ARTICLE
8 January 2025

Update On Implementation Of New Labour Codes

AL
Anhad Law

Contributor

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On December 28, 2024, the Ministry of Labour and Employment, Government of India, published Year End Review 2024 specifying that all 36 States/UTs of India are expected to complete harmonization...
India Employment and HR

On December 28, 2024, the Ministry of Labour and Employment, Government of India, published Year End Review 2024 specifying that all 36 States/UTs of India are expected to complete harmonization and pre-publication of draft rules under the four Labour Codes- Code on Wages, Code on Social Security, Code on Industrial Relations, and Code on Occupational Health & Safety, by March 31, 2025.

Significantly barring five States including West Bengal, Meghalaya, Nagaland, Sikkim and UTs like Andaman & Nicobar Islands, all others have pre-published the rules under the four Labour Codes setting the stage for the much-awaited rollout of the four Codes.

According to the said year-end review, Nagaland has recently pre-published draft Rules under Code on Social Security and the Occupational Safety, Health & Working Conditions Code while Sikkim prepublished draft Rules under the Occupational Safety, Health & Working Conditions Code and Andaman & Nicobar Islands pre-published draft Rules under the Industrial Relations Code.

The Ministry of Labour & Employment further identified four reforms in Labour Laws to be carried out viz.

  1. Single Registration,
  2. Single Return,
  3. Firm-based common license with 5 years validity.
  4. Change of role of Inspector to Inspector-cum-Facilitator.

In the years 2019 and 2020, a total of 29 Central Labour Laws were amalgamated, rationalised, and simplified into four Labour Codes, viz., the Code on Wages, 2019 (August 2019), the Industrial Relations Code, 2020, the Code on Social Security, 2020, and the Occupational Safety, Health & Working Conditions Code, 2020 (September 2020). Till date, only the provisions of the Code on Wages, 2019 relating to Central Advisory Board have been notified vide notification dated 18th December, 2020 being:

(1) sub-sections (1), (2), (3), (10) and (11) of section 42 (to the extent they relate to the Central Advisory Board);

(2) clauses (s) and (t) of sub-section (2) of section 67 (to the extent they relate to the Central Advisory Board);

(3) section 69 [to the extent it relates to sections 7 and 9 (to the extent they relate to the Central Government) and section 8 of the Minimum Wages Act, 1948

The Labour Codes, once enforced shall require employers to undertake significant changes in their HR policies to align their practices with the revised legal framework. These changes span a broad spectrum, impacting areas like wages, employee benefits, workplace conditions, and industrial relations.

One of the key changes under Code on Wages is the redefinition of wage structures. Employers will need to ensure that at least 50% of total remuneration is classified as "basic wages." This adjustment shall impact gratuity, provident fund contributions, and other statutory benefits, potentially increasing employer costs and reducing take home salary of employees. Companies must revisit salary structures and employment contracts to ensure compliance with this redefinition while maintaining transparency with employees.

Another critical area is working hours and overtime provisions. The Code standardize the maximum work hours to 8 per day and provide clarity on overtime calculations. Employers will need to implement robust systems to track working hours accurately and compensate overtime as mandated. Additionally, weekly offs and leave policies may need revision to align with the prescribed limits, ensuring fair treatment of employees. Employers must avoid paying less than the minimum wage and ensure no gender discrimination in recruitment and remuneration. A floor wage set by the central government must be adhered to, ensuring fair wages across regions.

Under the Social Security Code, employers are required to expand social security coverage to include gig and platform workers, ensuring they have access to benefits like provident fund and employee insurance. Employers, especially those in hazardous industries, must enhance safety standards and establish committees for health and safety at the workplace. Employers will also need to comply with new guidelines on interstate migrant workers and provide benefits such as housing and travel allowances where applicable. The Code also emphasizes timely payment and adherence to stricter deadlines for contributions.

The Occupational Safety, Health, and Working Conditions Code calls for improvements in workplace safety and health standards, requiring employers to create more robust compliance mechanisms. The Code allows for a single registration process instead of multiple registrations under different laws, simplifying administrative tasks. Employers are now mandated to issue appointment letters to all employees, formalizing their employment status. Employers must provide health facilities, conduct annual health examinations for certain workers, appoint safety officers based on workforce size, and maintain welfare facilities such as adequate lighting and ventilation. Specific provisions for women employees, such as ensuring safe work environments and offering flexibility in work hours with their consent, need to be integrated into workplace policies.

Regarding industrial relations, the Industrial Relations Code mandates stricter procedures for dispute resolution and introduces higher thresholds for unionization and strike actions and require establishments with over 300 workers to obtain government approval for retrenchment or closure. Employers must adhere to the 60-day notice requirement for strikes and the ban on flash strikes. The threshold for mandatory standing orders has increased from 100 to 300 workers, providing more flexibility in hiring and terminating the employees. The Code clarifies the use of fixed-term contracts, ensuring that such employees receive similar benefits as permanent staff. Employers will need to adapt their hiring practices and foster open communication channels with workers to pre-empt conflicts and adhere to union-related stipulations, such as recognition of trade unions and negotiation mechanisms. Establishing efficient internal grievance redressal mechanisms will be essential in managing workplace harmony and avoiding potential litigation.

Overall, the enforcement of new labour Codes shall require comprehensive overhaul necessitating that employers proactively audit existing policies, update documentation, and train HR teams to ensure seamless compliance. Employers must upgrade their documentation and compliance systems to reflect the changes under the new labour codes. Employers should leverage technology like Automated Labour Compliance Management Services, digital payroll systems, and mobile apps to ease compliance. This includes updating employment contracts, revising or drafting new HR policies, and maintaining detailed records as prescribed by the Codes. Training HR and legal teams on these updates will be crucial for seamless implementation and adherence.

By adopting these measures, businesses can navigate the complexities of the new Labour Codes while fostering a compliant and equitable workplace.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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