week, but, they'll have to work for 12 hours on those 4 days to maintain the weekly working hours condition. The Labour Ministry has declared that even though the policy comes through, the 48-hour weekly work condition must be met.
- Basic pay to be 50% of CTC
The new wages code mandates for businesses to ensure that 50% of personnel’s CTC is basic pay, while the rest 50% incorporates different worker allowances, which include house rent, overtime, etc. If the employer offers any extra exemptions or allowances that are above 50% of the CTC, it will be considered as remuneration to be included to the wages.
- Greater money in PF, lesser in-hand
Employees and companies ought to experience a greater provident fund liability, therefore there will be more money in PFs and lesser in-hand pay. Input to provident fund is evaluated as a part of basic salary that includes the basic pay and dearness allowance
(DA). Under the existing policies, an employer's percentage-based input in the PF balance relies upon the worker's basic pay and dearness allowance. Since the basic pay will increase, a greater PF amount will be deducted, therefore reducing the in-hand salary of the worker.
- More gratuity cost of businesses
The new labor codes restrict the maximum basic pay to 50% of CTC, thereby successfully growing the worker's gratuity bonus. Under this code, the gratuity balance will be evaluated on a bigger pay base, that will accommodate basic pay along with allowances like a special allowance on wages. This is predicted to grow the gratuity value of organizations. While boosting the social safety (pension) elements of wages, the new policies are expected to lower the take-home salary of personnel.
There's also an incoming policy that will remunerate overtime payment to the employees for any 15 minutes or greater time.
- Social protection for gig/platform workers
Companies today are progressively recruiting gig/platform workers who work independently of conventional employer-worker relationships. However, these workers are generally not applicable for social safety benefits. Initially, social safety benefits will reach over to gig and platform people. The central government will formulate and appraise appropriate social protection schemes for gig/platform workers for diverse social safety benefits. Also, there's a demand for aggregators to input a certain percentage of their turnover to the social safety fund. Hence, employers hiring gig/platform people must consider these modifications.
- Fixed work-time of 48-hours per week
The government has additionally clarified that a 48-hours working limit per week must be followed and the employers are free to select this work-time and avail it in 4 days, 5 days, or 6-day week frame.
- Modifications to HR, payroll compliance, and techniques to frame the new labor codes
The new laws have aimed to offer improved protection to personnel. Likewise, companies would require to bring about essential changes in their payroll/HR rules and methods which include complete and final agreement within 2 days, remuneration within designated timelines, monitoring overtime, modifications in leave encashment codes, publishing of appointment letters to all, additional safety provisions for ladies personnel, etc.
- Pre-published draft policies in 13 states
The Union Labour Minister has asserted that the Occupational Security, Health and Working Conditions Code is the sole code on which 13 states have pre-published the draft policies. The maximum amount of draft notifications has been pre-issued on The Code on Wages by 24 states/UTs accompanied by The Industrial Relations Code by 20 states and The Code on Social Security by 18 states.
- 4 broad labor codes on wages
With the new law, the government is prepared to entail 44 crucial labor policies into 4 broad labor codes – code on wages; industrial relations; occupational protection, health, and working regulations; and social protection. The same has acquired the President’s approval in advance. While the code on wages got passed in 2019, the rest of the 3 codes were accredited by both the Houses in 2020.
The success of these modifications will rely on the powerful implementation of the codes. It is the best time for companies to begin assessing the adjustments needed and the effect on the overall value to the organization in addition to HR/payroll procedures and guidelines, to get prepared for the anticipated implementation of these codes. Simultaneously, the workers must also be privy to the effect the new labor laws might have on their salary.