- In 2020, the Parliament passed three labour law codes that complete the government’s consolidation of 29 labour laws into four codes. The three Acts are the Industrial Relations Code, 2020, the Occupational Safety, Health and Working Conditions Code, 2020 and the Social Security Code, 2020.
- The first of the four codes- Code on Wages Act was passed in 2019.
- It should be noted that labour falls under the concurrent list of the Constitution. Therefore, both Parliament and state legislatures can make laws regulating labour.
Code on Wages
- The Code replaces the following four laws:
- the Payment of Wages Act, 1936
- the Minimum Wages Act, 1948
- the Payment of Bonus Act, 1965
- the Equal Remuneration Act, 1976
- Coverage: The Code will apply to all employees to enforce minimum wage among both formal and informal sector workers.
- Floor wage: According to the Code, the central government will fix a floor wage, taking into account the living standards of workers. Further, it may set different floor wages for different geographical areas.
- The minimum wages decided by the central or state governments must be higher than the floor wage. In case the existing minimum wages fixed by the central or state governments are higher than the floor wage, they cannot reduce the minimum wages.
- Fixing the minimum wage: The Code prohibits employers from paying wages less than the minimum wages. Minimum wages will be notified by the central or state governments. The minimum wages will be revised and reviewed by the central or state governments at an interval of not more than five years.
- Overtime: The central or state government may fix the number of hours that constitute a normal working day. In case employees work in excess of a normal working day, they will be entitled to overtime wage, which must be at least twice the normal rate of wages.
- Deductions: Under the Code, an employee’s wages may be deducted on certain grounds including: (i) fines, (ii) absence from duty, (iii) accommodation given by the employer, or (iv) recovery of advances given to the employee, among others. These deductions should not exceed 50% of the employee’s total wage.
- Gender discrimination: The Code prohibits gender discrimination in matters related to wages and recruitment of employees for the same work or work of similar nature. Work of similar nature is defined as work for which the skill, effort, experience, and responsibility required are the same.
- Advisory boards: The central and state governments will constitute advisory boards to advise the respective governments on various issues including: (i) fixation of minimum wages, and (ii) increasing employment opportunities for women.
The Code on Social Security, 2020
- It replaces nine laws related to social security, including the Employees’ Provident Fund Act, 1952, the Maternity Benefit Act, 1961, and the Unorganised Workers’ Social Security Act, 2008. Social security refers to measures to ensure access to health care and provision of income security to workers.
- Changes in definitions: The Code changes the definitions of certain terms. These include: (i) expanding the definition of ‘employees’ to include workers employed through contractors, (ii) expanding the definition of “inter-state migrant workers” to include self-employed workers from another state, (iii) expanding the definition of “platform worker” to additional categories of services or activities as may be notified by the government, (iv) expanding the definition of audio-visual productions to include films, web-based serials, talk shows, reality shows and sports shows, and (v) exempting construction works from the ambit of “building or other construction work” if the total cost of construction work exceeds Rs 50 lakhs (and if they employ more than a certain notified number of workers).
- The central government will set up a social security fund for unorganised workers, gig workers and platform workers. Further, state governments will also set up and administer separate social security funds for unorganised workers.
- Gig workers refer to workers outside of the traditional employer-employee relationship (e.g., freelancers). Platform workers are workers who access other organisations or individuals using online platforms and earn money by providing them with specific services. Unorganised workers include home-based and self-employed workers.
- The Code makes provisions for registration of all three categories of workers – unorganised workers, gig workers and platform workers.
- National Social Security for gig workers and platform workers: The Code provides for the establishment of the National Social Security Board and various state-level boards for welfare of unorganised sector workers, gig workers and platform workers and can recommend and monitor schemes for them.
- Term of eligibility for gratuity: Gratuity is payable on the termination of employment, if the employee has been in the organisation for at least five years. The Code extends gratuity entitlement to fixed term employees as well. Such employees would be paid gratuity based on the term of their employment contracts on a pro-rata basis, even if the contract period is less than 5 years.
The Occupational Safety, Health and Working Conditions Code, 2020
- The Code seeks to regulate health and safety conditions of workers in establishments with 20 workers for premises where the manufacturing process is carried out using power, and 40 workers for premises where it is carried out without using power.
- Contract workers: The Code will apply to establishments or contractors employing 50 or more workers (on any day in the last one year).
