Analysis: The Past, Present, and Future of Labour Codes in India

Introduction

  1. The Indian Government brought new labour codes last year to regularize and implement the new Labour Codes. That with the enforcement of new Labour Codes, the Organisations and the Employers would be required to sync themselves with the new and the upcoming definitions of terms like wages, gratuity and they should also adopt the new ways of calculating the provident fund, etc.

  2. That the four new Labour Codes are – Code on Occupational Safety, Health and Working Conditions Code 2020, Industrial Relations Code 2020, Code on Wages 2019 and Code on Social Security 2020 and these four Codes will embody the existing 29 Central Labour and Industrial Laws. The above Codes primarily aims to avoid the multiplicity of the Labour Laws in our Country. The main reasons for enacting the above Labour Codes are to facilitate the compliance and to bring about uniformity and equity.

Industrial Relations Code, 2020

  1. The Industrial Relations Code, 2020 will be enforced by merging and codifying the Industrial Disputes Act, 1947, The Trade Unions Act, 1926, and The Industrial Employment (Standing Orders) Act, 1946.

  2. Several changes have been made in the definitions of worker in which the working journalists and other newspaper employees were added and the persons employed with the supervisory capacity and earning less than 18,000 per month have been included. The Changes were also made in the definition of Industry and in the above Code the institutions owned and managed by organizations involved in charitable or philanthropic services are excluded.

  3. The Term Employer has been defined in Section 2(m) of the Industrial Relations Code, 2020. The concept of fixed term Employment has also been introduced. The Industrial Relations Code, 2020 also talks about setting up of National Industrial Tribunal to decide the Industrial disputes. This tribunal shall consist of two members who are to be appointed by the appropriate Government and one shall be a judicial member and the other shall be an administrative member.

Occupational Safety, Health and Working Conditions Code 2020

  1. The Occupational Safety, Health and Working Conditions Code 2020 proposes to subsume 633 provisions of 13 major labour laws into one single Code with 143 provisions. It applies to factories with having 20 or more workers and the manufacturing process is carried on with the aid of power (electricity) and also applies to factories with 40 or more workers where the manufacturing process is carried out without the aid of power. The Code emphasizes on the workers employed in various sectors like trade, business, manufacturing, factory, motor transport undertaking, building and other construction work, newspaper establishments, audio-video production, plantation, mines and dock-work and service sectors.

  2. The Code doesn’t apply to the Central Government, State Government and any ship of war or any nationality but at the same time, it applies to the contract labour employed through a contractor in the offices where central government or state government are principal employers. The purpose of this Code is to set up the occupational safety boards to advise the Central and state governments on the national and state-level upon the standards, rules and regulations to be framed under this Code.

Code on Wages, 2019

  1. The new wage Code removes the multiplicity of definitions for wage, which can significantly reduce litigation as well as compliance cost for employers. The new Act links minimum wage across the country to the skills of the employee and the place of employment. It seeks to ensure “Right to Sustenance” for every worker and intends to increase the legislative protection of minimum wage. A National Floor Level Minimum Wage will be set by the Centre and will be revised every five years, while states will fix minimum wages for their regions, which cannot be lower than the floor wage.

  2. The Code on Wages, 2019 will subsume the The Payment of Wages Act, 1936, The Minimum Wages Act, 1948, The Payment of Bonus Act, 1965, The Equal Remuneration Act, 1976.

The Code on Social Security, 2020

  1. The Code is enacted to provide social security to employees and workers either in organized or unorganized sectors. There have been several changes in the definition. An employee, under the Social Security Code, refers to a person employed on wages either directly or through a contractor to do a skilled, semi-skilled, unskilled, manual, operational, supervisory, managerial, administrative, technical, clerical or any other work, such that the terms of employment are expressed or implied.

  2. That the concept of Platform work has also been introduced. It is Any work arrangement outside of the employer-employee relationship where an online platform is used by individuals or organizations to provide services or solve problems or any such activities notified by the government in exchange for which a payment is received. The person engaged in taking the platform work is known as the platform worker. That the Code on Social Security also talks about benefits to Gig and platform workers.

  3. The Social Security Code mandates the provision of EPF under Chapter 3 to come into play in an organization where the number of employees is 20 or more. The employer is liable to pay 10% of the wages payable to the employee to the provident fund and the employee is liable to contribute equally as the employer. In the case where an employer has failed to make a contribution, it shall be punishable with an imprisonment of one to three years. In case, any employee fails to contribute it shall be fined Rs. 1,00,000/- or maximum imprisonment of 2 months and a maximum of 6 months. Event the maternity benefits were included in the above Code.

