New labour codes set for rollout as 25 states finalise draft rules. Details

With 25 of India’s 28 states and eight Union Territories having finalised draft rules under the new labour code laws, the long-anticipated implementation of the four labour codes passed by Parliament in 2019-2020 appears to be finally approaching, according to a report by The Financial Express.

The remaining three states, including West Bengal, which had previously raised concerns about the codes, have now agreed to draft the necessary subordinate legislation to enforce them, the report noted.

The four labour codes aim to strike a balance between easing labour market restrictions and enhancing workers’ rights and welfare. 

To streamline business operations and encourage trade and investment, 44 labour-related laws were consolidated into four comprehensive codes. These reforms aim to simplify compliance requirements while also decriminalising several minor offenses. The new codes place a particular focus on skill development and enhancing mechanisms for dispute resolution.

 

Although the government has not yet set a date for notifying the labour codes, it is expected to happen by next year. In addition to West Bengal, Meghalaya and Nagaland have yet to draft their rules.

What are the new labour codes?

The four codes include the Code on Social Security 2020, the Occupational Safety, Health and Working Conditions Code 2020, the Industrial Relations Code 2020, and the Code on Wages 2019.

Ensuring minimum wage: The new codes ensure all workers have a statutory right to minimum wages and timely payment, supporting inclusive development and sustainable growth. Additionally, a uniform definition of ‘wages’ across all four codes has been introduced to prevent multiple interpretations and reduce litigation.

Provisions for health-checkup and formal contracts: The codes also include provisions for annual health check-ups and medical facilities, which are expected to improve labour productivity and longevity. For the first time, a statutory requirement for employers to issue appointment letters to all employees has been introduced, formalising contracts and improving job security. Workers will now be able to claim statutory benefits such as minimum wages and social security.

Social security for gig workers: Other provisions include the creation of a Re-skilling Fund to support skill development and social security schemes for gig and platform workers, with contributions from both aggregators and government sources. The government may also extend benefits to unorganised, gig, and platform workers through the Employees’ State Insurance Corporation or the Employees’ Provident Fund Organization.

Gratuity and other benefits: Workers on Fixed Term Employment will now receive the same benefits as permanent employees and be eligible for gratuity after one year of service. Furthermore, workers will be entitled to annual leave with wages after 180 days of work, rather than the previous 240-day requirement, and will have the option to encash leave at the end of the calendar year.

The applicability of the Employees' Provident Fund has also been expanded to cover all industries, not just those previously listed.

Workings of the new labour codes

Labour laws fall under the Concurrent List of the Constitution, meaning both the Centre and states have the authority to create rules. However, in cases of conflict between state and central laws, central legislation typically prevails unless the state's law has obtained Presidential approval.

State governments are tasked with drafting rules to address areas not fully covered by the labour codes and where the power to elaborate has been granted to the appropriate government. This includes rules on issues such as working hours, overtime provisions, and trade union verification processes.