Four labour codes unlikely to be implemented in FY22

20 Sep 2021 CW Team

The four labour codes may not be implemented this fiscal year due to slow progress on the drafting of rules by the states.

The four labour codes implementation assumes importance because once these came into force, there would be a reduction in take-home pay of employees, and firms have to bear higher provident fund liability.

As per the source, under the four labour codes, the Ministry of Labour is ready with the rules. But the states have been late in drafting and finalising those under new labour codes. Besides, due to political reasons, the government is not interested in implementing the four codes.

Parliament passed the four codes. But for implementation of these codes, rules under these must be published by central and state governments for implementing those in particular jurisdictions.

The four labour codes implementation may likely be delayed beyond this financial year, said the source.

There will be key changes in the way basic pay and provident fund of employees are being determined, once the wages code is implemented.

From April 1, 2021, the ministry had envisioned the implementation of the four labour codes on industrial relations, social security, wages, occupational health safety, and working conditions. The four labour codes will account for 44 central labours laws.

Under the labour codes, the ministry had even finalised the rules. But these labour codes could not come into force because many states were not in a position to draft rules under these codes in their domains.

Allowances are capped at 50% under the new wages code. This indicates that half of the employee's gross pay would be basic wages.

After the new code implementation, the take-home pay of employees would decrease while provident fund (PF) liability of employers would rise in several cases, and employers would have to restructure the salaries of their employees according to the new code on wages.

Image Source

The four labour codes may not be implemented this fiscal year due to slow progress on the drafting of rules by the states. The four labour codes implementation assumes importance because once these came into force, there would be a reduction in take-home pay of employees, and firms have to bear higher provident fund liability. As per the source, under the four labour codes, the Ministry of Labour is ready with the rules. But the states have been late in drafting and finalising those under new labour codes. Besides, due to political reasons, the government is not interested in implementing the four codes. Parliament passed the four codes. But for implementation of these codes, rules under these must be published by central and state governments for implementing those in particular jurisdictions. The four labour codes implementation may likely be delayed beyond this financial year, said the source. There will be key changes in the way basic pay and provident fund of employees are being determined, once the wages code is implemented. From April 1, 2021, the ministry had envisioned the implementation of the four labour codes on industrial relations, social security, wages, occupational health safety, and working conditions. The four labour codes will account for 44 central labours laws. Under the labour codes, the ministry had even finalised the rules. But these labour codes could not come into force because many states were not in a position to draft rules under these codes in their domains. Allowances are capped at 50% under the new wages code. This indicates that half of the employee's gross pay would be basic wages. After the new code implementation, the take-home pay of employees would decrease while provident fund (PF) liability of employers would rise in several cases, and employers would have to restructure the salaries of their employees according to the new code on wages. Image Source

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