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Published on: April 10, 2021, 7:22 p.m.
Laboured response
  • The tug-of-war continues

By Rakesh Joshi. Executive Editor, Business India

The four new labour codes on wages, social security, industrial relations and occupational safety have been delayed and did not become effective on 1 April 2021, as was earlier planned by the government. The four codes were to replace a clutch of 29 labour laws. 

Lack of readiness on the part of states and delay on the part of the Centre to put in place adequate technology needed for implementing the new laws are being cited as reasons for the delay. A lot of activities, including licensing and return filing, will happen digitally under the codes.

The government will now notify the new dates to usher in the sweeping changes. The deferment would come as a relief for some companies, which would have to spend higher on mandatory employee benefits when the new rules kick in. Under the new wage code, 50 per cent of an employee’s gross pay would have to move under the basic pay umbrella, while India Inc’s expenditure on provident fund and gratuity will also likely increase. While this would mean higher expenditure on the payroll for businesses, it would also mean a reduction in the take-home pay for many employees, besides other changes to working conditions. 

Meanwhile, the Code on Social Security, 2020 will, for the first time, mandate companies employing gig or on-demand workers, to allocate 1-2 per cent of their annual turnover or 5 per cent of the wages paid to gig workers (whichever is lower) to a social security fund for gig workers. 

Defining turnover

The code mentions that besides the Central government that will set up a social security fund, state governments will also set up and administer separate social security funds for unorganised workers. It also makes provisions for the registration of all three categories of workers – unorganised workers, gig workers and platform workers. Beneficiaries of the scheme will be eligible for medical, maternity, disability and other benefits.

In January, companies such as Amazon, Flipkart, Ola, Uber and Urban Company, which rely heavily on gig workers for their daily operations, had asked the Ministry of Labour to clarify the definition of ‘turnover’, which is to be used to calculate the company contribution to a proposed social security fund for gig or platform workers.

The companies that would fall under this scheme are of the view that ‘turnover’ should only account for revenue from the unit that hires gig workers and not the company’s overall turnover.

For instance, Flipkart has multiple divisions, one of which hires gig workers. So ‘turnover’ should mean the revenue generated by the unit that hires these workers, and not the total revenue of the company. 

According to officials, the rollout of the new labour codes has got pushed back due to a delay by state governments in framing their own sets of rules. For now, the government will target implementing the new labour laws from May. However, the new target also looks difficult to meet as states will have to follow due process before finalising their rules.

Till date, the governments of Uttar Pradesh, Madhya Pradesh, Karnataka, Bihar and Jammu & Kashmir have published some of the draft rules for public consultation. While J&K started publishing its draft rules in January, other states did this towards the end of February and in March.

To press the states to issue their labour rules expeditiously, the labour and employment ministry recently held a review meeting with the state governments. “We’ll wait for the Central government’s notification (for implementing the codes). It was expected that it will implement it from April 1, but most states couldn’t finalise the rules. So, the government is extending time for implementation,” says Suresh Chandra, principal secretary (labour) for Uttar Pradesh. According to him, the state has made public draft rules under all codes, except for the one on occupational safety health and working conditions. “We need at least two months to finalise all the rules.”

Niraj Kumar Pawan, Labour Secretary, Rajasthan, informs that his department had sent the draft rules for the approval of the law department last month and they will be taken up by the state cabinet before being made public for consultation.

Vipul Mittra, additional chief secretary (labour & employment), Gujarat, feels the state may publish some of the draft rules under the codes by the end of this month. However, a senior Gujarat government official said on the condition of anonymity that the draft rules for occupational safety health and working conditions, and social security codes will be finalised only by next month.

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