In India, labour is a contemporary issue, which means that both the Central and State governments can pass legislation on the subject. The recent approval of three labour regulations represents a significant step forward in the country’s broader reform journey, helping to align the labour ecosystem with the imperatives of India’s globalised economy.

At the same time, they provide much-needed coverage to the vast majority of workers who have found themselves outside the regulatory framework. Parliament established four labour codes — the Wage Code, the Industrial Relations Code 2020, the Code on Occupational Health, Safety, and Working Conditions 2020, and the Social Security Code 2020 — that consolidate many of the Central labour legislation.

What was the government’s motive for enacting the codes? 

The government wished to make compliance easier and ensure equity for everybody. The new regulations would ensure that technology is used more effectively for varied compliance and effective enforcement. The new labour standards also raised questions about whether they would apply solely to blue-collar workers or all employees. The new labour codes state unequivocally that the laws would apply to all employees of an organisation, regardless of their role/level/nature of duties/salary (with minimal exceptions).

New Definition Of Wages

One of the most significant developments has been a shift in the definition of pay. The administration has attempted to simplify the new common wage definition across all four codes. The new definition of wages includes all remuneration components expressed in monetary terms or capable of being described in monetary terms. Specific exclusions in the new definition include statutory bonus, house rent allowance, conveyance allowance, commission, and so on. These exclusions, however, are restricted to 50% of the total salary (except gratuity and retrenchment compensation). This change in the concept of wages and its widespread application will have an influence on employee benefits and employer costs.

The Impact Of The New Wages Definition

The revised pay definition will have a direct influence on gratuity costs. Gratuity will now be payable to all present and prospective workers under the revised definition of earnings. Another significant change concerns the period evaluated for gratuity eligibility. The previous requirement of a minimum of five years of employment for fixed-term employees has now been decreased to one year.

This means that fixed-term employees will now be entitled to gratuity after only one year of service with a firm. The same does not apply to permanent employees who are not hired for a set amount of time. After five years of service, permanent employees will be eligible for a gratuity.

Labour law consultants should also emphasise that under the labour rules, any worker can now request leave encashment at the conclusion of each calendar year. Such leave encashment is based on ‘wages’ as defined by the Labor Codes.

Are you looking for a labour law consultancy? Prompt Personnel is all you need! 

The radical revisions to the labour regulations are likely to give a significant boost to labour reforms and have an influence on numerous companies across all sectors. The government’s goal is for the new legislation to decrease complexities, make Labour law compliance easy, increase openness and accountability, and benefit both companies and workers. The new regulations are intended to improve labour law compliance dramatically, owing to heightened criminal consequences.

As many as 40 Central laws govern the labour ecology, and each state has its own set of rules. Many of these were written decades ago and were no longer relevant in the current environment of economic development, growth, global trade circumstances, technological advancement, and changing consumer and producer expectations.

Many firms are now looking for labour law consultants as they have been perplexed by the complex and ever-changing statutory rules. In this challenging business environment, Prompt Personnel is a labour law advisor that assists clients in protecting themselves from the potential penalties of non-compliance with labour rules. Their expertise and distinguished knowledge in statutory compliance have effectively kept numerous organisations from facing risks and potential losses.