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Update on labour reforms

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Dear all,

As you may be aware, as part of the labour reforms, the Central Government on 19.09.2020, introduced the remaining three labour codes viz. Industrial Relations (IR) Code Bill, 2020; Code on Social Security Bill, 2020 and Occupational Safety, Health and Working Conditions Code Bill, 2020 in the parliament. The code received approval from both houses in the monsoon session which concluded earlier this week. The codes will now be required to get the President assent and published in the Gazette before coming into effect.

The passage of these bills are in line with the Government objective to simplify and rationalize labour laws in line with the changing work environment and to provide an effective and transparent system to meet the requirement of workers and industries.

Once notified, these codes will subsume twenty-four central legislations related to social security, industrial relations and health and safety of workers such as The Trade Union Act, 1926, The Industrial Disputes Act, 1947, The Employees’ State Insurance Act, 1948, The Employees Provident Fund and Miscellaneous Provisions Act, 1952, The Maternity Benefit Act, 1961, The Payment of Gratuity Act, 1972, The Contract Labour (Regulation and Abolition) Act, 1970 etc.

The Government had earlier published all three codes for public consultation; however, significant changes have been made in the final version that received approval in Parliament. We are now examining the fine prints to assess the impact from the tech industry perspective and shall keep you updated. Given below is a brief summary of key provisions and developments that we noted so far in each of these codes.

  1. Code on Social Security
  • Gig and Platform workers: The Government has laid special emphasis on ensuring the social security benefits are available to both organized and unorganized sector workers including gig and platform workers. Suitable provisions have been made in the code for this purpose. 
  • Aggregator: In line with the provisions of the earlier draft, the Code also contains the definition of aggregator which is defined as ‘digital intermediary or a marketplace for a buyer or user of a service to connect with the seller or the service provider’. Provisions related to the role of Aggregator in framing social security scheme and funding have also been incorporated in the code. 
  • Wages: The definition of Wages has been made uniform across all labour codes now. However, given the enhanced scope, it is likely to increase the employer’s contribution towards statutory contributions. 
  • Gratuity:  The eligibility period for gratuity has remained unchanged. Earlier the standing committee on labour in its recommendation has suggested bringing down the eligibility period to one year. 
  • Employee: The definition of ‘employee’ also includes a worker hired through a contractor.

 Code on Industrial Relations

  • Industry definition:  The definition of the term ‘industry’ under the Code has been broadened which could also include commercial establishment. This is likely to make the provision of standing order applicable to the commercial establishments. The code also has an enabling provision for exempting establishments from the applicability of standing order by the appropriate Government.
  • Fixed Term Employment: The code enables organizations to hire workers on a fixed term contract. In addition, it also provides for same social security benefits as available to the regular employees on a pro rata basis. This provision was earlier available only to traditional sector such as manufacturing.
  • Worker definition: The Code states that employees employed in supervisory capacity earning up to INR 18000 would be treated as a ‘worker’ and for those in non-supervisory capacity, no wage limit is specified. 
  • Worker re-skilling fund: Provision have been made for setting up a re-skilling fund for the workers who is retrenched from an industrial establishment. Employers will be required to contribute fifteen days of wages prior to retrenchment towards this fund. 
  1. Occupational Safety, Health and Working Conditions Code, 2020 
  • Registration requirement: The code mandated establishment with 10 or more workers to register itself within 60 days from the date of applicability of the code. However, entities that are already registered under any central law need will not be required to seek a separate registration under the code. 
  • Responsibility of payment of wages: The code makes the principal employer liable for making the payment to the worker in case the contractor fails to pay the workers, however, it enables the principal employer to recover the amount from the contractor either by deduction from any amount payable to the contractor under any contract or as a debt payable by the contractor.
  • Contractor labour: The definition of contract labour has also been changed and do not include workers who are regularly employed by the contractor and gets periodic increments and have social security coverage.

Click on below links to view the codes 

  1. The Industrial Relations Code 2020
  2. The Code on Social Security 2020
  3. The Occupational Safety, Health and Working Conditions Code 2020

Given the significance, we will also be organising detailed awareness webinars on these codes to discuss the key provisions and their impact on the industry and will keep you posted.

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