Decoding Industrial Relations under the New Labour Codes
- Blog|Labour & Industrial Laws|
- 12 Min Read
- By Taxmann
- Last Updated on 5 June, 2023
Table of Contents
- Objective, Applicability and Highlights of Code on Wages, 2019
- Objective, Applicability and Highlights of Code on Social Security, 2020
- Objective, Applicability and Highlights of Industrial Relations Code, 2020
- Objective, Applicability and Highlights of Occupational Safety, Health and Working Conditions Code, 2020
Check out Taxmann's Industrial Relations & Labour Laws for Managers which provides an extensive overview of Indian labour legislation to enrich the understanding of HR and IR professionals. The second edition is student-focused, featuring lucid language, a practical approach, amendments, case studies, and question sets, discussing industrial relations, wages, work conditions, and social security.
The maintenance of cordial and peaceful industrial relations is an important and delicate function of an organisation for attaining and maintaining high levels of production. This aim can be achieved if peace and continuity remain in the industry. Good industrial relations increase the morale of the workers and motivate the workers to work more. It is not only important from the point of view of the organisation but, it is also important for the prosperity of the community in particular and nation in general. Need of industrial relation has arisen to defend the interest of workers for adjusting the reasonable salary or wages. It also helps the workers to seek perfect working condition for producing maximum output. Workers are concerned with social security measures through this. Industrial relations is also needed for achieving the democracy by allowing worker to take part in management, which helps to protect human rights of individual.
Second National Commission on Labour, emphasized the importance of industrial relations for the overall economic development of the country and recommended a sea change in the legislations regulating the relationship between employer, workers and Government. To harmonize the industrial relations and balance the interest of employer and workers, out of a total 44 labour-related statutes promulgated by the Central Government, 29 are being amalgamated into four new labour codes. The new labour codes simplify and modernise labour regulation and aim to facilitate employment growth while protecting workers’ rights. The Labour Codes which were passed in both the Houses of the Parliament and received Presidential Assent are as follows:
- Code on Wages, 2019,
- Code on Social Security, 2020,
- Industrial Relations Code, 2020,
- Occupational Safety, Health and Working Conditions Code, 2020.
2. Objective, Applicability and Highlights of Code on Wages, 2019
The Code on Wages, 2019 was introduced in Lok Sabha on 23 July 2019 and was passed on 30 July 2019. The Bill was passed in Rajya Sabha on 2 August 2019. It received Presidential assent on 8 August 2019.
The Code aims to regulate the payment of wage and bonus in all employments where any industry, trade, business, or manufacture is carried out. It subsumed four labour legislations which used to regulate the payment of wages: the Payment of Wages Act, 1936, the Minimum Wages Act, 1948, the Payment of Bonus Act, 1965, and the Equal Remuneration Act, 1976.
The Code will apply to all employees employed in an industry, business, trade or manufacture. The Central Government reserves the power to make wage-related decisions for employment, such as railways, mines, and oil fields. On the other hand, State Governments is empowered to make decisions for all other employments.
- The State or Central Government shall not exceed five years to revise minimum wages.
- The definition of ‘employers’ includes any person who directly or indirectly employs one or more persons at an establishment.
- While the Payment of Wages Act, 1936 is applicable only on the employees who receive wages less than ` 24,000 per month, the code removes this threshold limit. It will cover all employees employed in an industry, trade, business or manufacturer irrespective of monthly wages.
- The Code provides a standard definition of the term ‘Wages’. Thus the code removes the confusion about the term “wages” created by different definitions given under the Payment of Wages Act, 1936, the Minimum Wages Act, 1948 and the Payment of Bonus Act, 1965.
- According to the conditions applicable in the Code, the employer shall pay wages not less than 50% of total remuneration. Wages include the basic pay, dearness allowance, and retaining allowance. The house rent allowance, conveyance, statutory bonus, overtime allowance, and commissions shall not be considered while wages are computed. The Code provides that a minimum 50% of Cost-to-Company shall comprise basic pay and dearness allowance.
- The code prohibits employers from paying wages less than the minimum wage. The Central or State Governments, as the case may be, are required to notify minimum wages based on (i) the time or number of pieces produced, (ii) skill of workers and (iii) work difficulty.
