Labour codes Codes: If you are doing a job, then some changes can be seen in the salary in your hands. The reason for this is that all four labour codes are likely to be implemented in the next few months. With the implementation of these four labor codes, the take-home salary will be reduced and the retirement amount will increase automatically. These labor codes were to be implemented earlier in April 2021. In which reduction in take-home salary and PF contribution would have increased. There is a possibility of increasing gratuity in this. Once the wage code is implemented, there will be major changes in the way employees calculate Basic Pay and Provident Fund.

However, the codes could not be implemented because many states were not able to notify rules under these codes in their jurisdiction. Under the Constitution of India, labour is a concurrent subject, hence both states and the Centre are required to notify rules to turn the codes into law in their respective jurisdiction.

Once the wages code comes into force, there will be significant changes in the way basic pay and the provident fund of employees are calculated.

The Labour Ministry had envisaged implementing the four codes on industrial relations, wages, social security and occupational health safety and working conditions from April 1, 2021.

These four labour codes will rationalise 44 Central labour laws.

Here’s how the codes will change the pay structure:

  1. Under the new wages code, allowances are capped at 50 per cent. This means half of the gross pay of an employee would be basic wages. Provident fund contribution is calculated as a percentage of basic wage, which includes basic pay and dearness allowance.
  2. The employers have been splitting wages into numerous allowances to keep basic wages low to reduce provident fund and income tax outgo. The new wages code provides for provident fund contribution as a prescribed proportion of 50 per cent of gross pay.
  3. After the implementation of new codes, the take-home pay of employees would reduce while provident fund liability of employers would increase in many cases.
  4. Moreover, the new industrial relation code also allows the companies with up to 300 workers for lay-offs, retrenchment and closure with government permission. Currently, the government has exempted all firms with up to 100 workers from permissions for lay-offs, retrenchment and closure.

According to media reports, many big states have not fixed the rules under the four codes. Some states are in the process of laying down rules to implement these laws. The central government cannot wait any longer for the states to decide the rules under these codes. Therefore, the central government is preparing to implement these codes within a few months. Because companies or establishments will have to give some time to adjust to the new law. According to the source, some states have already decided on the draft rules. These states are Uttar Pradesh, Bihar, Madhya Pradesh, Haryana, Odisha, Punjab, Gujarat, Karnataka, and Uttarakhand.