Transforming Indian Employee Laws - Highlights of the new Labour Codes– Throttle
or Speed Breaker ?
Labour falls under the
Concurrent List of the Constitution. Therefore, both Parliament and state
legislatures can make laws regulating labour and there are over 100 state and
40 central laws regulating various aspects of labour such as resolution of
industrial disputes, working conditions, social security and wages.
To improve ease of
compliance and ensure uniformity in labour laws, the Central Government introduced
four Bills to consolidate 29 central laws. These Codes regulate: (i)
Wages, (ii) Industrial Relations, (iii) Social Security, and (iv) Occupational Safety, Health and Working
Conditions. While the Code on Wages, 2019 has been passed earlier,
remaining three codes have been passed recently.
Code on
Industrial Relations, 2020
Provisions on
fixed term employment
The 2020 Bill introduces
provisions on fixed term employment. Fixed term employment refers to
workers employed for a fixed duration based on a contract signed between the
worker and the employer. Provisions for fixed term employment were
introduced for central sphere establishments in 2018. Let us analyse the pros
and cons of introducing fixed term employment.
Fixed term employment may allow
employers the flexibility to hire workers for a fixed duration and for work
that may not be permanent in nature. Further, fixed term contracts are
negotiated directly between the employer and employee and reduce the role of a
middleman such as an agency or contractor. They may also benefit the
worker since the Code entitles fixed term employees to the same benefits (such
as medical insurance and pension) and conditions of work as are available to
permanent employees. This could help improve the conditions of temporary workers
in comparison with contract workers who may not be provided with such benefits.
However, unequal bargaining powers between
the worker and employer could affect the rights of such workers since the power
to renew such contracts lies with the employer. This may result in job
insecurity for the employee and may deter him from raising issues about unfair
work practices, such as extended work hours, or denial of wages or leaves.
Further, the Bill does not restrict the type of work in which fixed term
workers may be hired. Therefore, they may be hired for roles offered to
permanent workmen. In contrast, under the Contract Labour (Regulation and
Abolition) Act, 1970 the government reserves its prerogative to prohibit
employment of contract labour in some cases including where: (i) the work is of
a perennial nature, or (ii) the work performed by contract workers is necessary
for the business carried out by the establishment, or (iii) the same work is
carried out by regular workmen in the establishment.
In fact, the 2nd National
Commission on Labour (2002) had recommended that no worker should be kept
continuously as a casual or temporary worker against a permanent job for more
than two years.
As we need to wait and watch the
rules and regulations which may be notified in due course to sail through the
detailed aspects, I have coined a few FAQs for a crisper understanding of the
codes.
Frequently Asked Questions
1.
What are Labour Codes?
Labour Codes are amalgamation of existing labour
laws; to bring uniformity, facilitate ease of doing business and regulate
employer employee relationship.
2. Which laws are getting covered under
new labour codes?
Following existing laws will get repealed on
implementation of Labour Codes
|
Labour Codes |
Existing Laws |
|
Wage
Code 2019 |
Payment
of Wages , Minimum Wages, Equal Remuneration , Bonus |
|
Social
Security Code 2020 |
PF,
ESIC, Maternity , Gratuity, Employee Compensation |
|
Industrial
Relation Code 2020 |
Standing
Orders, Trade Union, Industrial Dispute |
|
Occupational
Health & Safety Code 2020 |
Contract
Labour , Sales Promotion Employees, Interstate migrant worker, Factories, etc., |
3. What is current status of Labour
Codes?
All Codes have received presidential assent however
rules under this codes are yet to be formed and published.
4. When Labour Codes will be implemented
?
As per news source government is planning to implement all codes by December
2020
5. What are the Key Highlights of Labour
Codes likely to Impact?
Labour Codes at first sight come across as very
balancing provisions that will facilitate ease of doing business to employer
along with protection of worker’s / employee’s rights.