- The Central or States Governments will fix the number of working hours. In case of overtime, the employee is entitled to overtime compensation (at least twice the normal wages).
- The employer can fix the wage period as: daily, weekly, fortnightly or monthly. The payment will be made in coins, currency notes, through electronic medium, cheque or by a credit to the bank account.
- Advisory Boards will be constituted at Central and State levels. Central Advisory Board shall comprise members representing employers and employees, including independent persons and five State Government representatives. State Advisory Board shall have representative members of employers and employees, including an independent person. One-third of the total members of the Central and State Advisory Boards will be women.
- The Boards will advise the respective governments on various issues, including: (i) fixation of minimum wages and (ii) increasing employment opportunities for women.
- The Central Government will be empowered to fix the floor wage, considering workers’ living standards. It is to be noted that the floor wages will be different for different geographical locations.
- The minimum wages decided by the Central or State Governments must be higher than the floor wage. If the minimum wages fixed by the Central or State Governments are higher than the floor wage, they cannot reduce the minimum wages.
- The employer will be empowered to deduct wages on legitimate grounds including fines, absence from duty, accommodation provided by the employer or the advance payment made to the employee. However, such deductions cannot be more than 50% of the employee’s total wage.
- The employees whose wages do not exceed a specific monthly amount are entitled to an annual bonus of at least 8.35% of their wages or ` 100 whichever is higher. However, an employee cannot receive more than 20% of his annual wages as bonus.
- The Code prohibits discrimination based on gender in matters associated with wages and recruitment of employees for the same work or work of similar nature, i.e.,Work for which the skill, effort, experience, and responsibility required are the same.
- The Code specifies penalties for offences committed by an employer in cases where any provision of the Code is contravened or employees are paid less than the minimum wages. As per the Code, the maximum punishment for the said offences is three-month imprisonment along with a fine of ` 1 lakh.
3. Objective, Applicability and Highlights of Code on Social Security, 2020
The Code on Social Security, 2020 was introduced in Lok Sabha on 19 September 2020 and was passed on 22 September 2020. The Bill was passed in Rajya Sabha on 23 September 2020. It received Presidential assent on 28 September 2020.
The Code on Social Security aims to amend and consolidate the laws relating to social security to extend social security to all employees and workers either in the organized or unorganized or any other sectors. It integrates nine labour laws: The Employees’ Compensation Act, 1923, The Employees’ State Insurance Act, 1948, The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, The Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959, The Maternity Benefit Act, 1961, The Payment of Gratuity Act, 1972, The Cine Workers Welfare Fund Act, 1981, The Building and Other Construction Workers Welfare Cess Act, 1996 and the Unorganized Workers’ Social Security Act 2008.
The Code shall apply to any establishment by notification of the Central Government subject to the threshold specified.
- The code clearly defines the fixed-term employment, home-based worker, self-employed worker, platform worker and gig worker.
- A standard definition of ‘employee’ is provided under the Code which is applicable across all parts of the Code.
- The Code provides that it is not mandatory to obtain registration if the industry establishment is already registered under any other Central labour law.
- The Code mentions about the enforceability of social security organizations, their constitution and fund administration for different types of workers.
- The Social security funds for unorganised workers, gig workers and platform workers will be set up by the Central Government. The State Governments will also set up and administer separate social security funds for unorganised workers.
- The Advisory Board will comprise of five representatives of aggregators appointed by the Central Government, five representatives of gig workers and platform workers appointed by the Central Government, Director General of the ESIC and five State Governments representatives. The number of representatives of Central Government officials in the Board from 5 to 10 members and in the State Boards from 7 to 10 members for unorganised workers.
- A fixed limitation period of 5 years is fixed for the proceedings and
inquiries for the determination of the money dues of an employee.
- Aggregators have been introduced in the Code as a digital intermediary or a marketplace for a buyer or user of a service to connect with the seller or the service provider. The list of aggregators shall contribute 1%-2% of their annual turnover to the social security fund.
- Fixed-term employees shall receive the payment of gratuity on a prorata basis. The gratuity period has been reduced from 5 years to 3 years for working journalists.
- The Code specifies penalties for certain offences such as; maximum imprisonment for obstructing an inspector from performing his duty has been reduced from one year to six months. For unlawfully deducting the employer’s contribution from the employee’s wages has been changed from imprisonment of one year or a fine of ` 50,000 to only a fine of ` 50,000.
