Modi Govt Presents New Wage Code; July 1 Dateline Set For Enactment

| Updated: April 23, 2022 9:23 am

In what is being billed as the Modi government’s effort to galvanise optimal output from India’s workforce across industries, a new wage code has finally taken shape. Once implemented, it will impact working hours, salary restructuring-PF contribution and encashing of earned leaves.

The four labour codes on wages, social security, industrial relations and occupation safety, health and working conditions are likely to be implemented from July 1.

The government’s notification on Code on Wages 2019 may reduce the take-home pay while components like PF and Gratuity might rise. This is based on the grounds that the new wage code mentions provision entailing that the employee’s basic salary will be at least 50 percent of his/her net monthly CTC. Hence, if this provision comes into effect, it will mean that employees will not be able to get more than 50 percent of his/her net monthly salary in form of allowance. This also means that there will be a consequent rise in gratuity and PF contribution of the employee. Hence, while the take home pay of the employees may be reduced, the Gratuity and PF component may rise.

As per reports at least 23 states have pre-published draft rules on these laws, even as the Centre completed the process of finalising the draft rules on these codes in February 2021. Since labour is a concurrent subject, the Centre wants the states to implement these as well in one go.

12 hours work-week

Experts also believe that the new draft will impact the working hours of employees with some media reports saying that employees may be allowed a four-day workweek but they will have to work for 12 hours on those four days. The labour ministry has apparently made it clear that 48-hour weekly work requirement is a must.

Big changes in Earned Leave policy after new wage code implementation

The biggest change could be seen in cases of Earned Leave. Government departments now allow 30 holidays in a year, Defence employees get 60 holidays in a year. Employees can cash up to 300 holidays on carry forward. However, the Labour union is demanding an increase in the number of holidays to 450 in new code. At present there are 240 to 300 holidays in different departments. Employees can take these holidays in cash only after 20 years of service.

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