The Centre on Friday announced a rollout of new labour codes as it consolidated 29 labour laws into four comprehensive labour codes to overhaul the outdated rules governing factories and workers for decades.
Centre has consolidated 29 labour laws into four comprehensive Labour Codes – the Code on Wages, 2019, the Industrial Relations Code, 2020, the Code on Social Security, 2020 and the Occupational Safety, Health and Working Conditions Code, 2020 – to simplify and strengthen the framework governing workers’ rights, a PIB release read.
The historic reform, the Centre said, streamlines compliance, modernizes outdated provisions, and creates a simplified, efficient framework to promote “ease of doing business” and safeguard workers’ rights and welfare.
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Labour codes covering wages, industrial relations, social security and occupational safety will now be implemented uniformly across the country. In a reprieve for gig workers, who usually miss out on job security and other benefits, have been included in the new labour codes.
{{/usCountry}}Labour codes covering wages, industrial relations, social security and occupational safety will now be implemented uniformly across the country. In a reprieve for gig workers, who usually miss out on job security and other benefits, have been included in the new labour codes.
{{/usCountry}}The new labour codes include changes to gratuity eligibility, rules for layoffs benefits for gig workers among other things.
Key highlights from 4 labour codes
Gratuity eligibility
Fixed-term employees will now be eligible for gratuity after one year of continuous service, as compared to earlier criteria of five years.
Additionally, 50 per cent of the total remuneration (or such percentage as may be notified) shall be added back to compute wages, ensuring consistency in calculating gratuity, pension, and social security benefits.
Revised working hours and overtime compensation
Businesses can employ workers for 8-12 hours in a day, not exceeding 48 hours in a week. Currently, shifts are limited to 9 hours. Overtime will be paid at double the normal wage rate.
Contractors can now obtain a single license, valid for five years, for operating anywhere in the entire country.
Revised rules for layoffs
This particular rule is mentioned under Code 2 - The Industrial Relations Code, 2020 - which simplifies laws related to trade unions, conditions of employment in industrial establishment.
“Higher Threshold for Lay-off/Retrenchment/Closure: Approval limit raised from 100 to 300 workers; States may enhance the limit further. The provision will simplify compliance and contribute to formalization,” the PIB release on the labour codes stated.
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This means companies with up to 299 employees can now lay off staff without government approval, as the threshold rises to 300 from 100 under new labour codes, according to a Reuters report which decoded the new rules.
Previously, companies with 100 or more employees needed government‑approved employment conditions.
Benefits for gig, platform workers
The labour codes define gig and platform work for the first time, expanding social security to categories previously outside formal labour regulation.
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The labour code ensures a fund to finance schemes for unorganised, gig, and platform workers. This will cover life, disability, health, and old-age benefits and the government will use the funds through the compounding of offences to extend these benefits to gig workers.
Work from home provision
To improve flexibility at workplace, the labour codes include work-from-home provision in service sectors by mutual consent. The work-from-home arrangement became a necessity during Covid-19 pandemic and many companies now offer remote working or working in a hybrid setting, combination of work from home and office.
Minimum wages for organised, unorganised sector
Under the new code all workers, in organised as well as unorganised sector, will be entitled to minimum wages set by the government
“A statutory floor wage shall be set by the Government based on minimum living standards, with scope for regional variation. No state can fix minimum wages below this level, ensuring uniformity and adequacy nationwide,” the government said in its statement.
Additionally, irrespective of the monthly salary, the government has introduced provisions for timely payment and prevention of unauthorized deductions.
The definition of wages has also been revised and it now includes basic pay, dearness allowance, and retaining allowance.
Gender inclusivity
With equal pay for equal work, women can now work night shifts with safety measures, overturning earlier state restrictions on night work in certain industries.
The codes extend maternity benefits, including 26 weeks of paid leave to all women workers in unorganised sectors.
Social security
The Code on Social Security 2020 calls for social security benefits to all workers- including unorganized, gig, and platform workers. The benefits will cover life, health, maternity, and provident fund benefits.
Benefits for migrant workers
Under the new labour codes, inter-state migrant workers (ISMW) refer to workers employed directly, through contractors, or migrate on their own and establishments have declare the number of migrant workers. Benefits include:
- A lump-sum annual travel allowance to native place once in 12 months and portability of public distribution system.
- Social security benefits across states.
- Access to a toll-free helpline.