The government has released four new labour codes after working on them for several months, with an aim to revamp the rules dictating the age-old relationship between employees and their employers. The newly prescribed labour codes lay down a host of schemes, under which there will be significant changes in terms of an employee’s salary, his or her PF contributions and work hours. The labour codes also feature changes in working conditions, labour welfare, health and safety. These laws, once implemented, will make organisations across the country undergo paradigm shifts.
Till now, 23 states have pre-published draft rules on these laws, while the Centre has completed the process of finalising the draft rules on these codes in February 2021. The central government had notified four labour codes, namely, the Code on Wages, 2019, on August 8, 2019, the Industrial Relations Code, 2020, the Code on Social Security, 2020, and the Occupational Safety, Health and Working Conditions Code, 2020 on September 29, 2020.
Since labour is a concurrent subject, the Centre wants the states to implement these as well in one go, as has been reported earlier.
List of key changes to come into effect under new labour laws:
One of the key changes that the new rules would bring is working hours for employees in all sectors. At present, the working hours are governed by the Factories Act, 1948 at the national level for workers in factories and other such workplaces, and by the Shops and Establishment Acts of each state for office workers and other employees. However, as part of the new rules, daily and weekly working hours have been capped at 12 hours and 48 hours. This will let firms bring in 4-day workweeks, while overtime has been increased from 50 hours to 125 hours in a quarter across industries.
As part of the new labour laws, the basic salary of an employee will have to be at least 50 per cent of the gross salary. As an effect, the employees will be making more contributions to their EPF accounts and gratuity deductions will also increase which will decrease the take-home salaries of most employees.
The Central government is planning to rationalise leave schemes under the new labour laws. While the quantum of leaves in a year will remain the same, employees will now earn leave for every 20 days of work instead of 45. Moreover, the new employees will be eligible to earn leaves after 180 days of employment instead of 240 days of work.
Provident Fund Contributions
Another big change that is going to come under the new labour law is the ratio of the take-home salary and the employee’s and employer’s contribution to the provident fund. As per the provision of the new codes, the basic salary of the employee will have to be 50 per cent of the gross salary of the employees. The PF contributions of the employee and employer will increase, and the take-home salary will decrease for some employees, especially those working in private firms.