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INDIA: CHANGES IN NEW LABOUR CODES

June 22, 2021

By Rupin Chopra and Apalka Bareja

The Ministry of Labour and Employment introduced four Bills in 2019 to amalgamate 29 central laws related to labour laws thereby simplifying and modernizing the labour regulations in a labour intensive country, like India. These bills regulate: (i) Wages, (ii) Industrial Relations, (iii) Social Security, and (iv) Occupational Safety, Health and Working Conditions, which have been codified and enacted as:

  1. The Code on Wages, 2019;
  2. The Industrial Relations Code, 2020;
  3. The Occupational Safety, Health and Working Conditions Code, 2020; and
  4. The Code on Social Security, 2020

COMMON CHANGES

  1. Appropriate government: The Central Government will be the ‘appropriate government’ for public sector undertakings known as PSUs. This would be applicable even if the central government’s holding is less than 50%. The central government will be the appropriate government for specific industries like telecom, banking, railways, mines. This includes any controlled industry as well as the government may specify. The definition of ‘controlled industry’ is given as any industry whose control has been mentioned under Central Acts in The Occupational Safety, Health and Working Conditions Code, 2020.
  2. Offences compoundable with imprisonment: Compoundable offenses under The Industrial Relations Code, 2020 and The Code on Social Security, 2020 are punishable with one year of imprisonment or fine. Sum of 50% of maximum fine shall be compoundable for offences with fine and 75% for offences with imprisonment.
  3. Inspectors-cum-Facilitators: A ‘Inspectors-cum-Facilitators’ shall be established as new authority under The Occupational Safety, Health and Working Conditions Code, 2020, The Code on Social Security, 2020 and The Industrial Relations Code, 2020. Their duty will be to provide information and reports to industry employees and employers regarding compliance as decided by the central/appropriate government.

CODE ON SOCIAL SECURITY, 2020

The code was introduced to provide social security benefits by extending its goals to employers and employees.[1] The code seeks to simplify labour laws by amalgamating various enactments such as:

  1. The Employees’ Compensation Act, 1923
  2. The Employees’ State Insurance Act, 1948
  3. The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
  4. The Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959
  5. The Maternity Benefit Act, 1961
  6. The Payment of Gratuity Act, 1972
  7. The Cine Workers Welfare Fund Act, 1961
  8. The Building and Other Construction Workers Welfare Cess Act, 1996
  9. The Unorganized Workers’ Social Security Act, 2008

HIGHLIGHTS:

  1. The code shall be applied to any establishment by notification of central government subject to the threshold specified.
  2. Aggregators have been introduced in the Code as a digital intermediary or a market place for a buyer or user of a service to connect with the seller or the service provider. List of aggregators as mentioned in Schedule 7 of the code shall contribute 1%-2% of their annual turnover for purpose of social security fund.
  3. The central government shall frame social security schemes with respect to providing benefits under Employees’ State Insurance Corporation (ESIC) for platform workers, gig workers and unorganised workers. The code empowers the central government to extend its social security benefit schemes to self-employed or to any other class of persons as specified.
  4. Fixed term employees shall be subjected to payment of gratuity on pro rata basis by the employer. The term of gratuity period has been reduced from 5 years to 3 years for working journalists.
  5. The Code of Social Security introduces the term ‘career centre’ for providing information about job vacancies and vocational guidance to workers seeking employment. Career centres shall be established by the central government as any office, place, portal or employment exchange for providing career services.

CHANGES MADE IN THE CODE ON SOCIAL SECURITY, 2020:

Earlier provisions New Provisions
1.      No definitions were given for:

·         Fixed term employment

·         Home based worker

·         Self-employed worker

·         Platform worker

 

In various acts like Maternity Act, Unorganized Workers’ Social Security Act, and Welfare fund Act, the definition of the word ‘employee’ was not provided.

All specified definitions are included under the Code on Social Security, 2020.

 

Definition of ‘employee’ was introduced and applicable across all provisions under the Code on Social Security, 2020.

2.      Under all previous regime of labour laws, the cancellation of an industry establishment and its registration was required across all previous employment laws. As per Section 3 of the Code on Social Security, 2020, it is not mandatory to obtain registration if the industry establishment is already registered under any other central labour law.
3.      None of the previous labour law provisions had provisions for Social Security organisations and their formation. As per Section 4 of the Code on Social Security, 2020, enforceability of social security organization and its constitution is provided. It is required for fund administration for different types of workers.
4.      Lack of limitation period for deciding money dues from a particular employer under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. As per Section 125, a fixed limitation period of 5 years will be set which includes proceedings and inquiries for the determination of money dues of an employee.

