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EconomyLabour code to change in 2022: 4-day work-week, new salary slabs

Labour code to change in 2022: 4-day work-week, new salary slabs

The labour codes attain added significance in light of the fact that once these are implemented, there would be a reduction in the take-home pay of employees and firms will have to bear a higher PF

The union government is likely to implement four new codes on wages, social security, industrial relations, and occupational safety by the next fiscal year beginning 2022, according to a senior government official. Under the new code, a number of aspects related to and work systems may change. These include the take-home salary of employees, working hours and the number of weekdays.

If the new codes are implemented, employees in India may be able to enjoy a four-day workweek from next year, as opposed to the current five-day workweek. In that case, however, employees will have to work for 12 hours on those four days since the labour ministry has made it clear that even if the proposal comes through, the 48-hour weekly work requirement has to be met.

The codes also attain added significance in light of the fact that once these are implemented, there would be a reduction in the take-home pay of employees and firms will have to bear a higher provident fund liability.

Less take-home salary, more PF

According to experts who are assessing the proposed codes, the new laws will bring about a major change in the way employees calculate their basic pay and the provident fund (PF). Under these new codes, the contribution of employees to their PF account every month will increase but the monthly in-hand salary would get reduced, in turn.

The regulations restrict allowances to 50%, which implies that half of the salary would be basic wages and contribution to provident fund is calculated as a percentage of basic wage that involves the basic pay and dearness allowance (DA).

Under the current regulations, the employer’s percentage-based contribution towards the PF balance depends on the employee’s basic pay and dearness allowance. Say, if an employee’s salary is Rs 50,000 per month, their basic pay could be Rs 25,000 and the remaining Rs 25,000 might go into allowances. However, if this basic pay is increased, more PF will be deducted, thus decreasing the in-hand salary and hiking the contribution of the employer/company.

codes finalised, likely to be implemented next fiscal

The union government has already finalised the rules under the four codes and now states are required to frame regulations on their part as labour is a concurrent subject. 

“The four codes are likely to be implemented in the next financial year of 2022-23 as a large number of states have finalised draft rules on these,” the senior government official was quoted by PTI as saying. “The Centre has completed the process of finalising the draft rules on these codes in February 2021. But since labour is a concurrent subject, the Centre wants the states to implement these as well in one go.”

At least 13 states have pre-published draft rules

At least 13 states have pre-published draft rules on these laws, the official said.

Union minister Bhupender Yadav, too, had said in a reply to the Rajya Sabha earlier this week that the Occupational Safety, Health and Working Conditions Code is the only code on which the least number of 13 states have pre-published the draft rules.

The highest number of draft notifications are pre-published on The Code on Wages by 24 states/UTs followed by The Industrial Relations Code (by 20 states) and The Code on Social Security (18) states.

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