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No, Labour Codes are not coming into effect from July 1

These are structural reforms and the ministry is for balancing labour welfare on one hand and ease of doing business on the other.

June 30, 2022 / 05:34 PM IST
Representative image

Representative image

Notwithstanding wide speculations and scattered news reports, the four labour codes on industrial dispute, social security, wage and occupational safety, are not coming into effect from 1 July.

“It’s not getting rolled out on 1 July. The discussions and deliberations on final contours of the four codes are still on. Do not go by speculations,” a senior government official told Moneycontrol.

These are structural reforms and the ministry is for balancing labour welfare on one hand and ease of doing business on the other, a second official said, adding that the union labour ministry is in touch with states, industries and other stake holders and things have progressed well so far, but " July 1 is not the date we are looking at".

In response to a question whether the ministry is rolling out the labour codes from Friday (July 1), a ministry spokesperson said “No”.

Authorities in the labour and employment ministry said the ministry will make formal announcement when things are ready and codes are getting rolled out but nothing immediately is in the plan.

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India has consolidated 29 central labour laws into four codes on wages, social security, occupational health, and industrial relations. While the parliament approved the Code on Wages in August 2019, the rest three were passed in September 2020. But none of them has been rolled out as yet.

The labour codes are expected to introduce far-reaching changes with implications for employers and workers. They will offer greater flexibility in rolling out short-term work contracts, make hiring and firing flexible, and make industrial strikes harder.

There will be a new national wage floor that will benefit workers, while informal and gig workers will get a social security net. A change in the definition of wages may impact the take-home amount but will increase retirement savings – something that some entrepreneurs and employers oppose because it could increase their employee cost in the short term.

Among several other provisions, the wage code has underlined that a 48-hour work week will not change. But there may be some flexibility on work hours, which can stretch upto 12 hours a-day if an employee and employer agree on a case-to-case basis. This has given rise to speculations that some sectors and job roles may go for four-day work week but until the final rules are out and codes are rolled out it will remain as a conjecture.

Industry survey:

At least 64 percent of companies in India are expecting a visible impact on their profit and loss (P&L) as a result of the anticipated changes in the four labour codes, as per a recent survey by global advisory firm Willis Towers Watson (WTW).

On labour codes, the survey further said that at least 71 percent of companies have taken some action to assess implications. Similarly, 34 percent companies are unsure of making changes to their compensation structure in response to the new definition of wages, while 23 percent are planning to include variable pay in the wage definition.

In light of the possible changes via the labour reforms and increasing cost of providing retirement benefits, WTW survey has found that 53 percent of organisations in India are considering or have planned to review their retirement or long-term benefits design in the next two years.
Prashant K Nanda is an Associate Editor at Moneycontrol .
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