PMO To Review New Labour Rules; Decide Implementation Timeline

A senior Labour and Employment Ministry official said, on the condition of anonymity, that the rules to be framed under the four labour codes have been finalised and will be taken up for discussion with the prime minister’s office.

The Labour Ministry will present to the PMO key changes proposed through the rules accompanying all the codes, the official said. The government will take a call on the timeline for implementing the new labour codes after the review meeting is held in the coming days, the person said.

An email sent to the Labour Ministry on Wednesday evening is yet to be answered.

Key Concerns Remain

In its presentation, the Labour Ministry will highlight the biggest concern expressed by employers — regarding a change in the definition of wages which will impact wage structures and costs.

According to the new law, wages will have to be structured in a manner so that all the monetary allowances — house rent, leave travel, overtime, conveyance, among others — are capped at 50% of the wage of an employee, which will include the basic pay, dearness allowance and retention pay. Higher basic pay would mean increased costs towards provident fund and gratuity contributions which are calculated on the former.

Earlier this month, lobby group, the Confederation of Indian Industry, wrote to Labour and Employment Minister Santosh Kumar Gangwar asking the government to introduce a ‘grandfathering’ provision for computing gratuity or to postpone this provision by one year. The codes enable the central government to implement the new labour laws in phases, or to implement certain provisions from a later date. The letter was written by CII’s Chairman of National Committee on Industrial Relations MS Unnikrishnan.

Given that industry is still recovering from the impact of the Covid crisis, the additional impact will only add to their financial woes,” said the letter dated Feb. 6, a copy of which has been reviewed by BloombergQuint. The letter suggested that the gratuity due till implementation of the new codes should be based on the existing definition of wages and thereafter, the “calculations for gratuity should be done on a prospective basis.”

After initially contemplating such a move, the Labour Ministry dropped the idea. Labour and Employment Secretary Apurva Chandra told BloombergQuint in an interview last month that “definition of wages is a part of the codes and that cannot be addressed through the rules.”

A majority of concerns of the trade unions are, however, related to the codes itself, rather than the rules.

In its presentation, the Labour Ministry will also mention that the unions have objected to introduction of fixed-term employment without any cap on the renewal of such contracts and a higher threshold for allowing firms to retrench or layoff without seeking government consent.

Objections have also been raised on the matter of exempting larger companies from framing standing orders. A standing order is a legally binding collective employment contract signed between companies and workers, which has key work-related terms and conditions and is meant to prevent arbitrary dismissal of employees. Under the new law, companies with less than 300 workers do not have to frame a standing order. Earlier this threshold was set at 100 workers.

Codes Yet To Take Effect

Last year, Parliament passed four labour codes, one each on wages, industrial relations, occupational safety health and working conditions, and social security to usher in changes to India’s labour laws, some of which were framed during British rule. As many as 29 central labour laws have been subsumed into four codes.

However, the new labour codes are yet to take effect as the government wanted to finalise rules under each of the codes before notifying them. The government made the draft rules public for consultation in October-November 2020, followed by meetings with industry and trade union representatives.

One of the concerns on the timeline, the official quoted above said, is that none of the states have so far made their draft rules public which may delay the implementation of the new codes. Labour, as a subject, falls under the concurrent list of the Constitution wherein both the central and state governments can legislate. Under the new codes, state governments have the powers to make rules.

Chandra had said in October that the central government is aiming to notify the new codes by April 1.