New Wage Code: Most of the states of the country have stood with the draft laws for the new wage code. Because of these, the central government was unable to implement the new pay code. Earlier it was to implement the new labor laws on July 1.
The Central Government has passed these new laws in the Parliament. Many states have not yet ratified the new code; Due to which the implementation is getting delayed, because labor is a subject of the Concurrent List of the Constitution, and it cannot be implemented without the ratification of the states.
According to the government, so far 31 states and union territories have published the draft rules under the Code on Wages, 2019.
The new labor code, which will come into force soon, will affect the working hours, take-home pay and leave conditions of employees. The Wage Code mandates that full and final settlement of wages and dues should be completed within two days from the last working day of the employee.
Similarly, companies can increase the working hours of employees if needed. In such a situation, they will have to give extra leave.
The in-hand pay of employees is also going to be impacted as the new wage code states that the basic pay should be at least 50 per cent of the gross pay.
This will increase the contribution of both the employee and the employer to the provident fund.
This labor code, passed by Parliament in 2019, replaces 29 central labor laws.
Four new codes on wages, social security, labor relations, occupational safety, health and working conditions were to be implemented from July 1.
The new law emphasizes that full and final payment of wages must be made to the company within two days of the last working day of the employee after he resigns, removes or is dismissed from the job. Presently, companies are following a period of 45 days to 60 days for complete and final settlement.
The new labor law provides that where an employee has been – (i) removed or dismissed from service; or (ii) has been retrenched or has resigned from service, or has become unemployed by reason of the closure of the establishment, the wages payable to him shall be paid within two working days. be their expulsion, dismissal, retrenchment or, as the case may be, their resignation. Must be settled within two days.
However, the states are allowed to frame guidelines for the time period for complete and final settlement. Provident fund and gratuity are not part of salary and are covered under different laws.
Increased working hours
Under the new wage code, companies are allowed to increase the working hours of employees from 9 hours to 12 hours.
However, they will have to give one day extra leave. Therefore, in case of increase in working hours, employees will work only four days in a week instead of the current 5.
Employees will get 3 days weekly off. This continues with a minimum requirement of 48 hours of work every week. If an employee works more than 48 hours a week, the employer must pay overtime.
Take-home salary will be reduced
The new labor law, once implemented, will affect the take-home pay of employees. However, his retirement amount will increase.
As per the law, the basic salary of the employee should be 50% of the gross salary. This will lead to reduction in take-home pay and increase in retirement savings as provident fund contribution by both employer and employee will increase.