India is likely to implement four new labour codes on wages, social security, industrial relations, and occupational safety by the next fiscal year beginning 2022.

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[Burning Issue] New Labour Laws

New Labour Codes

The four codes likely to be implemented in FY23 are:

1. Code on Wages
2. Industrial Relations Code
3. Social Security Code, and
4. Occupational Safety, Health and Working Conditions Code

Objectives of the Labour Code

• The new labor codes are aimed at facilitating ease of doing business in the country and seek to replace 29 cumbersome laws.
• The objective is to encompass over 500 million organized and unorganized sector workers—90% of the workforce which has been outside labour laws.
• The idea is to ensure that they receive wage security, social security and health security, gender equality in terms of remuneration, a minimum floor wage, make the lives of inter-state migrant workers easier.

What is the current status of the codes?

• The central government has completed the process of finalizing the draft rules, state governments are in the process of drafting the same.
• With labor being a concurrent subject, states are in the process of pre-publishing draft rules for these reforms.

How many labour laws do Indian states have?

• The simplification of 29 labour laws into the four labour codes is expected be a watershed moment for labour reforms.
• India currently has a web of multiple labour legislations, over 40 central laws and 100 state laws involving labour.
• The Second National Commission on Labour (2002) recommended simplification to bring about transparency and uniformity.

What are the major goals in these codes?

• Social security benefits: With organized sector workers being approximately 10% of the total workforce, the new codes may ensure that social security benefits are for all.
• Take-home salary: As per the proposed labour codes, total allowances such as house rent, leave, travel etc. are to be capped at 50% of the salary, while basic pay should account for the remaining 50%.
• Four days work: There could also be a permissible four-day work week of 12 hours per day.

How will it affect ease of doing business?

• Labour productivity: It is likely to improve with both employees and employers developing a sense of being partners in wealth creation.
• Labour reform: A transparent environment in terms of workers’ compensation, clear definition of employee rights and employer duties.
• Compliance un-burdening: Simplified labour codes making compliance easier are likely to attract investments.
• Formalization of the economy: With more workers in the organized sector, leakage in terms of direct as well as indirect taxes may be plugged.

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