'Full And Final Settlement Of Wages' Rule Change Delayed

The new labour laws, which were to be implemented from July 1, have been delayed, including the wage code guidelines stating that full and final settlement of wages needs to be paid within two days from an employee's last working day.

By combining and reviewing previous Central Labour Laws, the government has made a series of changes to form new guidelines for pay, social security, labour relations, occupational safety, health, and working conditions.

The new rule has condensed the previous 29 laws to form the four labour codes, with a series of changes - including the wage code.

The new wage code says a company must pay the full and final settlement of wages within two days of an employee's last working day following their resignation, dismissal or removal from employment and services.

Currently, businesses take between 15 to 60 days to pay the complete settlement of wages, and in some cases, it goes up to 90 days.

The new wage code under the labour law says, "Where an employee has been - (i) removed or dismissed from service; or (ii) retrenched or has resigned from service, or became unemployed due to closure of the establishment, the wages payable to him shall be paid within two working days of his removal, dismissal, retrenchment or, as the case may be, his resignation." 

That does not include gratuity or provident fund payout, as those come under different laws.

The wage code says, "'wages' means all remuneration whether by way of salaries, allowances or otherwise, expressed in terms of money or capable of being so expressed which would,
if the terms of employment, express or implied, were fulfilled, be payable to a person employed in respect of his employment or of work done in such employment..."

That would bring relief to employees who serve long notice periods, between one month and six months and have to wait for a long duration to be paid.

While the labour laws were passed by the parliament and were set to be implemented on July 1, they have been delayed as states are yet to draft rules using the broader guidelines given, which are needed per the constitution.

All the states and UTs need to draft and notify these laws for these new regulations to be enforced, which has not been done yet.

For example, on one of the wage code rules, only a few states and union territories (UTs) have drafted the guidelines.

If the wage code is implemented, then businesses would need to realign their payroll processes and work around the timeliness and procedures for deriving the complete settlement of wages within two working days. 

But for now, the wait continues as the new labour codes, which will bring significant changes to the take-home salary, contribution to PF (provident fund) and the work timings, including the hours and days of work in a week, have been delayed as Indian states are yet to notify these regulations.