What is the new Labour code of wages?
The Code on Wages Bill 2019, also referred to as Wage Code, consolidates provisions of four labour laws concerning wages and bonuses, while allowing for timely payment of wages for workers in India.
The labour codes are meant to regulate the following:
- Code of Wages,
- Industrial Relations,
- Social Security, and
- Occupational Safety, Health and Working Conditions.
The Code on Wages, 2019 was been passed by the Parliament; however, Bills regarding the other three areas were sent to the Standing Committee on Labour for deliberation. The Standing Committee submitted reports on the three Bills and the Government then replaced the old Bills with new ones in September 2020. However official gazette is still not published by Government. Refer to the official link to the wage code documents here- Code on Wages | Ministry of Labour & Employment
What changes will this code bring?
As per Labour Minister, the new law will benefit about 50 crore workers in the country.
In addition, other changes will also become available:
- As per the bill, a committee of trade unions, employers and the state government will fix a floor wage for workers throughout the country.
- Provident fund (PF) and gratuity components and take-home pay of employees will be impacted. The new definition of wages caps allowances at 50% of total compensation.
- The basic pay will be 50% or more of total pay as per the new code. This will change the salary structure of most employees as the non-allowance part is usually lower than 50%.
- As provident funds (PF) are based around basic salary, it will go up, which means that the take-home pay will come down.
- Post-retirement pay-out will go higher due to higher contributions due to provident funds
- Companies will also see their cost rise as the contribution towards PF and gratuity increases.
You must go through the Occupational Safety, Health and Working Conditions Code 2020 introduced in the Parliament in September 2020, at the linked article. It is one of the three bills passed in the Lok Sabha related to Labour reforms.
To read about a comparison check with different labor Act, please refer our article here- New code of wages, 2019.