New Labour laws Codes 20 2019 - Brief.pptx

labour code

1. Session Index Introduction on all Codes and amalgamation New provisions and its Impact Changes that affect various stake holders - Examples Gist of financial impact Being prepared to the changes 1

2. Rationale The code is planned in pursuance to the recommendation of the 2 nd National Commission on Labour - 2002. Recommended that the existing set of labour laws should be broadly amalgamated into the following groups, namely Industrial Relations; Wages; Social Security; Safety; and Welfare and working conditions Simplification by removing multiplicity of definition and Rationalization was also thought out To apply the provisions for all establishments irrespective of scheduled employment s without compromising basic concepts of benefit and welfare To impart flexibility in dynamic factors and technological changes for better transparency Enhanced Penalty and provision for compounding of offence is introduced in order to give thrust to compliance. 2

3. Amalgamation Code on Wages, 2019 3 Sl. No. Act 1 The Minimum Wages Act, 1948 2 The Payment of Wages Act, 1936 3 The Payment of Bonus Act, 1965 4 The Equal Remuneration Act, 1976 08-08-2019

4. Amalgamation Code on Social Security, 2020 4 Sl. No. Act 1 The Employees‘ Compensation Act, 1923; 2 The Employees‘ State Insurance Act, 1948; 3 The Employees‘ Provident Funds and Miscellaneous Provisions Act, 1952; 4 The Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959 5 The Maternity Benefit Act, 1961; 6 The Payment of Gratuity Act, 1972; 7 The Cine Workers Welfare Fund Act, 1981; 8 The Building and Other Construction Workers Cess Act, 1996; 9 The Unorganized Workers‘ Social Security Act, 2008 29-09-2020

5. Amalgamation Occupational Safety, Health & Working Conditions Code, 2020 5 S. No. Act 1 The Factories Act, 1948 2 The Mines Act, 1952 3 The Contract Labour (Regulation and Abolition) Act, 1970 4 The Inter-State Migrant Workmen ( RoE and CoS) Act, 1979 5 The Plantations Labour Act, 1951 6 The Building and Other Construction Workers ( RoE and CoS) Act, 1996 7 The Dock Workers (SH&W) Act, 1986 8 The Sales Promotion Employees (CoS) Act, 1976 9 The Motor Transport Workers Act, 1961 10 The Working Journalist and Other News Paper Employees (CoS and MP) Act, 1955 11 The Working Journalist (Fixation of rates of wages) Act, 1958 12 The Beedi and Cigar Workers (CoE) Act, 1966 13 The Cine Workers and Cinema Theatre Workers Act, 1981 29-09-2020

6. Amalgamation Industrial Relations Code, 2020 6 Sl. No. Act 1 The Trade Union Act, 1926 2 The Industrial Employment (Standing Orders) Act, 1946 3 The Industrial Disputes Act, 1947 29-09-2020

7. 7 Sec 2(f) defines who ‘a contractor’ is ( almost on par with the one in the existing CLRA Act ) Sec 2(g) defines ‘contract labour ’ ( specifically includes inter-state migrant workmen and excludes the persons who are regularly employed ) Differentiates ‘employee’ (2(k)) and ‘worker’ (2(z)) Common definition for ‘wages’ for all the four existing laws Certain allowances, excluded for Minimum Wages and Bonus but included for Payment of Wages and Equal Remuneration A cap – 50 % - fixed for ‘excluded components’ HRA – No more part of minimum wages Minimum wage applies to employees as well as workers The appropriate Governments can fix the rates of minimum wages Floor rates can be fixed only by the Central Government State Governments cannot fix lower than the ‘floor rates Snapshot – Code on Wages, 2019

