LABOUR LAW REFORMS:  OVERVIEW AND IMPLICATIONS
IP Rights

LABOUR LAW REFORMS: OVERVIEW AND IMPLICATIONS

INTRODUCTION

The government has proposed to replace the existing 29 labour Acts, with the aim of removing duplications and contradictions therein, with 4 consolidated codes namely:

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

These four labour codes mainly consolidate earlier labour Acts with no radical change. In fact, the definition clause is common in all these four labour codes. Matters connected with labour laws are dealt with in List III relating to the Concurrent List of Seventh Schedule to the Constitution of India.

The objective is to streamline and modernize labour regulations. Key points include changes in key definitions, the coverage of small firms, establishing a threshold for retrenchment, and enforcing rules for flexible work conditions. With the emergence of new categories of labour, the existing regulations need to be updated to widen their scope and cover every kind of worker.

While making incremental changes to the regulatory framework, it also widens the scope of workers to include gig workers and freelancers. It tackles the complexity of the returns and registers by reducing the number of formats and registrations that entrepreneur needs to file. This is a step towards expanding and strengthening the labour market while accommodating entrepreneurs with ease of doing business without affecting labour welfare.

This write-up presents an overview of the four introduced codes and changes it proposes to implement.

COMMON TERMS UNDER THE FOUR CODES

Some important terms are common among the four proposed codes, which are mentioned below:

EmployerThe term ’employer’ has been defined as a person who directly or indirectly employs one or more employees at an establishment carried on by any department of central of state government Or the authority specified, by the head of such department Where no authority is specified, the head of the department is the employer and in relation to an establishment carried on by a local authority, the chief executive of that authority The definition also includes- Occupier of the factory as defined in section 2(n) of the Factories Act, 1948 and, the person named as a manager of the factory under section 7(1)(f), in case of a factory. Any person who, or the authority which, has ultimate control over the affairs of the establishment and where the said affairs is entrusted to a manager or managing director, such manager or managing director; ContractorLegal representative of a deceased employer
EmployeeAny person who is employed to do – Skilled, Semi-skilled or unskilled, manual, operational, supervisory, managerial, administrative, Technical or clerical work for hire or reward Irrespective of terms of employment being express or implied. EXCLUDES- An apprentice under the Apprentices Act 1961, Any member of Armed forces of the Union.
WagesAll remuneration in any way be it salaries, allowances or otherwise which is expressed in terms of money or is capable to be expressed. It is payable if the terms of employment, express or implied were fulfilled. INCLUDES- Basic pay, Dearness allowance, Retaining allowance
EXPLANATION: Where an employee is given remuneration in kind, whether in whole or part of his wages and the value of which does not exceed 15% of the total wages, it shall be part of wages.  
WorkerAny person who is employed to do – Manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward, whether the terms of employment be express or implied.
INCLUDES- Working Journalists, Sales promotion employees.
EXCLUDES- Any person who is subject to the Air Force Act, 1950, or the Army Act, 1950, or the Navy Act, 1957, employed in the police service or as an officer or other employee of a prison employed mainly in a managerial or administrative capacity; or employed in a supervisory capacity drawing wage of 15,0000 per month or an amount as may be notified by the Central Government from time to time.
Appropriate GovernmentFor establishment carried by or under- Central Govt.: The central Government.
Any other establishment: State Government Establishment carried on by central govt includes Railways including metro railways, mines, oil field, major ports, air transport service, telecommunication, banking and insurance company.
A corporation or other authority established by a Central Act or the central public sector undertaking or subsidiary companies set up by the central public sector undertakings, Establishment of contractors, corporation or other authority, central public sector undertakings, subsidiary companies or autonomous bodies,
ContractorA person who undertakes to produce a given result for the establishment, other than a mere supply of goods or articles of manufacture to such establishment, through contract labour; or supplies contract labour for any work of the establishment as mere human resource  
Contract LabourAny worker who is hired in or in connection with the work of an establishment through or by a contractor.
INCLUDES- Interstate migrant worker
EXCLUDES- any person who is regularly employed by the contractor for any activity of his establishment and his employment is governed by mutually accepted standards of the conditions of employment (including engagement on a permanent basis), and gets periodical increment in the pay, social security coverage and other welfare benefits in accordance with the law for the time being in force in such employment.
FactoryAny premises wherein- 10 or more employees are working Or 20 or more employees were working on any day of the preceding 12 months, and in any part of which a manufacturing process is being carried on with the aid of power, or is ordinarily so carried on. EXCLUDES- A mine, A mobile unit belonging to the Armed Forces of the Union, Railways running shed, or a hotel, restaurant or eating place.

THE CODE ON WAGES 2019

The code on wages, 2019 was introduced in Lok Sabha on 23rd July 2019 and received the assent of the President on 8th August 2019. This code seeks to control and regulate wage and bonus payments in all employments where any industry, trade, business, or manufacture is carried out.

This code states to repeal the following four (4) Acts to consolidate central labour laws into one single legislation-

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

The goal of the Code is to create a uniform system for corporate governance that can be easily and effectively enforced.

APPLICABILITY

The Code will apply to all employees.  The central government will make wage-related decisions for employments such as railways, mines, and oil fields, among others.  State governments will make decisions for all other employments.

