exceeding expectations

SINCE 1985

Labour Codes

W W W. L A K S H M I S R I . C O M
 Need For Labour Reforms

Protect
rights of con-
Provide solu- tract labour
tions for as there is
New concepts challenges an increase
to match faced in the in their en-
Abuse of in- changing last 3 dec- gagement
spection re- times (eg. gig ades
Compliance gime. Trans- workers/ ag-
Challenges formed to In- gregators,
Multiplicity of spector-cum-
laws equal treat-
facilitator ment of
transgenders,
recognition of
fixed term
employment)

© 2020 | Lakshmikumaran & Sridharan S T R I C T LY C O N F I D E N T I A L | 2

 Four Labour Codes
• Code on Wages, 2019 (“Wage Code”)
• Code on Occupational Safety,
Health and Working Conditions,
2020 (“OSHW Code”)
• Code on Industrial Relations, 2020
(“IR Code”)
• Social Security Code, 2020 (SS Code”)

© 2020 | Lakshmikumaran & Sridharan S T R I C T LY | 3

 exceeding expectations
SINCE 1985

The Code on Social Security, 2020

A PRESENTATION BY NOORUL HASSAN

W W W. L A K S H M I S R I . C O M
 Employees Compensation Act, 1923

The Cine-Welfare Fund Act, 1981

The Building and Other Construction Workers Welfare Cess Act, 1996

Employees State Insurance Act, 1948

LAWS Employees Provident Funds and Miscellaneous Provisions Act, 1952

SUBSUMED
The Unorganised Worker's Social Security Act, 2008
The Employment Exchanges (Compulsory Notification of
Vacancies Act), 1959
The Maternity Benefit Act, 1961

The Payment of Gratuity Act, 1972

© 2020 | Lakshmikumaran & Sridharan S T R I C T LY | 5

 Definitions: Appropriate Government
• Central Government is the appropriate government to CPSUs and their subsidiaries,
mines and oil fields, major ports, railways, air transport service, telecommunications,
banking and insurance companies, including establishment of contractors in respect of
the foregoing.

• Other establishments – State Government

• Central Government is appropriate government to entities having branch in more than

one state.

© 2020 | Lakshmikumaran & Sridharan S T R I C T LY | 6

 Definitions: Employer
• Employer includes:
• Occupier or manager under Factories Act, 1948;
• the person who, or the authority which, has ultimate control over the affairs;
• contractor; and
• legal representative of a deceased employer

© 2020 | Lakshmikumaran & Sridharan S T R I C T LY | 7

 Definitions: ‘Wages’
• Uniform definition of wages

• Wages: means Salary components expressed in terms of money or capable of being so

expressed and includes basic, DA and retaining allowance, if any
• Exclusions (bonus payable under any law, HRA, House accommodation, Supply of -
light, water, medical attendance; commission, OTA, conveyance allowance, Em-
ployer’s Contribution to PF/ pension, Gratuity, Retrenchment compensation, Remuner-
ation payable under any award or settlement between the parties)

• Excluded components cannot exceed 50% of the remuneration – else will be added
back to the wages

• Remuneration in kind to the extent it does not exceed 15% of total wages shall be in-
cluded in wages
© 2020 | Lakshmikumaran & Sridharan S T R I C T LY | 8
 Definitions: ‘Wages’ (contd.)
• Exclusions cannot exclude 50% of total wages.
Example # 1:
– Basic: ₹ 10,000

– DA: ₹ 3,000

– HRA: ₹ 2,000

– Basic + DA = ₹ 13,000

– Exclusion items (HRA) – ₹ 2000

– Total Remuneration (TR) – ₹ 15,000

– 50% of TR - ₹ 7,500

– Exclusions excess of 50% of TR – Nil

⸫Wages for the purpose of Labour Codes: ₹ 13,000

© 2020 | Lakshmikumaran & Sridharan S T R I C T LY | 9
 Definitions: ‘Wages’ (contd.)

