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22 Oct 2020

Consolidation Of Labour Laws – Balancing Ease of Business with Employee Right

Over the last few years, there have been talks by the government to reform the existing labour laws, which are mostly archaic, to make them compatible with current issues and needs of the labour market. In the Union Budget 2019, the Government has pushed ahead with such reforms and proposed to streamline over 44 central laws and over 100 State laws pertaining to labour into 4 major Labour Codes, with the objective of increasing the ‘ease of doing business’ and ‘Make in India’ initiatives. The Government hopes that by standardizing definitions, registrations, and filings, there would be less conflict and fewer reasons for disputes. The 4 Labour Codes passed by the Government in 2019 and more recently in September 2020 are as follows:

Code of Wages, 2019
Passed in Lok Sabha30th July, 2019
Passed in Rajya Sabha2nd August, 2019
Presidential Assent8th August, 2019
Existing Laws Subsumed·Payment of Wages Act, 1936
·Minimum Wages Act, 1948
·Payment of Bonus Act, 1965
·Equal Remuneration Act, 1976
Industrial Relations Code, 2020
Passed in Lok Sabha22nd September, 2020
Passed in Rajya Sabha23rd September, 2020
Presidential Assent28th September, 2020
Existing Laws Subsumed·Trade Unions Act, 1926
·Industrial Employment (Standing Orders) Act, 1946
·Industrial Disputes Act, 1947
Code on Social Security, 2020
Passed in Lok Sabha22nd September, 2020
Passed in Rajya Sabha23rd September, 2020
Presidential Assent28th September, 2020
Existing Laws Subsumed·The Employees Provident Fund and Miscellaneous Provisions Act, 1952
·The Employees State Insurance Act, 1948
·Industrial Disputes Act, 1947
·The Maternity Benefit Act, 1961
·The Payment of Gratuity Act, 1972
·The Building and other Construction Workers Cess Act
·The Employees Exchange (Compulsory Notification of Vacancies) Act, 1959
·The Cine Workers Welfare Fund Act, 1981
·The Unorganized Workers’ Social Security Act, 2008
·Employees Compensation Act, 1923
Occupational Safety, Health and Working Conditions Code, 2020
Passed in Lok Sabha22nd September, 2020
Passed in Rajya Sabha23rd September, 2020
Presidential Assent28th September, 2020
Existing Laws Subsumed·The Factories Act, 1948
·The Contract Labour (Regulation and Abolition) Act, 1970
·The Mines Act, 1952
·The Dock Workers (Safety, Health and Welfare) Act, 1986
·The Building & Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1979
·The Plantations Labour Act, 1951
·The Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979
·The Working Journalist and other Newspaper Employees (Conditions of Service and Miscellaneous Provisions) Act, 1955
·The Working Journalist (Fixation of rates of wages) Act, 1961
·The Cine Workers and Cinema Theatre Workers Act, 1961
·The Motor Transport Workers Act, 1961
·The Sales Promotion Employees (Conditions of Service) Act, 1976
·The Beedi and Cigar Workers (Conditions of Employment) Act, 1966

Brief Overview of the Labour Codes

All the Labour Codes have been aimed at broadening the scope of coverage, rights and protections, reducing multiplicity in definitions, authorities and compliances, and embracing more digitization in registrations/compliances. However, at the same time, the Labour Codes are largely a consolidation of existing laws rather than a significant overhaul of them, with there not being substantial changes in the position of law itself.

Code of Wages, 2019 – The Code of Wages largely covers the various aspects of wages payable to employees. The most significant aspect of the Code of Wages is a uniform definition of wages which has also been adopted across the other Labour Codes. The Code of Wages is applicable to all establishments regardless of industry, another move away from the existing position where it was limited to certain types of employment or classes of employees.

Industrial Relations Code, 2020 – The Industrial Relations Code is the Code that governs employer-employee relationships including collective bargaining, labour disputes, separation from employment and employment terms. This Code in particular has received a lot of flak from the workmen and trade unions in India, their belief being that they have been stripped of their rights and that the Code heavily favours the employer. These negative views are on account of the threshold for applicability of certified standing orders and the requirement for permission to fire employees (in certain industries) being increased greatly as well as their right to go on strike without notice being curtailed. However, the majority of rights and protections have actually been retained for employees and in fact, the coverage has broadened on account of certain def\inition changes. It also encourages more industries to expand operations since the law is not as onerous in some respects as before.

Code on Social Security, 2020 – Code on Social Security is intended to create a comprehensive social security system to provide retirement, health, old-age, disability, unemployment and maternity benefits to a vast majority of the population. Provident fund coverage has expanded to all establishments meeting the employee threshold. Unorganized sector, gig and platform workers have been brought in as beneficiaries under the schemes and the concept of aggregators has been included for funding of some benefit schemes. This Code has certainly been beneficial to a number of classes of employees but may prove to be a greater financial burden on employers.

Occupational Safety, Health and Working Conditions Code, 2020 – This law has been codified in a single regulatory framework, the various laws applicable to factories, mines, plantations, contract labour and construction establishments. There has been a huge simplification of the regulatory framework, with the commonality of definitions, maintenance of registers and records, and health and safety measures. The threshold aspects have also changed in most cases, some increasing the threshold thus excluding more establishments from compliance and reducing in some cases offering welfare measures to more people.

Impact of the Labour Codes

As stated earlier, the laws in itself have not truly been significantly reformed by the Labour Codes and anyone reading the same will likely find the content quite familiar to the present situation. While many workmen and trade unions feel that the Labour Codes have curtailed their rights, it may be seen as the law finally catching up with modern times and encouraging more cooperation between parties as opposed to one-sided legal force, especially in terms of work responsibilities. The Labour Codes still offer a great deal of protection to employees and the benefits largely tilt in the employees’ favour. From a business standpoint, with the reduction in multiplicity of definitions and duplicate compliance requirements, as well as more freedom for digitization, employers will find it easier to set up or even expand their business without necessarily worrying that the labour law implications would be a huge hindrance.

Please watch out for this space as this is the first in the series of comments on the labour law amendments to be followed in further blogs in detail on each of the new codes.


Photo by Your Photo Trips from Pexels

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