The Centre is keen to go ahead with the implementation of the four labour laws in a couple of months. The new codes will result in decline of take-home pay of employees and higher provident fund liability of companies. The Labour Ministry has finalized these laws under 4 codes. These codes will rationalize 44 central labour laws.
In April 2021, the ministry intended to implement the four codes on industrial relations, wages, social security and occupational health safety & working conditions. However, it was not possible to implement these as many states were not in a position to notify rules under these codes in their jurisdiction.
Labour comes under the concurrent list in the Indian Constitution which means that both the Centre and the States have to notify rules under these four codes to make them the laws in their respective jurisdictions.
A source told PTI that, “some states had already circulated the draft rules. States like Uttar Pradesh, Bihar, Madhya Pradesh, Haryana, Odisha, Punjab, Gujarat, Karnataka and Uttarakhand have already circulated the draft rules”.
As per the new wages code, half of the gross pay of an employee will be basic wages. Earlier, employers used to split wages into numerous allowances keeping the basic wages low. To reduce provident fund and income tax outgo. According to the new wages code, Provident Fund contribution will become 50% of the gross pay of an employee.
After the implementation of these laws, the take-home pay of the employees will reduce, increasing the PF liability of the employers.
Employers would now have to restructure the salaries of their employees as per the new code on wages, once the laws are implemented.
