India, which is one of the most labour-intensive countries in the world, has finalized rules under the four labour codes, or laws that will take effect from April. The country has finally taken a leap-of-faith and codified 29 of its national-level labour laws into 4 codes.
The Ministry of Labour and Employment will complete the process of bringing the latest amendments in the four new labour codes soon that will provide the companies with the flexibility of four working days in a week. However, there will be a maximum of 48 hours of work in a week.
Most of the labour laws in India are almost 70-80 years old. The economy of India has changed considerably since then. Hence, this is a bold and progressive move by the government as these age-old labour laws in India needed to change.
According to the latest amendments in labour laws the new definition of ‘wage’ will exclude pension and PF contribution, statutory bonus, HRA, conveyance allowance, overtime and gratuity. If these exclusions result in more than 50% of an employee`s CTC, the excess amount will be added back to the wage for calculation of social security benefits.
Once these codes will be implemented, the companies will have to restructure the employee compensation packages or CTC. The companies will also have to modify an employee`s CTC because under the new rules, all travel allowances such as house rent, leave travel, overtime, and conveyance, have to be capped at 50% of the CTC.
The Code on Wages was notified by the government in 2019. However, the remaining 3 codes- the Industrial Relations Code 2020, the Code on Social Security 2020, and the Occupational Safety, Health and Working Conditions Code 2020, were approved by the government on September 29, 2020.
The newly introduced codes appear more as an act of consolidation rather than reform. The codes mentioned in the new reforms will bring several changes that employers in every sector, location and size will need to scrutinize closely.
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