Employment Laws in India have traditionally been governed by contract as well as multifarious and fragmented legislations, both at the central and state level. With a view to harmonising and consolidating the various legislations pertaining to employment, social security, wages, industrial disputes and other relevant labour/employment related matters, the Ministry of Labour and Employment (“Ministry“) introduced four bills in 2019 to amalgamate 29 central laws related to labour laws. These bills have been codified and enacted as:
- The Code of Wages, 2019;
- The Industrial Relation Code, 2020;
- The Occupational Safety, Health and Working Conditions Code, 2020; and
- The Code on Social Security, 2020.
We have below summarised the essence of each code with a viewpoint of highlighting the changes one can anticipate once the 4 codes and rules thereunder are in effect.
- The Code of Wages, 2019 (“Wage Code“)
The Wage Code has unified and subsumed four different acts, namely the Payment of Wages Act, 1936, the Minimum Wages Act, 1948, the Payment of Bonus Act, 1965 and the Equal Remuneration Act, 1976. The implementation of the Wage Code is expected to have wide ranging implications for a majority of industries and it is therefore crucial to understand the key aspects of the Wage Code and how they differ from the previous regulations.
The Wage Code has modified the definition of “employee” from the extant definition as contained under the Minimum Wages Act, 1948. Under the Minimum Wages Act, 1948, “employees” were restricted to workers in certain specified categories of scheduled employment which under the Wage Code has been extended to all types of establishment, irrespective of whether it falls under the organised or the unorganised sector. This implies that the benefits under the Wage Code with respect to payment of wages and minimum wages to all employees, including those engaged in skilled, semi-skilled or unskilled, manual, operational, supervisory, managerial, administrative, technical or clerical work, and irrespective of whether the terms of employment have been expressly conveyed or merely implied, therefore widening the ambit considerably. This development is especially beneficial to the large number of workers in India’s unorganised sector, who often do not have written contracts to rely on.
Furthermore, “wages” have also now been given a unified structure as opposed to the varying definitions stipulated before. The definition of “wages” under the Wage Code encompass (i) basic pay; (ii) dearness allowance; and (iii) retaining allowance and categorically excludes components such as statutory bonus, value of house accommodation, overtime, gratuity, etc, unless such exclusions exceed more than 50% (fifty percent) of all remuneration, in which case the amount which exceeds 50% (fifty percent) shall be considered as remuneration and be added to the wages thereof. The Wage Code has also introduced the concept of “floor wages” which will be fixed basis the minimum living standards of a worker within the relevant geographical area, and where the minimum rate of wages fixed by the respective State Government is higher than the floor wage, then the former shall be retained.
- The Industrial Relation Code, 2020 (“IR Code”)
The IR Code subsumes and amends the following acts (i) The Industrial Disputes Act, 1947, (ii) The Trade Unions Act, 1926; and (iii) The Industrial Employment (Standing Orders) Act, 1946.
The IR Code has introduced a ‘sole negotiating union’ in establishments where there are more than one trade union. Such sole negotiating union is required to have 51% or more workers as members. Only the sole negotiating union shall be permitted to negotiate terms with the employer. The IR Code provides provisions for workers to secure their employment after being laid off. It further sets forth a mechanism for resolution of industrial disputes which shall be constituted by the central government comprising of a national industrial tribunal and one or more industrial tribunal. It also mandates that a workman is required to approach the grievance redressal committee.
The IR Code also sets forth the notice periods that are to required to be provided by a workman prior to going on any strike and lock-out in breach of contract. The IR Code provides that the provisions with respect to the standing orders shall apply to all industrial establishments with three hundred (300) workers in comparison to the earlier one hundred (100) workers. The IR Code includes other provisions that touch upon matters related to retrenchment, layoffs, closure of an establishment, industrial tribunes etc.
- The Occupational Safety, Health and Working Conditions Code, 2020 (“OSH Code”)
The OSH Code has subsumed several key pieces of legislation on the working conditions of labour and consolidated it into one comprehensive act, including, inter alia, the Contract Labour (Regulation and Abolition) Act, 1970, the Factories Act, 1948, etc. Some of the important definitions that the OSH Code has amended are Contract Labour, Employee, Employer, Establishment, Principal Employer, Wages and Workers.
