LABOUR CODES

• Parliament approved 3 labour codes in September 2020 subsuming 25 central labour

laws effecting a major reform that has been on the table for 17 years. The root of this
idea goes back to 2002 report of national commission on labour. The 3 codes are- the
industrial relations code 2020, code of social security 2020 and occupational safety,
health and working condition code 2020. The wage code was passed in august 2019.
• Code on wages 2019- Features:-
• 1) A person employed in a supervisory capacity drawing up to Rs 15000 will also be
considered a worker.
• 2) In the erstwhile minimum wages act, an employment having more than 1000
workers to be first included in the schedule and there after minimum wages will be
fixed as per law. The new code has dispensed with the minimum number of workers
and the inclusion into the schedule.
• 3) once central govt. fixes floor wage, state govt. can’t fix minimum wages less then
floor wage but many states fix ,minimum wages higher than existing wages so the
concept is for a binding minimum wage and not have dual wage rates.
• 4) Several high courts have placed minimum wages act to over ride MNREGA. Now
MNREGA is excluded from the purview of this code.
• 5) Section 45 of the code stipulates claims to be heard and determined by an authority
not below the rank of a gazetted officer which means that a govt. officer without legal
and administrative background can hear such claims. Any dispute regarding bonus
continues to go before the industrial tribunal ( the new IR code contemplates a 2
member tribunal) as per section 49 of the new code, the appeal against gazetted
officer’s decision can lie with an appellate authority who must be one rank higher then
the competent authority (gazetted officer). The code or rules do not prescribe
qualifications and experience for competent authority and for appellate authority.
• 6) Sec 52 says that an officer not below the rank of an under secretary to govt. will be
empowered to impose penalty in place of judicial magistrate. So an essential judicial
function is now vested with the executive although as per constitution judiciary is to be
kept separate from executive.
• 7) Sec 56 of the code exempts employers from penal provisions if they can prove that
they had used due diligence in enforcing execution of the code and it was other person
who committed the offence without his knowledge, consent or connivance.
• 8) Though govt. claims that the erstwhile provisions covered only 30% of the workers,
there is nothing in this code to show that it will have wider coverage.
• Code on social security 2020- consolidates nine central laws- EPF act 1952, employees state
insurance act 1948, maternity benefit act 1961, building and other construction workers cess
act, payment of gratuity act 1972, employees exchange act 1959, cine workers welfare fund
act 1981, unorganised workers social security act 2008 and employees compensation act
1923.
• Features- 1) GIG worker- A person who performs work or participate in a work arrangement
and earns from such activities outside of traditional employer- employee relationship. This
covers delivery persons for online food delivery platforms, E-com, sites etc.
• Platform worker- A person having work arrangement outside traditional employer- employee
relationship in which organisations/ individuals use online platform to access other
organisation or individuals to solve specific problem or to provide specific services or any such
activity notified by central govt. in exchange for payment.
• Unorganised worker- A homebased worker, self-employed worker or a wage worker in the
unorganised sector who is not covered by industrial disputes act 1947. The code mandates
that central govt. should frame scheme for welfare of these classes of employees in relation
to
• i) Life and disability cover.
• ii) Health & Maternity benefits.
• iii) Old age protection.
• iv) Education.
• v) Any other benefit determined by central govt.
• Also the state govt. should frame scheme for such employees in relation to
• i) Provident fund.
• ii) Employment injury benefit.
• iii) Housing.
• iv) Educational scheme for children.
• v) Skill upgradation of workers.
• vi) Funeral assistance.
• vii) Old age homes.
• 2) Every unorganised, gig or platform worker to be registered provided he has completed 16
years of age, Aadhar No. mandatory for registration.
• 3) Role of aggregators- schemes for Gig workers or platform workers may be funded through
contribution from central govt., state govt. and aggregators listed in schedule 7. The schedule
lists9 categories including ride sharing services, food and grocery delivery services, content
and media services and e-market places. Contributions for such aggregators may be notified
by govt. falling between 1-2% of annual turn over of aggregators. Such contribution can’t
exceed 5% of the amount paid by an aggregator to gig and platform workers.
