Understanding the New Labour Code: What Every Employee and Employer Should Know

As India’s economic landscape continuously undergoes change. With newer technologies and globalization, the way companies function in India has changed. To help businesses keep up with changes, the Indian government has introduced new labour codes that would allow businesses to retain their employee relations with minimal complication. These are expected to make life easier for companies that follow the rules while making sure workers get a fair deal. Here in this blog, we will understand the new labour code the government has issued for India in detail.    

New Labour Code

Importance of Labour Code for Workers

The empowerment of workers is important to build a strong and self-reliant India. Even after 73 years of independence in India, about 90% of the workers still work in unorganized workplaces without any social security. India has more than 50 crore workers in both organized and unorganized sectors. For the first time ever, a government has cared to improve the lives of all workers along with their families. It will ensure that a worker gets respect, health, and security. Earlier, the workers had to tackle a lot of complex labour laws. The government of India has passed a new Labour Code, through which it has combined the already existing 29 labour laws into four different codes. These codes will enable all workers, organized or unorganized, to get maximum wages and social security.

Latest Labour Code

As we know the government of India has combined the previous 29 labour laws into 4 new labour codes. Those 4 latest labour codes are the Code on Wages, Code on Social Security, Industrial Relations Code, and Occupation Safety, Health and Working Conditions Code by amalgamating 29 central labour laws. These new labour codes were approved by parliament and received the President’s assent in the year between 2019 and 2020. But these laws have not been fully implemented yet as they need both the central government and state government corporation.

1. Code on Wages

The Code on Wages simplifies the current set of laws related to wages, including the Payment of Wages Act, and Minimum Wages Act, among others. It applies to all employees in all industries and provides a fair wage to each worker.

  • Minimum Wages for All:

    Under this new code, all employees working either in the organized or unorganized sectors have to be given minimum wages. This was earlier limited to a few sectors. This would apply now to all categories of workers irrespective of the industry they come from.

  • Timely Payment:

    Payment of wages by the employer is to be ensured on time. Every monthly wage is to be paid on or before the 7th of the succeeding month.

  • Equal Pay for Equal Work:

    This labour code ensures equal pay for men and women for equal work.

New Labour Code

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New Labour Code

2. Industrial Relations Code

The Industrial Relations Code combines the previous three laws known as the Industrial Disputes Act, the Trade Unions Act, and the Industrial Employment Standing Orders Act. Essentially, this will be beneficial in fixing and improving employer-employee relations through methods of fast and fair resolution of disputes. Key components of this include the following:

  • Strikes and Lockouts:

    The workers can declare a strike only after giving a 60-day notice. The employers too have to give a notice before declaring a lockout.

  • Dispute Resolution:

    To resolve and handle disputes quickly, the latest labour code encourages negotiations at the workplace level. It encourages workers and employers to sort out issues at their level before they go to the courts of law.

  • Layoffs and Retrenchment:

    Companies with up to 300 employees are permitted to lay off workers or remove staff without obtaining prior approval from the government. Earlier, this limit was 100 employees.

3. Code on Social Security

Code on Social Security aims to provide social welfare benefits to the workers. It includes pensions, insurance, gratuity, and maternity benefits, among others, in order to ensure a wider safety net for employees. Key features of this law are as follows:

  • Universal Social Security:

    This new labour code India aims to extend social security benefits to all workers, including those in the gig economy such as delivery boys or freelancers and unorganized sectors.

  • Gratuity:

    Under gratuity, the employer had to pay a lump sum to an employee if they have worked for the same company for at least 5 years or more, which now has been reduced to 3 years. This labour code is made to simplify the process of receiving gratuity so more workers can benefit from it.

  • Maternity Benefits:

    Women employees are entitled to paid leaves for up to 26 weeks as maternity benefits.

  • Provident Fund and Pension:

    The code makes provisions for provident fund and pension schemes for workers. It also aims at making the administration of such benefits transparent and efficient.

New Labour Code
New Labour Code

4. Occupational Safety, Health, and Working Conditions Code (OSH Code)

OSH code mainly deals with protecting the employee by providing better work conditions. It integrates many older acts like the Factories Act and Mines Act into one to develop a more regulated health and safety environment. The OSH code will have the following inclusions:

  • Working Hours and Conditions:

    The code regulates working hours and ensures that employees do not work beyond a certain limit. It is also mandatory under the code that working conditions must be safe in case of industries that are prone to accidents, such as construction, mining, and factories.

  • Annual Health Check-ups:

    Annual health check-ups for the employees to monitor their health have to be given by the employers if they are working in risky industries.

  • Women in the Workforce:

    Women are allowed to work in all kinds of industries, even on night shifts.

  • Registration of Establishments:

    Employers must register their establishments with the government to ensure they meet all the safety and health standards.

Key Strategies for Businesses to Adapt

New Labour Code

  • 1. Understand the Financial Impact

    Businesses have to understand how the new labour code is going to affect their finances. The new labour code will explain how wages are defined, gig platform workers' benefits, and social security for employees.

  • 2. Re-designing HR Policies

    As a new labour code has been established it will have new rules and regulations, Hence HR may need to change its business policies. Businesses have to ensure their policies match with the new labour codes concerning working hours, overtime pay, leave entitlements, and health benefits.

  • 3. Compliance and Training of Employees

    In order to follow new labour laws, companies will need to establish solid systems and processes. This may require investing in new technologies or upgrading existing systems to manage compliance. Training employees who are responsible for managing labour law compliance is also important for smooth operation.

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