Labour codes introduced by Government of India are significant steps towards the much-needed labour reforms in the country. The four labour codes subsume 29 existing labour laws with an intent to simplify and rationalise the relevant provisions of the subsumed laws.
The new codes cover gig and platform workers through social security schemes for the first time. With an aim to improve ease of doing business and provide universal social security to all 500 million workforces of India, the codes will significantly impact workers and employers.
What are the four new codes
How the codes impact businesses
Widened coverage: No wage threshold for employees, definition of employer includes ‘contractor’ and ‘legal representative of deceased employer’, etc.
New definition of ‘wages’: Applicable to all employees; specified exclusions and conditional inclusions specified, cap on benefits in kind
Timeline for full and final settlement: Two days from the date of removal/resignation/retrenchment/dismissal
Stringent penal implications: Introduced for non-maintenance of registers and records under the Code of Wages, 2019 5 Payment of wages and deductions: Payment vide cheque, online mode; no unauthorised deductions allowed from the wages
Voluntary coverage: Opt in/opt out of social security schemes
Introduction of new category of beneficiaries:
Platform workers, gig workers, fixed-term employees, etc.
Introduction of the concept of holding the ‘officer in charge’: Who will be held responsible for any default in relation to payment of gratuity and contribution towards ESI
Increase in quantum of gratuity payment:
- New category of employees introduced i.e.‘Fixed term workers’ rendering services forless than 5 years;
- Working period of 3 years for journalists introduced;
- Gratuity payable to the contract labourers as well, in line with eligibility criteria are set out in the Code
Concept of fixed-term employment: Introduced with benefits not be less than of a permanent worker
Conditions for strikes and lockouts prescribed: No strikes and lock outs without giving proper notice in compliance with the norms laid down in the code
Standing orders: Required in establishments where 300 or more workers are employed
Retrenchment, lay-off and closure provisions: Not to be applicable if workers are
Concept of core and non-core workers: Employment of contract labour in core activities of any establishment is prohibited (with certain exceptions)
Canteen and crèche facility: Mandated for specified establishments
Special provisions for women: Consent of female employees required for working before 6 am and after 7pm along with other safety measures
Concept of leave rules and leave encashments introduced
Free annual health check-ups: Mandated for specified employees of specified establishments
Why Grant Thornton Bharat
Transitioning to a new legislative framework is a journey. At Grant Thornton Bharat, we are well equipped to assist you navigate through this change in legislation impacting employers across industries.
We help organisations divide their strategy in three phases, gauge preparedness and ensure a smooth transition.
Detailed assessment, i.e., comparing existing with new provisions
- Review compensation structure and benefits
- Review existing HR processes and policies
- Review employment and other contracts
- Map/compare the prescribed guidelines under the codes as applicable
- Presentation before the management and stakeholders
- Assist in revising compensation structure, policies, contracts, etc.
- Assist in putting plan in place for transition to new codes
- Assist in creating the process ownership structure and align internal department, management and other stakeholders
Implementation and compliance
- Assist in compliances under new codes
- Provide handholding support over a fixed period
- Assist with implementing any change in provisions, clarifications, notified after the effective date
50% companies are prepared to implement new labour codes, says a Grant Thornton Bharat and CII survey on the industry preparedness.
Impact and analysis
Grant Thornton Bharat and IACC organised a webinar to discuss challenges arising from provisions under the law and the impact areasView the recording