In-Hand Salary Of Indian Employees Will Reduce From July 1, 12-Hour Work Week Starts: New Labour Codes

The four labour codes on wages, social security, industrial relations and occupation safety, health and working conditions will likely take effect from July 1.

The new code revises working hours, salary restructuring and PF contribution, encashment of Earned Leaves among the prominent ones.

The Labour Codes

At least 23 states have pre-published draft rules on these laws, while the Centre has finalised the draft rules on these codes in February 2021.

It has notified four labour codes:

• Code on Wages, 2019, on August 8, 2019 
• Industrial Relations Code, 2020
• Code on Social Security, 2020
• Occupational Safety, Health and Working Conditions Code, 2020 on September 29, 2020

Since labour is a subject of common interest, the Centre wants states to implement these as well in one go.

Reduced in-hand salary

The notification on Code on Wages 2019 may reduce the take-home pay while components like PF and Gratuity might rise.

This is based on a new provision entailing that the employee’s basic salary will be at least 50 percent of his/her net monthly CTC.

If this provision comes into effect employees basic salary is capped at 50 percent of his/her net monthly salary and not more.

Higher PF

As mentioned, though the basic pay goes down, it could also mean a consequent rise in gratuity and PF contribution.

Employees can now enjoy a hike in their Gratuity and PF component.

12 hours work-week

The new rules will also affect working hours.

Some media reports say that a four-day workweek may become the norm.

This means that employees will have to work for 12 hours on those four days.

The labour ministry has decided that a 48-hour weekly work requirement is a must. 

Changes in Earned Leave policy

The biggest change is in this domain. 

Government departments now allow 30 holidays in 1 year.

Defence employees get 60 holidays in 1 year.

Employees can carry forward up to 300 holidays but the Labour union wants this to increase to 450.

Currently there are 240 to 300 holidays in different departments.

Employees can encash these holidays only after 20 years of service.