India has over the years introduced several legislations in the precinct of labour protection and upholding their interests but has seen very few amendments to keep them updated with the times. Hence an overhaul of all existing labour laws to bring them in line with contemporary standards and practices has been a long-standing demand. Recently, the Ministry of Labour and Employment introduced four new codes providing for the regulation of labour and the workforce. These labour laws codify the existing 29 central labour laws into a framework of four codes as below:

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

These codes along with the other provisions, cover within their ambit, protection of social welfare of labourers, industrial relations, occupational health and safety measures, working conditions and laws related to wages.

Current Status of Implementation:

The New Labour Code was passed by both Houses of Parliament in September 2020 and has also received Presidential assent but still awaits an effective date. It was anticipated to be effectuated in the month of July, 2022. However, some States are yet to prepare the draft rules in line with the new codes due to which there has been a delay in the implementation of the new labour code. As per the latest figures, out of the total of 36 (States and UTs together), 31 States and UTs have framed rules on the Code on Wages, 26 of them have done so on industrial relations. Of the two remaining codes, 25  States and UTs have framed rules on social security and 25 on Occupational Safety, Health, and Working Conditions.^[1] The Centre awaits the draft rules of States in order to universalise the implementation of the New Labour Code. While some States are rolling out these draft rules in parts, States such as West Bengal, Nagaland and Meghalaya including the Union Territories of Lakshadweep and Daman and Diu have not yet drafted or adopted either of the codes. The State of Maharashtra recently published the Occupational Safety, Health and Working Conditions Code in addition to the other drafts..

As commented by the Union Labour Minister, Mr. Bhupendra Yadav, the ministry awaits the drafts of the remaining States for the uniform implementation of the New Labour Code^[2]. They shall be implemented at one go in order to facilitate smoother execution. The delayed implementation of the New Codes have caused confusion among the businesses, workers, employees and the human resource departments.  

This Article shall explore the changes the new codes will bring in and analyse the repercussions it shall have on the existing workforce. In this part, we will cover within its ambit the Wage Code and the Social Security Code and deal with the Industrial Relations Code and Occupational Safety, Health and Working Conditions Code in the next part.

Code on Wages, 2019

The new Wage Code was enacted with an intent to regulate the payment of bonus, payment of wages and any other compensation in connection to employment in any sector. It is an amalgamation of the pre-existing wage related Acts such as:

1. Payment of Wages Act, 1936;
   1. Minimum Wages Act, 1948;  
   2. Payment of Bonus Act, 1965; and
   3. Equal Remuneration Act, 1976.

All four of these provisions have imbibed within themselves the spirit of equal pay for equal work. The new code also expands the right to fair wages for all employees. Some of its key highlights are as follows:

• The most striking feature of the new Wage Code is that it provides homogeneity to the definition of wages and removes all ambiguity associated with the term. The term  “wages” means all remuneration whether by way of salary, allowances or otherwise, expressed in terms of money or capable of being so expressed which would, if the terms of employment, express or implied, were fulfilled, be payable to a person employed in respect of his employment or of work done in such employment, and includes,— (i) basic pay; (ii) dearness allowance; and (iii) retaining allowance, if any. It shall however, not include any bonus paid at the time of employment, house rent allowance, conveyance allowance and other benefits.
• Extension of Minimum Wages to the unorganized sector workers.
• Equal payment shall be made for equal amounts of work irrespective of gender.
• Extension of right to fair minimum wages to the unorganized employees as well.
• The employer should ensure that the basic pay of the employee is not less than 50% of the total remuneration. Additionally, it includes under its ambit that 50% cost to company should be the sum of basic pay, dearness allowance and the retaining allowance. It specifically excludes house rent allowance, statutory bonus etc. from this provision. It shall therefore affect the calculation of provident fund and gratuity of the employee.
• Under the code, time durations have been prescribed for daily, weekly, fortnightly and monthly payment of wages.
• The time duration for filing of claims by employees has been increased to 3 years in the interest of workers.
• Provisions with respect to payment of bonus have been made. Minimum bonus that is to be paid on an annual basis shall be 8.33% of the wages or Rs. 100 whichever is higher. Employees guilty of fraud, violent behaviour, theft or convicts of sexual harassment shall not be entitled to a bonus. If the allocable surplus exceeds the minimum bonus payable to employees, the employee shall be entitled to receive the bonus in proportion to their wages, subject to a maximum of 20% of their wages. The allocable surplus of a company shall be decided as per the norms of the Code.
• Creation of Advisory Boards at both the State as well as the Central Level to ascertain matters in connection with the creation of employment opportunities, increment or fixation of minimum basic pay etc. Such Advisory Boards shall also include representation of all stakeholders i.e; the Central and State Government, the Employer and the Employees in equal numbers.
• Appointment of Inspectors for regular inspection of work premises to keep a check on the compliances and advise the employer as well as the employees. A Facilitator shall also be appointed to act in the absence of the Inspector.
• Additionally, the Wage Code empowers the Central Government to decide the floor wages which every worker shall be entitled to depending on the minimum standards of living, level of complexity involved in the work and geographical factors. The minimum wages thereupon decided by the State Government should not be less than such floor wages.
• The new Wage Code also entrusts the employers with the powers to deduct wages of employees based on certain grounds such as absence from duty, rent for accommodation spaces provided by employers, fines or advance payments being made to employers.  However, such deductions shall not be more than 50% of the minimum wages.

