LABOUR LAWS
Central government has merged the existing labour laws into four labour
codes.
1. The Code on Wages, 2019
It has replaced (repealed) four previous acts viz:
• Payment of Wages Act, 1936
• Minimum Wages Act, 1948
• Payment of Bonus Act, 1965
• Equal Remuneration Act, 1976
➢ The central government shall fix floor wage (which will be applicable for
both organized and unorganized sector) taking into account minimum
living standards of a worker in such manner as may be prescribed.
Provided that different floor wage may be fixed for different geographical
areas. State governments will fix the minimum wages (which may be
different for different skill-category of workers) for
their states which cannot be lower than the floor wage (of the central
government). The code also provides that there would be a review/
revision of minimum wages at intervals not exceeding five years. Further,
the rate of wages for overtime work shall not be less than twice the rate
for normal wages. MGNREGA wages have been kept outside the purview
of Code on Wages.
➢ In case the employee is removed, dismissed, retrenched, resigns or
becomes unemployed due to closure of an establishment, the wages are
required to be paid within two working days.
➢ The Code has expanded the definition of “employer” as well as
“employee”, resulting in a broad based applicability of the regulations and
is now applicable to employees in both organised and unorganized
sectors.
➢ The provisions of the previous Minimum Wages Act and the Payment of
Wages Act used to apply only to workers drawing wages below a
particular ceiling and working in scheduled employments only.
However, under the Code, the minimum wages and the payment of wages
provisions cover all establishments, employees and
employers.
➢ The definition of “wages” includes basic pay, dearness allowance and
retaining allowance. It specifically excludes components such as statutory
bonus, utilities (light, water, medical etc.), conveyance allowance, house
1
LABOUR LAWS
rent allowance, overtime allowance etc. The specified exclusions
however may not exceed 50% of the total
remuneration. This is aimed at ensuring that companies do not adopt
compensation structures which result in wages being reduced below
50% of the total compensation.
➢ All employees whose wages do not exceed a specific monthly amount (to
be notified by the central or state government) will be entitled to an
annual bonus. Bonus is payable on higher of minimum wage or the wage
ceiling fixed by the appropriate government for payment of bonus.
Minimum bonus prescribed under the Code is 8.33 percent and the
maximum bonus payable is 20 percent of the wages.
➢ The cut-off date for salary disbursement has been advanced to the 7th of
the subsequent month.
2. The Occupational Safety, Health and Working Conditions Code, 2020
It has replaced (repealed) 13 previous acts including The Factories
Act 1948.
➢ The code deals with the duties of the employer in respect of workplace
safety and working conditions, and makes issue of employment
letter a must for all employees, a move that will promote
formalisation of employment.
➢ The code specifies leave and working hours (which is limited at 8
hours, and any overtime requires workers’ consent and wages have
to be doubled), requires health and safety norms including adequate
lighting and ventilation and other welfare facilities such as separate
toilets for male, female and transgender employees.
➢ A manufacturing unit will be defined as a factory if it employs 20
workers (and uses electricity) or 40 workers (without using electric
power)
➢ The government may, in public interest, exempt any new industrial
establishment from “all or any of the provisions” of the Codes in the
interest of increased economic activity and employment generation.
➢ Employment of women has been allowed in all establishments for
all types of works and in the night shift, subject to their consent and
requires employers to provide adequate safeguards. This will
promote gender equality.
2
LABOUR LAWS
3. The Code on Social Security, 2020
It has replaced (repealed) 9 previous Acts.
➢ The Code proposes social security benefits to all employees and
workers in the country (around 50 crores) including those in the
unorganized sector leading to universalization of social security.
➢ “Social Security Fund” will be created to fund social security
schemes for extending benefits like death and accident insurance,
maternity benefit and pension cover to all of the 90% (basically
informal) of the country’s over 50 crore workforce who do not till now
come under any sort of social security cover.
➢ Scheme will be framed for unorganized workers, gig workers,
platform workers and even those self-employed and the members of
their families for providing benefits. Establishments will be allowed
to join Employees’ Provident Fund Organization (EPFO) and
Employees’ State Insurance Corporation (ESIC) on voluntary basis
even if they have fewer workers (less than 20 in case they use
electricity or less than 40 in case they do not use electricity).
➢ EPFOs coverage would be applicable on all establishments having 20
workers. Earlier it was applicable only on establishments included in
the relevant Schedule.
4. The Industrial Relations Code, 2020
The new Act replaces the following previous acts (some provisions will
be repealed as and when the code comes into effect and some provisions
may be repealed in future):
• The Trade Unions Act, 1926
• The Industrial Employment Act, 1946
• The Industrial Disputes Act, 1947
➢ A much larger segment of firms – those with workers up to 300 (as
against 100 earlier) will be able to resort to closure and
retrenchment/ lay off without prior government permission. And the
3
LABOUR LAWS
state governments are authorized to increase this 300 threshold just
by a notification.
➢ Companies having more than 300 workers need to apply for approval
to layoff any worker, but if authorities do not respond to their request
then it will be deemed approved.
➢ The government may, in public interest, exempt any (existing or new)
industrial establishment from “all or any of the provisions” of the
Codes for a specified period.
➢ The Code prohibits the employment of contract workers in any core
activity, and specifically permits employment in a specified list of
non-core activities including canteen, security and sanitation
services.
➢ Fixed Term Employment has been made applicable for all industries
which will help those businesses that witness seasonal spurt/change
in activities.
➢ Requirement of mandatory 14-day notice for strikes and lockouts will
now apply to all units which was earlier for just public utility firms.
➢ Definition of strike has been amended to include ‘mass casual leave’
within its ambit. Concerted casual leave on a certain day by 50% or
more workers will be treated as a strike.
➢ Proliferation of Trade Unions will be curbed, as only those unions with
support of more than 51% of the workers on the muster roll of the
unit concerned will have the right to negotiate the terms with the
management.
➢ Encourages resolution of disputes through negotiation.
Key Points/Highlights of Labour Laws
✓ Gives industries flexibility in doing business and hiring & firing
✓ Make industrial strikes difficult while promoting fixed term
employment
✓ Reduces influence of trade unions
✓ Reduction of cost & complexity in compliance
✓ Lead to formalization of jobs resulting in increase in wages to
employees
4
LABOUR LAWS
✓ Universalization of minimum wages and making it statutory
rights
✓ Universalization of social security by expanding benefits to
informal sector workers
These four labour codes have become acts but has not
come into force yet
