The Parliament passed the Code of Wages Bill, 2019 last year, slated to come in effect from April 1, 2021. The New Code Bill consolidates four labor laws, with most of the bills being formed in the British era. It combines the Minimum Wages Act, 1948; Payment of Wages Act, 1936; Payment of Bonus Act, 1965; and Equal Remuneration Act, 1976. The New Code Bill is the government’s step towards facilitating ease of doing business in India by bringing various administrative, legislative, and e-governance changes to the existing system.
The New Wage Code, which combines the 29 labor laws into four codes, will undoubtedly be a boon for both the workers and the employers.
Here are some of the benefits that the new bill is likely to bring with its enforcement.
Standard Wage Definition
The single most considerable change being introduced by the labor code is a standard, unified definition of ‘wages’ for the Code on Wages and the Code on Social Security. The interpretation of the term ‘wages’ has been a contentious issue for employers for years. However, with the new labor code's enforcement, employers will now have a simplified and unified definition. The new ‘wage’ definition comprises three parts: an inclusion part, specified exclusions, and conditions. It also includes components like basic pay, dearness allowance, retaining, and special allowances.
Universal Minimum Wage
As per the current laws, the Minimum Wage Law is applicable to employees working in scheduled employment. However, the amended code will expand the ambit by including all employees, irrespective of their employment’s nature. The government will set a Minimum Floor Wage depending on the geographical area. Workers belonging to both organized and unorganized sectors will be covered under ESI (Employee State Insurance). Furthermore, an increased contribution to gratuity and PF will help workers lead a pleasant, stress-free life after retirement by offering them enough money to meet their daily expenses.
A Halt on Exploitation
The new labor code prevents employers from exploiting innocent workers. It will act as a warning sign for companies who have been exploiting employees by deducting their salaries for unnecessary reasons. Also, employers will have to calculate wages considering both the inclusions and the exclusions. However, if the value of exclusion exceeds 50% of the total wages, the excess amount will eventually be included in wages. If the employee’s remuneration is paid in kind, then 15% of the value of compensation paid in kind will be included in wages. The government under the new code has also specified that the salary deduction in various forms, including housing rent, loan, or fines, should not exceed 50% of wages to prevent employees’ exploitation.
Boost to Contractual Employees
The employers will now have to pay in advance to the contract employees. This step is taken to ensure that the contractor's contractual employees receive their wages in time. Furthermore, suppose the contractor defaults or fails to pay the minimum bonus to contractual employees. In that case, the primary employer will be liable to pay the employees upon receipt of a written complaint. Thus, the new wage code will further ensure that the employees hired on a contract basis are not exploited by the contractor. The new wage code will also ensure that any arbitrariness, vagueness, and malpractices during labor inspection are minimized.
There is a plan to set up an online inspection portal that requires the inspectors to randomize checks focusing on specific geographical areas. Remote inspections will replace physical inspections to ensure that all the required information is kept in records by employers.
Empowering Women along with Non-discrimination
The new labor law will ensure that no discrimination occurs on the grounds of gender during employee hiring. Furthermore, it provides that women can work in all kinds of trade. It also has a provision allowing women to take up night shifts if they wish to. The new wage code will ensure that organizations hire employees based on their talents and what they can bring to the table if hired rather than giving preference to a particular gender. This will, in turn, ensure healthy competition among suitable candidates applying for a specific job role.
Flexible Working Hours
With its new labor law, the Indian government is seen transiting to a 4-day-week work policy fixing the total working hours a week to 48. The employees will be allowed to choose between three shifts, including 4-days a week wherein they’ll work for 12 hours a day, 5-days a week wherein they’ll work 9.5 hours a day, and 6-days a week working 8 hours a day. Thus, employees will have the advantage of choosing the work culture they prefer as per their requirements. Furthermore, employees will be paid twice their pay in case of overtime.
Though the New Wage Code brings ‘New’ hopes, both employers and employees must understand the pinpoints in detail. Both parties need to be clear with the new law to prevent miscommunication once the law comes to implementation on April 1, 2021. It is likely to introduce bolstering confidence in the Indian business ecosystem. However, the law's effectiveness will be gauged only after its final implementation.