The new labour codes in India

The Code on Wages, 2019 

The Code on Wages was passed by the Parliament and received the President’s nod in August 2019. It consolidates the following legislations concerning wages: ▪ Minimum Wage Act, 1948; ▪ Payment of Wages Act, 1936; ▪ Payment of Bonus Act, 1965; ▪ Equal Remuneration Act, 1976. 

The codification made two critical changes in definitions.

First, while the Minimum Wage Act, 1948 was applicable only to the ‘schedule of employment’ covered under law, the Code extended the ambit by removing the distinction between scheduled and non-scheduled employment. Accordingly, the definition of ‘employee’ and ‘employer’ has been expanded to include both formal and informal sectors.

Second, the Code extended the application of the Minimum Wages Act, 1948 and Payment of Wages Act, 1936, from being limited to workers whose income had to be under a predetermined ceiling, to cover all establishments and employees unless specifically exempted. The state governments are supposed to fix the minimum wage for their region, which cannot be lower than the national wage floor that is set by the GoI. Employers are prohibited from paying less than the notified minimum wage of the respective region unless specifically exempted in the Code.

India Inc. loves new labour codes; experts say they will promote 'ease of  closing business'

Earlier, the minimum wage was set using a formula laid down by The Indian Labour Conference (ILC) in 1957. The formula included considerations such as expenses on adequate nutrition, clothing, education, healthcare, etc. This formula was reiterated in 2012 and 2015 by the 44th and 46th ILC, respectively. The new Wage Code ignores this formula and does not suggest an alternative in its place. It gives the state administration the power to determine and set a suitable minimum wage. In case employees work more than the stipulated hours, they are entitled to overtime pay, no less than twice the normal rate of wages. Provisions of the erstwhile Payment of Bonus Act, 1965, are incorporated to ensure that those who are earning less than a predetermined wage ceiling will be entitled to an annual bonus, which will be at least 8.3 per cent of their wage or Rs. 100, whichever is higher. Interestingly, specific mention of ‘man’ and ‘woman’ in the Equal Remuneration Act, 1976, which ensured equal compensation for the same work for men and women, has been replaced by ‘gender’. 

The Code also sets up a quasi-judicial appellate authority that is responsible for overseeing disputes. Importantly, the Code has changed the role of Inspectors-in-Charge of monitoring compliance to Inspectors-cum-Facilitators. The erstwhile inspector could undertake surprise checks after getting notified about potential violations, inquire about employers, or enter workplaces. However, the Inspector-cum-Facilitators are no longer empowered to carry out these functions. Instead, they are required to advise employers and employees on how to effectively comply with the Code.

The Industrial Relations Code, 2020 

The Industrial Relations Code was passed by the Parliament in September 2020. It consolidates the following labour laws: ▪ Industrial Disputes Act, 1947 ▪ Trade Unions Act, 1926 ▪ Industrial Employment (Standing Orders) Act, 1946 

The Code legislates overstrikes, trade union registrations, and resolution of industrial disputes. To register a trade union, it is required to have either 10% of the workers of an industry or a minimum of 100 workers. If a trade union has a membership of 51 per cent of the workers, it will be the sole designated negotiating union. It also introduces a necessary 60-day notice that workers must submit before any strike, which was not required before. Establishments with more than 300 workers are required to take permission from the Union or state governments before laying off workers. It also provides for the setup of an Industrial Tribunal to resolve disputes. One of the more controversial provisions of the Code allows companies to directly hire workers on short-term contracts instead of providing more stable employment or going through a contractor. The Code has faced a lot of backlash from trade unions, which called for nationwide protests. Trade unions have called the Code “anti-workers” arguing that it allows employers to hire and fire workers more easily, and reduces the bargaining power of workers. 

The Occupational Safety, Health and Working Conditions Code, 2020 

This Code was passed by the Parliament in September 2020. It subsumes 13 legislations related to the health and safety of workers in the workplace.

The Code lays down the regulatory framework for establishments with 10 workers or more, and all mines and docks, regarding health and safety conditions of employees. Establishments that fall under the Code are required to register themselves with relevant officers assigned by the Union or state governments. The minimum standards of working conditions and welfare facilities are to be notified by the Union government. The Code also stipulates the setting up of ‘Safety Committees’ for certain establishments and classes of workers. These committees will be represented equally by employers and employees, and function as a bridge between the two. Interestingly, in the light of the migrant crisis following the lockdown during the COVID-19 pandemic, the Code has incorporated certain provisions for inter-state migrants. Under these changes, any inter-state migrant will be able to access the benefits of the Public Distribution System (PDS). Moreover, the Code directs the Union and state governments to maintain a database of all inter-state migrants. Finally, part of the money collected through fines imposed under the Code will be allocated to a social security fund dedicated to migrant workers. 

The Code on Social Security, 2020 

Under this Code, social security is defined as “…the measures of protection afforded to employees, unorganised workers, gig workers and platform workers to ensure access to health care and to provide income security, particularly in cases of old age, unemployment, sickness, invalidity, work injury, maternity or loss of a breadwinner by means of rights conferred on them and schemes framed, under this Code.” It consolidates and rationalises 10 existing legislations.

The Code provisions for the Union government to introduce social security schemes for workers. Such social security measures include schemes such as Employees’ Provident Scheme; Employees’ Pension Scheme; schemes for the benefit of unorganised workers, etc. It also directs governments to take into account the welfare of gig economy workers such as for-hire drivers or delivery persons. There are multiple thresholds for eligibility in different schemes, depending on the number of workers employed in the establishment and the income being drawn.

As per the Code, to provide social security for unorganised workers, gig workers and platform workers, the Union government can frame suitable welfare schemes on matters relating to life and disability cover, health and maternity benefit, old age protection, and education. Similarly, the state governments can frame schemes on aspects such as provident fund, employment injury benefit, and housing, educational schemes for children, etc. The Code, much like the erstwhile Unorganised Workers Social Security Act (UWSSA), stipulates the formation of national and state-level Social Security Boards to recommend schemes for unorganised workers. Similar to the Code on Wages, this Code also introduces Inspectorcum-Facilitators and a quasi-judicial appellate authority to adjudicate over disputes.

One thought on “The new labour codes in India

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s