Category: finance

Continuing the spree of merging various laws and consolidating it under a few manageable ones, the Govt has released draft Labour codes for public review. As the last date for public comment on the draft Labour code is approaching, here is a brief review of the structure and nuances, for which, the brainstorming started way back in 2002.

In India, the law relating to employees/workmen has always been a complex subject due to various factors whether due to its archaic laws, multiplicity of laws/regulatory authorities, central v/s states legislation and so on. One of the key factors to remember is that labour laws are part of the concurrent list and accordingly both the central and the state government can legislate wherever they feel need for the same. However, instead of bringing clarity, this has created confusion due to overlapping and multiplication. Central Government has passed more than fifty laws till date pertaining to labour and related aspects while various state governments have also passed more than one hundred and fifty laws on similar or the same subject. Secondly, not only the state and central laws clash on the same subject and create confusion but even in central laws also, a single subject has been placed under multiple laws. For instance, the maternity benefits aspect has been provided in more than four legislations. Wages definitions also have been provided in various Acts leading to varying interpretations. Lastly, some of these laws were too old, archaic and not in line with current economic and industrial requirement. Therefore, consolidation and codification of the entire set of labour laws was the urgent need of India and its manufacturing industry in order to scale up further and put its footprint in global manufacturing base. In order to improve its ranking further, attract more foreign investment, augment domestic capital in order to make India a truly manufacturing hub as envisaged in “Make in India” scheme, we need to create a conducive environment that can facilitate and nurture industrial and manufacturing set up(s). To achieve this, it is necessary to reform and replace, on top priority basis, its’ old and archaic labour laws, which are often considered to be one of the key bottlenecks in making it a manufacturing power house in the global map.

Here is a brief structure of the new codes:

Code of Wages, 2019

The Preamble of Code on Wages, 2019, states its aim is to amend and consolidate the laws relating to wages and bonus and matters connected therewith or incidental thereto and therefore, four laws directly impacting wages and bonus have been submerged and subsumed into one. The first three aspects are minimum wages, governed by The Minimum Wages Act, 1948, payment of wages, governed by The Payment of Wages Act, 1936, and payment of bonus, governed by The Payment of Bonus Act, 1965. In addition to these, another aspect pertaining to wages (i.e. equal remuneration for equal work irrespective of gender of employee in the form of Equal Remuneration Act, 1976) has also got subsumed in the Code on Wages Act pursuant to the Section 69 (Repeal and Savings) of Code on Wages, 2019.

Key Highlights:

• Definition of wages revamped and made uniform for all chapters
• Consistency in provisions across all sections of the Code
• Includes all remuneration payable to a person; Exclusions specifically listed to be limited to 50% of total wages; Benefits in kind to be part of wages
• Managerial employees included;
• Contractor identified as employer
• Concept of floor wages introduced in addition to minimum rate of wages;
• Early settlement of claims envisaged.

CODE ON OCCUPATIONAL SAFETY, HEALTH AND WORKING CONDITIONS, 2019

The Preamble to the Code on Occupational Safety, 2019 states that it will consolidate and amend the laws regulating the occupational safety, health and working conditions of the persons employed in an establishment and the matters connected therewith or incidental thereto.Therefore, it intends to consolidate the various laws which deals with occupational safety, health and working conditions of employees for example Factories Act, 1948, Contract Labour (Regulation and Abolition) Act, 1970 etc. Clause 134 (Repeal and Saving) of the Code on Occupational Safety, 2019 clearly mentions the acts which will be repealed once this Code gets the force of law. The Laws getting consolidated are:

1. The Factories Act, 1948
2. The Mines Act, 1952
3. The Dock Workers (Safety, Health and Welfare) Act, 1986
4. The Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996
5. The Plantations Labour Act, 1951
6. Contract Labour (Regulation and Abolition) Act, 1970
7. The Working Journalist and other News Paper Employees (Conditions of Service and Miscellaneous Provision) Act, 1955
8. The Working Journalist (Fixation of Rates of Wages) Act, 1958
9. The Motor Transport Workers Act, 1961
10. The Sales Promotion Employees (Conditions of Service) Act, 1976
11. The Cine Workers and Cinema Theatre Workers Act, 1981

Key Highlights are:

• Employees include workers and all other persons employed in a managerial, administrative, or supervisory role (with monthly wage of at least INR 15,000)
• Applicable to all establishments having 10 or more employees and mines and docks
• Consolidates procedural aspects and provides uniformity in threshold
• Mandatory registration and licensing process for establishments covered by the Code
• Work hours, working conditions and welfare facilities to be notified
• Entitled to one day of leave for every 20 days of work per year.
• Bar on civil courts from hearing matters under the Code

CODE ON Social Security, 2019

The Preamble to the Code on Social Security, 2019 states that its a bill to amend and consolidate the laws relating to social security of the workers and the matters connected therewith or incidental thereto and therefore it amends and consolidate the aspects relating to PF, ESI, maternity, gratuity, welfare fund aspects in line with the overall scheme of the Code. Clause 157 (Repeal and Savings) of the Code specifies that following Acts (explained in brief) will be repealed once this Code becomes effective:

1. Employees’ Compensation Act, 1923
2. Employees’ State Insurance Act, 1948
3. Employees’Provident Fund and Miscellaneous Provisions Act, 1952
4. Payment of Gratuity Act, 1972
5. The Cine Workers Welfare Fund Act, 1981
6. The Building and Other Construction Workers Cess Act, 1996
7. The Unorganized Workers’ Social Security Act, 2008

Salient Features of the code are;

• Broad based applicability –coverage for gig, platform and unorganized workers, thresholds for specified chapters
• Limitation period of five years for initiation and two years for concluding enquiries
• Provision for filing single return electronically or otherwise by the employer
• Significant increase in penalties and prosecution –No compounding for repeat offences
• Aadhaar linked identification of employee / beneficiary
• Impact of the wage definition on contribution / entitlement
• Provisions predominantly aligned with those in the erstwhile statutes;
• Change in definitions –to apply consistently to all chapters of the Social Security Code;
• Provisions relating to Employees’ State Insurance mutually exclusive to those providing for maternity benefit, employees’ compensation;
• Specific provision for creation of social security boards for unorganized workers;
• Inclusion of gig / platform workers widens coverage of social security;
• Provides for funding of notified schemes for unorganized workers through Corporate Social Responsibility Fund besides other funding mechanisms (partly by Central / State Governments, contributions collected etc.)

CODE ON INDUSTRIAL RELATIONS

The Code on Industrial Relations is not yet in public domain. However, a good guess is it may subsume The Trade Unions Act, 1926; Industrial Employment (Standing Orders) Act, 1946 and Industrial Dispute Act, 1947.

The Key differentitors are:

• Treats fixed term workers on par with regular employee for benefits
• Provides for sole negotiating trade union
• Re skilling fund for training of retrenched employees.

Legal Disclaimer: All though due care has been exercised while writing this article, this should be read for purely academic interests. This is not to be constructed as legal advice. No responsibility for the actions, if any, arising out of use of this article binds the author