New labor laws
India recently surpassed the UK to move up to the fifth-largest economy in the world, with a staggering $3.5 trillion in GDP. Despite having the highest major economic growth rate in the world, it has a very low per capita GDP. The fact remains that the average annual wage of an Indian worker is only $2,500, compared to over 19 times as much (around $47,000) in the UK.
A country’s economic growth is heavily influenced by labour, one of the four components of production. Unfortunately, the legal system in India has been out of date and asynchronous, which has hindered improvements in worker welfare. The labour regulations from the colonial era, which were created to satisfy the socioeconomic needs of the day, have outlived their usefulness in the modern era of progress.
Even though there has been a long-standing demand for labour law reforms, India didn’t begin the long-overdue process of rethinking its labour law framework until 2020. The four new Code adoption has prepared India for the start of its next phase of economic growth. This article examines the effects of the reforms made on India’s workforce as the country excitedly awaits the implementation of the Codes.
1. Basic Pay Will Be 50% of CTC
According to the new wage code, employers must ensure that 50% of an employee’s CTC is basic pay and the other 50% is made up of other employee benefits like overtime pay and housing allowance.
Any additional exemptions or allowances paid by the employer beyond 50% of the CTC will be considered compensation and added to the employee’s earnings.
2. Four Major Wage Labor Codes
The government plans to consolidate 44 central labour laws into four board labour codes, which include occupational safety, health, and working conditions (OSH), social security, and code on pay. The President has already approved the same.
The other three codes were ratified by both Houses of Parliament last year, while the wage code was passed by Parliament in 2019. The new regulations under these four labour laws will soon be put into effect by the Labour Ministry.
Companies will be compelled to make significant adjustments to the wage structure of their employees in order to comply with the new labour laws. These include raising the gratuity and excluding some benefits from salaries, such as bonuses, PF, and HRA.
The industry-leading Gen Payroll software includes all of the labour rules for businesses included to combat these most recent changes. To fully accommodate the impending labour law of 2021, adjustments have been made to the compensation structure, payroll/leave schedules, and overtime payment features.
3. 15-minute payment for overtime
Additionally, there is a provision that will pay employees overtime for every overtime of at least 15 minutes.
4. Set Work Time of 48 Hours for One Week
The government has also made it plain that the maximum amount of time that can be worked in a week is 48 hours, and companies are free to choose this amount of time and offer it in a 4-day, 5-day, or 6-day workweek structure.
5. Higher Leave Flexibility
The revised Codes have rationalised the leave requirements. According to the Factories Act of 1948, a holiday must be granted on a Sunday unless a compensatory holiday is offered either three days before or after the required Sunday (with the prior approval of authorities). Planning the compensatory holiday should prevent the employee from working more than 10 days in a row. The revised Codes, on the other hand, eliminate the convoluted provisions on compensating holidays and allow for more freedom when giving absences, mandating that a worker shall be entitled to at least one leave each week.
However One Bane For The Employees Or If I Say Boon For The Companies Is The Gratuity Increase
The maximum basic salary is now capped at 50% of CTC under the new labour regulations, essentially raising the employee’s gratuity bonus.
The gratuity amount will be determined by the new wage code’s higher salary base, which will include basic pay plus additional benefits like a special allowance on salaries. The cost of gratuities for businesses will likely go up as a result.
The new legislation is probably going to result in a fall in the take-home pay for employees while raising the social security (pension) components of earnings.
Suggested Reads;From July 1st, there will be new labor rules! Changes in Working Time, PF, and In-Hand Income
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