Explained | India's new labour codes: All you need to knew

In a bid to overhaul the 'outdated' system—with some laws dating back to British colonial rule—and extend protection to millions of workers, the government has introduced 4 new labour laws.

In a watershed moment for India's labour landscape, the long-pending four labour codes which were passed by the Parliament back in 2020 have finally come into effect.

In a bid to overhaul the 'outdated' system—with some laws dating back to British colonial rule—and extend protection to millions of workers, the government has introduced four new labour laws. These laws effectively replace and repeal the already 29 existing ones and mark the beginning of a new labour law regime.

The four new codes are – Code on Wages (2019), Industrial Relations Code (2020), Code on Social Security (2020) and the Occupational Safety, Health and Working Conditions (OSHWC) Code (2020).

Let's take a look at the new labour laws.

Gig workers now under social security

With more than 23.5 million people expected to be employed in the gig workforce by 2030, the government has extended the net of the social security and minimum wage benefits to gig workers.

This means food delivery agents, ride-hailing drivers and other platform based workers will now have access to retirement savings via provident fund, coverage under the Employees' State Insurance Corporation among other benefits.

Gig workers will also receive minimum wage that will be aligned to a national floor rate, along with mandatory timely wage payment and no unauthorised deductions.

Moreover, the companies that employ them will have to allocate up to 2 per cent of their annual turnover for the welfare of gig and platform workers.

Every component of the cost-to-company (CTC) will now be treated as remuneration unless specifically exempted, with the maximum exemption capped at 50 per cent of total compensation.

Women allowed to work night shifts

Under the newly minted laws, women across all sectors will now be able to work the night shift across all industries including mining and heavy machinery, provided consent is given and safety measures are in place.

This opens up more employment opportunities for women and helps overcome the previous barriers that existed.

The codes also ask employers to ensure equal pay for equal work.

The codes extend maternity benefits, including 26 weeks of paid leave to all women workers in unorganised sectors.

Gratuity for Fixed-Term Employees

The new codes have spelled out the definition of 'Wages' stating that they now include basic pay, dearness allowance, and retaining allowance; 50% of the total remuneration shall be added back to compute wages, ensuring consistency in calculating gratuity, pension, and social security benefits.

Moreover, fixed-term employees who form a major part of India's workforce will now receive gratuity after only 1 year of service. This number has been brought down from 5 years.

Working hours

The working hours have been capped at 8 hours per day and overtime will only be allowed with the worker's consent and employers will need to pay twice the regular rate.

However, since the weekly cap remains at 48 hours per week, critics warn that this may lead to 12-hour work shifts across fewer days.

Universal minimum wage

A national minimum wage will be applied to all workers across all sectors (both organised and unorganised). Prior to these codes, the Minimum Wages Act applied only to scheduled employments covering 30% of workers.

The government shall also set a statutory floor wage. The state governments will have the option of setting a higher wage according to their preference but they are not allowed to set it below the floor wage.

Easier hire and fire

Critics also raise the point that companies with up to 299 employees can now lay off staff without the approval of the government. Earlier this threshold was at 100 workers.

Trade unions cry 'Anti-worker, pro-employer'

Opposition trade unions have condemned the implementation of the new labour codes calling them, "anti-worker, pro-employer' and claimed that it was the union government's "deceptive fraud" committed against the working people.

Trade unions argue that the implementation of these laws will dilute worker protections, allow for easy hire and fire and will snatch workers' rights.