- Establishments covered by the Code are required to register with registering officers, appointed by the central or state governments.
- Welfare facilities, working conditions and work hours for different types of establishments and workers will be prescribed by the central or state governments through rules.
- It subsumes and replaces 13 labour laws relating to safety, health and working conditions. These laws include: Factories Act, 1948; Mines Act, 1952; Dock Workers Act, 1986; Contract Labour Act, 1970; and Inter-State Migrant Workers Act, 1979.
- The Code sets up occupational safety boards at the national and state level to advise the central and state governments on the standards, rules, and regulations to be framed under the Code.
- The Code bars civil courts from hearing matters under the Code. Therefore, the only judicial recourse for a person aggrieved under the Code is to file a writ petition before the relevant High Court.
- Daily work hour limit: The Code fixes the maximum daily work hours for workers at eight hours per day.
- Benefits for inter-state migrant workers: The Code provides for certain benefits for inter-state migrant workers. These include: (i) option to avail the benefits of the public distribution system either in the native state or the state of employment, (ii) availability of benefits available under the building and other construction cess fund in the state of employment, and (iii) insurance and provident fund benefits available to other workers in the same establishment.
- Database for inter-state migrant workers: The Code requires the central and state governments to maintain or record the details of inter-state migrant workers in a portal.
- Social Security Fund: The Code provides for the establishment of a Social Security Fund for the welfare of unorganised workers. The amount collected from certain penalties under the Code will be credited to the Fund.
- The Code empowers the state government to exempt any new factory from the provisions of the Code in order to create more economic activity and employment.
The Industrial Relations Code, 2020
- It seeks to replace three labour laws: (i) the Industrial Disputes Act, 1947, (ii) the Trade Unions Act, 1926, and (iii) the Industrial Employment (Standing Orders) Act, 1946.
- It defines ‘workers’ to include, besides all persons employed in a skilled or unskilled, manual, technical, operational and clerical capacity, supervisory staff drawing up to ₹18,000 a month as salary.
- It introduces ‘fixed term employment’, giving employers the flexibility to hire workers based on requirement through a written contract. Fixed term employees should be treated on a par with permanent workers in terms of hours of work, wages, allowances and other benefits, including statutory benefits such as gratuity.
- Applicability of standing orders: All industrial establishments with 300 workers or more must prepare standing orders on the matters listed in a Schedule to the Code. These matters relate to: (i) classification of workers, (ii) manner of informing workers about work hours, holidays, paydays, and wage rates, (iii) termination of employment, and (iv) grievance redressal mechanisms for workers.
- Closure, lay-off and retrenchment: An establishment having at least 300 workers was required to seek prior permission of the government before closure, lay-off, or retrenchment.
- Lay-off refers to an employer’s inability to continue giving employment to a worker in the face of adverse business conditions. Retrenchment refers to the termination of service of a worker for any reason other than disciplinary action.
- Negotiating Union and Council: If there were more than one registered trade union of workers functioning in an establishment, the trade union having more than 51% of the workers as members would be recognised as the sole negotiating union.
- In case no trade union is eligible as sole negotiating union, a negotiating council will be formed consisting of representatives of unions that have at least 20% of the workers as members.
- Prior notice: The code has expanded to cover all industrial establishments for the required notice period and other conditions for a legal strike. It proposes that no person employed in an industrial establishment shall go on strike without a 60-day notice and during the pendency of proceedings before a Tribunal or a National Industrial Tribunal and sixty days after the conclusion of such proceedings. The Industrial Disputes Act, 1947, had placed such restrictions on announcing strikes only in respect of public utility services. However, the present Code extends it to all establishments.
- Disputes relating to termination of individual workers: Any dispute in relation to discharge, dismissal, retrenchment, or otherwise termination of the services of an individual worker to be an industrial dispute. The worker may apply to the Industrial Tribunal for adjudication of the dispute.
- It confers on the ‘appropriate Government’, that is the Centre or the State governments, the power to exempt, with or without conditions, any industrial establishment or class of industrial establishments from all or any of the provisions of the Code, if it is satisfied that adequate provisions exist to fulfil its objectives.
Why in News?
- The government has announced that about 70% of compliance-related hassles faced by businesses pertain to labour laws and will be resolved once States notify the four Labour Codes approved by Parliament.
- The government has reduced 25,000 compliances in the past year but is conscious that many more need to be reduced to improve the ease-of-doing business.
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