The Centre’s four
labour codes on wages, social security, industrial relations, occupation
safety, health, and working conditions are likely to be implemented from July
1, 2022. Earlier, it was to be implemented from April 2021, however, as labour
is a concurrent subject, both the Centre and states had to notify rules under
these four codes to make them the laws.

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According to
Minister of State of Labour and Employment Rameshwar Teli’s written response to
the Lok Sabha, only 23 states and union territories (UTs) have issued the draft
guidelines under the Code on Wages.

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Once the New Wage
Code comes into effect, there could be several changes in terms of salary
restructuring, PF, and gratuity component, working hours, and paid leaves. If
these labour codes are implemented, the new wage code will impact full and
final payment settlement in case of resignation, dismissal, or removal from
employment and services of the employees. 

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In 2019 and 2020,
29 central labour laws were merged, rationalised, and simplified into four
labour codes, namely, the Code on Wages, 2019; the Industrial Relations Code,
2020; the Code on Social Security, 2020; and the Occupational Safety, Health
& Working Conditions Code, 2020.

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Here’s how the new
labour code will impact employees:

1. The government’s
notification on Code on Wages 2019 would impact take-home pay but increase
retirement savings – something that a section or employers are opposed to as it
may increase their employee costs. The new wage code mentions a provision
entailing that the employee’s basic salary will be at least 50% of his net
monthly CTC. This will increase the PF contributions made by employees and
employers, and the take-home salary will be affected more by the employees in
the private sector. The retirement corpus and gratuity will increase.

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2. According to the
new law, companies will be allowed to make their employees work for 4 days a
week instead of the current 5. However, the working hours will increase daily
working hours from 9 hours to 12 hours daily as they will have to meet the
48-hour weekly work requirement. If a 4-day working week is implemented,
employees will enjoy a week off of 3 days. If an employee works more than 48
hours week requirement, overtime payment should be paid to them.

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3. As per the new wage
code, a company must pay the full and final settlement to employees within two
days of their last working day. Currently, the final settlement of salary and
dues is given after 45 days to 60 days from an employee’s last working day. The
new law says, “Where an employee has been – (i) removed or dismissed from
service; or (ii) retrenched or has resigned from service, or became unemployed
due to closure of the establishment, the wages payable to him shall be paid
within two working days of his removal, dismissal, retrenchment or, as the case
may be, his resignation.”

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4. The biggest change
could be seen in cases of Earned Leaves. If the new code is implemented, the
labour force will be entitled to leaves after every 180 days against 240 days
earlier. The maternity leaves for female employees will increase to 26 weeks.
Employers cannot place them on the night shift without their consent. Also,
proper facilities and security should have to be ensured.

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5. Currently, the
Factories Act provides annual/earned leave of 12 working days for all the
workers who have worked at least 240 days in a year. This has now been reduced
to 180. Employees can also encash their unused leaves annually – which could
earlier be done only after the separation from the company.