360° Implementation of New Labour Codes

Question

1. As per the definition of wages under the Code, do wages change every month as the exclusions such as “commissions” are also variable?

Answer 1

There are possibilities of “wages” becoming dynamic and varying every month for employees, receiving say for example, “commission” depending upon their performance. Though the commission is excluded from wages, if it is sufficiently high to make the total of all excluded allowance exceed 50% of total remuneration, then such sum that exceeds 50% has to be added back to the wages. Therefore, it is possible that the wage shall vary from one month to the other.

Answer 2

As per Section 17(2) of the Code on Wages, the wages shall be paid within two working days. When an employee has been removed, dismissed, retrenched, 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. Similarly, Leave Encashment shall be paid under the Occupational Safety, Health & Working Conditions, 2020, within 2 days of such termination. However, the term, Full and Final Settlement, normally includes other elements, for example, Gratuity. And for Gratuity, the Code on Social Security, 2020 and draft central Rules thereunder provide 30 days. Therefore, it is not the entire component of the Full and Final Settlement that needs to be settled in 2 days.

Answer 3

The new “wage” definition is certainly complex, with inclusions and certain exclusions with a cap on exclusions @ 50% of the total remuneration. Therefore, in a situation where the only component included is Basic, and is less than 50% of the remuneration, the proviso of the definition would ensure that the “wage” is 50% of the remuneration. For all practical purposes like calculating contributions for PF/ESIC, the calculation for gratuity etc, the “wage” will be 50% of the Remuneration, even if the Basic is less than 50%. However, if the Basic is more than 50% of remuneration, then the wage for such calculation would be the actual Basic.

Answer 4

As per the OSH Code, a contractor who has an establishment in more than one State and is desirous of obtaining a license for supplying or engaging contract labour or undertaking or executing the contract work in more than one State or for pan-India makes provision for “National License” for a contractor but this is subject to requisite qualifications or criteria to be fulfilled by the Contractor as may be prescribed by the Central Government.

Answer 5

While the OSH Code applies to all establishments having 10 or more employee therein, the specific chapters thereunder would apply based on the subject matter it governs.
The Contract Labour chapter will only apply to establishments or contractors employing 50 or more contract workers.
And the Factories chapter would apply to factories (without the aid of power) employing 40 or more workers and if they are running with aid of power, then 20 or more workers therein. Such factories would also require a licence in the same manner as required currently under Factories Act. But factories having less than 20 employees (but more than 10 employees) will have to comply with the registration requirement under the OSH Code.

Answer 6

Chapter X of the OSH Code prescribes special provision relating to the employment of women and are entitled to be employed in all establishments for all types of work and they may also be employed, with their consent before 6 a.m. and beyond 7 p.m. i.e., night. But this is subject to conditions relating to holidays, working hours and adequate safety, which shall be prescribed in the Rules.

Answer 7

Gratuity calculation remains the same as per the Payment of Gratuity Act. However, the wages to be considered may be impacted based on the salary structure of an employee which should be in line with the definition of wages as per the new Codes.

Answer 8

Yes! The Standing Orders are applicable for the IT/ITeS sector as well unless no specific exemption is granted.
As per the new definition of “Industry” under the Industrial Relations Code, 2020, all IT/ITeS companies would be Industry. All their establishments would be Industrial Establishments. Therefore, as per the IR Code, any such establishment engaging 300 or more workers would not obtain a Standing Order. They can either adopt the Model Standing Order or get their Standing Order certified.

Answer 9

Yes. It is not only the definition of wage that is expected to change. For example, the concept of who is a “Worker” is now clearly defined. The term “Employee” is also defined clearly, and it includes “Worker”. There are few provisions such as the ones that regulate working hours, overtime, annual leave that apply only to workers and not all employees. Similarly, all IR Code provisions apply only to workers. Therefore, it is important that every employer relooks at their HR policies, organization structure, role, and responsibility of every employee to understand the impact of provisions of the code and realign as required.

Answer 10

OT applies to all the workers including the person engaged in supervisory levels earning less than INR 18,000 (Rupees Eighteen Thousand only) per month. But it does not apply to employees engaged in a supervisory capacity drawing a wage exceeding INR 18,000 (Rupees Eighteen Thousand only) per month or such other amount as may be notified by the Central Government and to employees engaged in a managerial and administrative capacity.

