Written by:Adv. Pooja Gupta

New Labour Law in India 2022

Introduction of the New Labour Law in India: – There are the latest speculations circulating in corporate corridors and the labour ministry about the upcoming labour laws 2022, which are set up to take effect in the coming fiscal year.

Employees’ take-home pay will be reduced as a result of new labour laws that raise the HRA and PF classifications of the wage structure, lowering their take-home pay. In addition, as per reports, new labour laws enacted in 2022 will broaden hours of work to 12 hours per day.

The ministry of labour has the rules for the four codes prepared and will announce them whenever some states are willing to implement the recommendations in their jurisdiction. The regulations have been notified in J&k, while proposed laws for two codes have been placed in  Bihar, U.P, Uttarakhand, & M.P., Uttar Pradesh, Bihar, Uttarakhand, and Madhya Pradesh, and regulations have been prepared for one code in Karnataka.

Most Significant Implications of New Labour

One of the most significant implications of new labour legislation would be a reduction in take-home pay, as the legislature aims to expand financial contributions to PF and other post-retirement initiatives. The new legislation is probably expected to go into effect soon, forcing employers to modify their employee salaries and bonuses.

Wages paid to the employee also include basic salary and as well as dearness DA and retention rates payment, as per the Wages Codes 2019. Other salaries and bonuses, such as PF contributions, bonus payments, retirement benefits, HRA, gratuity, overtime, and so on, are thus excluded from the purview of salaries.

Less cash on hand more cash in the PF

A significant modification that’ll be implemented as a result of the 4-day working weeks is a reduction in employees’ take-home pay. Employees and industries will be expected to bear a relatively high PF liability, as per reports, resulting in more money in PFs and therefore less in-hand salary.

Significant modifications will be made to the way an employee’s base salary and PF are estimated as a result of this. As per reports, basic wages would account for half of the wage, with allowances limited to 50%.

The provident fund contribution is based on a percentage of the basic salary, which includes both the basic salary as well as the dearness allowance (DA). The amount of a company’s percentage of the total contribution to a PF balance is determined by the employee’s basic salary & dearness DA under existing legislation. Because the employee’s basic salary would be increased, more PF would be deducted.

A four-day workweek

From 2022-23, the new labour rules could lead the way in a four-day working week as opposed to the current five-day work period. An employee should be able to take three days off per week, but they’ll have to work for 12 hours on those 4 days to make sure their weekly working time is probably checked. The Ministry Of labour has stated that although the bill has been passed, the 48-hour weekly work criterion must have complied.

The Code on Wage levels has had the most draught notifications (24 states/UTs), accompanied by the Labour Relations Code (20 states) and the Social Security Code (18 states)

The federal government has issued four labour codes, which are as follows:

  • The 2020 Industrial Relations Code
  • The 2020 Social Security Code, and
  • The 2019 Wage Code on August 8, 2019, and
  • On Sept. 29, 2020, the Occupational Health and safety, & Working Conditions Code, 2020 

The federal government, as well as the state and local governments, are mandated to establish regulations.

Wage Regulations

A new wage definition

Wages must be at least 50% of a worker’s overall gross remuneration, as per the new code. At the present time, companies are paying between 25% and 50% of gross pay as a basic salary, with the remaining amount as allowances. This allows businesses to save money on gratuities as well as provident fund contributions, which are determined as a % of basic salary.

Some of these payments would be more expensive if the wage was higher. Many businesses may need to restructure their compensation plans to accommodate the new wage concept.

A reduction in the basic wage

Because each government sets a various wage for various criteria, including the job, the sector, the worker’s skill, and so on, India has hundreds of minimum wages.

Gender Neutrality

Its 3rd aspect to take into account is gender neutrality. For the same or similar amount of work, the Equal Remuneration Act stipulates that males and females obtain equal pay. The new code expanded this gender equity to all people, regardless of race or gender, which include transgender workers. It’ll be difficult, even so, to achieve this equality in practise.

