Labour Codes: Keen On October Rollout, Govt May Address Employers’ Concerns

The labour ministry is considering fine-tuning some contentious provisions and rules concerning the four labour Codes passed by Parliament recently, in order to ensure that these reformist laws take effect from October 1 throughout the country.

A source in the government said all the four labour codes – code on wages, industrial relations, social security and occupational safety & health – will be implemented at one go.

“Since the new labour minister, Bhupender Yadav, has taken charge, it is obvious that the draft rules under the codes will be reviewed, but that does not mean an overhauling,” another source said.

One of the contentious provisions that might be reviewed is the definition of wages which proposes to cap allowances at 50% of the wages. This means if the allowances exceed 50%, then the employer will have to pay social security, including gratuity, on the excess amount. This will lead to an increased social security burden and hence, the financial burden of the employers through an increase in the salary cost. Employees’ take-home salary will also come down.

Currently, employers enjoy flexibility in calculating the compensation package by reducing the components liable for social security and increase the allowances. Employers’ body were arguing that the 50% threshold for basic pay plus dearness allowance should be brought down to 20-30% of the total package.

While the trade unions are for implementing the labour code on wages and labour code on social security, industry bodies want sufficient preparation time for adhering to the new rules.

The labour code on wages was passed in August 2019, Parliament approved three other codes – on industrial relations, social security and occupational safety & health – on September 23 last year. The Centre had earlier put on hold the original plan to roll out the codes from April 1, 2021, citing the dithering displayed by several states.

The wage code proposes universalisation of minimum wages; while the social security code proposes to bring all workers, including gig and platform workers, under some sort of social security. The industrial relations code raises threshold to 300 workers from 100 earlier for establishments to resort to lay-off, closure and retrenchment without government permission.

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