  4. The hazardous industries are included in the schedules where extra precautions as to the standard of safety and health are to be followed for the well being of workers and safe working conditions along with the list of notifiable diseases that can affect them. These shall be informed to the concerned authorities. For the employer, there are benefits as these Codes replace the various registrations required under the different laws with one common registration. One licence and one registration will create a consolidated database centrally and improve the ease of doing business. These Codes aim to keep the workplaces free from hazards that can likely cause an injury to the workers. The employers shall mandatorily conduct the free annual health check-up for their employees. The employers shall be held responsible for the disposal of hazardous and toxic waste including e-waste. Every employee shall be issued an employment letter on their appointment in the establishment.

Impact of New Labour Codes in India

  1. It is predicted that the new Labour Codes will ensure the use of technology for the compliance purposes and also for effective implementation of the same. The new Labour Codes applies to all employees of an Organization irrespective of their Level, type of work, designation, role, salary, etc, with minimum exceptions.
  1. In the above Codes the definition of wages has been changed and new definition of wages have been introduced which is common in all the above four Codes. The new definition of wages covers the component of Salary which is expressed in the terms of money. The specific exclusions are also there in the new definition such as statutory bonus, conveyance allowance, house rent allowance, commissions, etc., but the aforesaid exclusions are limited to 50% of the remuneration. This new definition will have an impact on the employee’s benefits and also on the Cost to employer. The new definition of wages will also have an impact on the gratuity cost, as according to the new definition all the current and future employees will be eligible for gratuity. That a major change was also brought in the period for eligibility of gratuity as now it is one year in comparison to five years earlier for fixed term employees. That it is also pertinent to mention that the above criteria of one year would not be applicable on the permanent employees and they will be eligible for gratuity after five years only. It should be noted that under the new Labour Codes the worker can demand leave encashment at the end of each calendar year and that leave encashment would be calculated on the wages defined under the new Labour Codes.
  1. The new Labour Codes introduce changes which the employers all over the country should understand and implement. That the new Labour Codes have an Employer centric approach as well as Employee centric approach.
  1. The employer centric approach is evident from the following:
  • Introduction of single registration and licensing provision,
  • Making it legal to engage the contract workers in core activities in particular cases,
  • Allowing maintenance of registers in electronic form,
  • Providing Limitation period for compliance with respect to provident fund.
  • Transfering labour Courts into Industrial Tribunals and introducing inspector-cum facilitator.
  • It is said that these above Codes will have a long term impact on the Industries and will facilitate the Business and its operations.
  1. The Employee centric approach is evident from the following:
  • Definition of wages has been revised resulting in increased wages to the workers and will also make employees eligible for statutory bonus, provident fund, retrenchment compensation and gratuity.
  • Limit of daily working hours would decrease in certain cases.
  • Permission to engage women with employee consent between 7 P.M.-6 A.M.
  • Provision with respect to Leave encashment on annual basis.
  • Requirement of consent to work overtime.
  • Provision of same employee benefits and pro rata gratuity payments to fixed term employees.
  • Provision for payment of wages next day in case any employee resigns.
  1. So, it is visible that the efforts have been made to balance the interest of the Employer vis-a-vis the Employees.
  1. Some new provisions were also introduced with respect to the fixed terms employees, work re-skilling fund, social security for gig workers and platform workers, recognition of Trade Unions, notice period for strikes and also with respect to compounding of certain offences. Some changes were also prescribed for hiring of employees through third parties or contractors.
  1. So the new Labour Codes lay emphasis on the compliances, wages like prescribed format of register for wages, wages slip, employee register, payment of wages, payment of wages during voluntary resignation of any employee, etc. the above Codes also made aadhaar compulsory for social security contributions and benefits. It is also prescribed in the new Labour Codes that a safety committee must be formed by the employer and that committee shall consist of the representatives of both the Employer and the workers.
  1. That all the four Labour Codes have been passed by both the houses of the Parliament and the assent of President and they will be notified soon.

Conclusion

So, at last it can be said that these Labour Codes are aiming to bring about a huge change and to bring about the reforms with respect to Labour Laws. These Labour Codes will impact organizations in every sector in India. The primary reason to bring them is to remove the complexities and to maintain transparency, improve the compliance, accountability and the new Labour Codes seems to be beneficial for both the Employer and the Workers and as penal liabilities are also there in the new Labour Codes so that the Compliance of these new Codes could be improved. Because the variation will rely on the current salary and organisational structure of the relevant business or establishment, the effects of the new labour regulations on implementation will differ from one industry or employer to another and slowly-slowly it is now evident in the public discourse that these codes have different effect on different class people in India.