The most far-reaching reform has been the extension of the guarantee of minimum wages to the unorganized sector which employs 93% of the total work force. This will go a long way on bridging income disparity but its implementation remains a challenge. It also tries to plug the gender wage gap by proposing equal pay for equal work irrespective of gender. On the flip side, the net take home salary of employees may be reduced as the basic pay has been increased to be atleast 50% of the gross salary. Due to this, deductions like Employee Provident Fund (EPF) and pension fund which are calculated based on the basic salary will increase thereby reducing the net take home salary. This will also affect employers as their contribution to the EPF and gratuity will also increase proportionately. On the brighter side, this will lead to a larger corpus in the EPF, pension scheme and gratuity.

Code of Social Security, 2020

The Code of Social Security (“CoSS”) was introduced with a perspective to protect the interests of the employees and it amalgamates 9 Central Labour Laws into the Social Security Code in order to secure the right of workers to insurance, pension, gratuity, maternity benefit etc.. Before this Code, this protection was available only to employees in the organized sector. With the introduction of the new code, this protection is now being offered to the unorganized sector as well.

Therefore, this extension of protection being offered to the unorganized sector is a welcome-step. Another distinguishing feature of this code is that it has made space for the inclusion of gig economy workers. The inclusion of gig economy workers has been commended recognizing the growing culture of freelancing, remote working and start-ups. With the demographics of the working structure making a shift towards the unorganized mode of employment, the broadening of the social security regime was important.

The new code has under its ambit incorporated nine legislations which earlier provided for the protection of social interests in various precincts of employment. The Acts that existed prior to the CoSS were:-

1.  The Maternity Benefit Act, 1961
2. The Payment of Gratuity Act, 1972
3. The Building and Other Construction Workers Welfare Cess Act, 1996
4. The Employees Compensation Act, 1923
5. The Employees  State Insurance Act, 1948
6. The Employees  Provident Funds and Miscellaneous Provisions Act, 1952 (“EPF Act”)
7. The Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959
8. The Cine Workers Welfare Fund Act, 1981
9. The Unorganised Workers’ Social Security Act, 2008.

Each of these legislations covered various facets of employee interests and provided protection of their social security. The new consolidated labour code provided for the protection of all employees in all sectors. By introducing this new framework, the major changes that have been furthered can be enumerated as follows –

• Widening of the definition of employees in organized as well as unorganized sectors. It means any person employed on wages by an establishment, either directly or through a contractor, to do any skilled, semi-skilled or unskilled, manual, operational, supervisory, managerial, administrative, technical, clerical or any other work, whether the terms of employment be express or implied, and also includes a person declared to be an employee by the appropriate Government but does not include any member of the Armed Forces of the Union.
• It has also provided a definition for Gig workers, Home-based workers, Self-employed workers, Platform Workers and the Unorganised Sector.
• Relaxations in certain compliances which were otherwise necessary to have been followed. For eg., if an establishment is registered under any existing Central Labour Laws, it is not required to obtain registration under Section 3 of the Code of Social Security.
• Penalties imposed on the employers in cases wherein the employer has failed to protect the employee’s social interest. For eg. denial of gratuity, EPF.
• Mandate for employers to clear all dues of the employees within the prescribed limitation period mentioned in the Code i.e; 5 years. Prior to this there was no limitation period prescribed under the EPF Act, 1952.
• Creation of an unorganized employee’s database by registering them on an online portal.
• Constitution of the social security fund in all establishments for their employees including those in the unorganized sector. If funds are not allocated to the respective Social Security Organisation, they shall not be able to approach the Tribunal.
• Increases the accountability and transparency of employers by mandating the maintaining detailed records and registers of employees.
• Reduction in employee and employer contribution during national disasters or pandemic situations.
• Provision of extra expenditure as sickness benefit for unsanitary working conditions in the factory or in the accommodations due to the neglect on the owners part.
• Providing insurance benefits to unorganized sector employees through the ESIC regime.
• Removal of minimum service ceiling for fixed term employees in order to avail gratuity benefits.
• Enhanced penalties for employers for not complying with the CoSS as well as for employees for misuse of social security benefits provided to them.

It can be deduced from the above that the new code on social security is not only headed in the right direction of upliftment of all employees but has also worked proactively for making an all-inclusive regime of protection of social interest. It is made applicable to all industries through the notification of the Central Government keeping in view the prescribed threshold limits.

An introduction of this revamped legislative framework has brought with itself newer challenges. The extension of similar protection to temporarily engaged people in some manner may deter people having permanent jobs and form long-term association with organizations.  Another impediment would be the implementation of the social security measures for employees in the unorganized sector the unorganized sector enterprises are dispersed, difficult to regulate, typically small in size with low margins. How the unorganized sector can bear the costs of these social security measures remains to be seen and poses a major challenge to implementing agencies which will have to drastically increase their capabilities to bring the unorganized sector under the ambit of these new regulations. Rapid adoption of technology-enabled measures is the only way of doing this.

Conclusion

The new Codes have their own set of challenges, however the introduction of a labour law regulation in line with economic demands of the country and society shall prove beneficial. Through the widening of the scope of these legislations, greater protection is being provided and employee interest is upheld. It has also decreased the burden of employers in respect of the number of labour law compliances. At large, it shall cater to a greater number of workforce, therefore, its implementation is much awaited. Companies would do well to prepare themselves in terms of their HR policies and systems to implement these new Codes when they come into force.

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^[1] https://pib.gov.in/PressReleasePage.aspx?PRID=1844649

^[2]https://www.business-standard.com/article/economy-policy/wait-for-labour-codes-continues-even-as-most-states-publish-draft-rules-122072000528_1.html