KEY HIGHLIGHTS

PAYMENT OF WAGES

  • Provisions regarding payment of wages will apply to all employees in both organized as well as unorganized sectors, irrespective of any such wage limit.
  • Meaning of wages is described under section 2(y) of the code as described above- INCLUDES- Basic pay + Dearness allowance + Retaining allowance.
  • As per section 18 (3) – Quantum of deductions – Permissible deductions are specified – aggregate deductions cannot exceed 50% – includes PF and Pension contributions, tax withholdings, advances, fines.
  • As per section 17 there are specified Timelines for wage payment
    • Daily wage period – At the end of the shift
    • Weekly wage period – On last working day of the week
    • Fortnightly wage period – by end of the second day after expiry of fortnight
    • Monthly wage period – by seventh day of the succeeding month
    • Wage period- Cannot exceed a month
  • Final settlement for removal, resignation, dismissal, retrenchment is to be paid within extremely short timeline of 2 working days.

MINIMUM WAGE RATE

Section 6 states that the minimum rate of wages shall be notified by the appropriate Government below which no employee shall be paid FOR-

  • Time work or
  • Piece work

Considering the skill of workers under semi-skilled, skilled, unskilled, highly skilled or geographical area or both.

Section 8(4) states that Minimum wages are to be revised at an interval not exceeding 5 years.

MINIMUM FLOOR WAGE

  • National Minimum Wage (or Floor Wage)- Section 9 of the code states Central Government will fix national minimum wage /floor wage after taking into account minimum standard of living of workers.
  • The minimum rates of wages fixed by the appropriate Government under section 6 shall not be less than the floor wage and if it is more than the floor wage, then, the appropriate Government shall not reduce such minimum rates of wages fixed by it earlier.

PAYMENT OF BONUS

  • Section 26 talks about payment of bonus. Applicability – Establishments employing 20 or more employees and factories as defined under the Factories Act, 1948.
  • Eligibility- Every eligible employee is entitled to receive a statutory bonus ranging from 8.33% to 20% of the wages. Wage threshold for eligibility of employees/ computation of bonus – to be notified by the appropriate Government
  • Time period and mode of payment (Section 39) – 8 months from the end of the financial year.  The bonus is credited into the employee’s bank account instead of being paid in cash.
  • Schedule A of the code states the manner for calculation of set on or set off for the sixth and seventh accounting year.

SUMS DEDUCTIBLE FROM GROSS PROFIT

  • Section 34 states sums deductible from gross profit.
  • It includes- any amount by way of depreciation admissible in accordance with the provisions of sub-section (1) of section 32 of the Income-tax Act or in accordance with the provisions of the agricultural income-tax law.
  • Any direct tax which the employer is liable to pay for the accounting year in respect of his income, profits and gains during that year;
  • Further sums in respect of the employer as may be prescribed by the Central Government

EMPLOYERS OBLIGATIONS

  • Responsibility for Payment of wages within the timelines prescribed (Section 17) –
    • for monthly wage period – before seventh of the succeeding month,
    • for wages paid on a fortnightly basis – by second day after end of the fortnight
    • for dismissed/ resigned employees’ wages to be settled within 2 working days.
  • Complying with the limits relating to working hours and provide days of rest as specified
  • Recording and Maintenance of employee registers
    • All deduction and realizations under section 21(3) under Form I and Single Application under section 45(5) in Form II along with documents specified in this form
    • Appeal under section 49(1) Form III
    • Wage Slip and Issuing wage slip in prescribed manner- Under Form V of section 50(3)
    • Payment of Dues on death (Section 44)- In death cases, dues to be paid to the person nominated or to be deposited with the specified authority (being deputy chief labour commissioner (central)) within 3 months/ 6 months

LIMITATION PERIOD FOR FILING CLAIMS

Under the existing legislation, the maximum limitation period was restricted to 1 year. The period of limitation for filing claims by an employee has increased and is set at 3 years from the date on which the claim arises.

INSPECTOR CUM FACILITATOR

Section 51 of the code provides for the appointment of an Inspector cum facilitator whose role is not just inspection but also advising the employers and workers with regard to the various compliances prescribed under the Code. The government may confer jurisdiction of randomized selection of inspection for the purposes of this code to Inspector-cum- facilitator.

OFFENCES AND PENALTIES

  • Section 52 to 55 deals with offences and penalties associated with such offences.
  • Payment of wages less than prescribed amount- Fine of up to INR 50,000 at first instance.  Second and subsequent commission – Imprisonment up to three months and/or fine up to INR 100,000
  • Contravention of any other provision or rules under the Code- First instance – Fine up to INR 20,000 Second and subsequent commission – Imprisonment up to one month and/or fine up to INR 40,000
  • Non-maintenance or improper maintenance of records- Fine up to INR 10,000
  • Non-compliance of the provision of the Code- Under the directions from Facilitator Cum Inspector Prosecution proceedings may be initiated after providing opportunity of being heard; No opportunity will be provided for repetition of violation within five years from the date on which first violation was committed

CHANGED SALARY STRUCTURE

As per section 18 (3), an employee’s basic salary will be at least 50 per cent of his/her net monthly CTC. Hence, if this provision comes into effect, it will mean that employees will not be able to get more than 50 per cent of his/her net monthly salary in form of allowance.

