New labor codes: Decoding what's good and bad for you
India's new four labor codes on wages, social security, industrial relations and occupational safety, and health and working conditions may be implemented by the government on July 1. When implemented, the new codes will bring a lot of changes related to salary restructuring, working hours, PF contribution, and more. The parliament has already passed the reforms. It's up to the states to implement them.
- As the Indian government seeks to implement its four new labor codes, uncertainty looms in the country.
- The new codes are bound to bring several changes in the country but we are still unsure when these changes will come into force.
- It needs to be seen how changes ranging from decreased in-hand salary to increased retirement corpus affect overall labor well-being.
The new wage code will require companies to pay the full and final settlement of wages and dues within two days of an employee's last working day. At present, the common practice followed by companies is to settle the salary and dues after 45-60 days from the last working day. It even goes up to 90 days in some cases.
The timeline provided to settle salary and dues is the same in cases of resignation, removal, dismissal, or retrenchment. The wage code also allows individual states to set the full and final settlement timeline based on what they think is reasonable.
One of the most significant changes proposed is the change in the number of working days. Under the new codes, companies will be able to increase working hours from 9 hours to 12 hours. In such a case, however, the number of working days in the week will be limited to four days. The codes mandate 48 hours of work per week.
The new codes may not be all employee-friendly. It proposes that the employee's basic salary must be at least 50% of their net monthly CTC. This means the allowance cannot be more than 50%. An increase in basic pay would mean an increase in PF contribution as well. In the end, the take-home salary will be reduced, and PF and gratuity might rise.
The new codes also aim to bring changes to the maternity leave policy. Maternity leaves for female employees will increase to 26 weeks. Companies won't be able to place them on the night shift without their consent. Another important change is related to the earned leaves policy. At present, 300 leaves can be carried forward and encashed by employees. This could increase to 450.
The four new labor codes are a compilation of the previous 29 central labor laws. The parliament has already passed them. The Union Government seeks to implement them from July 1. As labor lies in the concurrent list, the government wants full state participation in the implementation process. Several states have already finalized draft rules, while there are some left.