Working Hours to Salary: What Will Change Under New Labour Code From 1 July?

The Central Government has introduced four new labour codes to amalgamate and refine 29 existing laws.

Image used for representational purposes.

(Photo: Altered by Arnica Kala / The Quint)

From working hours to in-hand salary, paid leaves and several aspects of employment will change from 1 July – provided the codes are notified by the Centre.

The four broad codes on wages, industrial relations, social security and occupational safety, health and working conditions (OSH) have already been notified after getting the President's assent earlier in 2021. But for implementing these four codes, the rules need to be notified.

What are the changes that may come to effect from 1 July? Here's all you need to know.

Whom do the new rules apply to?

According to the Centre's booklet on the new codes, the laws will apply to both organised and unorganised workers. Those engaged in the unorganised sector will be brought under the legislation by providing them with a Unique Account Number (UAN).

“Employees’ Provident Fund (EPF), Employees’ Pension Scheme (EPS) and coverage of all types of medical benefits under Employees’ Insurance will be available to all workers.”

The Government's booklet on New Labour Codes

All workers will now be entitled to the Employees’ State Insurance Corporation (ESIC) cover.

How will this affect my working hours?

The rules have put a limit to daily and monthly working hours of 12 hours and 48 hours, respectively. The existing daily limit is 9 hours.

This means a company can make its employees work for four, five or six days, and accordingly divide the number of hours across the week. For example, a 12-hour working days across the week will lead to a four-day work week, reaching the 48-hour limit.

How the company divides the hours is completely its own decision.

This will not affect your paid leaves as they will increase to three leaves per week if a four-day work week is being followed.

How do the new rules affect leaves?

The new codes bring the eligibility criteria for a new hire to take a leave of absence down to 180 days from the previous 240 days. The Factories Act has currently provides annual/earned leave of 12 working days for all the workers who have worked at least 240 days in a year. This has now been reduced to 180.

Employees can also encash their unused leaves annually – which could earlier be done only after the separation from the company.

In government jobs, an employee is entitled to thirty leaves per year and sixty leaves per year in the military.

How will these rules impact my salary?

The new rules have fixed the base salary of workers to be at least 50 percent of their gross salary. This will lead to an increase in the Provident Fund contributions of both employees and employers – but result in reduction in the take-home/in-hand salary of workers.

The gratuity and corpus paid to employees after retirement is likely to increase due to this.

What are the changes in the final settlement of wages?

Companies will have to make the final settlement of pending dues to employees within two days of their separation from the company for reasons of resignation, retrenchment, and termination under the Code on Wages.

What are special provisions for women?

The code on OSHC, 2020 provides female workers with the provision to be employed at night subject to their consent and safety in any kind of establishment.

Under the code, the employer has the responsibility to make safety arrangements for female workers working at night and ensuring safe working conditions.

Is only the Centre responsible for labour code?

Labour laws fall under the concurrent list which means that both the Centre and state governments have authority over the subject. Due to this, the states also must create their framework of rules under the codes.

(With inputs from PTI)