The Centre has announced to likely give green light to the four labour codes in a couple of months, as it is looking forward to implementing these laws, which if takes form, will lead to a decrease in the take-home pay of employees, in extension to an increase in provident fund liability of companies.
Labour Codes to Set into Action?
The labour ministry had plans of implementing the four labour codes on industrial relations, wages, social security and occupational health safety & working conditions, from april 1, 2021.
However, due to many states not being able to notify these rules under their jurisdictions in time, the action could not be implemented.
Moneycontrol states that ‘Labour’ being a concurrent subject in India’s Constitution, it is compulsory for both the Centre and states to notify these four codes, for turning it into a law.
”Many major states have not finalised the rules under four codes. Some states are in the process of finalising rules for the implementation of these laws. Central government cannot wait forever for states to firm up rules under these codes. Therefore it is planning to implement these codes in a couple of months as some time would have to be given to establishments or firms to align with new laws,” states a source.
In-Hand Salary for Employees to Reduce
Once the labour codes come into action, there is going to be major changes in calculations of basic pay and provident fund of employees.
Under the code, allowances are capped at 50%. This clearly means that half of the employee’s gross pay will be basic pay. Additionally, provident fund is calculated as a percentage of basic wage, which includes basic pay and dearness allowance.
The new wages code provides for provident fund contribution as a prescribed proportion of 50% of gross pay.
Once the code is implemented, employees will take lesser pay home, while the provident fund liability of employers would increase in many cases.
It is a given that the employers will have to restructure salaries of their employees based on the new codes, once implemented.
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