The deduction that may be made from wages-

  • fines imposed on employee
  • deductions for absence from duty;
  • deductions for damage to or loss of goods expressly entrusted to the employee for custody; or for loss of money for which he is required to account, where such damage or loss is directly attributable to his neglect or default;
  • deductions for house-accommodation supplied by the employer or by appropriate Government or any housing board set up under any law for the time being in force, whether the Government or such board is the employer or not,
  • deductions for such amenities and services supplied by the employer as the appropriate Government or any officer specified by it in this behalf may, by general or special order, authorize and such deduction shall not exceed an amount equivalent to the value of such amenities and services.
  • deductions for recovery of—
    • advances of whatever nature (including advances for travelling
    • allowance or conveyance allowance), and the interest due in respect thereof, or for adjustment of overpayment of wages;
    • loans made from any fund constituted for the welfare of labour, as may be prescribed by the appropriate Government, and the interest due in respect thereof;
    • deductions for recovery of loans granted for house-building or other purposes approved by the appropriate Government and the interest due in respect thereof;
    • deductions of income-tax payable by the employee or deductions required to be made by order of a court.
    • deductions for subscription to, and for repayment of advances from any social security fund or scheme constituted by law including provident fund or pension fund or health insurance scheme or fund known by any other name;
    • deductions for payment of co-operative society subject to such conditions as the appropriate Government may impose;
    • deductions made, with the written authorization of the employee, for payment of the fees and contribution payable by him for the membership of any Trade Union registered under the Trade Unions Act, 1926;
    •  deductions for recovery of losses sustained by the railway administration on account of acceptance by the employee of counterfeit or base coins or mutilated or forged currency notes;
    • deductions for recovery of losses sustained by the railway administration on account of the failure of the employee to invoice, to bill, to collect or to account for the appropriate charges due to the railway administration whether in respect of fares, freight, demurrage, wharfage and cranage or in respect of sale of food in catering establishments or in respect of commodities in grain shops or otherwise;

WHAT NOT TO BE DEEMED AS A DEDUCTION

Any loss of wages to an employee, for a good and sufficient cause, resulting from—

  • the withholding of increment or promotion, including the stoppage of
  • an increment; or
  • the reduction to a lower post or time-scale; or
  • the suspension,

FORMS

  • FORM I- Fines/ deductions and realizations thereof to be recorded in a register
  • FORM II- Single Application under section 45
  • FORM III – For any person aggrieved by an order passed by the authority under preferring an appeal under sub-section 1 of section 49
  • FORM IV- Employee Register
  • Form V- For issuing wage slips, electronically or otherwise.
  • FORM VI- Form for composition of offense

OCCUPATIONAL SAFETY, HEALTH AND WORKING CONDITIONS CODE 2020

The Occupational Safety, Health and Working Conditions Code, 2020 (‘OSHWC Code’) is one of the 4 labour laws introduced on 29th September 2020 and the Rules on 29th November 2020 but is yet to be finalized. This Code will consolidate and repeal the following existing 13 Acts:

  • The Factories Act, 1948
  • The Contract Labour (Regulation and Abolition) Act, 1970
  • The Building & Other Construction Workers (Regulation of

Employment and Conditions of Service) Act, 1996;

  • The Mines Act, 1952;
  • The Dock Workers (Safety, Health and Welfare) Act, 1986;
  • The Plantations Labour Act, 1951
  • The Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979
  • The Beedi and Cigar Workers (Conditions of Employment) Act, 1966;
  • The Working Journalist and other News Paper Employees (Conditions of Service and Miscellaneous Provision) Act, 1955;
  • The Motor Transport Workers Act, 1961;
  • The Sales Promotion Employees (Conditions of Service) Act, 1976;
  • The Working Journalist (Fixation of rates of wages) Act, 1958; and
  • The Cine Workers and Cinema Theatre Workers (Regulation of Employment) Act, 1981.

APPLICABILITY

This code applies to all establishments. It states that a place where 10 or more workers are employed is considered an establishment. These establishments would also include-

  • Motor transport undertaking, newspaper establishments, building under construction, plantation, audio video visual
  • Factory, a mine or port or vicinity of port where dock work is carried out.

KEY HIGHLIGHTS

REGISTRATION

  • Section 3 of the code provides for registration. Existing establishments, registered under any other central labour law are not required to obtain fresh registration under the OSHWC Code- deemed registered.
  • Employer needs update the registration particulars in the Shram Suvidha portal within 6 (six) months from the date on which the OSHWC Code comes into force.
  • The OSHWC Code has introduced a single registration for establishments that employ ten (10) or more workers. The employer of any new establishment, is required to register under the OSHWC Code within 60 (sixty) days from the date of applicability of the Code through E-registration process
  • Employer shall intimate any change in the ownership or management which occurs after the registration of an establishment within 30 days of such change.