• 4) Definition of wages- All remuneration by way of salaries, allowances and includes basic pay,
DA and retaining allowances. Components excluded from wages are bonus, house rent,
provident fund, commission to employee, over time allowance and conveyance allowance where
the aggregate amount paid under these heads does not exceed 50% of the remuneration paid to
the employee i.e. the total excluded component should not exceed 50% of total remuneration.
• 5) Interstate migrant workers- Apart from a migrant worker recruited through a contractor,
interstate migrant worker includes a person who has come on his own from one state and
obtained employment in an establishment of another state. It covers worker drawing wages more
than Rs 18000 per month or such higher amount as notified by central govt.
• 6) EPF scheme-Will be applicable to all establishment having 20 or more employees. The
contribution paid by employer shall be 10% of the wages and employee's contribution shall be
equal to contribution paid by employer and may, if any employee so desires , be an amount
exceeding 10% but the employer shall not be under obligation to pay any contribution over and
above his contribution payable under the code.
• 7) ESI- Applicable to every establishment with 10 or more persons employed other than a
seasonal factory worker. Gig worker, plantation workers, unorganised sectors also brought under
the purview of ESI.
• 8) Gratuity Applicable to - i) Every factory, mine, oil field, plantation, port and railway company.
• ii) Every shop or establishment with more than 10 employees on any day of the preceding 12
months. In case of an employee employed on fixed term employment or a deceased employee,
employer shall pay gratuity on pro- rata basis.
• 9) Construction works less than Rupees 50 lakhs exempted.
• 10) Code empowers central govt. to defer application of provisions of the code for a
period of 3 months in the event of a national disaster, pandemic or endemic.
• 11) Code empowers govt. to exempt any industrial establishment from provisions of
the code.
• 12) In addition to unorganised workers, the national social security board may also act
as the board for welfare of gig and platform workers and can recommend and monitor
schemes for these workers.
• 13) Under 2019 bill authorised officers were empowered to conduct enquiries regarding
disputes on EPF & ESI and an aggrieved party could file for review of the order but the
2020 bills removes provisions for such review. Also maximum imprisonment for
obstructing an inspector from performing his duty has been reduced from 1 year to 6
months. Penalty for unlawfully deducting employer’s contribution from employee’s
wages is changed from imprisonment of 1 year or fine of rupees 50,000 to only fine of
rupees 50,000.
• Remarks- 1) code has removed mandatory minimum gratuity threshold of 5 years
while introducing different threshold structure- regular and permanent employee
five year, fixed term worker no such limit and their gratuity linked to their tenure of
work. For working journalists period 3 years and for seasonal worker it is
equivalent to salary for seven days for every season of work. Earlier five year was
mandatory which meant many workers used to forfeit their gratuity (15 days salary
for every completed year of work) if they lost job before five years.
• 2) Inclusion of informal workers, platform workers and interstate migrants is a
positive step but it is not clear whether this covers agriculture wage workers, bidi
workers and domestic workers.
• 3) Code does not talk about registration and provision of a portable social security
card where in all workers giving a unique labour market identity number and it
should be maintained in the identity card along with company identity number. The
registration of such card should be done by centre and state should do the
delegated responsibility else social security card by one state may not be
accepted by another.
• 4) Social security has two components- social protection and social insurance.
While one is contributory the other is taxed and state financed. Govt. must make
contributory protection transparent which will incentivise people to contribute.
• 5) Since gig and platform workers are nascent in India and the move on social
security may burden them financially, the govt. can give social security credit
which will be notional and can be recovered once the initial time frame is over and
companies mature. While gig and platform workers can contribute, enterprises
below a certain capital limit can be giving this notional credit and recovered after
incubation period.
• 6) Social security protection should have been uniformly applicable to entire work
force but now we have arbitrary categorisation that may leave millions of working
poor out. Only sites having more than 10 workers are covered. Also personal
residential construction work is excluded, such workers also need protections.
The parliamentary standing committee had recommended removal of definition of
a wage worker since it excludes many of those at the margins. However the wage
ceiling to fall with in the definition of a wage worker exist and will again be used
arbitrarily across states.