New Delhi: The four labour codes on wages, social security, industrial relations, and occupational safety, health, and working conditions may be implemented soon. Once the new wage code comes into effect, there could be a lot of changes in terms of salary restructuring, PF and gratuity component, working hours, and earned leaves, as per media reports. If these labor codes are implemented, the new wage code will also impact full and final payment settlement in the event of resignation, dismissal, or removal from employment and service of the employee. Since these are now early speculations, nothing concrete should be inferred till the government officially notifies the rules.
Till now, 23 states have pre-published draft rules on these laws, while the Centre has completed the process of finalising the draft rules on these codes in February 2021. The central government had notified four labour codes, namely, the Code on Wages, 2019, on August 8, 2019, the Industrial Relations Code, 2020, the Code on Social Security, 2020, and the Occupational Safety, Health, and Working Conditions Code, 2020, on September 29, 2020.
As labour is a concurrent subject, the Centre wants the states to implement these as well, in one go, as has been reported earlier.
The government's notification on Code on Wages 2019 may reduce the take-home pay while components like PF and gratuity might rise. This is based on the fact that the new wage code mentions a provision entailing that the employee's basic salary will be at least 50 percent of his/her net monthly CTC. Hence, if this provision comes into effect, it will mean that employees will not be able to get more than 50 percent of their net monthly salary in the form of allowance.
This also means that there will be a consequent rise in the employee's gratuity and PF contributions. Hence, while the take home pay of the employees may be reduced, the gratuity and PF components may rise.
Experts also believe that the new draft will impact the working hours of employees, with some media reports saying that employees may be allowed a four-day workweek, but they will have to work for 12 hours on those four days. The labour ministry has apparently made it clear that a 48-hour weekly work requirement is a must.
The biggest change could be seen in cases of earned leave. Government departments now allow 30 holidays in a year. Defense employees get 60 holidays in a year. Employees can cash up to 300 holidays on carry forward, but the labor union is demanding to increase the number of holidays to 450 in the new code. At present, there are 240 to 300 holidays in different departments. Employees can take these holidays in cash only after 20 years of service.
The New Wage Code says, "Where an employee has been—(i) removed or dismissed from service; or (ii) retrenched or has resigned from service, or became unemployed due to the closure of the establishment, the wages payable to him shall be paid within two working days of his removal, dismissal, retrenchment, or, as the case may be, his resignation."