New Labour Law: India to implement an overhaul of its Labour Laws by amalgamating 29 Central Labour Laws into 4 Major Labour Codes. The Government of India aims to simplify regulations, increase investor confidence and promote Worker Welfare through this new approach. The question most frequently asked is…The answer is to identify the Winners, Losers & Grey Definitions associated with these New Codes.
Winners of the New Labour Codes:
1) Formal Sector Workers – Employees working within the organised sector will benefit the most from this update to the definition of ‘Wages.’ With this new definition, there is now greater transparency related to salaries. Also, a large portion of wages earned will be accounted for by Social Security. As a result of this change, higher contributions to Provident Funds may result in less money being received ‘in hand’, but will ultimately contribute to the long-term growth of your savings.
2) Industries looking for ease of Doing Business – The New Codes are going to enhance the ability for companies (particularly manufacturers, logistics providers and Start-Up companies) to hire people and manage compliance. Digital Records, Single Window Compliance Process (Single Window Clearance) and Self Certification will help eliminate red tape that many companies have experienced with previous Labour Laws that have multiple, redundant and overlapping Compliance Requirements.
3) Gig Workers/Platform Workers – The New Codes have now provided a Formal Definition for Gig Workers (Delivery Personnel, Taxi Drivers, Freelancers, etc.) and will soon provide these workers the Ability to participate in the Social Security Schemes that will be funded by the Employer (Aggregator) & the Government of India.
The Ones Likely to Lose
1. Small and medium enterprises employ many individuals and have some degree of flexibility, but may not provide stable jobs for employees. By removing the need for government approval before terminating an employee, the number of informal/temporary jobs may rise in the future.
2. With the recent changes to the wages of employees, a larger percentage of an employee’s CTC (cash to company) will be allocated towards Provident Fund (PF) and gratuity. Therefore, many employees will receive less monthly pay than they did before the increase in deductions from their wages. This issue will likely affect most employees, especially mid-level employees who are often the highest level of workers within a company.
3. With the increase in strictness concerning compliance organisations, companies that had previously operated with a less-than-strict approach to compliance could find themselves facing harsh fines. Companies should anticipate that compliance requirements will be strictly enforced due to stricter definitions and digitised Inspections.
Grey Areas
1. Overtime and Work Hours
The maximum limit of 48 hours per week remains at this number, but extending the number of hours worked to 12 per shift is an issue that is still controversial. States still need to define how these provisions will be carried out and what parameters will be put in place by them.
2. Role of States vs Central Government
Labour is a concurrent subject in India. As such, states will develop rules relating to labour at different times and, as a result, there may be discrepancies in terms of how companies that are operating nationwide function.
3. Effects on Gig Worker Social Security
Although the recognition of Gig Workers is a step forward in the labour law overhaul, it remains to be seen how the funding for these workers and their entitlements will work.
What Does this Mean for the Future?
The overhaul of Indian labour laws has been a groundbreaking step forward. This will enhance efficiency and transparency in the manner in which we regulate jobs in India. However, it will also create new challenges as companies adjust to these changes.
