Indian labor law regulates the labor and employees in India. The law seeks to be a mediator between workers, trade unions, entities, and the government. The constitution provides the rights to protect labor and workers from unfair practices by business entities. The labor laws help in maintaining a fair relationship between employees and their companies.
The empowerment of workers is necessary and for this, the Central Government has taken the historical step of codifying 29 laws into 4 Codes, so that workers can get security along with respect, health and other welfare measures with ease.
- The Code on Wages, 2019 (Wage Code)
- The Occupational, Safety, Health & Working Conditions Code, 2020 (OSH Code)
- The Code of Social Security, 2020 (SS Code)
- The Industrial Relations Code, 2020 (IR Code)
These Labour Reforms will enhance Ease of Doing Business in the country. Employment creation and output of workers will also get enhanced. The benefits of these four Labour Codes will be available to workers of both organised and unorganised sector. Now, Employees’ Provident Fund (EPF), Employees’ Pension Scheme (EPS) and coverage of all types of medical benefit under Employees’ Insurance will be available to all workers.
Code on Wages, 2019
Employee & Worker
‘Employee’ includes persons carrying out managerial and administrative work
‘Worker’, includes working journalists and sales promotion employees
Wages
Wages is defined as remuneration by way of salaries, allowances or otherwise
- Includes basic pay, dearness allowance and retaining allowance, if any
- Specifically excludes components such as statutory bonus, value of house accommodation and utilities (light, water, medical etc.), employer contribution to provident fund/ pension, conveyance allowance/ travelling concession, house rent allowance, remuneration payable under settlement or award, order of a Court / Tribunal, overtime allowance, commission, gratuity, retrenchment compensation
- The specified exclusions, however may not exceed 50% of all remuneration, and in the event of exceeding, such excess amount will be considered as wages
Minimum Wages
- Floor wage will be notified by the Central Government
- Minimum wage to be fixed by the Central or State Government, as the case may be
Payment of Wages
- Payment of monthly wages – 7th of succeeding month
- Full & Final settlement within two working days (including resignation)
- Limitation period for filing the claims is 3 years
- Burden of proof is on employer for claims filed by employee
Equal Remuneration
No discrimination is permitted on the basis of gender
Bonus
Applicable to establishments employing at least 20 employees on any day in the accounting year
Authority, Penalty
- Inspectors-cum-Facilitators
- Graded penalty for different types of contravention
- Compounding of offences
Occupational, Safety, Health & Working Conditions Code, 2020
- Employer includes Contractor and legal representative of a deceased employer
- Employer includes Contractor and legal representative of a deceased employer
- Contract Labour includes inter stage migrant workers within the ambit
- Independent director excluded for the position of ‘Occupier’
- Core activity includes any activity for which an establishment has been set up including an activity essential or necessary thereto
- Manufacturing process definition has been expanded
- Applicability – Applies to establishments employing 10 workers (1 in case of an establishment undertaking hazardous operations)
- Registration – Establishments are required to register within 60 days of the commencement of the Code
- Working Hours
- 8 hours / day and 6 days / week
- Prior consent for OT and 2X wages
- Female employees – 7 p.m. till 6 a.m. with their consent
- Leave with wages
- 180 days or more – calendar year’
- 1 day of leave for every 20 days of work per year
- Requisites
- Hygienic work environment with good facilities
- Conduct free annual health check-up for employees
- Appointment letters to every employee
- Welfare activities
- Creche (50)
- Canteen (100 vs 250)
- Safety officer (250 vs 500)
- Potable drinking water, locker / shelter rooms, etc., as prescribed
- Factory
- 20 or more workers (with aid of power)
- 40 or more workers (without power)
- Appropriate Government will be the State Government for OSH in a factory
- Appropriate Government has power to exempt establishments or class of establishments from any provisions of the OSH Code
- Contract Labour
- Applicability revised to 50 from 20 workmen
- No principal employer registration
- Wage payments through electronic mode
- Use security deposit in case of failure of wage payments
- Prohibited for core activity
- Inter State Migrant Workers
- Applicable to every establishment with 10 or more ISMW
- Excludes those individuals whose monthly wages are in excess of INR 18,000
- Benefits under PF or ESI
- Welfare facilities to be provided by the establishment
- Journey allowance
- Employees to be self-sufficient and report unsafe situations
- Recognizes the rights and needs of transgender employees
- Enhanced role of Inspector cum Facilitator
- Occupational safety boards at the National and State level
- Emphasis on compliance rather than penalising the employer
- Provision for compounding of offences
- Specifically excludes the jurisdiction of civil courts
Code on Social Security, 2020
- Establishments shall be registered (electronically), unless already registered under any other labour law
- Provision for cancellation of registration, if the establishment’s business activities are in the process of closure
- Inclusion of new category of worker – gig and platform workers
- Schemes for unorganized sector, self employed, gig and platform workers
- Defined benefits to Fixed Term Employment (FTE)
- Central Government will be the Appropriate Government for an establishment operating in more than one State (except in the case of Factory and Plantation)
- Provident Fund
- Applicable to establishments with 20 or more employees
- Aadhaar based registration is mandated
- Provides for specifying differential rates of employees’ contribution
- Employee State Insurance
- Applicable to establishments with 10 or more employees
- Mandatory for establishments carrying out hazardous activities
- Option for voluntary coverage
- ESIC can provide benefits to employees and recover from employer in case of default by the employer
- Social Security Organisations & National and State-level Social Security Boards
- Toll free call centre or helpline numbers
- Report vacancies to career centers
- Different threshold for eligibility for gratuity of permanent and fixed term employees
- Limitation period of five years for initiation and two years for concluding enquiries
- Maternity benefits can be deprived if dismissed / discharged for any gross misconduct
- Inspector cum Facilitator to provide information and advice to employers and employees
- Enhanced and stringent penalties for employers who fail to pay contributions
- No compounding for repeat offences
Industrial Relations Code, 2020
- Industry excludes domestic services, establishments owned / managed for carrying out charitable, social or philanthropic services
- No retrenchment compensation for Fixed Term Employees (FTE)
- Termination of a worker on the grounds of continued ill-health is not considered as retrenchment
- Concerted mass casual leave at least by 50% of workers shall be construed as strike
- Willful go-slow shall be construed as unfair practice on part of the worker
- Establishment with less than 300 workmen can lay-off, retrench, close without government approval (earlier 100)
- Employer to contribute an amount equivalent to 15 days wages for every retrenched worker towards re-skilling fund of the government
- 14 day notice period for strikes and lockouts in any industrial establishment
- Period for filing a grievance application is reduced from 3 years to 1 year
- Number of members in the grievance redressal committee shall not exceed 10
- Conciliation officer to hold proceeding within 2 years from date of dispute (as against 3 years)
- Industrial disputes can be voluntarily referred to arbitration by the employer or workers through a written agreement
- Penalty for different types of violations
- Provision for compounding of offences
- Standing Orders
- Applicable to industrial establishments in which 300 or more workers
- Central government shall draft the model standing orders
- Certifying officer shall certify within 60 days, otherwise deemed approval
- Employers shall consult the trade union / negotiating council
- Trade Union
- Recognition of trade union
- 1 trade union – sole negotiating union
- > 1 – union having 51% or more workers shall be the sole negotiating union
- > 1 union with no union having 51% or more workers support – sole negotiating council to be formed
Points to ponder..
- Understand applicability of the provisions of the Code
- Identify changes required in the policies and processes
- Review employee agreements, third party contracts, etc.
- Adapt to digital approach / evaluate technological upgradation
- Quantify the financial impact due to the changes proposed
