Legal Update: The New Labour Codes of India

Introduction

Prior to the introduction of the new labour codes in India, the labour law regime in India comprised of more than 40 central and 150 state laws. Therefore, labour laws in India were not only vast but also complex. The complexity of these laws, some of which dated back a century, had a detrimental impact on several businesses.

With a view to boost the economic and tax growth of the country, the Modi government introduced Bills in the parliament in 2019 with the aim to consolidate the vast number of labour laws into 4 to 5 codes.

On August 8th 2019, the first code, namely, Code on Wages 2019, received the President’s assent. Thereafter, on September 28th 2020, the three additional codes, namely, Code on Social Security 2020, Industrial Relations Code 2020 and Occupational Safety, Health and Working Conditions Code 2020, also received the President’s assent. Through informal press releases, the government has confirmed that these four codes shall be brought into effect simultaneously by the end of the year.

By the introduction of these labour codes, the government has been able to merge 29 central laws into 4 labour codes. As per the press release of the government, these codes are a ‘game changer’ and envisages to grant more protection and promote the welfare of more than 500 Million workers in both organized & unorganized sectors.

Overview:

• Code on Wages 2019 – This code seeks to consolidate and amend 4 central laws on the payment of wages and remuneration, namely, (i) The Payment of Wages Act, 1936; (ii) The Minimum Wages Act, 1948; (iii) The Payment of Bonus Act, 1965; and (iv) The Equal Remuneration Act, 1976. This code aims to provide, inter alia, equal remuneration to all employees irrespective of their gender and grant minimum wages to all employees whether a part of the organized or unorganized sector.
• Code onSocial Security 2020 – This code seeks to consolidate and amend 9 central laws on social security which inter alia includes, (i) The Employees’ State Insurance Act, 1948; (ii) The Employees Provident Fund and Miscellaneous Provisions Act, 1952; (iii) The Maternity Benefit Act, 1961; and (iv) The Payment of Gratuity Act, 1972. Through this code, the government seeks to grant social security to “platform or gig workers”, a form of employment created due to changing technologies. Under the press release of the government it has been noted that “India is one of the few countries where this unprecedented step to bring workers in this category under social security has been taken.”
• Industrial Relations Code 2020 – This code seeks to consolidate and amend 3 central laws on the conditions of employment in industrial establishments, namely, (i) The Trade Unions Act, 1926; (b) The Industrial Employment (Standing orders) Act, 1946; and (iii) The Industrial Disputes Act, 1947.This code brings in new rules for hiring and firing of employees in mid-sized and large industries, making retrenchment easier. Prior to the introduction of this code, an establishment with more than 100 employees required the prior approval of the government before lay-offs, retrenchment and closure. This threshold has now been increased from 100 to 300. It is believed that the previous stringent hiring and firing rules incentivized smaller firms to stay small. According to a report of the World Bank, with less restrictive laws, India could approximately add “2.8 million more good quality formal sector jobs” on an annual basis.
• Occupational Safety, Health and Working Conditions Code 2020 – This code seeks to consolidate and amend 13 central laws on safety and working conditions of employees in a workplace, inter alia, (i) The Factories Act, 1948; (ii) The Mines Act, 1952; and (iii) The Contract Labour (Regulation and Abolition) Act, 1970. Amongst others, this code seeks to introduce free health checkups once a year by the employer for workers over a certain age.

We at D’Andrea and Partners are continuously following the amendments to the Indian laws and regulations. Please do get in touch at info@dandreapartners.com for any queries or clarifications.