- The Central Government reserves a right to defer or reduce the employer’s or employee’s contributions (under PF and ESI) for up to three months in the case of a pandemic, endemic, or national disaster.
4. Objective, Applicability and Highlights of Industrial Relations Code, 2020
The Industrial Relations Code, 2020 was introduced in Lok Sabha on 19 September 2020 and was passed on 22 September 2020. The Bill was passed in Rajya Sabha on 23 September 2020. It received Presidential assent on 28 September 2020.
The Industrial Relation Code aims to simplify the compliance process and promotes ease of doing business in an establishment. It will merge three legislations; The Industrial Disputes Act, 1947, The Industrial Employment (Standing Orders) Act, 1946 and The Trade Unions Act, 1926.
The Code applies to establishments as per the formation of committees and unions:
- A Works Committee is required to be constituted by the employer having an industrial establishment where 100 or more workers are employed or have been employed on any day in the preceding 12 months.
- Industrial Establishments with 20 or more workers shall have one or more Grievance Redressal Committees to resolve disputes arising from individual grievances.
- Any trade union having seven or more members may register under the Code electronically or otherwise.
- The Standing Orders apply to every industrial establishment where 300 or more workers are employed or were employed on any day of the preceding 12 months.
- The code introduces definitions of both ‘employee’ and ‘fixed-term employment.’
- The term ‘workmen’ is replaced with ‘worker’ in the Code.
- Definition of the term ‘strike’ is now referred as ‘mass casual leave’ by more than 50% of workers on a given day.
- In case of a grievance, the workers will be required to approach the grievance redressal committee. An inquiry, along with its investigation, needs to be completed within 90 days. The time limitation starts from the date of the worker’s suspension.
- The standing orders only applied to a threshold above 100 or more workers as per the Industrial Establishment Standing Order Act, 1946. The threshold of standing order has now been increased from 100 to 300 workers.
- The Code proposes a ‘sole negotiating union’ in establishments with more than one trade union. Such sole negotiating union must comprise of 51% or more workers as members. Only a sole negotiating union shall be permitted to negotiate terms with the employer. If there’s no eligible sole negotiating union, a negotiating council will be formed, having at least 20% of the workers as members.
- Three is a provision for workers to secure employment after being laid off. A fund shall be initiated consisting of contributions from the employer and the Appropriate Government.
- The disputes related to the discharge, dismissal, retrenchment, or termination of the services of an individual worker will be an industrial dispute. The worker may apply to the Industrial Tribunal for adjudication of the dispute.
- The mechanism for resolving industrial disputes shall be constituted by the Central Government comprising a national industrial tribunal and one or more industrial tribunals.
- The Code provides that a worker cannot go on strikes and lockouts in breach of contract:
- without giving to the employer notice of strike/lockout, as hereinafter provided, within sixty days before striking; or
- within fourteen days of giving such notice; or
- before the expiry of the date of strike/lockout specified in any such notice; or
- during the pendency of any conciliation proceedings before a conciliation officer and seven days after the conclusion of such proceedings; or
- during the pendency of proceedings before a Tribunal or a National Industrial Tribunal and sixty days after the conclusion of such proceedings; or
- during the pendency of arbitration proceedings before an arbitrator and sixty days after the conclusion of such proceedings
- during any period in which a settlement or award is in operation, in respect of any of the matters covered by the settlement or award.
5. Objective, Applicability and Highlights of Occupational Safety, Health and Working Conditions Code, 2020
The Occupational Safety, Health and Working Conditions Code, 2020 was introduced in Lok Sabha on 19 September 2020 and was passed on 22 September 2020. The Bill was passed in Rajya Sabha on 23 September 2020. It received Presidential assent on 28 September 2020.
