New Wage Code: What’s New For Employees?

Within the framework of legislation, the new laws accommodate the minimum wage requirements and welfare needs of unorganised sector workers, including those who are self-employed and workers


Over the years, the Government of India and several State Governments have been taking various measures to promote the ease of doing business in India. The four newly proposed Labour Law Codes – Wages, Industrial Relations, Social Security, and Occupational Safety, Health, and Working Conditions – are designed to facilitate the ease of compliance, increase openness and accountability, and create employment opportunities, making it easier to conduct business in the country.

India is slowly edging towards a new era in labour and employment law. The new Labour Codes are aimed at simplification of the current labour laws and promoting digitisation, and thereby easing the burden of compliance for employers besides providing social security for all workforce.

There is a high possibility that the Centre will implement its four labour codes on wages, social security, industrial relations, occupational safety, health and working conditions in the near future. According to the earlier plans, the codes would be implemented by April 2021, but as labour is a contemporaneous subject, both the centre and states had to notify rules under these four codes for them to take effect.

Bhupendra Yadav, Labour Minister expressed that recently 90 per cent of the states have already drafted rules for the four codes.

During 2019 and 2020, 29 central labour laws were merged, rationalised, and simplified: 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, as per the survey. Within the framework of legislation, the new laws accommodate the minimum wage requirements and welfare needs of unorganised sector workers, including those who are self-employed and workers.

Accoridng to Vidur Gupta, Director, Spectrum Talent Management said, "The newly enacted Labour Codes are 29 central labour laws combined into 4, and focus on an array of reforms relating to wages, social security (pension, gratuity), labour welfare, health, safety and working conditions (including that of women). With the implementation of the same, there will be a drastic change in EPF contribution of an employee, work timings, as well as take home salary & leave encashment. This simplification is a part of a maturing labour economy and will make things more uniform and easy to implement".

The implementation of any new law brings its own challenges. As per the industry reports, organizations are both concerned and intrigued since it has the potential to boost employee costs and compliance expenditures. In other words, it not only affects the bond between

employers and employees but also impacts the achievement of organisational objectives and goals.

But the real question is – Are all the industrial sectors prepared to adapt and adjust to these new labour codes?

What are The New Labour Codes And Its Impact On Employees?

· If implemented, the four codes will fundamentally change industrial firms' practices, treating their employees as walking hours, taking home salaries, and other rights. In the wake of the new wage code, there will be significant changes to the way basic pay and Provident Funds (PF) are calculated for employees.

· There would be a substantial impact on take-home pay, but it would also increase retirement savings, which some employees are opposed to because it may increase the cost of hiring employees.

· The basic salary for employees will have to be 50 per cent of the growth salary as per the new code. This will result in a reduction in their take-home pay but an increase in their PF contributions.

· As a result of the new law, the company will allow the employees to work for four days a week instead of five, but in that case, the working hours will be increased from 9 to 12 as they must meet the 48-hour weekly work target. The implementation of four days a week will provide the employees with three days of vacation. If the employee's work exceeds the 48 hours required, then overtime should be paid.

· According to the new wage code, employers must make final settlements with employees within two days of the last work. The complete payment of salaries and dues is currently made 45 to 60 days after the employee has left his or her job.

In a survey conducted by Karnataka Employers’ Association and BCP Associates, Pratik Kumar, CEO Wipro Infrastructure Engineering & Executive Director – Wipro Enterprises stated that, “The changes that the four codes are expected to bring about have been long overdue and it has been an industry ‘ask’. The codes aim to enhance social security of the workforce and guide implementation of labour law compliance. The codes will cut down on significant systemic complexities and help accelerate economic growth. On their part, organizations need to revisit their HR policies and relook at their employee compensation structure. They have to conduct their own impact analysis and critically look at their own compliance practices.”

Commenting on the study findings, Ritobrata Sarkar, Head of Retirement, WTW India, said: “Organisations are gradually coming out of the pandemic survival mode and focusing on issues such as the long-term implications of retirement adequacy and employee benefits. Our study shows that the retirement benefit landscape in India is evolving, with organisations retaining superannuation as an option in addition to promoting NPS.”

While both these avenues co-exist, it will be critical for organisations to consider the regulatory environment, flexibility for employees, cost-benefit analysis and most importantly, employee experience as they review their long-term employee benefits strategy and mix. That said, NPS continues to be a focus area with a large majority exploring strategies to increase employee participation rates.

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