How New Labour Codes will Change the Labour Laws in India - Purpose and Key Highlights

How New Labour Codes will Change the Labour Laws in India - Purpose and Key Highlights

Impact of 4 New Labour Laws Codes in India: Complete Guide & Key Highlights

A labour-intensive country like India requires proper regulations in place to safeguard and regulate labour and employment aspects. India is all set to introduce four New Labour Law Codes that will merge existing 29 laws governing employment and labour issues. 

These New Labour Law Codes includes:

  • The Code on Wages, 2019
  • The Occupational Safety, Health and Working Conditions Code, 2020
  • The Industrial Relations Code, 2020
  • The Code on Social Security, 2020

Here’s a complete guide about the four new labour law Codes, their purpose and coverage:

A. The Code on Wages, 2019

Purpose: To consolidate the laws governing wages and bonus payments and regulate them, balance the interests of employees and employers and provide for minimum and timely wages to workers.

Amalgamating/Repealing Laws: The Code on Wages, 2019 will amalgamate

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

Key Highlights:

  • A uniform definition of ‘Wages’ is introduced, thus bringing standardization in multiple issues related to wages and streamlining them.
  • Central and State Advisory Board shall be constituted comprising of members representing employers and employees along with independent persons.
  • Basic pay and dearness allowance shall comprise a minimum of 50% of cost-to-company (CTC)
  • The central or state government shall not take 5 years period for revising minimum wages.

B. The Occupational Safety, Health, and Working Conditions Code, 2020

Purpose: To consolidate, amend and regulate provisions governing health and occupational safety conditions in industries and establishments.

Amalgamating/Repealing Laws: The Occupational Safety, Health and Working Conditions Code, 2020 will amalgamate

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

Key Highlights:

  • Mandatory free-of-cost health checkups for employees shall be provided by the employer at least once a year.
  • Mandatory issue of appointment letters to employees in order to formalize the workplace.
  • Constitution of National and State Occupational Safety and Health Advisory Board for advising on issues in relation to the implementation of safety and health standards to the central and state government respectively.
  • Special provisions governing leave and working hours for workers and employees under the sales, transport and journalism sector.
  • Streamlining the provisions for leave encashment and addressing issues in relation to leave encashment during dismissal, discharge, superannuation, death and carry forward of excess leave at the end of the year.
  • Regulating night-shift of women employees with conditions addressing working hours, safety, consent, etc.
  • Portability and ration benefits shall be mandatorily provided to inter-state migrant workers.
  • Introducing employee’s consent for overtime work including overtime pay that is at least twice the normal wage rate.

C. The Industrial Relations Code, 2020

Purpose: To consolidate and amend laws governing various aspects of trade unions, simplify dispute resolution and matters incidental thereto.

Amalgamating/Repealing Laws: The Industrial Relations Code, 2020 will amalgamate

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

Key Highlights:

  • If there is more than one trade union in an establishment, then a sole negotiating union shall be formed that solely shall be permitted to negotiate on relevant issues with the employer. The sole negotiating union shall have 51% or more workers as members.
  • Establishment of a national industrial tribunal and appropriate industrial tribunals to provide a mechanism for industrial dispute resolutions.
  • Mandatory for workers to approach grievance redressal committee before going for conciliation.
  • Establishment of fund comprising of contributions from employer and the appropriate government to secure employment of workers after they are being laid off.
  • The time period for completion of the investigation is set to 90 days starting from the date of suspension of the worker.
  • Introduction of definitions for employee and fixed-term employment.
  • Replacement of the term ‘workmen’ with the term ‘worker’.
  • Prohibiting lock-outs and strikes in breach of contract unless:
  1. 60 days prior notice before going on a strike is given or,
  2. Within 14 days of giving such notice or,
  3. During the pendency of tribunal or conciliation proceedings or, 
  4. Within 7 days after concluding such proceedings.
  • Definition of the strike being casual leave on a given day by more than 50% of the workers.
  • The threshold limit for standing orders increased to 300 workers. This implies that establishments with less than 300 workers are not required to issue standing orders for matters specified in the schedule, including termination of employment.

D. The Code on Social Security, 2020

Purpose: To widen the goal of providing social security benefits to all categories of employees and workers by consolidating laws dealing with social security and incidental matters.

Amalgamating/Repealing Laws: The Code on Social Security, 2020 amalgamate

  • The Employees' Compensation Act, 1923
  • The Unorganized Workers' Social Security Act, 2008
  • The Maternity Benefit Act, 1961
  • The Payment of Gratuity Act, 1972
  • The Employees' Provident Funds and Miscellaneous Provisions Act, 1952
  • The Employees' State Insurance Act, 1948
  • The Building and Other Construction Workers Welfare Cess Act, 1996
  • The Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959
  • The Cine Workers Welfare Fund Act, 1961

Key Highlights:

  • Pro-rata payment of gratuity by the employer in the case of fixed-term employees and deceased employees.
  • Aggregators, as listed in Schedule 7 of the code, are required to mandatorily contribute 1%-2% of their annual turnover towards the social security fund.
  • Introduction of the career center for providing information relating to vocational guidance and job vacancies to workers seeking employment.
  • The responsibility placed on the Central Government to frame social security schemes for providing ESIC benefits to unorganized workers, gig workers, and platform workers along with the power to extend the benefits to self-employed and other classes of people.
  • Setting a limitation period of 5 years for initiating proceedings and inquiries in relation to the determination and recovery of dues from employers for Insurance and Provident Fund. In earlier laws, there was no such limitation period thereby causing undue hardships to the employers.
  • Reduction of gratuity period for working journalists from 5 years to 3 years

Bottom Line

In an effort to streamline the labour laws in India and rule out the inconsistencies, the government consolidated various laws shrinking them down to 4 New Labour Law Codes. While many changes were done in order to safeguard the interests of workers and employees, certain points like increasing the threshold for standing orders, etc. triggered debates among the experts regarding their consequences. It can be anticipated that government will streamline these laws as well considering the overall interest of employers as well as employees and workers.

New Labour Law codes are soon to be notified that will merge the existing 29 laws governing employment and labor issues. In case of any query or expert assistance, feel free to contact the ASC Group.


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thanks for info