THRESHOLD AMENDMENTS AND CHANGED APPLICABILITY OF PROVISIONS

  PROVISIONNO. OF EMPLOYEES FOR APPLICABILITY PREVIOUSLYNO. OF EMPLOYEES FOR APPLICABILITY NOW
Factories utilizing power1020
Factories not utilizing the power2040
Contract Labour provisions2050
Creche Facility provision3050
Canteen Provision250100
Appointment of Welfare Officer (Factory, mine or plantation)500250
(As per section 2(w), section 24(3), section 24(2)(iv), section 24(5) and 45 of the code)

LEAVES AND HOURS OF WORK

  • Section 25 of the code talks about leaves and hours of work. It states that workers can work in an establishment for a maximum of 8 hours a day. The provision further mentions works hours rules for mines, motor transport and sales promotion employee or a working journalist.
  • As per section 26 no worker shall be allowed to work for more than 6 (six) days in a week.
  • In clause 3, a working journalist or a sales promotion employee is to be granted, if requested-
    • earned leave on full wages for not less than 1/11th of the period spent on duty.
    • Leave on medical certificate on half of wages for not less than 1/18th of period of service
  • Heirs of a Person who dies in service will be entitled to cash compensation for earned leave not availed by the employee.
  • As per section 27 the worker shall be paid at the rate of twice the rate of wages for overtime work
  • The qualifying period for leave entitlement has been reduced to 180 (hundred and eighty) from the previous 240 (two hundred and forty) under the Factories Act. Under the OSHWC Code, workers who have worked 180 (hundred and eighty) days or more in a calendar year will be entitled to 1 (one) day leave for every 20 (twenty) days of work. (In case of adolescent worker- 15 days)
  • Period of layoff, maternity leave, annual leave will be counted to for calculating the period of 180 days or more but worker shall not earn leave for the period so counted.
  • Further, a worker is permitted to avail his/ her leaves in the year it is earned, unlike previously, where it could only be availed in the subsequent calendar year.
  • With respect to leave encashment of annual leaves, the limit under the Factories Act was 30 (thirty) days (with certain exceptions) for carrying forward leaves. This has been retained in the OSHWC Code.
  • Code allows workers to encash unused annual leaves at the end of a calendar year.

SPECIAL WOMEN PROVISIONS

Under section 43 of the OSHWC Code, a woman can be employed to work at night-time, i.e., between 7:00 pm and 6:00 am, with her consent. Previously, women were prohibited from working at night. Only in specific circumstances (such as where the employment was necessary to prevent damage to raw material), the state government could prescribe rules to allow women to work between 10:00 pm and 5:00 am.

PROHIBITION OF EMPLOYMENT THROUGH CONTRACT LABOUR

Section 119 of the OSHWC Code provides for obtaining a common license for supplying or engaging contract labour in an establishment.

  • Single application is to filled electronically in FORM XIII accompanied by a fee. Any person aggrieved by an order passed against can file an Appeal against the order within 30 days from date of order.
  • The OSHWC Code does not provide for recovery of costs incurred by the principal employer on account of providing amenities. Section 53 states the liability of employer for welfare facilities relating to providing of canteens, rest rooms, drinking water and first aid. This is unlike the previous position under the Contract Labour Act, which specifically allowed a principal employer to recover sums from the contractor either as deduction for any amount payable or as debt payable by the contractor for the expenses incurred in providing amenities.
  • Moreover, if the contractor fails to make payment of wages to the contract labour the responsibility shifts to the principal employer.

MAINTENANCE AND PRODUCTION OF REPORTS, REGISTERS AND OTHER RECORDS

  • As per Rule 58 of OSHWC Draft rules, Maintenance and production of reports, registers and other records under Section 33 is mandatory-
  • Every employer shall-
    • maintain register of workers, wages, overtime, fine, rest days, deduction for damage or loss in Form-VIII electronically and shall be kept available at an office or the nearest convenient building within the precincts of the establishment;
    • Issue wage slips to the workers electronically or otherwise
    • in case of manual registers and other records, be legibly entered in ink in English and Hindi or the language understood by a majority of the persons employed;
    • be preserved in original for a period of one calendar year after the date of the last report or entry;
  • Rule 59 states Display of Notice board at work place
  • Rule 60 requires every employer to file annually a Return in duplicate not later than 1st February following the end of each calendar year.

OFFENCES AND PENALTIES

  • Section 94 to 114 deals with offences and penalties.
  • Obstructing discharge of duties of Inspector, refuses entry to the Chief Inspector cum facilitator, fails to produce any document or comply with his order- imprisonment up to 3 months or fine up to INR 1 lakh or with both.
  • For non-maintenance of registers, records and non-filing of returns-Penalty of not less than 50,000 which may extend to 1 Lakh.
  • In case of falsification of records-imprisonment of upto 3 months or fine of upto 1 Lakh or both
  • For omission to furnish plans-penalty upto 2 lakh and not less than 1 lakh
  • For disclosure of information-imprisonment of upto 3 months or fine of upto 1 lakh or both
  • For wrongfully disclosing results of analysis- imprisonment upto 6 months or fine upto 50.000 or both.
  • As per section 103, an offence that leads to the death of an employee will be punishable with imprisonment of up to two years, or fine up to INR 5 lakhs, or both. In case of a serious injury- imprisonment which may extend to one year or fine of not less than 2 lakhs but not exceeding 4 lakh or with both.
  • Where penalty is not specified, the employer will be punished with a fine between INR 2 – 3 lakhs and if the contravention continues with further penalty up to Rs 2,000/- for each day till such contravention continues.
  • If employee violates provisions of the Code, penalty not less than 50,000 which may extend up to Rs 1,00,000.
  • As per section 109, Offences committed by a Company shall hold each person liable who, at the time the offence was committed, was in charge of, and was responsible to, the company for the conduct of the business.

SOCIAL SECURITY FUND

  • As per section 115 of the code, government shall establish a social security fund for welfare of unorganized workers.
  • The amount received from composition of offence and other sources prescribed by the government shall be credited to the same.

