15 April 2020
EY Alert
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1
https://www.ndtv.com/india-
news/amid-covid-19-effects-
executive-orders-to-fast-track-
labour-codes-2210509
New labor codes, provident fund and other
employment related updates on account of
COVID-19
Executive summary
This Alert summarizes various new proposed labor codes, provident fund and other
employment related updates on account of COVID-19.
The Government of India is in the process of introducing the following four new labor codes
which will replace the current multiple central labor laws relating to wages, social security,
industrial disputes, etc.:
► The Code on Wages, 2019
► The Occupational Safety, Health and Working Conditions Code, 2019
► The Industrial Relations Code, 2019
► The Code on Social Security, 2019
The Code on Wages, 2019 has already been approved by both houses of Parliament and has
received Presidential assent on 8 August 2019. However, the central government is yet to
notify the date of its entry into force.
The other three labor codes are pending before the lower house of Parliament (Lok Sabha).
As per a media report1, the government may issue an ordinance to bring these labor codes
into effect.
Once in force, the new labor codes might have a significant impact on employment costs,
payroll policies and processes as well as on employment related conditions.
Certain other measures taken by the government for employees in organized sector are:
► Extension in the due date for payment of Provident Fund contributions for March
2020
► Non-refundable advance available to provident fund members
► Partial withdrawal for National Pension System members
► Central government’s contribution to provident fund accounts of low-wage
earners of eligible establishments under the Pradhan Mantri Garib Kalyan Yojana
► Extension in the due date for payment of Employees’ State Insurance
contributions and facilitating medical benefits for members
► Issuance of advisory on termination of employment/reduction of wages
New Labor Codes on the anvil
► The Ministry of Labour and Employment,
Government of India is in the process of
introducing the following four labor codes which
will replace current multiple central labor laws
relating to wages, social security, industrial
disputes etc.:
► The Code on Wages, 2019
► The Occupational Safety, Health and Working
Conditions Code, 2019
► The Industrial Relations Code, 2019
► The Code on Social Security, 2019
► The Code on Wages, 2019 has already been
approved by both houses of Parliament and has
received Presidential assent on 8 August 2019.
The other three labor codes are pending before
the lower house of Parliament (Lok Sabha).
► The Government has also issued a draft Code on
Wages (Central) Rules, 2019 for public comments
on 1 November 2019. However, the final rules are
yet to be rolled out. Also, the schemes and rules
under the other codes are pending to be released.
► As per a media report, the Government may fast-
track the implementation of these labor codes
through the ordinance route. Once in force, the new
labor codes will have a significant impact on
employment costs, payroll policies and processes as
well as on employment related conditions.
► Some key aspects of the new labor codes that
may be relevant to note are:
► Full and final settlement on termination of
employment - Under the Code on Wages,
2019, the employer is required to pay wages
to the employee within two working days of his
/ her removal, dismissal, retrenchment or
resignation.
► Overtime pay - Where an employee, whose
minimum rate of wages has been fixed under
the Code on Wages, 2019, works on any day in
excess of the number of hours constituting a
normal working day, the employer is required
to pay overtime at twice the normal rate of
wages.
► Gratuity payable to eligible employees on
termination of employment - Under the Code
on Social Security, 2019, gratuity is to be
calculated basis ‘wages’ as defined under the
labor codes. The current practice is to
calculate gratuity on basic salary only.
► The four labor codes will come into force once the
Central Government has issued a notification to
that effect.
Measures taken by the
Government for employees
in organized sector
Extension in due date for payment of Provident
Fund contributions
► The Employees’ Provident Fund Organisation
(EPFO) has through its circulars dated 15 April
2020 extended the due date for filling of
Electronic Challan cum Return (ECR) and
payment of contributions and administrative
charges for the month of March 2020 to 15 May
2020 (instead of 15 April 2020).
Thus, employers may deposit Provident Fund
contributions for March 2020 by the extended
due date.
