Upcoming Labour Codes

Employment

Upcoming Labour Codes

The Labour reforms will ensure ‘Ease of Doing Business.’ These are cutting-edge laws aimed at empowering businesses by minimizing red tape and compliance and existing ‘Inspector Raj’.The new Labour code seeks to cater to the needs of industry and the workers which keep on changing. Accordingly, the law also needs to be changed, reviewed and rationalized. The new Labour Code ensures that minimum wages are paid on time and workers' occupational safety is prioritised. The measures will help to improve the working environment, which will help to boost economic growth.

Since labour is a concurrent subject, both the central and state governments have to frame the rules. The present central government initiated a comprehensive process of labour law reforms by undertaking the exercise of codification of a large number of existing labour legislation in 4 major Labour Codes which are yet to be notified. They are:

  1. The Code on Wages, 2019;
  2. The Industrial Relations Code, 2020;
  3. The Occupational Safety, Health and Working Conditions Code, 2020; and
  4. The Code on Social Security, 2020

Upcoming Labour Codes FAQ's

The Code on Wages, 2019 was introduced to amend and consolidate the laws relating to wages, bonus and matters incidental to the same. 

Highlights:

  • Existing laws define wages in numerous conflicting ways, which has led to confusion. The codes provide a uniform definition of the term wages, which could reduce litigation and ease compliance. 
  • According to the conditions applicable in the Code, employers shall pay wages not less than 50% of total remuneration. Minimum 50% of Cost-to-Company shall comprise of basic pay and dearness allowance. The computation of wages will include basic pay, dearness allowance, retaining allowance, and it specifically excludes house rent allowance, conveyance, statutory bonus, overtime allowance, and commissions. [Section 2(y) of the Code of Wages, 2019]


CHANGES MADE UNDER THE CODE ON WAGES, 2019

Existing Law Upcoming Code
1) Section 20 of the Minimum Wages Act, 1948 provided that any claim for wages could be made within 6 months. In the upcoming code, under Section 45(6) the claim could be made within 3 years.
2. Existing Definition: "employer" means any person who employs, whether directly or through another person, or whether on behalf of himself or any other person, one or more employees in any scheduled employment in respect of which minimum rates of wages have been fixed under Minimum Wages Act.

Note: The provisions of the Minimum Wages Act and the Payment of Wages Act apply only to workers drawing wages below a particular ceiling and working in scheduled employment.
New Definition: Any individual who employs one or more people, directly or indirectly at an establishment is considered as an employer.
3. The legislation facilitates for a Central Advisory Board consisting of:

(i) Representative of employer and employees in equal number
and

(ii) autonomous individuals (not exceeding 1/3rd of the total members).[1]
The Code provides for a Central Advisory Board consisting of:

(i)  Representative of employer and employees in equal numbers.

(ii) autonomous individuals (not exceeding 1/3rd of the total members), and

(iii) 5 representative officials of the State Government to be nominated by the Union Government.[2]
4. The Payment of Wages Act is applicable only to workers earning less than Rs. 24,000 per month.[3] The code is now applicable to everyone, since such a threshold limit has been removed.

The Code introduces provisions for simplifying compliance burdens and promoting ease of doing business in an establishment. 

The code seeks to simplify labour laws by amalgamating various enactments such as:

  • The Industrial Disputes Act, 1947
  • The Trade Unions Act, 1926; and
  • The Industrial Employment (Standing Orders) Act, 1946.

Highlights:

  • The Code has introduced a 'sole negotiating union' in establishments where there are more than one trade union. Such sole negotiating union is required to have the support of  51% or more workers as per Section 14 of the Code. Only the sole negotiating union shall be permitted to negotiate terms with the employer.
  • As per the provisions of the Code, no person shall go on strikes and lock-outs in breach of contract without giving prior notice of 60 days before going on strike or before 14 days of submission of notice or during pendency of conciliation or tribunal proceedings including within 7 days of conclusion of proceeding. (CHAPTER VIII STRIKES AND LOCK-OUTS)

 

CHANGES MADE UNDER THE CODE OF INDUSTRIAL RELATIONS, 2020

Existing Law  Upcoming Code
1. The terms “Fixed term employment”, “Employee'' were not defined.

The term “Workman” was defined in The Industrial Dispute Act, 1947[1].
Both the terms “Fixed term employment” and “Employee” are defined in the new code.

The definition “workman” is substituted and redefined as 'worker'.

A mass casual leave by half or more than half of the workers on any given day will be considered a  ‘strike’[section 2(zk)].
2.The total number of members in the Grievance Redressal Committee (“GRC”) shall not exceed six and shall include one female member if the GRC has 2 members and in case the GRC has more than 2 members, the number of women members may be increased proportionately. (Section 9C ID Act. ) A maximum of 10 members is required to constitute a Grievance Redressal Committee ("GRC"). Such Committee shall have adequate representation of women workers which shall not be less than the proportion of women workers to the total workers employed in Industrial Establishment.
3.  There was no time frame for disciplinary proceedings against a particular worker to be finished within. The preliminary inquiry alongside investigation will be required to finish within the time frame of 90 days, starting from the date of suspension of an individual [Section 38].[2]
4. The Industrial Establishment Standing Order Act, 1946 is only applicable to industrial establishment wherein 100 or more workers are employed[3]. The limit has been increased and now standing orders will be applicable to industrial establishments wherein 300 or more workers are employed.