FORMS

  • FORM I – Application for registration for existing and new establishments
  • FORM II- Certificate of registration
  • FORM III- Register of establishment
  • FORM IV- Notice of commencement/ cessation of establishment
  • FORM V- Annual health examination of employees proforma
  • FORM VI- Notice of Accident/ dangerous occurrence
  • FORM VII- Notice of periods of work
  • FORM VIII- Register of workers employed- wages, overtime, fine
  • FORM IX- Unified Annual Return
  • FORM X- Register for accidents
  • FORM XI- Register for leave with wages
  • FORM XII- Improvement notice and prohibition order
  • FORM XIV- Proforma of license
  • FORM XV- Experience certificate of contract employee
  • FORM XVI- Agreement between producer and audio-visual worker

CODE ON SOCIAL SECURITY 2020

Code on Social Security or CSS 2020 was enacted to extend social security to all workers and employees in organized, unorganized or any other sector. This code was introduced on 29th September 2020 and Draft Rules on 13th November 2020.

It amalgamates & rationalizes the various provisions related to social security in following 9 legislations-

  • The Employees’ Compensation Act, 1923
    • The Employees’ State Insurance Act, 1948
    • The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
    • The Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959
    • The Maternity Benefit Act, 1961
    • The Payment of Gratuity Act, 1972
    • The Cine Workers Welfare Fund Act, 1981
    • The Building and Other Construction Workers Welfare Cess Act, 1996
    • The Unorganized Workers’ Social Security Act, 2008.

APPLICABILITY

  • This Code is applicable to any establishment for making certain benefits mandatory.
  • Where it appears to the Central Provident Fund Commissioner, by an application made to him by the employer of an establishment or otherwise, that the employer and majority of employees of that establishment have agreed that the provisions of Chapter III should be made applicable to that establishment, the Central Provident Fund Commissioner, may, by notification, apply the provisions of the said Chapter to that establishment on and from the date of such agreement or from any subsequent date specified in the agreement.
  • The Central Government may, after giving not less than two months’ notice of its intention so to do, by notification, apply the provisions of this Code to any establishment not less than no. of persons as specified.
  • Every establishment to which this Code applies shall be electronically or otherwise, registered within such time and in such manner as may be prescribed by the Central Government.
  • CoSS 2020 not only looks into the welfare of unorganized sector workers, but also addresses the concerns of the gig and platform workers, who were not covered by existing schemes.
  • Employee Provident Fund (EPF) shall be applicable to establishments with 20 or more employees.
  • Employee’s state insurance scheme (ESI) shall be applicable to certain establishments with 10 or more employees; to all establishments which carry out hazardous or life-threatening work as notified by the central government.

KEY HIGHLIGHTS

EMPLOYER- EMPLOYEE CONTRIBUTIONS

Section 16 states that the EPF, EPS, EDLI and ESI schemes will be financed through contributions from the employer and the employee. In the case of EPF, the employer and the employer each will make contributions of 10% of wages. If an employee desires to exceed the amount of 10%, he may.

Other contributions towards gratuity, maternity benefit, Cess for workers will be given by an employer. Under other schemes, contributions will be notified by Government from time to time.

For the Pension Scheme-

(i) employer’s contribution shall not exceed eight and one-third per cent. of the wages or such per cent. of wages as may be notified by the Central Government;

(ii) For the employers of the exempted establishments under section 143 to which the pension scheme applies; such sum as the Central Government after due appropriation by Parliament by law in this behalf, specify;

(c) the Insurance Scheme shall be paid by the employer from time to time in respect of every such employee, such amount, not being more than 1% of the wages or such per cent. of wages as may be notified by the Central Government for the time being payable in relation to such employee.

MANTAINING OWN PF TRUST

Under section 21 there is a threshold of minimum employee strength needed for the formation of the trust. Under the new Code, an establishment can only establish and manage its trust if it has an employee strength of 100 or more. It may include maintaining such account, submitting the return, depositing the contribution, providing for facilities for inspection, paying administrative charges, and abiding by other terms and conditions, as may be specified in the Provident Fund Scheme.

APPEAL TO TRIBUNAL

Any person aggrieved by an order passed by any authority in regard to the following matters may prefer an appeal to the Tribunal-

(a) determination and assessment of dues under section 125 relating to Chapter III;

(b) levy of damages under section 128 relating to Chapter III.

EMPLOYEES STATE INSURANCE FUND

  • As per section 28, All employees in an establishment to which this Chapter applies shall be insured in such manner whether electronically or otherwise, as may be prescribed by the Central Government.
  • Insured person- An employee whether insured or insurable in respect of whom contributions are or were payable and who is entitled to any of the benefits provided under this Chapter.
  • As per section 29, contributions payable for each wage period will ordinarily fall due on last day of the wage period.

GIG AND PLATFORM WORKERS

Section 109 provides recognition to provide unorganized sector workers with insurance policies and other benefits, as the government may determine, for their work. These schemes are fully or partially funded by the central or state government. Aggregators will have to contribute at least 2% of their annual turnover towards these funds but shall not exceed 5% of the amount payable to gig workers and platform workers.

