Change In Take-Home Salary and Working Hours From New Wage Code, Check Details

More number of states have come up with draft laws for the new wage code, which is delayed from the government's original plan of July 1 implementation of the new labour laws.

While the government has passed these new laws through the parliament, many states are yet to ratify the new codes; the implementation was delayed as labour is a subject on the concurrent list of the Constitution, and the states must ratify them. 

According to the government, until now, 31 states and Union Territories have published the draft rules under the Code on Wages, 2019.

The soon-to-be-implemented new labour code will impact employees' working hours, take-home salary and leave conditions. The wage code mandates that the full and final settlement of the wages and dues should be completed within two days from the employee's last working day. 

Similarly, the companies can increase employees' working hours if needed. In such cases, they have to offer extra leave.

The in-hand salary of the employees is also going to be impacted as the new wage code stipulates that the basic salary should be at least 50 per cent of the gross salary. 

This will increase the contribution towards the provident fund by both the employee and the employer.

This labour code, passed by the Parliament in 2019, replaces 29 Central labour laws. 

The four new codes on pay, social security, labour relations, occupational safety, health, and working conditions, were to be implemented from July 1. 

Read how the new labour code will impact salaried employees:

Full and Final Settlement Within 2 Days

The new law mandates that a company must pay the full and final settlement of wages within two days of the employee's last working day following the resignation, removal or dismissal from the job. Currently, the companies are following 45 days to 60 days period for the full and final settlement.

"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," says the new labour code.  

However, the states are allowed to frame the guidelines for the time period for full and final settlement. The provident fund and gratuity do not form a part of wages and come under different laws.

Increased Working Hours

Under the new wage code, the companies are allowed to increase the working hours for the employees from 9 hours to 12 hours. 

However, they have to provide one extra day off. So, in case of increased work hours, the employees will work only for four days in a week instead of the current 5. 

Employees will get 3-day weekly off. This has continued with the minimum requirement of 48-hour work every week. If an employee works more than 48 hours a week, the employer should make the overtime payment.  

Reduced in-hand salary

Once implemented, the new labour code will impact the employees' in-hand salary. However, their retirement corpus will increase. 

According to the law, the employee's basic salary must be 50% of the gross salary. This will bring down the take-home salary and increase the retirement savings as the provident fund contribution by both the employer and the employee will increase.