The code aims to consolidate and amend the laws regulating the occupational safety, health and working conditions of the persons employed in an establishment and for matters connected therewith or incidental thereto. The code subsumes 13 existing labour laws; The Occupational Safety, Health and Working Conditions Code, 2020 replaces 13 existing Laws:
(a) The Factories Act, 1948
(b) The Mines Act, 1952
(c) The Dock Workers (Safety, Health and Welfare) Act, 1986
(d) The Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996
(e) The Plantations Labour Act, 1951
(f) The Contract Labour (Regulation and Abolition) Act, 1970
(g) The Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979
(h) The Working Journalist and other News Paper Employees (Conditions of Service) and Miscellaneous Provisions Act, 1955
(i) The Working Journalists (Fixation of rates of wages) Act, 1958
(j) The Motor Transport Workers Act, 1961
(k) The Sales Promotion Employees (Condition of Service) Act, 1976
(l) The Beedi and Cigar Workers (Conditions of Employment) Act, 1966
(m) The Cine-Workers and Cinema Theatre Workers Act, 1981.
The Code on Occupational Safety, Health and Working Conditions seeks to regulate workers’ health and safety conditions in establishments with ten or more workers and all mines and docks. It will apply to
- Establishments employing at least ten workers, and irrespective of the number of workers in all mines and docks.
- Workers and all other persons engaged in a managerial, administrative, or supervisory role (with a monthly wage of at least ` 15,000).
- Further, specific provisions of the Code, such as health and working conditions, apply to all employees, excluding apprentices.
- Contract labour engaged through a contractor in the offices of the Central and State Governments (where the respective Government is the principal employer).
- The code provides special provisions specify leave requirements and working hours for workers employed in transport, journalism, and sales.
- There are provisions for the leave encashment at the time of discharge/dismissal, death or superannuation during employment. Most notably, the Code provides for carry-forward of leaves in case a worker does not avail the whole of the leave allowed to him in any calendar year. However, the total number of leave days that may be carried forward cannot exceed 30 days, and any leave with wages that have been refused can be carried forward without limit.
- Provisions are included regarding the employment of women between 7 pm to 6 am with conditions related to their consent and safety, working hours, and holidays. If the employment of women is dangerous for their health and safety, the employer will provide adequate safeguards to them before their employment.
- All the establishments must provide washrooms, bathing places and locker rooms for male, female and transgender employees.
- Provision has been introduced for the employer to take consent from the employee for overtime work. It will also apply to a small establishment with up to 10 workers. Further, the workers shall receive twice the wages for their overtime work.
- Employers are required to organize annual health check-ups for the employee at their own cost and expense.
- The employer shall mandatorily issue an appointment letter to the employee to promote formalization at the workplace.
- The Code prohibits contract labour in core activities except where:
i. The normal functioning of the establishment is such that the activity is ordinarily done through a contractor,
ii. The activities are such that they do not require full-time workers for a significant portion of the day,
iii. There is a sudden increase in the volume of work in the core activity, which needs to be completed in a specified time.
- Any person who goes to another state and obtains employment there will be regarded as an inter-state migrant worker. A person drawing wages not exceeding the amount of rupees eighteen thousand per month or such higher amount as may be notified by the Central Government from time to time will be considered inter-state migrants. The inter-state migrant workers are entitled to certain benefits such as:
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,
iii. Insurance and provident fund benefits are available to other workers in the same establishment.
Although, the labour codes have received the assent of the President, the Central Government has not yet announced an ‘Effective date’ for their implementation. Since, legislation concerning ‘welfare of labour including conditions of work, provident funds, employers’ liability, workmen’s compensation, invalidity and old-age pensions and maternity benefits is in the concurrent list, rules are required to be framed by the Central Government as well as by the State Governments. As a step towards implementation of the four Labour Codes out of the 30 States and 8 Union Territories have pre-published draft Rules for the Codes.
- The Code on Wages, 2020 primarily aims to regulate the payment of wage and bonus in all employments where any industry, trade, business, or manufacture is carried out.
- It subsumed four labour legislations which used to regulate the payment of wages.
- The Code on Wages, 2020 consolidates nine labour laws relating to social security of workers.
- The code aims to extend social security to all employees and workers either in the organized or unorganized or any other sectors.
- The Industrial Relations Code, 2020 simplifies the compliance process and promotes ease of doing business in an establishment.
- This code integrates three existing legislations dealing and promoting cordial industrial relations.
- The Occupational Safety, Health and Working Conditions Code, 2020 consolidates 13 existing labour laws.
- The code amends the laws regulating the occupational safety, health and working conditions of the persons employed in an establishment and for matters connected therewith or incidental thereto.
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