SOCIAL SECURITY ORGANIZATIONS

  • The provisions of section 4 – 7 enforce Constitution of Social Security Organizations for the administration of funds for the type of workers which have been added in the Code of Social Security.
  • No provisions were made for National Social Security Board and State Unorganized Workers’ Board under all the labour laws. Section 6 enforces National Social Security Board and (State) Unorganized Workers’ Board to be formed by persons of eminence in the fields of labour welfare, management, finance, law and administration. It will also administer schemes for the welfare of gig workers and platform workers.
  • Rule-7 of EPF Appellate Tribunal (Procedure) Rules, no appeal by employer shall be entertained by the Tribunal unless it has deposited a Demand Draft payable in the Fund and bearing 75% of the amount due from him. Section 24, No appeal by the employer shall be entertained by the Tribunal unless it has deposited 25% of the amount due with Social Security Organization concerned.

SICKNESS BENEFIT

No provision for Excessive Sickness Benefit existed in previous labour laws. Section 43, provides extra expenditure as a sickness benefit for unsanitary working conditions in the factory or in the accommodations due to the neglect of the owner. The government may appoint a competent person to conduct an inquiry into the matter.

PAYMENT OF GRATUITY

  • Section 53 to 56 deals with gratuity. Gratuity is applicable to every establishment that has more than 10 workers.
  • Payment of Gratuity Act, the payment of gratuity for every employee after termination was payable only if he had rendered a continuous service of not less than 5 years. But with introduction of section 53, the term for payment of gratuity has been reduced to 3 years for working journalists and for others it remains the same.
  • Moreover, service of continuous 5 years may not be necessary where termination of employment of any employee is due to death or disablement or expiration of fixed term employment. Nomination shall be in Form III and submitted in duplicate by employee to the employer.
  • In case of a piece-rated employee, daily wages shall be computed on the average of the total wages received by him for a period of three months immediately preceding the termination of his employment, and, for this purpose, the wages paid for any overtime work shall not be taken into account:
  • In case seasonally employed employee, the employer shall pay the gratuity at the rate of seven days’ wages for each season.
  • As per Section 56, Gratuity is to be paid within 30 days from the date it becomes payable.

COMPULSORY INSURANCE

Section 57 provides for compulsory insurance by every employer other than central government or state government-controlled establishments, for payment towards gratuity from any insurance company regulated by Insurance Regulatory and Development Authority Act, 1999

LIMITATION PERIOD

  • No limitation period was mentioned for determination of moneys due from an employer, under the EPF Act Section 125, In case of any dispute or proceedings for determination of dues from the employer, fixed the limitation period of proceedings and inquiry to be five years.
  • Inclusion of Enhanced punishment did not exist in previous labour laws. Section 134 provides for enhanced punishment for every subsequent offence. Section 137 allows employer an opportunity to correct non-compliance for any offence under the Code prior to the initiation of the prosecution or proceedings.
  • Misuse of benefits did not have any separate provisions under the labour laws. Section 148, if any person has misused any benefit, then the person will be deprived of such benefit where manner to ascertain misuse of any benefit will be specified in the Provident Fund Scheme or the Pension Scheme or the Insurance Scheme.

REGISTRATION

  • Section 113 states that there is a compulsory registration of every unorganized worker, gig worker and platform workers to avail the benefit of the concerned scheme framed under this code, subject to the fulfilment of the following conditions:
  • He has completed sixteen years of age or such age as may be prescribed by the Central Government;
  • He has submitted a self-declaration containing information prescribed by the Central Government.
  • Every eligible worker is to make an application for registration in such form along with such documents including Aadhaar number.

MATERNITY BENEFIT

  • Section 60 provides that No woman shall work in establishments that cater to pregnant women during the 6 weeks following the termination of her pregnancy.
  • Payment of maternity benefit- at the rate of the actual daily wage- for the period not less than 80 days in the 12 months immediately prior to her expected delivery.
  • Any woman shall be entitled to receive maximum maternity benefit of the 26 weeks preceding the expected date of her delivery.
  • Aside from maternity benefit, every woman is also entitled to a medical bonus of up to 3,500 INR. This benefit can be obtained if the post pregnancy treatment- not provided by the employer.
  • In case of miscarriage, or if the pregnancy has been terminated, a woman shall be entitled to leave with pay for a period of 6 weeks.