Non-refundable advance from Employees’
Provident Funds Scheme
► The Employees’ Provident Funds Scheme, 1952
has been amended through a notification dated
27 March 2020 to allow any provident fund
member, who is employed in any establishment
located in an area declared as affected by
outbreak of any epidemic or pandemic by the
appropriate Government, to claim non-
refundable advance from the provident fund
account of such member to the extent of lower
of the following:
► 3 months basic wages and dearness
allowance; or
► Up to 75% of the corpus in the member’s
provident fund account (which covers
employer’s contribution, employee’s
contribution and interest accrued till date)
► The EPFO has issued Frequently Asked
Questions (FAQs) on 31 March 2020 and 4 April
2020 on the provisions relating to non-
refundable advance. FAQs clarify the following:
► Employees working in establishments across
India, who are provident fund members, are
eligible for the advance.
► No certificate or documents are to be
submitted by member or his/her employer
for availing the advance.
► The claim for advance can be made online on
the EPFO portal once employee’s Universal
Account Number (UAN) is validated with
Aadhaar and KYC of bank account and
mobile number is seeded in UAN.
► The claim for advance can also be made
through UMANG (Unified Mobile Application
for New-age Governance) mobile application.
► Employees covered under recognized private
provident fund trusts are also eligible for the
advance.
► Advance can be claimed irrespective of the
advances claimed earlier.
► The EPFO has in its circular dated 28 March 2020
instructed its regional offices to process such
applications for advance promptly so that the
intended relief reaches the employee and family
to help them fight with COVID-19.
Also, through a press release dated 9 April 2020,
the EPFO has communicated that it has processed
about 137,000 claim applications disbursing an
amount of INR 2.79 Billion.
Partial withdrawal from National Pension System
► Under Regulation 8 of the Pension Fund
Regulatory and Development Authority (Exits and
Withdrawal under the National Pension System)
Regulation, a member is permitted to withdraw up
to 25% of member’s own contributions made
under National Pension System (NPS) for
specified purposes. One of the purposes for which
such partial withdrawal is available is if the
member, his / her spouse, children including
adopted child or dependent parents suffer from
specified illness which requires hospitalization and
treatment in respect of specified diseases
including any critical illness of a life-threatening
nature as prescribed by the authority.
► The Pension Fund Regulatory and Development
Authority, which is responsible for regulating NPS,
has in its circular dated 9 April 2020 declared
COVID-19 as a critical illness which is life
threatening in nature. Accordingly, partial
withdrawal will be permitted from NPS to fulfill
financial needs towards treatment of COVID-19
illness of member, his / her spouse, children
including adopted child or dependent parents.
The following documents are required to be
provided to claim partial withdrawal:
► Medical certificate
► Formal request for partial withdrawal
► As per the regulation, such partial withdrawal
from NPS is subject to the following conditions:
► The individual should be a NPS member for at
least 3 years;
► Maximum amount that can be withdrawn for
specific purposes cannot exceed 25% of
member’s own contribution (not including
employer’s contribution)
► The withdrawal will be permitted for maximum
3 times during the entire tenure of
subscription under the NPS.
Pradhan Mantri Garib Kalyan Yojana
► On 26 March 2020, the Government of India
announced a relief package under the Pradhan
Mantri Garib Kalyan Yojana (PMGKY) for the poor
to help them fight the battle against COVID-19
pandemic.
As part of the said package, the Central
Government will pay 24% of the monthly wages
into provident fund accounts for 3 months for
employees with wages below INR 15,000 per
month, who are employed in establishments
having up to 100 employees, with 90% or more
of such employees earning monthly wages less
than INR 15,000.
► The Scheme, which is subject to various
conditions, will be in operation for the wage
months - March 2020, April 2020 and May
2020.
Extension in due date for payment of
Employees’ State Insurance contributions and
facilitating medical benefits for members
► The Employees’ State Insurance Corporation has
through its circulars dated 16 March 2020 and
13 April 2020 extended the due dates for
payment of Employees’ State Insurance (ESI)
contributions as under:
► For the month of February 2020: To 15 May
2020 (instead of 15 March 2020)
► For the month of March 2020: To 15 May
2020 (instead of 15 April 2020)
Thus, employers may deposit ESI contributions
for February 2020 and March 2020 by the
extended due dates. No interest or penalty will
be levied on employer for deposit of ESI
contributions during the extended period.