Example # 2:
– Basic: ₹ 10,000
– DA: ₹ 3,000
– OTA: ₹ 20,000
– Conveyance allowance (CA): ₹ 6,000
– Basic + DA = ₹ 13,000
– Exclusions (OTA + CA): ₹ 26,000
– TR - ₹ 39,000
– 50% of TR – ₹ 19,500
– Exclusions excess of 50% of TR – ₹ 26,000 (-) ₹ 19,500 = ₹ 6,500
⸫Wages for the purpose of Labour Codes: ₹ 13,000 + 6,500 = ₹ 19,500

© 2020 | Lakshmikumaran & Sridharan S T R I C T LY | 10

 Cost to the Company model
• Cost To the Company (CTC):
CTC ₹ 10,00,000 per annum

Basic ₹ 5,00,000

Gratuity ₹ 24,000 4.8%

Employer PF Contribution ₹ 21,600 12% on threshold of ₹

15,000
Flexi Benefit Plan (as below) ₹ 4,54,400

• "Flexi Benefit Plan" can be various heads of reimbursements, viz., HRA, Meal voucher,
Telephone, Broad Band, Leave Travel Allowance, Vehicle Reimbursements, etc. Unal-
located or remaining "Flexi Benefit Plan" amount will be paid as Special Allowance on
a monthly basis.

© 2020 | Lakshmikumaran & Sridharan S T R I C T LY | 11

 Issues in the definition of ‘Wages’
• Reimbursement of internet and telephone expenses, club membership fee, movable as-
sets, car lease which are reimbursed by the Company to an employee upon incurring of
expenditure [may come under sub-clause (e) to defray special expenses]

• If the above reimbursements are considered as remuneration in kind, then such reim-
bursements shall also be included in the definition of wages, if the total of such reim-
bursements does not exceed 15% of the total wages. [Explanation]

• Where does these items fall: performance bonus, discretionary award, incentives -
‘Means’ clause or ‘Exclusion’ clause?

• Whether the definition to be applied monthly/ yearly?

• Does the restructuring of wages is needed to be undertaken mandatorily?

© 2020 | Lakshmikumaran & Sridharan S T R I C T LY | 12

 Definitions
SOCIAL SECURITY

• “Social security" means the measures of protection afforded to employees, unorganised workers,
gig workers and platform workers to
• ensure access to health care; and
• to provide income security, particularly in cases of old age, unemployment, sickness, invalid-
ity, work injury, maternity or loss of a breadwinner by means of rights conferred on them and
schemes framed.
EMPLOYEE
• means is any person (other than an apprentice under the Apprentices Act, 1961), employed on
wages by an establishment to do any skilled, semi-skilled or unskilled, manual, operational, super-
visory, managerial, administrative, technical or clerical work for hire or reward, whether the terms
of employment be express or implied.
• Employed either directly or through a contractor
• Specifically excludes apprentice engaged under the Apprentices Act, 1961.
© 2021 | Lakshmikumaran & Sridharan S T R I C T LY | 13
 Definitions:
• Fixed Term Employment: Engagement of an employee through a contract for a fixed
period, provided
(i) his hours of work, wages, allowances and other benefits shall that of a permanent
worker;
(ii) he shall be eligible for all benefits proportionately according to the period of ser-
vice.

• Eligible for gratuity if service is rendered under the contract for a period of 1 year –
mentioned only in IR Code.

• Termination due to completion of fixed term shall not be treated as retrenchment.

© 2020 | Lakshmikumaran & Sridharan S T R I C T LY | 14

 Definitions
CONTRACT LABOUR

• Means a worker who is hired through a contractor and includes inter-state migrant worker but
does not include a regular employee (other than a part time employee) of the contractor.

