The government is working to implement newly codified labour laws, but how will they fare in a transformed working environment? Ragini Rastogi reports
With the new labour codes having received presidential assent, 29 labour laws will now be amalgamated into four codes. These laws pertain to wages, industrial disputes, terms and conditions at work, leave, working hours, occupational safety and welfare measures, social security benefits, inspection rights of authorities, and penalties for non-compliance. The rule-making process is in full swing and the intention of the government is to implement these codes by April 2021.
With covid-19 and its fallout, there has been a tectonic shift in the way we work, and issues that had long been overlooked have now come to the fore. For instance, the lockdown resulted in migrant labourers heading back to their hometowns, and this led to a huge loss for the micro, small and medium enterprise (MSME) sector. Further, the absence of social security benefits to migrant workers was highlighted, and the need to address this was felt.
There will now be a database maintained on migrant workers, which will facilitate a better reach of government schemes. Additionally, the labour codes will combine and reduce the number of registrations required, and avoid duplication of returns, as is the case in separate legislations.
For employers, these codes will create: More responsibilities in terms of social security benefits to gig workers, platform workers and home-based workers; recognition of employment status to fixed-term employees; increased thresholds for government approval in case of retrenchment, closure and lock-out; facilitation of electronic inspections; constitution of negotiating unions; and enabling provisions for exemption to new establishments.
Code on Wages, 2019
The Code on Wages, 2019, amalgamates four labour laws in relation to payment of wages, minimum wages, payment of bonus and equal pay across genders. Covid-19 has led to an estimated labour income loss of 9.9% in the Asia-Pacific region in the first three quarters of 2020, and the expected wage and income loss (between 24 March 2020 and 3 May 2020) is at 17.37% in India. This makes a universal minimum wage construct also the need of the hour.
The wage code, read along with the Code on Wages (Central) Rules, 2020, will set the national minimum wage floor for different regions of India applicable to unskilled, semi-skilled, skilled and highly skilled occupations. This wage floor will be set by the central and state governments, in consultation with the advisory boards constituted in the manner specified under the wage code. Under the Code on Wages (Central) Rules, 2020, occupations in 123 unskilled, 127 semi-skilled, 320 skilled and 111 highly skilled categories were specified.
The Economic Survey 2018-19, produced annually by the Ministry of Finance to provide a view on the state of the economy to parliament, stated that the present minimum wage system is complex, with 1,915 minimum wages for various scheduled job categories across states. Yet, according to the International Labour Organization’s (ILO) India Wage Report 2018, another publication that identifies wage trends with the goal of encouraging wage equality and inclusive growth, the minimum wage regime in India does not cover about 34% of wage earners.
Unlike the present regime, the wage floor prescribed by the central government will be mandatory under the wage code. Further, the wage code covers a larger workforce, as the existing wage ceilings for eligibility of employees (₹21,000 [US$285] per month under the Payment of Bonus Act, 1965 [PBA], and ₹24,000 per month under the Payment of Wages Act, 1936) are removed.
Having increased the responsibilities of the employer, it appears that the wage code has enhanced coverage in terms of components of wage, type of workers, eligibility of workers to receive minimum wage, statutory bonus, and restrictions on deductions/fines.
The logical extension of this is an increase in the obligations of employers regarding minimum wage, statutory bonus, mode of payment of wages, time-limit for payment of wages, prohibition of discrimination in wages on account of gender, and disputes in relation to these.
Another new aspect is that overtime allowance stands included in the term “wage” only in certain cases, and when it does, it is to be treated at par with the included components for mode of payment, wage period, deductions that may be made from it, and equal wages to all genders. Unlike the PBA, the wage code does not specify what constitutes “remuneration in kind”. To such extent, this term is ambiguous and requires clarity.
Further, the streamlining of formats of making claims, appeals and compounding applications, as also with the issuance of wage slips, is likely to create uniformity. To the relief of employees, the time limit for filing a claim now stands increased to three years, as opposed to six months. In case of a claim, compensation of up to 10 times of the claim may be sought, and the authority shall endeavour to decide the claim within three months.
In India, with about 50% of the workforce engaged in self-employment, and another 30% engaged in casual employment, the applicability of the Minimum Wages Act, 1948 (MWA) is limited to less than 20% of the workforce. In light of this, with the wage code making the national-level minimum wage floor mandatory, it appears that it will address the implementation gap and lack of reach of the MWA.
Social Security Code, 2020
The Social Security Code, 2020 (SS code) amalgamates nine labour laws in relation to: Compensation for employment injuries; insurance coverage for sickness, maternity and employment injury; provident fund contribution; notification of employment vacancies; maternity benefit; payment of gratuity; cinema workers’ welfare fund; building and other construction workers’ welfare; cess (levy) and social security of unorganized workers.