Some highlights as below:
·
Uniformity in definition
·
Fixed Term Employment
·
Increased threshold for retrenchment (From 100 to 300)
·
Fixation of Floor Wages
·
Amended provisions on Gender Discrimination
·
Standing order for workers in the industrial
establishment
·
Employee & Trade Union can apply for
prosecution against employer
·
Enhanced Fines & Penalties
·
Employer responsible for accident due to negligence
6. What is floor wages?
Floor wages is a national minimum wage over and above which the state
governments have to fix respective minimum wages
7. Which major processes will get
revamped once codes are implemented?
·
Compensation
structure:
Definition of Wages have undergone major change where the Government has
defined what can and what cannot be part of wages and also has prescribed about
proportionality of some components .
·
Settlement of Wages: After Separation
employee to be paid Wages ( Everything that constitutes wages as per definition)
within 2 working days
·
Employment Models : Majority of
workforce will get covered under code ; thus all provisions applicable to them will
have to be followed rigorously
·
Rules around
standing order: Post publication of draft rules and schedules, the standing order certification or adapting model
standing order may become relevant for the establishments.. Standing orders
specifies rules about working conditions and termination of workers. It is
pertinent that many States have already mandated establishment of standing
orders for even establishments not being factories. However, many
establishments are either not aware or have taken shelter that while the
Standing Order may apply to this establishment, they do not have any workman
(the definition in the original ID Act/ISEO)on whom they can apply the standing
orders. However, the wider definition of Worker now brings almost every
establishment to the fore.
·
Gender disparity in
compensation / recruitment: This codes have protected rights of women
employees and any gender based disparity in compensation and recruitment for
same or similar work is prohibited.
·
Grievance Redressal
Mechanism IR Code specifies formation of works committee
and grievance Redressal committee . Accordingly, existing committees to be
reviewed and restructured.
·
Stricter fines
& Penalties : Fines have been increased 10 fold ; especially any workplace
safety violation that may lead to death of an employee
8.
How uniformity in definitions will
facilitate better implementation of laws?
Definitions of Wages, Worker, Employee, Employer,
Industry, Industrial Establishment, Fixed Term Employment are same across the
codes reducing confusion and ambiguity existing in current laws
9. How changes in definition will impact
our business ?
Change in definition of employee and worker will
bring majority of workforce under protection of labour laws.
10. Who is considered as worker under
Codes ?
“Worker" includes:
manual, unskilled, skilled,
technical, operational, clerical or supervisory work sales promotion
employees
but does not include any
such person—
mainly in a managerial
or administrative capacity; or supervisory capacity drawing wage of
exceeding Rs.15000 rupees per month
or an amount as may be notified. (Rs. 18000
of OSH Code )
11. Who is an Employee as per Codes?
“Employee" means any
person (other than an apprentice engaged under the Apprentices Act, 1961)
employed by an industrial establishment to do any skilled, semi-skilled or
unskilled, manual, operational, supervisory, managerial, administrative,
technical or clerical work for hire or reward, whether the terms of
employment be express or implied.
12. Has Wage Ceiling under PF / ESIC /
Bonus been changed?
Wage Ceiling have not been specified under code yet
. They will be published via government notification
. Clarity Awaited on how it will impact current processes.
13. What are provisions around Fixed Term
Employment?
·
Fixed Term employment model has been validated.
(Now establishments can Directly employ FTCs without
contract labour vendor)
·
Termination after Fixed Term will not constitute retrenchment.
·
FTC employees to be paid gratuity on pro rata basis
if they complete one year
14. What are enhanced Health & Safety
Provisions?
Employer has to provide for Annual Health Check Up
for Workers.
We can initiate this through group insurance policy.
15. How Unpaid Wages / dues will be
treated ?
Any unpaid amount due on death of employee to be
paid to nominee. If nominee not known to be deposited with authority in 6
months . Nomination forms of utmost importance , also review and realignment of
entire F & F process needed.
16. What is impact Labour Welfare Fund Act
provisions ?
Clarity awaited on how it will affect provisions
under labour welfare fund act for unpaid accumulations.
17. What are provisions around Inter
State Migrant Workers?
•
Change in definition to include worker from one
state who has obtained employment in another state. Wage ceiling supervisor up
to 18000 . Benefits to inter state migrant workers like insurance
travel allowance once a year
•
Any migrant worker can
declare details online ; for provisions to be applicable
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