New labour codes: Centre mulling monetary contributions to support employer-led re-skilling fund

Worker's Re-Skilling Fund is a first-of-its-kind statutory provision in the country’s labour law.

• Govt may fund Worker Re-Skilling to boost corpus per retrenched worker
• Employers must pay 15 days' wages for each retrenched worker under current rules
• Industry calls for government funds to support large-scale reskilling programs.

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The central government may tweak the present process of adding funds in the 'Worker Re-Skilling Fund', which is introduced in country post the implementation of new labour codes, Moneycontrol has learnt.

The Industrial Relations Code, 2020 introduces a 'Worker Re-skilling Fund' that requires employers to contribute 15 days' wages for each retrenched worker within 45 days of termination. This fund is aimed at improving the employability of the worker.

According to sources in the know, the government is mulling to include a provision, where it will also contribute monetarily to the Re-Skilling Fund, as this would “increase the corpus per worker”.

What is the Re-skilling Fund?

Section 83 of the Industrial Relations Code, introduces this fund, a first-of-its-kind statutory provision in the country’s labour law designed to provide a financial safety net and career transition support for workers who lose their jobs due to retrenchment. At present, no such fund exists.

Once operational, any retrenched worker – who is not into managerial of administrative role – will get the benefit from the fund for re-skilling, a government official clarifies.

The Code, however, doesn’t define the exact meaning of re-skilling, or how it will be done. It only says that the "fund shall be utilised by crediting fifteen days wages last drawn by the worker to his account who is retrenched, within forty-five days of such retrenchment, in such manner as may be prescribed."

The details of how the fund will function will be known through rules, which will be notified in the coming months, according to sources in the know. There is no clarity on the timeline.

Moreover, Section 83 (2) (b) allows the fund to receive contribution from other sources as well, which includes government as well.

The quantum of the contribution from the government is not yet decided, and it could be mentioned in the rules. However, the 15-day wages' contribution criteria for the employer is unlikely to change, the sources said.

"The labour ministry will issue the rules, which would provide clarity on how the re-skilling fund will work. Apart from the 15-day wage contribution employers, the fund will have monetary contribution from several other sources, which may include the government too," the government official quoted above told Moneycontrol. "Every year, a fixed amount from the Budget could be allocated for the fund."

What does the industry say?

According to industry, the employer's mandated 15 days' wages per retrenched worker, while progressive, falls short amid escalating displacements.

Suchita Dutta, Executive Director, Indian Staffing Federation, says that with employer inputs limited to 15 days' wages per retrenched worker—averaging Rs 15,000-20,000 for blue-collar roles— the fund risks underfunding comprehensive programs.

“A matching government infusion, say 1:1 ratio, could double the corpus, enabling Public Private partnerships, to deliver certified courses in high-demand sectors like IT and manufacturing,” she added.

Industry executives say that government matching funds, akin to “successful models like Skill India”, would amplify the corpus, ensuring sustainable retraining for 400 million needing reskilling.

The Skill India Mission, launched in 2015, is implemented through National Skill Development Corporation (NSDC). The NSDC receives money to impart training to workers, through funds received from the central government, states, multilateral institutions, and private donors.

Rahul Singh, Associate Professor, OP Jindal Global University says a government co-contribution to the Fund can enhance the per-worker corpus and enable scalable public-private partnerships. "While the employer-mandated 15 days’ wage contribution creates accountability, it is inadequate for meaningful reskilling amid rapid technological and sectoral change," he adds.