Proposed new labour codes in India – The Legal Industry Reviews

This article was contributed as a column in Legal Industry Reviews’ India Edition.

By Atul Gupta (Partner)

The Indian labour and employment law framework has traditionally been perceived as rigid, archaic, confusing and cumbersome. Over recent years, there have been efforts to simplify, rationalize and consolidate Indian labour laws. 29 existing Central legislations are proposed to be reduced to four Codes, namely, the Code on Wages, 2019, the Code on Social Security, 2020, the Occupational Safety, Health and Working Conditions Code, 2020, and the Industrial Relations Code, 2020. These Labour Codes, once enforced, will govern the conditions of employment, social security, employee health, safety and welfare, industrial and labour disputes, payment of wages, etc. The Codes will facilitate the ease of doing business and eliminate the inconsistency and multiplicity of definitions across several existing labour laws. While a formal date for implementation has not yet been announced, it is anticipated these will come into effect in the near future.

While most provisions under the proposed Codes are analogous to those in the current regime, there are some significant new developments including various new obligations that employers would need to comply with. Hence, companies will need to ensure that any changes brought forth in compliance with the Codes are executed carefully.

One of the key changes to be introduced by the Codes is change in the definition of ‘wages’. Under the current regime, most employment statutes have their own definition for ‘wages’. with each statute prescribing its own list of salary components to be included and excluded from such definition. Going forward, there would be a single, uniform definition for ‘wages’ across all four labour codes, impacting existing practices on how employers calculate and pay various statutory amounts and benefits.

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