Modi government notifies draft rules for new labor codes
What's the story
The Indian government has issued draft rules for four new labor codes, inviting public feedback within 45 days. The codes are the Code on Wages, Code on Social Security, Industrial Relations Code, as well as Occupational Safety, Health and Working Conditions (OSH) Code. The final rules are expected to be notified by April 2026, with most industry-related provisions coming into effect by then.
Key provisions
Draft rules outline new provisions for workers
The draft rules detail several new provisions for workers. These include a weekly working hour limit of 48 hours, Aadhaar-linked registration for unorganized workers above 16 years, and the establishment of a National Social Security Board (NSSB) for gig and platform workers. The NSSB will have representatives from Lok Sabha, Rajya Sabha, unorganized sector workers' and employers' associations, states, as well as seven central government nominees representing scheduled castes/tribes, women and minorities.
Clarifications
Transition period and wage definition clarified
The Ministry of Labour and Employment has clarified that during the transition period, old rules will remain in force until new ones are notified under the Code. It also reiterated the definition of wages under these codes. Wages include all remuneration like salaries, allowances or any other payment to a person employed. However, performance-based incentives, employee stock option plans (ESOPs), and variable or reimbursement-based payments won't be included as wages.
Changes
Gratuity and fixed-term employment under new labor codes
The new labor codes introduce the concept of fixed-term employment, where workers can be hired for a specific period based on demand and seasonality. Fixed-term employees will be entitled to gratuity after one year of continuous service, unlike permanent workers who had to wait five years. The rules also clarify that leave encashment won't be included as part of allowances.
Wage determination
Minimum wage calculation and trade union recognition
The draft rules specify that the minimum rate of wages will be determined on a daily basis considering various factors. These include the standard working-class family structure, daily calorie intake per member, annual cloth requirement per family, housing rent expenditure as a percentage of food and clothing expenditure, and miscellaneous items' expenditure as a percentage of minimum wage. The Industrial Relations Code also sets a 30% threshold for recognizing trade unions in an industrial establishment with only one registered union.