Act	Code On Wages, 2019
Rule	Code On Wages Draft Rules, 2020 Code On Wages Draft Rules, 2020 Code On Wages Draft Rules, 2020
Status	Rule in Published
Draft Published Date	2021-05-12
Expected Consideration Date	2021-05-12

Act	Central Act
Rule	Central Rule Central Rule
Status	Rule in Draft
Draft Published Date	2021-05-11
Expected Consideration Date	2021-05-26

Act	The Code On Social Security, 2020
Rule	The Code On Social Security Central (Draft) Rules, 2020 The Code On Social Security Central Draft Rules 2020.pdf Draft Code On Social Security Employees Compensation Central Rules 2021.pdf
Status	Rule in Draft
Draft Published Date	2021-02-25
Expected Consideration Date	2021-09-28

Act	Not Published
Rule	Not Published
Status	Not Published
Draft Published Date	Not Published
Expected Consideration Date	Not Published

Before	40
After	11

Code On Wages	Before		After
Code On Wages	Fine	Imprisonment	Fine	Imprisonment
The Payment Of Wages Act, 1936	Min: INR 1,500 Max: INR 7,500		Max: INR 20,000
The Minimum Wages Act, 1948	Max: INR 500	Upto 6 months	Max: INR 50,000
The Payment Of Bonus Act, 1965	Max: INR 1,000	Upto 6 months	Max: INR 20,000
The Equal Remuneration Act, 1976	Min: INR 10,000 Max: INR 20,000	1-3 months	Max: INR 20,000

The Payment Of Wages Act, 1936	Before	After
Fine	Min: INR 1,500 Max: INR 7,500	Max: INR 20,000
Imprisonment	-	-

The Minimum Wages Act, 1948	Before	After
Fine	Max: INR 500	Max: INR 50,000
Imprisonment	Upto 6 months	-

The Payment Of Bonus Act, 1965	Before	After
Fine	Max: INR 1,000	Max: INR 20,000
Imprisonment	Upto 6 months	-

360° Implementation of New Labour Codes

360° Implementation of New Labour Codes

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Simpliance’s professional team will help your organisation to adopt and accurately implement the new codes.

Key Features of 360° New Labour Codes Consulting:

Accurate checklist based on the applicability of new Labour Codes

Update HR policies in line with new Codes

Budget forecasting and impact analysis for finance

Salary restructuring for C&B teams

Assistance to correct HRIS systems based on new Codes

Correct existing compliance tools if any

Constant updates on changes in new Labour Codes

Training for HRBPs and legal teams

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New Labour Codes Status

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Central

Code On Wages,2019

Code On Industrial Relation,2020

Code On Social Security,2020

Occupational Safety, Health & Working Conditions, 2020

Changes in Statutory Requirements: Before & After

REGISTERS

RETURNS

LICENSES

DISPLAYS

REGISTRATION

REMITTANCE

Non-Compliance Consequences

Code On Wages, 2019

Code On wages

Code On Social Security, 2020

Code On Social Security

The Occupational Safety, Health and Working Conditions Code, 2020

The Occupational Safety, Health and Working Conditions Code, 2020

The Industrial Relations Code, 2020

The Industrial Relations Code, 2020

Frequently Asked Questions

1. As per the definition of wages under the Code, do wages change every month as the exclusions such as “commissions” are also variable?

2. What is the timeline prescribed for the full and final settlement of an employee exiting under the Code? Should it happen in 2 days of the last working day or month-end/ salary processing day?

3. Does the basic wage need to be maintained at 50% of CTC across all employees where DA is not applicable?

4. If a contract employer has their establishment in more than one State, what type of CLRA license should they obtain? Do they need to obtain separate licenses for each State?

5. Will the applicability of provisions & Rules under the Contract Labour chapter have different threshold limits or it will be consistent as provided in Codes? What about the threshold limit for applicability of the Factories Act?

6. Is the employment of women in all types of work and night shift permitted?

7. How is Gratuity computed as per the new Labour Codes? When is it supposed to be paid to an exiting employee?

8. Are the Standing Orders applicable for IT/ITES sectors?

9. Do we need to change any policies or procedures or is it only the wage structure?

10. Does an employer have to pay overtime to all the types of employees in their establishment?

Read our latest BLOGS analysing the New Labour Codes

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Total Time: 1 ms Total Queries: 4 queries

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Code On Wages,
2019

Code On Industrial Relation,
2020

Code On Social Security,
2020

Occupational Safety, Health & Working Conditions,
2020

Total Time: 1 ms
Total Queries: 4 queries