PMO To Review New Labour Rules; Decide Implementation Timeline

Key Concerns Remain

In its presentation, the Labour Ministry will highlight the biggest concern expressed by employers — regarding a change in the definition of wages which will impact wage structures and costs.

According to the new law, wages will have to be structured in a manner so that all the monetary allowances — house rent, leave travel, overtime, conveyance, among others — are capped at 50% of the wage of an employee, which will include the basic pay, dearness allowance and retention pay. Higher basic pay would mean increased costs towards provident fund and gratuity contributions which are calculated on the former.

Earlier this month, lobby group, the Confederation of Indian Industry, wrote to Labour and Employment Minister Santosh Kumar Gangwar asking the government to introduce a ‘grandfathering’ provision for computing gratuity or to postpone this provision by one year. The codes enable the central government to implement the new labour laws in phases, or to implement certain provisions from a later date. The letter was written by CII’s Chairman of National Committee on Industrial Relations MS Unnikrishnan.

Given that industry is still recovering from the impact of the Covid crisis, the additional impact will only add to their financial woes,” said the letter dated Feb. 6, a copy of which has been reviewed by BloombergQuint. The letter suggested that the gratuity due till implementation of the new codes should be based on the existing definition of wages and thereafter, the “calculations for gratuity should be done on a prospective basis.”

After initially contemplating such a move, the Labour Ministry dropped the idea. Labour and Employment Secretary Apurva Chandra told BloombergQuint in an interview last month that “definition of wages is a part of the codes and that cannot be addressed through the rules.”

A majority of concerns of the trade unions are, however, related to the codes itself, rather than the rules.

In its presentation, the Labour Ministry will also mention that the unions have objected to introduction of fixed-term employment without any cap on the renewal of such contracts and a higher threshold for allowing firms to retrench or layoff without seeking government consent.

Objections have also been raised on the matter of exempting larger companies from framing standing orders. A standing order is a legally binding collective employment contract signed between companies and workers, which has key work-related terms and conditions and is meant to prevent arbitrary dismissal of employees. Under the new law, companies with less than 300 workers do not have to frame a standing order. Earlier this threshold was set at 100 workers.

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