INTER-STATE MIGRANT WORKER

• Employed by (i) employer, or (ii) contractor

• Obtained employment – another state (destination state)
• Changed establishment in destination state
• Drawing wages not exceeding ₹ 18,000 per month

CONTRACTOR
• Produce a given result other than a mere supply of goods and services
• Supplies contract labour as mere human resource
• Includes sub-contractor
© 2021 | Lakshmikumaran & Sridharan S T R I C T LY | 15
 Applicability (First Schedule)
PROVISIONS
Employees' Provident Fund
Employees’ State Insurance
Corporation
Gratuity
Maternity Benefit
Employee Compensation
© 2020 | Lakshmikumaran & Sridharan
THRESHOLD
Every establishment with 20 or more employees (voluntary opt-in and opt-out
introduced, provided there is an agreement between the employer and majority of
the employees)
Every establishment with 10 or more persons employed earning below the
threshold (voluntary opt-in and opt-out introduced as above). Scheduled/ notified
establishments omitted
a. every factory, mine, oilfield, plantation, port and railway company; and
b. every shop or establishment in which 10 or more employees are employed, or
were employed, in the past 12 months
a. Every factory, mine or plantation
b. Every shop and establishment in which 10 or more employees are employed
or were employed in the past 12 months
Applies to employees employed in scheduled categories (Second Schedule)
employers and to whom ESIC does not apply
S T R I C T LY | 16
 Social Security Organisations

Social Security
Organisations

SSC Code

Board of Trustees Employees State State Building

National Social State Unorganised
of Employees Insurance Worker’s Welfare
Security Board workers board
Provident Fund Corporation Board
Aided by the Welfare of Unorganised
ESIC BOCW
EPFO gig workers, Workers
platform workers
and unorganised
workers

© 2020 | Lakshmikumaran & Sridharan S T R I C T LY | 17

 Definitions
GIG WORKER

• Means a person who (i) performs work or participates in a work arrangement and (ii) earns from
such activities outside of traditional employer-employee relationship. Ex: Drivers for Ola/ Uber

PLATFORM WORK

• Means a work arrangement outside of a traditional employer employee relationship in which organ-
isations or individuals use an online platform to access other organisations or individuals to solve
specific problems or to provide specific services or any such other activities which may be notified
by the Central Government, in exchange for payment. Ex: Urban Clap

AGGREGATOR
• means a digital intermediary or a market place for a buyer or user of a service to connect with the
seller or the service provider. Schedule VII – Classification of Aggregators, Ex: Ride sharing ser-
vices, Food and grocery delivery services; e-market places, etc.

© 2021 | Lakshmikumaran & Sridharan S T R I C T LY | 18

 Key Changes
SOCIAL SECURITY FOR GIG WORKERS, PLATFORM WORKERS
• Aadhaar based registration of Gig Workers, Platform Workers and Unorganised Workers. Not engaged by the ag-
gregator for 90 days in the preceding 12 months – cease to gig/ platform worker.
• Central Govt. may notify specific conditions for availing any benefit.

Life and disability cover Wholly funded by Central Government

Accident insurance Partly funded by Central and State

Government

Health and maternity benefit Wholly Funded by Aggregators

Social security
Funding
schemes Partly by Government, beneficiaries
Old age protection
of scheme or Aggregators*

creche Funded from Corporate Social

Responsibility Fund

Other as prescribed Other Sources

© 2021 | Lakshmikumaran & Sridharan S T R I C T LY | 19

 Key Changes
CONTRIBUTION BY THE AGGREGATORS

• Contribution shall not exceed 2%, but not less than 1% of the annual turnover of the aggregator, as
notified by the central government. Provided contribution by an aggregator shall not exceed 5% of
the amount paid or payable by an aggregator to gig workers and platform workers.

• ‘Turnover’ as defined under the Companies Act. 2013 – Gross amount of revenue recognised in the
P&L A/c from the sale, supply or distribution of goods or provision of services.

• Every aggregator shall assess and pay contribution on provisional basis by 30 th June for the preced-
ing FY and after finalisation audited financials by 31 st October. For delays - interest @ 1% per
month

© 2021 | Lakshmikumaran & Sridharan S T R I C T LY | 20