Labour codes implementation set to bring in major overhaul
The four labour codes are likely to see the light of day in a couple of months as the Centre is now keen to go ahead with the implementation of these laws, which among others will result in reduction in take-home pay of employees and higher provident fund liability of companies.
Once the wages code comes into force, there will be significant changes in the way basic pay and provident fund of employees are calculated. The labour ministry had envisaged implementing the four codes on industrial relations, wages, social security and occupational health safety & working conditions from April 1, 2021. These four labour codes will rationalise 44 central labour laws.
The ministry had even finalised the rules under the four codes. But these could not be implemented because many states were not in a position to notify rules under these codes in their jurisdiction.
“Many major states have not finalised the rules under four codes. Some states are in the process of finalising rules for the implementation of these laws. Central government cannot wait forever for states to firm up rules under these codes. Therefore it is planning to implement these codes in a couple of months as some time would have to be given to establishments or firms to align with new laws,” a source said.
According to the source, some states had already circulated the draft rules. These states are Uttar Pradesh, Bihar, Madhya Pradesh, Haryana, Odisha, Punjab, Gujarat, Karnataka and Uttarakhand.
Under the new wages code, allowances are capped at 50%. This means half of the gross pay of an employee would be basic wages. The new wages code provides for provident fund contribution as a prescribed proportion of 50% of gross pay.
After the implementation of new codes, the take-home pay of employees would reduce while provident fund liability of employers would increase in many cases.
Once implemented, employers would have to restructure salaries of their employees as per the new code on wages.