Code on Wages, Code on Social Security to increase employer's financial liability

Source: AP

The Code on Social Security, 2020 and the Code on  Wages, 2019 will result in an increase in the financial liability on the part of employers, experts say.

"Code on Wages would impact the employer largely as they will have to pay more to the workers with regard to what they were paying till now," said Prashant Singh, Vice President and Business Head- Compliance and Payroll Outsourcing, TeamLease Services.

"The skewness of skilled and semi-skilled in a few developed states would dilute and business and labour uniformity would start happening which would ease the business continuity," he adds.

The Code of Wages was passed in August 2019. It makes provisions for minimum and timely payment of wages to all the workers in India.  The Code introduces the concept of floor wages wherein the rates will be fixed by the central government by taking into account the minimum living standards of the workers.

Once the code is enacted, the minimum rates of wages fixed by the state government cannot be less than floor wages as determined by the central government. The Code applies to all the establishments irrespective of the number of employees working in the establishment. It also applies to all the employees employed in both the organised and the unorganised sector.

Commenting on the impact of Code on Social Security on employers, Singh remarked: "Inclusion of gig workers would surely help in providing them social security, stability and retention. However, employers will have to streamline their accounting system, payroll and statutory benefits which would put some stress to exchequer but would help in retaining right talent not moving to organised aggregators."

The Code on Social Security, 2020 passed by the Narendra Modi-led NDA government in September 2020 has for the very first time extended the social security benefits like maternity leave, disability insurance, gratuity and health insurance and old age protection to the workers in the country’s booming gig economy sector.