THE INDUSTRIAL RELATIONS CODE, 2020[2]

The Code introduces provisions for simplifying compliance burdens and promoting ease of doing business in an establishment. The code seeks to simplify labour laws by amalgamating various enactments such as:

  • The Industrial Disputes Act, 1947
  • The Trade Unions Act, 1926; and
  • The Industrial Employment (Standing Orders) Act, 1946.

Highlights:

  1. The Code has introduced a ‘sole negotiating union’ in establishments where there are more than one trade union. Such sole negotiating union is required to have 51% or more workers as members per Section 14 of the Code. Only sole negotiating union shall be permitted to negotiate terms with the employer.
  2. The code provides provisions for workers to secure their employment after being laid off. A fund shall be initiated consisting contribution from the employer and the appropriate government.
  3. Mechanism for resolution of industrial disputes shall be constituted by the central government comprising of a national industrial tribunal and one or more industrial tribunal.
  4. As per the provisions of the Code, no person shall go on strikes and lock-outs in breach of contract without giving prior notice of 60 days before going on strike or before 14 days of submission of notice or during pendency of conciliation or tribunal proceedings including within 7 days of conclusion of proceeding.

CHANGES MADE IN THE INDUSTRIAL RELATIONS CODE, 2020

Earlier Provisions New Provisions
1.      No definitions were given for:

·         Fixed term employment

·         Employee

 

The definition of workmen was provided in The Industrial Dispute Act, 1947[3].

 

Definitions of both, employee and fixed term employment were introduced.

 

The term ‘workmen’ got replaced and renamed as ‘worker’ in the Industrial Relations Code, 2020.

 

Definition of the term ‘strike’ is now denoted as mass casual leave by more than 50% of workers on a given day.

2.      A workman is not required to bring grievances to the grievance redressal committee and can directly move to conciliation officer under Section 9C of the Industrial Dispute Act, 1947 It is now mandatory under the Industrial Relations Code, 2020 to approach the grievance redressal committee.
3.      Lack of time limitation provided for completion of a disciplinary proceeding against a particular worker. It is introduced that an inquiry along with its investigation needs to be completed within a time period of 90 days. The time limitation starts from the date of worker’s suspension.
4.      The standing orders were only applicable to threshold above 100 or more workmen as per the Industrial Establishment Standing Order Act, 1946[4]. The threshold of standing order has now been increased and shall be applicable to 300 workers.

OCCUPATIONAL SAFETY, HEALTH AND WORKING CONDITIONS CODE, 2020

The code was introduced in the Parliament to regulate and manage safety and health conditions in industries and establishment.[5] The code seeks to simplify labour laws by amalgamating various enactments such as:

  • The Factories Act, 1948;
  • The Plantations Labour Act, 1951;
  • The Mines Act, 1952;
  • The Working Journalists and other Newspaper Employees (Conditions of Service and Miscellaneous Provisions) Act, 1955;
  • The Working Journalists (Fixation of Rates of Wages) Act, 1958;
  • The Motor Transport Workers Act, 1961;
  • The Beedi and Cigar Workers (Conditions of Employment) Act, 1966;
  • The Contract Labour (Regulation and Abolition) Act, 1970;
  • The Sales Promotion Employees (Condition of Service) Act, 1976;
  • The Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979;
  • The Cine Workers and Cinema Theatre Workers Act, 1981;
  • The Dock Workers (Safety, Health and Welfare) Act, 1986; and
  • The Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996.

HIGHLIGHTS:

  1. An inter-state migrant worker shall be provided benefits with respect to portability and ration, including cess.
  2. Employees shall be given a health check-up by the employer once a year and free of cost.
  3. The employer shall mandatorily issue an appointment letter to the employee for promoting formalisation at workplace.
  4. National Occupational Safety and Health Advisory Board shall be constituted by the central government as per the provisions of the Code. The board shall advise the central government on issues related to implementation of health and safety standards regulated under the Code. State Occupational Safety and Health Advisory Board shall also be constituted on a state-level.