Once implemented, the SS code will be the law relating to social security to employees and workers in the organized and unorganized sector. Based on the Periodic Labour Force Survey 2018-19, about 51.9% of salaried employees in the non-agriculture sector in India were not eligible for any social security benefit.
Given that today’s workforce faces a tectonic shift in nature and method of work towards teleworking, the SS Code, for the first time, has introduced the requirement of social security schemes to be framed and implemented for gig workers, platform workers and unorganized workers.
Gig workers are defined as persons engaged in work arrangements outside of employer-employee relationships, and platform workers have been defined as personnel engaged outside of traditional employer-employee relationships, by organizations using online platforms, to access other organizations or individuals to solve specific problems or provide services or other activities (notified by the government) in exchange for payment.
Further, aggregators – being digital intermediaries in the online marketplace engaged in ride-sharing services, food and grocery delivery, logistic services, e-marketplace for the wholesale or retail sale of goods and/or services, professional services providers, healthcare, travel and hospitality, content and media services, and any other goods and services provider platform –will be required to make social security contributions for its unorganized workers, gig workers and platform workers.
While there is a limit placed on the contribution by an aggregator, the social security schemes are intended to provide for life and disability cover, accident insurance, health, maternity, creche and old age. Workers in the unorganized sector will be required to obtain registration with the government, and a unique number will be allotted to each worker, based on which he/she shall be entitled to social security benefits.
In case of non-compliance, the code allows for the compounding of offences, and also, the employer’s right of opportunity to comply with the SS code by way of a written direction of the inspector-cum-facilitator (local government official as primary authority responsible for inspection and enforcement), which shall lay down a time period for such compliance.
While the onus on employers is increased under the SS code, since unorganized workers also stand covered vis-a-vis social security benefits, the inspector-cum-facilitator will, however, provide employers with the opportunity to comply before proceedings are initiated. Further, given the change in definition of “wage” across each social security benefit, the payroll systems will have more work to synchronize calculations of these benefits, as also with actuarial valuations.
The SS code attempts to universalize social security protection with regard to gratuity, maternity benefit, compensation for employment injury by accident or occupational disease. However, it appears that, to the extent of provident fund and employees’ state insurance schemes (i.e., provident fund, pension fund, deposit-linked insurance, insurance coverage for sickness, maternity, pregnancy/ miscarriage, compensation for employment injury on account of accident or occupational disease, funeral expenses of the deceased employee, etc.), there will still be bifurcation of covered and exempted employees. The criterion for exemption will be set out in the respective schemes, and the same has not been issued by the government as yet.
The occupational safety code
The Occupational Safety, Health and Working Conditions Code, 2020 (OSH code) will amalgamate 13 labour laws of India. These laws pertain to occupational safety, health and working conditions of persons employed in factories, plantations, working journalists of newspaper establishments, motor transport workers, beedi (unprocessed cigarette) and cigar workers, contract labour, sales promotion employees, interstate migrant workers, cinema workers, dock workers, and building and other construction workers.
In a post-covid-19 world, employers will need to provide safe and hygienic workplaces to motivate workers to resume work at the workplace, especially in the context of factories, mines and construction sites. To strengthen feelings of security and welfare at the workplace, the concept of medical officers has been introduced, and such officers will have a responsibility to examine and certify workers, and exercise medical supervision where cases of illness have occurred (if it is reasonable to believe to be due to the nature of work process carried out). However, there are no specific instructions or requirements in relation to the growing segment of remote workers and teleworkers.
As far as workers’ health and safety is concerned, the OSH code requires employers to conduct periodic medical examinations of workers. Further, employees have the right to bring to the notice of the employer and the inspector-cum-facilitator any imminent potential for serious injury or death, or danger to health and safety, whereupon the employer is required to take immediate remedial action. If the employer is not satisfied about the existence of any imminent danger, then he/she may refer the matter to the inspector-cum-facilitator.
Based on an ILO database of labour statistics on occupational injuries, India has a rate of 117 fatal injuries, and 325 non-fatal injuries, per 100,000 workers. Similarly, in research conducted by the National Institute of Mental Health and Neuro Sciences, Bangalore, it was mentioned that there is no centralized agency in India to examine occupational injuries.
To address this, a new body, the National Occupational Safety and Health Advisory Board, has been introduced, which will advise on uniform implementation of the OSH code. Similarly, at the state level, State Occupational Safety and Health Advisory Boards will be constituted. Further, the OSH code requires employers to constitute safety committees and appoint safety officers to report issues of unsafe/unhealthy conditions to the employer.
The appointment of safety officers is mandatory for factories with 500 workers or more. In cases of factories undertaking hazardous activity, along with building or other construction work, the threshold is 250 or more workers. In cases of mines, the threshold has been reduced to 150 or more workers. Under the Factories Act, 1948, threshold for appointment of safety officers in factories was 1,000 or more workers. With the OSH code, there will now be a larger set of establishments required to appoint safety officers.