► The ESI Corporation in its circular dated 8 April
2020 has acknowledged that hardships are
faced by some ESI beneficiaries as certain ESI
hospitals across the country have been
converted to function as dedicated COVID-19
hospitals. In such cases, it has been clarified
that the ESI beneficiaries may avail emergency /
non-emergency medical treatment through
other hospitals with which ESI Corporation has
as a tie-up.
► Through a press release issued on 14 April
2020, it has been confirmed that in order to
ease hardship of ESI beneficiaries, purchase of
medicines by ESI beneficiaries from private
chemists during the lockdown period and its
subsequent reimbursement by ESI Corporation
has been permitted.
Central Government advisory on termination of
employment / reduction of wages
► On 20 March 2020, the Ministry of Labour and
Employment, Government of India has issued an
advisory to all employers of public / private
establishments to protect interests of
employees employed by such establishments on
account of COVID-19. As per the advisory
issued:
► Employers are advised to extend their
cooperation by not terminating their
employees, particularly casual or contractual
workers, from jobs or reduce their wages.
► If any worker takes leave, he / she should be
deemed to be on duty without any
 consequential deduction of wages for this
period.
► If place of employment is made non-
operational due to COVID-19, the employees
of such unit will be deemed to be on duty.
► On 29 March 2020, the Ministry of Home Affairs,
Government of India has issued an order stating
that all employers, be it in the industry or
commercial establishments, shall make payment
of wages to their workers on the due date without
any deduction for the period their establishments
are under closure during the lockdown.
► Further to this, on 10 April 2020, the Ministry of
Corporate Affairs, Government of India has issued
COVID-19 related FAQs on Corporate Social
Responsibility (CSR). In relation to salary payable
to employees, the FAQs clarify the following:
► Payment of salary/ wages in normal
circumstances is a contractual and statutory
obligation of the company. Similarly, payment
of salary/ wages to employees and workers
even during the lockdown period is a moral
obligation of the employers, as they have no
alternative source of employment or livelihood
during this period. Thus, payment of salary/
wages to employees and workers during the
lockdown period (including imposition of other
social distancing requirements) shall not
qualify as admissible CSR expenditure.
► Payment of wages to temporary or casual or
daily wage workers during the lockdown period
is part of the moral/ humanitarian/ contractual
obligations of the company and is applicable to
all companies irrespective of whether they
have any legal obligation for CSR contribution
under Section 135 of the Companies Act
2013. Hence, payment of wages to temporary
or casual or daily wage workers during the
lockdown period shall not count towards CSR
expenditure.
► If any ex-gratia payment is made to temporary
/ casual workers/ daily wage workers over and
above the disbursement of wages, specifically
for the purpose of fighting COVID 19, the
same shall be admissible towards CSR
expenditure as a one-time exception provided
there is an explicit declaration to that effect by
the Board of the company, which is duly
certified by the statutory auditor.
Comments
a. The new labor codes might have a significant
impact on employment costs, payroll policies
and processes as well as on employment-
related conditions. While the government is
yet to roll out various schemes and rules
under the four codes, employers may need to
be future-ready in implementing the new
labor codes.
Implementation of the new codes will require:
i. Analysis of the impact on cost to
company
ii. Analysis of the impact on benefit for
employees
iii. Review and implementation of changes
required in various policies, processes
and technology systems to ensure
appropriate compliance.
b. With regard to the availability of non-
refundable advance under the Employees’
Provident Funds Scheme, employers should
support employees by ensuring that
employees’ UAN are validated with Aadhaar,
and KYC of bank account and mobile number
is seeded in UAN. EPFO has issued detailed
FAQs on the UAN and KYC requirements on
13 April 2020. This will help employees in
making online applications for the advance.
c. Eligible employers may also avail the benefits
of PMGKY under which the central
government will contribute both employers’
and employees’ share of provident fund
contribution for three months.
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