The government has extended the execution of the new labour law which consists of codes on wages, besides 1 April providing the firms more time to refurbish the structure of their salary as well as the human resource concerned schemes where it can lead to high employee costs.

The government wants at least some industrial states to notify rules across the four labour codes along with the Centre to avoid any legal disputes or repercussions.

The labour ministry is ready with the rules for the 4 codes and mentions them when some states will be ready for the guidelines applied in their domain. Jammu & Kashmir has notified the rules, while Uttar Pradesh, Bihar, Uttarakhand, and Madhya Pradesh have placed draft laws for two codes and Karnataka has prepared rules for one code.

“Elections in a few states have delayed the entire process… while the resurgence of Covid cases in many states has also diluted the focus to some extent,”. The government has recently deferred application of theses labour laws and ask state governments to frame rules for implementation of these laws.

One of the biggest impacts of the new labour law will be on the take-home salaries, which is expected to reduce, owing to the fact that the government is eyeing increasing contributions towards provident fund (PF) and other post-retirement schemes. The new laws are expected to come into play soon, which will force employers to modify their employee compensations.

As per the Wages Codes 2019, wages that are paid to an employee include the
1). Basic pay plus;
2). Dearness allowance (DA); and
3). Retention payment.

Therefore, other remunerations such as PF contributions, bonuses, pension, HRA, gratuity, overtime, etc. are not covered under the definition of wages.

LETS’ CONSIDER SOME IMPORTANT POINTS OF NEW CODE OF WAGES,2019

1. Basic Pay to be 50 Percent of CTC

The new wages code makes it compulsory for organisations to make sure that 50 percent of employees’ CTC is basic pay, while the remaining 50 per cent comprises other employee allowances, including house rent, overtime, etc.

NOTE THAT : If the company pays any additional exemptions or allowances that exceed 50 per cent of the CTC, the same will be treated as remuneration to be added to the wages.

2. Gratuity Cost of Companies to Increase

The new labour laws limit the maximum basic pay to 50 per cent of CTC, thus effectively increasing the Gratuity bonus to be paid to the employee.

Under the new wages code, the gratuity amount will be calculated on a larger salary base, which will include basic pay plus allowances such as special allowance on wages. This is expected to increase the gratuity cost of companies.

While increasing the social security (pension) components of wages, the new laws are likely to decrease the take-home salary of employees.

3. 15 Minutes Overtime Payment

There is also a rule incoming for any 15 minutes or more overtime will be attracting overtime payment to the employees.

NOTE THAT: overtime payment will be double of normal payment.
48 Hours Set Work Time for One Week

4. The government has also made it clear that 48 hours is the maximum limit for a one-week work capacity and the employers are flexible to choose this work time and make it available in 4 days, 5 days, or 6-day week structure.
5. Four Broad Labour Codes on Wages
   With the new law, the government is all set to subsume 44 central labour laws into four broad labour codes, which are –
6. Code on Wages;
7. Industrial Relations;
8. Occupational safety;
9. Health and working conditions (OSH) and social security.

The same has already received the President’s nod.

While the code on wages was passed in Parliament in 2019, the other three codes were approved by both the Houses last year. The Labour Ministry is now all set to implement the new rules under these four labour codes.

Pertaining to the new labour rules, companies will be required to make major changes in the employees’ salary structure. These include an increase in gratuity and the exclusion of benefits such as bonus, PF, and HRA from the wages.

Disclaimer : Above write up is only for knowledge of readers. This should not b considered as professional advise. Please do consult your labour law advisor before taking any decision.