Labour codes: Most states are ready for the rollout.

News Highlight

• The four labour codes on wages, social security, industrial relations, and occupational safety, health, and working conditions are likely to be implemented by the next fiscal year.

Key Takeaway

• The Centre has already finalised the rules under these codes, and now states are required to frame regulations on their part as labour is a concurrent subject.

Labour reforms in India

• Over 2019-20, Parliament enacted four labour codes to consolidate  multiple laws:
• The Code on Wages, 2019:
  • It strives to control salary and bonus payments in all employment and to provide equal remuneration to employees performing a labour of a similar type in every industry, trade, business, or manufacturer.
  • The bill has ensured that employees getting a monthly salary shall get the salary by the 7th of the next month, those working every week shall get the salary on the last day of the week, and daily wagers should get it on the same day.
  • It applies to all employees in the organised and unorganised sectors.
  • The bill subsumes the following four labour laws:
    1. The Payment of Wages Act, 1936
    2. The Minimum Wages Act, 1948
    3. The Payment of Bonus Act, 1965
    4. The Equal Remuneration Act, 1976
• The Industrial Relations Code, 2020:
  • The Industrial Disputes Act of 1947, the Trade Unions Act of 1926, and the Industrial Employment (Standing Orders) Act of 1946 attempt to be consolidated.
  • The Code intends to improve the country’s business environment by minimising the burden of labour compliance on businesses.
  • The new standing order provision will apply to every industrial establishment wherein 300 or more than 300 workers are employed or were employed on any day in the preceding twelve months.
• The Social Security Code, 2020:
  • The regulations limit allowances to 50% of the salary, implying that half of the payment is basic wages. Therefore, provident fund contributions are computed as a percentage of basic earnings, including basic pay and the dearness allowance (DA).
  • The employer’s percentage-based contribution to the PF balance is determined by the employee’s basic wage and daily dearness allowance under current labour standards.
  • It proposes a National Social Security Board, which shall recommend to the central government the formulation of suitable schemes for different sections of unorganised workers, gig workers and platform workers.
• Occupational Safety, Health and Working Conditions Code, 2020:
  • It aims to control worker health and safety in workplaces with ten or more employees and all mines and docks.
  • It has defined inter-state migrant workers as workers who have come independently from one state and obtained employment in another state, earning up to Rs. 18,000 a month.
  • The proposed definition distinguishes it from the current definition of only contractual employment.
  • It has dropped the earlier provision for temporary accommodation for workers near the worksites. Instead, it has proposed a journey allowance, a lump sum of fare to be paid by the employer for the worker’s journey to their native place from the place of employment.

Overview of Labour Law Reforms

• Coverage:
  • Most labour laws apply to establishments over a specific size (typically ten or above).  
  • Size-based thresholds may help firms reduce the compliance burden.  However, one could argue that basic protections related to wages, social security, and working conditions should apply to all establishments. 
• Retrenchment:
  • Establishments hiring 100 or more workers need government permission for closure, layoffs or retrenchments.  
  • It has been argued that this has created an exit barrier for firms and affected their ability to adjust their workforce to production demands. 
  • The Industrial Relations Code raises this to 300 and allows the government to further increase this limit by notification. 
• Labour enforcement:
  • The diversity of labour laws has resulted in distinct compliances, increasing the compliance burden on firms. But on the other hand, the labour enforcement machinery has been ineffective because of poor enforcement, inadequate penalties, and the rent-seeking behaviour of inspectors.  The Codes address some of these aspects.
• Contract labour: 
  • Labour compliance and economic considerations have resulted in the increased use of contract labour.  However, contract labour has been denied basic protections such as assured wages.  The codes do not address these concerns fully. For example, the Industrial Relations Code introduces a new form of short-term labour – fixed-term employment.
• Trade Unions:
  • There are several registered trade unions but no criteria to recognise unions which can formally negotiate with employers. However, the Industrial Relations Code creates provisions for the recognition of unions.
• Simplification and updation: 
  • The Codes simplify labour laws to a large extent but fall short in some respects.  Further, the Code on Social Security creates enabling provisions to notify schemes for “gig” and ‘platform’ workers; however, there is a lack of clarity in these definitions.  

Pic Courtesy: Indian Express

Content Source: Indian Express

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Created on August 25, 2022 By Pavithra

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Consider the following statements.

1. The Social Security Code, 2020 limits allowances to 75% of the salary of the employee.
2. The Code on Wages, 2019 strives to control salary and bonus payments in all employment.

Which of the statements given above is/are incorrect?

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2 only

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