CHANGES MADE IN OCCUPATIONAL SAFETY, HEALTH AND WORKING CONDITIONS CODE, 2020

Earlier Provisions New Provisions
1.      Lack of any particular provisions for workers who were employed in sectors like transport, journalism, sales. Special provisions are specified with leave requirements and working hours for workers employed under transport, journalism, sales.
2.      Lack of provisions stating leave encashment policy. Provisions relating to leave encashment are laid out as well for availing at the end of calendar year. Leave encashment at the time of discharge/dismissal, death or superannuation during the course of employment are also laid out under Section-32 of the Code. Most notably, it also provides for carry forward of leaves in case a worker does not avail the whole of the leave allowed to him in any one calendar year. However, the total number of leave days that may be carried forward cannot exceed 30 days and any leave with wages that have been refused can be carried forward without limit.
3.      Lack of provisions regarding night shift employment of women. Provision were included regarding employment of women after 7pm – 6am with conditions related to their consent and safety, working hours, holiday.
4.      Lack of provisions covering the overtime of employees and their consent. Provision has been introduced for the employer to take consent from the employee for overtime work. Further, the workers shall receive twice the rate wages for its overtime work.

CODE ON WAGES, 2019

The Code on Wages, 2019 was enacted to amend and consolidate the laws relating to

wages, bonus and matters incidental to the same. The code repeals 4 major labour law

enactments –

  • The Payment of Wages Act, 1936
  • The Minimum Wages Act, 1948
  • The Payment of Bonus Act, 1965
  • The Equal Remuneration Act,1976

HIGHLIGHTS:

  1. The Code provides for a common definition of the term Wages, this is significant change introduced to provide a uniform definition of the term Wages as opposed to the different definitions given under the Payment of Wages Act, 1936, the Minimum Wages Act, 1948 and the Payment of Bonus Act, 1965 1 . This will allow the employers to follow a standard practice for computation of wages and avoid multiple interpretations of the term wages.[6]
  2. According to the conditions applicable in the Code, employer shall pay wages not less than 50% of total remuneration. Minimum 50% of Cost-to-Company shall comprise of basic pay and dearness allowance. The computation of wages will include basic pay, dearness allowance, retaining allowance, and it specifically excludes house rent allowance, conveyance, statutory bonus, overtime allowance, and commissions.
  3. Central Advisory Board shall be constituted by the central government as per the provisions of the Code. It shall comprise of members for representation of employers and employees including independent persons and 5 state government representatives. State Advisory Board shall comprise of representative members of employers and employees including independent person.

CHANGES MADE IN THE CODE ON WAGES, 2019

Earlier provision Latest Provision
1.      In an interval of 5 years, the state or the central government must revise the minimum wages. The state or central government shall not exceed a period of five years for revision of minimum wages.
2.      The definition of the term ‘employer’ includes any person who employs one or more persons at an establishment. The definition of ‘employers’ includes any person who directly or indirectly employs one or more persons at an establishment.
3.      The Code provides for a Central Advisory Board consisting of: (i) employers, (ii) employees in equal number as employers, and (iii) independent persons (not exceeding one-third of the total members). The Code provides for a Central Advisory Board consisting of: (i) employers, (ii) employees in equal number as employers, (iii) independent persons (not exceeding one-third of the total members), and (iv) five representatives of state governments to be nominated by the central government.

 

4.      The Payment of Wages Act was applicable only to employees under wages below Rs. 24,000 per month. There has been removal of such threshold limit for applicability under Code on Wages. Hence, the Code shall be applicable to all employees irrespective of monthly wages.

CONCLUSION:

The new labour code introduces various provisions and special provisions for accommodating better regulations for industries and establishments thereby allowing industries flexibility. Further, the codification and consolidation of such laws has also let to expansion of the ambit and applicability of the laws, ease of compliance, removal of multiplicity of definitions and overlapping of authorities. The new set of rules shall empower the relationship between the employer, employee, the government and have a positive long-term impact on the industry and further contribute towards the idea of ease of doing business.

[1] https://labour.gov.in/sites/default/files/SS_Code_Gazette.pdf

[2] https://labour.gov.in/sites/default/files/IR_Gazette_of_India.pdf

[3] https://labour.gov.in/sites/default/files/THEINDUSTRIALDISPUTES_ACT1947_0.pdf

[4] https://legislative.gov.in/sites/default/files/A1946-20.pdf

[5] https://labour.gov.in/sites/default/files/OSH_Gazette.pdf

[6] https://egazette.nic.in/WriteReadData/2019/210356.pdf

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