Home / Economy / Less take home salary, likely 4-day work week: India's new labour laws may be implemented next fiscal year

The four labour codes on wages, social security, industrial relations and occupation safety, health and working conditions are likely to be implemented by the next financial year, news agency PTI reported citing a senior government official.

The labour codes were to be implemented from April 2021 this year, however, as labour is a concurrent subject, both the Centre and states have to notify rules under these four codes to make them the laws of the land. Many states are in the process of finalising draft rules in this regard.

The four codes, if implemented, will drastically alter the way industrial houses treat their employees and also impact the working hours, take home salary and other rights of employees. For instance, once the wages code comes into force, there will be significant changes in the way basic pay and provident fund of employees are calculated.

A key change in the definition of “wage" would impact take-home pay, but increase retirement savings—something that a section employers are opposed to as it may increase their employee costs.

Till now, employers have been splitting wages into numerous allowances to keep basic wages low to reduce provident fund and income tax outgo. The new wages code provides for provident fund contribution as a prescribed proportion of 50% of gross pay.

"The four labour codes are likely to be implemented in the next financial year of 2022-23 as a large number of states have finalised draft rules on these.

The Centre has completed the process of finalising the draft rules on these codes in February 2021. But since labour is a concurrent subject, the Centre wants the states to implement these as well in one go," the official said.

The four labour codes are expected to introduce sweeping changes that would affect both businesses and workers. While employers would have greater flexibility in rolling out short-term work contracts and while industrial strikes may become harder, a new national wage floor could benefit workers, besides informal and gig workers will have a new social security net.

The new industrial relation code would also improve ease of doing business by allowing firms with up to 300 workers to go ahead for lay-offs, retrenchment and closure without government permission.

At present all firms with up to 100 employees are exempted from government permission for lay-off, retrenchment and closure.

After the implementation of new codes, there is also a possibility that employees in India may be able to enjoy a four-day work week, as opposed to the current five-day workweek. However, employees still need to meet 48-hour weekly work requirement, which would be 12 working hours a day in this scenario.

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