The four labour codes, which the government has been trying to implement, have been in talk for quite some time now. The government has been deliberating on how they should come into effect, and what the rules under the new labour codes will be.
The Centre Government is considering a high limit on allowances, around 70% to 80% of an employee’s wages, during the implementation of the labour code on wages during the first year.
The allowances, as prescribe under the new labour rules, could be bought down to 50% over a period of 3 years.
Another major change the government is mulling is restoring the cap on the number of employees in an organisation to 100 from the proposed 300 too seek its permission ahead of retrenchment or closing down operations.
This is going to fall under the international relations code.
Under the wages code, which has already been pass at the Parliament, payment by the mode of salaries, allowances or otherwise and include basic pay, dearness allowance and retaining allowance, if any.
So, this excludes allowances such as house rent allowance and overtime allowance.
The industry, to not raise its employee costs, has kept the allowances at 50% of the wages.
Official Said :
“The government is discussing changes that can be made to the code in view of the concerns express,”.
This change would mean that the take home salary of the employee will decrease, but their provident fund contributions and gratuity will be hike.
The PF contributions by the employer will also increase in this case.
This is because these laws are going to change how the provident fund is calculate.
This will reportedly prescribe that allowances cannot be more than 50% of the total salary, meaning the basic pay has to be 50% or more of total pay.
Employers keep the non-allowance part of the salary below 50%, resulting in high in-hand pay for employees.
When the changes are brought in, employers are require to increase the basic pay of employees.
This will result in reduce take-home salaries because of rise in gratuity payments and employees’ contribution to the provident fund.
The jobs industry is afraid that these norms would affect them since the pandemic has shatter the economy in the country, which is still recovering.
The central government has notified four labour codes, the Code on Wages, 2019, on August 8, 2019, and the Industrial Relations Code, 2020, the Code on Social Security, 2020, and the Occupational Safety, Health and Working Conditions Code, 2020 on September 29, 2020.