Code of Labor Relations

Hiring fixed-term employees

Because labour laws didn’t explicitly recognize fixed-term employees till now, companies usually hire employees for a fixed or project period through third-party contractors.

The new code recognizes fixed-term employees and requires them to be eligible for benefit plans, which include pro-rata gratuity reimbursements. The rule may empower companies to hire more fixed-term employees because they have more control over them than those recruited through third-party agencies.

Standard orders ( operating procedures)

Standing orders are government-issued employment terms of service that should be abided by employers. Previously, only industries, mines, & plantations were required to follow these instructions, but the rule now extends them to all businesses with far more than three hundred employees. Furthermore, some exceptions would need to be approved by the government.

A redressal committee for grievances

As per the new code, any company with at least 20 employees must constitute a grievance committee.

The criterion for terminating an employee

Under existing rules, any manufacturing, mine, or plantation with far more than 100 employees requires permission from the government to terminate employees. Only industries with more than 300 employees are required to seek official permission under the new rule.

Code for Occupational Health, safety & Workplace Conditions

Women’s night shift

This rule allows companies or industries to employ women to work at night between 7 pm to 6 a.m., as long as the industries meet specific security and protection requirements for these employees.

Modifications to the contract workers authoritarian rule

According to the new rules, a federal statute specifies what constitutes an organization’s “core” activity. As of now, numerous industries, such as those in the automotive and information technology industries, hire contract labourers for their core exercises and do not have to pay benefits to them. The code reaffirms the previous law, which strictly prohibits industries from using contract workers for core activities, but it now encompasses a number of notable exceptions.

Encashment of leave

Earlier, corporate policies required employees to keep any unutilized Leave until the end of their employment. The new regulations allow workers to make a request encashment at any time during the year.

Social Security code

The Social Security Code is a set of rules that govern how people receive benefits from the government

Acknowledging platform & gig workers

For the very first time, the social security code distinguishes between gig & self – employed workers, like those who actually work for ride-sharing services like OLA & Uber.

Checks for compliance with the Provident Fund should be limited

Till now, there’s no restriction about how far back law enforcement agencies could look to see if a company was in compliance with all rules pertaining to the Workers’ Provident Fund (PF), India’s social security system. And that could take many years for an investigation to be concluded once it is initiated.

Conclusion of the New labour Law in India

The new labour law includes a variety of regulations as well as special rules to accommodate stricter controls for industry sectors & organizations, enabling factories to be more flexible. Furthermore, the regulation & centralization of such legislation has allowed for the advancement of the scope & applicability of the regulations, convenience of adherence, the elimination of various definitions, and also the elimination of overlapping legislation enforcement agencies. The set of regulations will strengthen the relationship between employers and employees,  and the government, have a long-term impact on the industry and make a significant contribution to the concept of the convenience of practicing business.

Frequently Asked Question

What are the new labour regulations?

In the new labour rules, total combined allowances, which include housing rental, leave, transportation, etc, will be limited to 50% of the remuneration, with the base salary providing for the other 50%.

What are India’s new labour  Codes?

As per a senior administration official asserted by the PTI media organization, India is keen to integrate 4 new labour codes on salaries, social security, labour relations, and occupational health and safety by the next financial year commencing in 2022.

What are the several categories of labour legislation?

There are two major aspects of labour law. First, collective labour law is concerned with the three-way relationship between an employee, employer, as well as union. Furthermore, individual labour law is concerned with workers’ rights at work and through the employment agreement.

Is the Wage Code Bill 2021 now in effect?

The New Wage Code 2021 shall enter into force in April, as per an official declaration made during the 2021 Union Budget.  Wages, or a worker’s month-to-month normal salary, cannot be less than 50% of the net CTC, according to the new definition highlighted in the New-Wages Code, Bill 2021. (Cost To Company).

Is India’s new labour law in effect?

“The 4 labour laws & regulation are expected to be adopted in the financial year 2022-23, as a large majority of state have already concluded proposed regulations on all of these codes, and the Centre has already completed the process of drafting new guidelines on all of these rules in Feb 2021.”

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