Industrial Relations Code, 2020
The Industrial Relations Code, 2020 (IR code), has subsumed three laws relating to industrial disputes, trade unions and standing orders. The IR code has enhanced coverage of the term “worker”, and in the context of industrial disputes, the term has a wider coverage than the erstwhile “workman” under the Industrial Disputes Act, 1947 (IDA).
In relation to trade unions, the term covers all persons employed in trade or industry, and “unorganized workers” under the Unorganized Workers’ Social Security Act, 2008. This term, then, has been used to extend to: Unorganized workers; rights in relation to fixed-term employment; recovery of money due from employer; inclusion of name in the muster roll; compensation in case of lay-off, lockout, closure or retrenchment; representation and negotiation of disputes by a trade union; and participation in the constitution of a negotiating union, or negotiating council of a trade union.
It also allows them: Representation in a works committee and grievance redressal committee; commenting on the draft standing orders prior to certification by the certifying officer; receiving notice of change pursuant to change in conditions of service; receiving funds accumulated in the worker re-skilling fund upon retrenchment; raising industrial disputes against unfair labour practices; and penalization of employers for non-compliance of the above-mentioned. Thus, upon a bare reading, it appears that an enhanced coverage of the term “worker” brings about a larger population of the workforce to benefit from the above-mentioned rights.
Further, given that fixed-term employees are “workers” under the IR code, the above-mentioned rights stand granted to them as well. This means that fixed-term employees will have parity with permanent employees in so far as substantive rights under the IR code, and social security benefits, are concerned.
Also, fixed-term employees are now eligible to receive gratuity upon completion of one year of service. A new requirement under the IR code is for employers to contribute a specific amount (calculated as prescribed) for each retrenched worker to the worker re-skilling fund set up by the government. In a covid-impacted world, mass retrenchments have been seen across sectors in India, and may perhaps continue for a while. This fund will bring financial support to retrenched workers.
The IR code introduces the requirement of constituting a dedicated body, i.e., a negotiating union or council, within an industrial establishment. This body will have the right to negotiate with employers on prescribed matters, to represent workers in case of industrial disputes referred to arbitration (not relating to termination of workers by way of discharge, dismissal, retrenchment or otherwise), and to provide comments on draft standing orders. Given such participative rights, this body is likely to play the role of a bridge between employers and workers.
Unlike the IDA, the IR code exempts an employer from providing the 21-day notice of change, if changes to the working shift are undertaken in an emergent situation in consultation with the grievance redressal committee. With employees now working from home, and the working hours sometimes ranging between and beyond opening and closing hours of establishments, this exemption will provide employers with the flexibility to change working shifts without having to issue notice of change. However, workers may view this as a one-sided relief. The IR code does not provide definition of an “emergent” situation, and perhaps the rules will elaborate on its meaning.
With work from home becoming the “new normal”, employees and employers will need to be flexible, and acquaint themselves with a change in the working-hour shift. As India has not ratified the ILO’s C177-Home Work Convention, 1996, it has no mandate to adopt a specific law for employees working from home. In the absence of a specific law, such exemptions may be seen to easily dilute the terms and conditions of work at the employer’s behest.
The new definition of “strike” includes concerted casual leave by 50% or more workers on a day. During and beyond covid-19, employers are emphasizing improving profitability with an optimum workforce, and any disruption in output could see an exponential impact on revenue. Thus, this provision seeks to avoid surreptitious attempts of workers to covertly damage productivity, and also introduces leave discipline among team members.
As a majority of the work-from-home population belongs to the services sector, the IR code will play a pivotal role in providing flexibility to employers, and, simultaneously, social security protection to workers in a digitalized space.
Many protective aspects do seem to have been covered in the codes, however, from a remote working/teleworking/work-from-home construct, there is no specific protection granted to employees. There is no provision in the codes for social security coverage for injuries sustained in the course of work-from-home, nor a mechanism to calculate overtime hours in a work-from-home regime, and accordingly the method that should be adopted to calculate compensatory leave, etc.
In traditional workplaces, employees had access to various IT equipment, however in a work-from-home construct, such equipment now comes as an expense for employees. While a few corporates have introduced a one-time, work-from-home allowance to enable employees to bear this expense, others have not. Clarity is required on the rights of a worker vis-a-vis such requirements.
While it appears that the employer’s onus has increased, greater flexibility has also been provided vis-a-vis regulatory hurdles in retrenchment, lockouts, closures and change of working shifts. With covid-19 placing new challenges before employers, and internal restructuring becoming the new tool to overcome these challenges, there now lies the bigger task of implementing these codes, and also making businesses economically viable.
Ragini Rastogi is a compliance and employment law specialist based in Gurugram. The views expressed in the article are personal.