The OSH Code sets forth certain duties of every employer with respect to their workplace and employees. The employer under the OSH Code is also required to provide and maintain welfare activities for employees as may be prescribed by the Central Government and as required for decent standard of life of the employees. Furthermore, the OSH Code prescribes a more stringent set of duties for employers with respect to factories, mines, dock work, building and other construction work or plantations. The OSH Code has further clarified that it shall be the duty of the architect, project engineer or designer responsible for any building or construction work or the design of any project relating to such building, to ensure that, at the planning stage, due consideration is given to the safety and health aspects of the building workers and employees who are employed in the erection, operation and execution of such projects.
The OSH Code has modified the number of minimum contract labour to fifty (50) from twenty (20) for the OSH Code to apply. Welfare facilities as specified under the OSH Code are to be provided by the principal employer of the establishment to the contract labour employed in such establishment. The OSH Code has also safeguarded the rights of the Inter-State Migrant Workers by ensuring that the contractor extends all benefits as are available to a worker under the various labour laws to inter-state migrant workers as well. Furthermore, the employer of every applicable establishment is required to pay to every inter-state migrant worker, a lump sum fare for to and fro journey to his native place from the place of his employment.
- The Social Security Code, 2020 (“SS Code”)
The SS Code has been enacted to amend and consolidate the laws relating to social security with the goal to extend social security to all employees and workers either in the organised or unorganised or any other sectors. The SS Code has subsumed several key pieces of legislation such as The Employees’ Compensation Act, 1923, The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, The Payment of Gratuity Act, 1972, The Maternity Benefit Act, 1961 etc. The SS Code introduces new definitions in this context which are as follows:
- “Aggregator” has been defined as a digital intermediary or a marketplace for a buyer or user of a service to connect with the seller or the service provider.
- “Gig Worker” under the SS Code has been defined as a person who performs work or participates in a work arrangement and earns from such activities outside of traditional employer-employee relationship.
- “Platform work” has been defined as a work arrangement outside of a traditional employer employee relationship in which organisations or individuals use an online platform to access other organisations or individuals to solve specific problems or to provide specific services or any such other activities which may be notified by the Central Government, in exchange for payment and a “platform worker” has been defined as a person engaged in or undertaking Platform Work.
- “SocialSecurity” under the SS Code means the measures of protection afforded to employees, unorganised workers, gig workers and platform workers to ensure access to health care and to provide income security, particularly in cases of old age, unemployment, sickness, invalidity, work injury, maternity or loss of a breadwinner by means of rights conferred on them and schemes framed, under the SS Code.
- “Unorganised Sector” means an enterprise owned by individuals or self-employed workers and engaged in the production or sale of goods or providing service of any kind whatsoever, and where the enterprise employs workers, the number of such workers is less than ten (10).
- “Unorganised Worker” means a home-based worker, self-employed worker or a wage worker in the Unorganised Sector.
One prominent change that the SS Code brings about it is to include within its ambit benefits to Platform Workers and Gig Workers. While the SS Code currently does not provide for any specific social security to be provided to Gig Workers and Platform Workers, however it provides the right to the Central Government and State Government to notify schemes for such workers related to life and disability cover, health and maternity, provident fund, employment injury benefit, housing etc. The SS Code mandates that the schemes may be funded through a combination of contributions from the central government, state governments, and Aggregators. The SS Code also mandates that every Unorganised Worker, Gig Worker or Platform Worker is required to be registered. Every eligible Unorganised Worker, Gig Worker or Platform Worker is to make an application for registration along with prescribed documents including Aadhaar number and such worker shall be assigned a distinguishable number to his application. Whether such schemes would be applicable to all Unorganised Workers, Gig Workers and Platform Workers irrespective of the quantum of salary earned by them, will depend on the final form of the schemes introduced by the State or Central Government. The SS Code has also ushered a host of other changes to provident fund benefits, gratuity benefits and other social security measures currently in place.
Given the above changes that the new labour codes have brought to the existing Employment Laws in India, it will be important for establishments to assess the implications and revisit the compliance requirements under each Code, once it is brought into effect along with the final rules and state amendments.