New Wage Code: Reduced Salary, Higher PF, 12 Hours Work Week, Extra Paid Holidays? Expected Changes From July 1st..

Newest reports have mentioned that the four labor codes are most likely to be implemented from July 1. These four labor codes will be on wages, social security, industrial relations and occupation safety, health and working conditions.

A minimum of 23 states have pre-published draft rules on these laws, and after its implementation, the new wage code will affect working hours, salary restructuring and PF contribution, encashing of Earned Leaves as well.

The Centre has completed the process of finalizing the draft rules on these codes in February 2021. 

There are four labor codes by the central government – the Code on Wages, 2019, on August 8, 2019, and the Industrial Relations Code, 2020, the Code on Social Security, 2020, and the Occupational Safety, Health and Working Conditions Code, 2020 on September 29, 2020.

The Centre intends to implement all these all at once as labor is a concurrent subject. 

Reduced in-hand salary after implementation of Wage Code

As per the government’s notification on Code on Wages 2019, the take-home pay may reduce while components like PF and Gratuity will probably increase. This is because the new wage code includes the provision that specifies that the employee’s basic salary should be at least 50 percent of his/her net monthly CTC. 

This means that if this provision comes into effect, employees will not be able to get more than 50 percent of his/her net monthly salary in the form of allowance. 

Higher PF after implementation of Wage Code

There will be a consequent rise in gratuity and PF contribution of the employee. This means that if the take home pay of the employee may be reduced, the Gratuity and PF component may increase. 

12 hours work-week

The new draft will reportedly affect the working hours of employees as well. There is a possibility that the working hours of employees will be affected, as in they will be allowed a four-day work week. However, they might be made to work 12 hours on those four days. 

As per the labour ministry, the 48 hour work week requirement is a must. 

Big changes in Earned Leave policy after new wage code implementation

As per reports, the employees of government departments will be allowed 30 holidays in 1 year, defense employees get 60 holidays in 1 year. Employees will be able to cash up to 300 holidays on carry forward. On the other hand, the Labor union is demanding an increase of holidays to 450 in the new code from the 240 to 300 available presently. Employees will be able to cash these holidays only after 20 years of service.