OFFENCES AND PENALTIES

  • Section 133 of the code deals with offences and penalties.
  • Failure to pay any contribution- not less than 1 and up to 3 years of imprisonment and a fine of one lakh rupees in case of failure to pay employee’s contribution deducted. In other cases not less than two months but may be extended to six months, in any other case and shall also be liable to fine of Rs 50,000
  • Deduction or attempt to deduct from the wages of an employee, the whole or any part of employer’s contribution- fine which may extend to Rs 50,000.
  • Reduction of the wages or any privilege or benefits admissible to an employee- fine which may extend to Rs 50,000
  • In contravention of the provisions of Chapter IV or Chapter VI or rules, regulations or schemes made or framed under this Code respectively, relating to such Chapters, dismisses, discharges, reduces in rank or otherwise penalises a woman employee- imprisonment for a term of up to 6 months or with a fine of up to Rs 50,000, or with both;
  • Failure or refusal to submit any return, report, statement or any other information –- fine which may extend to Rs 50,000
  • Obstruction with any Inspector-cum-Facilitator or other officer or staff of the Central Board or the Corporation or other Social Security Organisation or a competent authority in the discharge of his duties- imprisonment for a term of up to 6 months or with a fine of up to Rs 50,000, or with both;
  • Failure to pay any amount of gratuity to which an employee is entitled under this Code- with imprisonment for a term up to 1 year or with fine which may extend to Rs 50,000, or with both;
  • failure to pay any amount of compensation to which an employee is entitled- fine which may extend to Rs 50,000
  • Failure to provide any maternity benefit- imprisonment for a term of up to 6 months or with a fine of up to Rs 50,000, or with both;
  • Failure to send to a competent authority a statement which he is required to send under Chapter VII- fine which may extend to Rs 50,000
  • Failure to produce on demand by the Inspector-cum-Facilitator any register or document in his custody– imprisonment for a term of up to 6 months or with a fine of up to Rs 50,000, or with both;
  • Failure to pay the cess for building workers- imprisonment for a term of up to 6 months or with a fine of up to Rs 50,000, or with both;
  • In contravention of or non-compliance with any of the requirements of this Code or the rules or the regulations or schemes for which no special penalty is provided- fine which may extend to Rs 50,000
  • Obstructs executive officer in exercising his functions under Chapter XIII- fine which may extend to Rs 50,000
  • Dishonestly making a false return, report, statement or information to be submitted– imprisonment for a term of up to 6 months or with a fine of up to Rs 50,000, or with both
  • fails or makes default in complying with any condition subject to which exemption under section 143 was granted- fine which may extend to Rs 50,000
  • Failure to pay any administrative or inspection charges payable under any of the schemes framed under Chapter III- fine which may extend to Rs 50,000

FORMS

  • FORM I – Appeal under section 23 
  • FORM II- Receipt Slip
  • FORM III- Nomination
  • FORM IV- Application for gratuity
  • FORM V- Notice for payment/ Rejection claim for gratuity
  • FORM VI- Application for Direction
  • FORM VII- Notice for Appearance before competent authority
  • FORM IX- Application for recovery of gratuity
  • FORM X- Certificate of medical officer
  • FORM XI- Notice for claim under maternity benefit and receipt of maternity benefit
  • FORM XII- Complaint to inspector-cum-facilitator
  • FORM XIII- Appeal
  • FORM XV- Information for commencement by employer
  • FORM XVI- Format for self-assessment of Cess for building
  • FORM XVII- Notice for stoppage or reduction of building
  • FORM XX And FORM XXI- Return and self-assessment format for gig workers and platform workers
  • FORM XXII- Register of women employees
  • FORM XXIII- Unified annual return
  • FORM XXIV- Application and notice for compounding of an offence
  • FORM XXV- Reporting vacancies to career centers
  • FORM XXVI- Employment information Return

INDUSTRIAL RELATIONS CODE 2020

The Industrial Relations Code, 2020, is a set of regulations designed to improve the working conditions of workers and reduce the friction between them and their employers. The bill on Industrial Relations Code 2020 was introduced on 28/09/2020 and draft rules on 29.10.2020.

The Code is prepared after combining and repealing the following 3 central labour Acts:

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

It consolidates & amend the laws regarding Trade Unions, conditions of employment in Industrial establishment or undertaking, and sleek settlement of industrial disputes.

APPLICABILITY

This code will apply to all industrial establishments and matters for which the central government is the appropriate authority.

KEY HIGHLIGHTS

COMPLIANCE REQUIREMENTS

  • Section 3 and 4 deals with formation of bi-partite forums as per number of workers employed.
  • 100 or more workers – Constitution of Works Committee consisting of representatives of employer and workers.
  • 20 or more workers – Constitution of Grievance Redressal Committees for consisting of equal number of members representing employer and workers
  • 300 or more workers-
    • Employer must prepare draft Standing Orders within a period of six months from the date of commencement of this Code.
    • Employer must give a 21-day notice before effecting any change in conditions of service.
  • 50 or more workers- Employer must maintain muster rolls and entries are to be made by workers to present themselves at work.

STRIKES AND LOCK OUTS

  • Section 62-64 deals with strikes and lockouts in an industrial establishment.
  • Every person employed in an Industrial Establishment is prohibited for strikes and lock-out, in breach of contract:
    • without giving 60 days advance notice of strikes and lock-out to the employer
    • within fourteen days of giving such notice; or before the expiry of the date of strikes and lock-out specified in any such notice; or
    • during the pendency of any conciliation proceedings before a conciliation officer and seven days after the conclusion of such proceedings; or
    • during the pendency of arbitration proceedings before an arbitrator or proceedings before a industrial tribunal & 60 days after conclusion of such proceedings.
    • During any period in which award or settlement is in operation

CLOSURE

  • Section 74 states that employer who plans to close down an Industrial Establishment is required to serve 60 days advance notice to the Government.
  • Section 75 is a Provision for compensation in case of Closure to those workers who are in a continuous period of service not less than 1 year.

TRADE UNIONS- NEGOTIATION

  • Section 14(4) states that if there are several unions, the union is recognized by the employer as a bargaining union with 51% of the employees in the industrial company’s model directory.
  • In the case of several trade unions, none of which fulfil the above-mentioned 51% membership criteria, the employer forms a negotiating council made up of representatives of these registered trade unions, who are supported by at least 20% of the total workforce of the industrial company (1 representative for every 20 %).

TRADE UNIONS REGISTRATION

  • Section 6 states that any 7 or more member of a trade union by subscribing to their names, apply for registration to the Authority. At least 10% of workers or 100 must be members of Trade Union
  • If the name of the Trade Union proposed to be registered is identical with an existing registered Trade Union, alteration of the name is required as asked by the Registrar of Trade Union.
  • It will have a common seal and perpetual succession with the power to hold property.