 

 

 

 

The code on Social Security was introduced to provide social security benefits by extending its goals to the employees and workers.  It is an amalgamation of nine central laws.

Highlights:

  • The code shall be applied to any establishment upon notification to the central government, subject to the specified threshold.
  • Aggregators are defined in the Code as a digital intermediary or marketplace that connects a buyer or user of a service with the seller or service provider. The aggregators listed in Schedule VII of the code will be required to contribute 1% to 2% of their annual revenue to the social security fund.[Section 114 (4)]
  • The term "career centre" is introduced in the Social Security Code for providing information about job openings and vocational guidance to workers looking for work. The central government will eventually establish career centres as any office, location, portal, or employment exchange for the purpose of providing career services. [Section 2 (9)]

CHANGES MADE IN THE CODE ON SOCIAL SECURITY, 2020:

Existing Law  Upcoming Code
1. The existing law does not define “Fixed term employment” or “Platform worker”.  Further, the term “Employee” has also not been defined under certain legislations such as the Maternity Benefit  Act, Unorganized Workers' Social Security Act, etc. 

The Code defines “Fixed Term Employment” and “Platform Worker”.

The term “Employee” had been defined which is applicable across all the provisions.[1]

2. The existing law provides for the establishment of a National Social Security Board for unorganised workers and State Social Security Board for unorganised workers. Chapter 2 of the Code on Social Security, 2020 provides for establishment of various social security organisations. 
3. Lack of time window for determining money dues from a specific worker under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. As per Section 125, no proceeding will be initiated for determination of dues from an employer, after the expiry of the period of 5 years, from the date on which the amount is alleged to have been due from the employer. Further, the provision also requires that the enquiry shall be held on day to day basis, and endeavor shall be made to ensure that the same is concluded in a period of 2 years. 

 


 

[1] https://prsindia.org/billtrack/the-code-on-social-security-2020

[2] Ibid

 

The code was introduced in the Parliament to regulate and manage safety and health conditions in industries and establishments. 

 

Highlights:

  • The Code applies to factories with 20 or more workers and a manufacturing process that uses power, or to factories with 40 or more workers and a manufacturing process that does not use power. [Section 2(w)]
  • Employees will be given a health check-up by the employer once a year and free of cost. [Section 6 (c)]
  • The Code sets up Occupational Safety Boards at the national and state level to advise the Central and State Governments on the standards, rules, and regulations to be framed under the Code. [Section 16 and 17]
     

 

CHANGES MADE VIDE THE OCCUPATIONAL SAFETY, HEALTH and WORKING CONDITIONS CODE, 2020.
 

Existing Law  Upcoming Code
1.Few Key Terminologies like "Employee", "Employer" and "Establishment" were defined inconsistently in various Acts and Rules.  ●        New definition of Employee introduced with a wide coverage.
●        New definition of Employer introduced covering Occupier of a factory.
●        "Establishment" is now defined to include factory, newspaper establishment and plantation in which more than ten workers are employed.
2. Lack of any Central regulations concerning leave encashment policy. Regulations for leave encashment are also included for use at the completion of the calendar year.  

Section-32 of the Code also addresses leave encashment at the moment of discharge/dismissal, death, or superannuation while on the job.

Most importantly, it allows for leave carryforward if a worker does not use all of the leave available to him in any given calendar year. 

The total number of leave days that can be passed over, nonetheless, must not exceed 30 days, and any leave with salaries that has been rejected can be carried forward indefinitely.   
3. Under the Section 49 of the Factories Act the threshold for Appointment of Welfare Officer was 500 workers in a Factory.   Section 24(2)(iv) of the Code states that the Central Government may prescribe for appointment of a welfare officer in every factory, mine or plantation wherein 250 or more workers are ordinarily employed. 
4. Lack of regulations concerning the explicit consent for overtime work.  Provisions are instituted for the employer to take consent from the employee for overtime work. Further, the workers shall obtain an amount twice their wages for their overtime employment.


Latest Updates related to implementation of labour code:

  • At least nine tripartite consultations have been conducted, both virtual and physical, between the Labour Ministry and the stakeholders.[1]
  • As per available information, below mentioned no of states/UTs has pre-published draft rules[2]:

 

Number of states and UT   Upcoming code name
27 Code on Wages, 2019
23 Industrial Relations Code, 2020,
21 Code on Social Security, 2020
18 Occupational Safety, Health and Working Conditions Code, 2020

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