RE-SKILLING FUNDS

Section 83 of the Industrial Relations Code 2020 provides for the creation of a “reskilling fund” for employees laid off from the industrial establishment by the employer. The fund will be made up of the following amounts:

  • Employer contribution, equivalent to 15 days of salary as the last retirement of the worker immediately before being fired.
  • Contributions from other sources prescribed.

The fund must be used to pay the last 15 days of salary extracted by the worker, to his account, within 45 days after the worker’s dismissal.

ENHANCED WAGE CEILING FOR COVERAGE OF SUPERVISORY EMPLOYEES

Section 1(zr) defines “worker” which has enhanced the threshold for including supervisory employees within the ambit of “workers” has been enhanced from INR 10,000 to INR 18,000. Now the supervisory employee who earns wages between INR 10,000 and INR 18,000 per month will qualify as a worker and their employers may, amongst others, need to follow the retrenchment requirements to terminate their services.

OFFENCES AND PENALTIES

Section 86 states following penalties and punishments –

  • Penalty on contravening lay off, retrenchment and closing down provisions mentioned in section 78 ,79 or 80 is punishable with- fine up to 10 lakhs and not less than 1 Lakh.
  • Penalty on contravening the provisions of lay off, retrenchment and closure after conviction once Fine of Rs. 5 lakhs to Rs. 20 lakhs and/or imprisonment upto 6 months.
  • For unfair labour practice- fine upto 2 laks and not less than 10,000
  • Penalty for committing unfair labour practice after conviction- Rs. 50 thousand to Rs. 5 lakhs and/or imprisonment upto 3 months.
  • Penalty in case of violation of:
    • Rights of workers laid off for compensation
    • Conditions for retrenchment of workers
    • Compensation to workers in case of transfer of establishment
    • Compensation to workers in case of closing down of industry

Fine of Rs. 50 thousand to Rs. 2 lakhs

  • Penalty in case of violation after conviction of:
    • Rights of workers laid off for compensation
    • Conditions for retrenchment of workers
    • Compensation to workers in case of transfer of establishment
    • Compensation to workers in case of closing down of industry
    • Fine of Rs. 1 lakh to Rs. 5 lakhs and/or imprisonment upto 6 months.

NOTICE FOR CHANGE IN SERVICE CONDITIONS

Section 24 states that conditions of services cannot be changed by the employer without giving notice for the same 21 days prior. It shall contain the proposed changes and workers who will be affected. It may be related to wages, contribution, leaves, working hours etc.

FORMS

  • FORM I – Memorandum of settlement arrived at during conciliation
  • FORM II – Notice of change of service
  • FORM III Agreement for voluntary arbitration
  • FORM IV Authorization by worker before the authority
  • FORM V- Oath of office for judicial member
  • FORM VII- Notice of strike
  • FORM VIII- Notice for lock out
  • FORM IX- Notice for intimation of retrenchment
  • FORM X- Application for permission of lay-off
  • FORM XI- Complaint under section 91

TRANSITION PROCESS

What is changing under the new wage code that one must know?

SALARY CHANGE

  • BASIC PAY- Earlier, the compensation structure ranged from 30%-40% of the gross salary and the allowances made up the balance gets altered. Now, the basic pay has to be capped at about 50% of the employee’s CTC so that the allowances can be utmost 50% of the gross pay.
  • Provident Fund- Provident Fund was earlier calculated on an employee’s basic pay, considering the dearness allowance and other allowances offered by the organization. Employer and employee contribution will now be calculated on 50% of the CTC. This will increase your PF contribution but decrease your take-home pay.
  • Gratuity- Similarly, gratuity was earlier calculated as a % of your basic salary but will also now be calculated on new definition of “wages”.

EMPLOYEE WORK TIME

According to the new law, 15-30 minutes of extra work done would qualify as overtime. Currently, less than 30 minutes of extra work is not considered for overtime. The new rules also state that employees would have to be given a break of half an hour after every five hours of work.

ILLUSTRATION

Suppose a person’s salary per month = ₹1 lakh

The exclusions can’t be more than 50% of the salary

Hence, the basic wage will have to be ₹50,000. Companies may have to cut down certain allowances to meet the 50% limit for a basic wage.

Contribution towards PF in cases where the employer is contributing towards PF on the actual Basic salary rather than the minimum required contribution of 12% of ₹15,000 (the minimum wage for PF contributions) will change. A higher PF contribution will lead to lower in-hand pay.

Say, if a person’s salary is ₹1 lakh and the current basic wage is ₹40,000, then at 12% each, the employee and employer would be contributing ₹4,800 each towards PF. The in-hand salary would then be ₹90,400. But if the basic wage rises to ₹50,000 after complying with the definition of the New-Wage Code, PF contribution would be 6,000 each and then the take-home will reduce to ₹88,000, that is ₹2,400 less.

Gratuity is an amount equaling 15 days of last drawn basic wage for each year of service. The gratuity will also go up if there is an increase in basic wage.

One’s take-home pay might reduce, and the quantum will depend on the salary bracket you fall under. The impact is expected to be higher in lower salary brackets than the mid-and high-salary brackets. However, one will receive a higher payout on retirement, which is the government’s motive behind this move.

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