8. Code on Wages, 2019 - Impact 8 8 Description Impact Wages - HRA is excluded from wages Cannot have HRA as a component particularly when mere MW is paid Wage ceiling for eligibility for bonus and calculation - To be notified by Appropriate Govt. Have to wait for the Appropriate Govts to notify - There could be difference in eligibility from State to State to Central. Since Basic salary shall not be less than 50% of total wages, Employer's liability towards payment of Bonus may increase. Bonus chapter shall apply to such establishment in which 20 or more persons are employed or were employed on any day during an accounting year Clarity required on continuity of bonus in case of reduced strength Mode of payment of bonus - Only through bank credit Employers cannot pay bonus to their employees in cash Bonus to contract workers - If contractor fails, Principal Employer should pay the same Responsibility is fixed to Principal Employer for payment of bonus to contract workers if contractor fails. No explicit mention of recovery from the contractor's invoice. Payment to contractors - Contractors payment shall be ensured by the Principal Employer before Contractor makes the payment to his employees Principal Employer cannot hold the payment to the contractors even if the contractor fails to ensure appropriate compliance including statutory compliance.

9. 9 Description Impact Wages on separation including resignation - To be made within the next 2 working days For non-payment / less payment of wages - first offence: maximum fine upto Rs . 50,000/- & subsequent offence - with imprisonment: Upto 3 months; or with fine upto Rs . 1 Lakh. For non-maintenance of records: with Fine: upto Rs . 20,000/- and Subsequent Offence: Fine upto Rs . 40,000/- Due date for payment of wages Daily - End of the day Weekly - Last working of the week Fortnightly - Within 2 days after the end of the period. Monthly - Within 7 days of next month For non-payment / less payment of wages - first offence: maximum fine upto Rs . 50,000/- & subsequent offence - with imprisonment: Upto 3 months; or with fine upto Rs . 1 Lakh. For non-maintenance of records: with Fine: upto Rs . 20,000/- and Subsequent Offence: Fine upto Rs . 40,000/- Wages - Shall not be less than 50% of total remuneration. Employer's liability towards PF & ESI contribution, Bonus, and Gratuity may vary. All employees ( Rs . 24,000/- ceiling removed) without any exception would be covered under POW Procedural compliances to be done for all employees Equal remuneration claim - All gender can claim equal remuneration and no disparity is permissible in recruitment too Transgender are also included. Code on Wages, 2019 - Impact 9

10. 10 Single Registration of establishments Providing definition to certain new terminologies Gratuity for Fixed Term Employees Extending social security benefits to even for those who do not fall under traditional employment relationship Mandating Aadhaar Major change in the definition of ‘wages’ PF coverage to all industries PF coverage for apprentices engaged through Certified Standing Orders Voluntary coverage under ESI ESI for plantations, hazardous and life threatening establishments Career centre – Employment exchange Snapshot – Social Security Code, 2020

11. Social Security Code, 2020 - Impact 11 11 Description Impact PF applicability to establishments engaging 20 or more employees - Industry specific applicability withdrawn (apply to all industries) Current non-scheduled industries shall have the implication of statutory coverage. Apprentices engaged as per the Standing orders are to be covered in PF Increased PF liability on employers PF Wages - 50% of wages from gross and spilling out amount of more than 50% shall be construed as "wages". It can be restricted to ceiling wage. Existing Schemes are retained for 1 year. There could be higher commitment where allowances are more than 50% of Gross wages. Inspection - Proceedings can happen only for five years period Reduced risk exposure under PF ESI Applicable if 10 or more employees are engaged. ESI Applicability to Banks and Mines For Hazardous or life threatening occupation as notified by Central Govt , applicable even if single employee is employed Specific notification of area of implementation is removed Voluntary coverage to plantation Shall have the extended applicability. Wages for ESI coverage and remittance - To be notified. Existing Rules & Regulations are retained for 1 year. More employees are likely to be covered under ESI

12. 12 Description Impact Und er ESI, currently less than two months periodicity payments are assumed as wages for remittance purpose only but no mention of the same in the Code May give room for making payment on more than a month frequency to avoid ESI. Requires clarity Gratuity - Wages shall not be less than 50% of total remuneration. Gratuity payout may increase substantially. Fixed term employee - Fixed term employees for all establishments shall become eligible for gratuity benefit proportionately even less than 5 years of continuous period of service. Extra gratuity commitment towards such fixed term employees EC - Funeral expenditure is Rs 15000 or such sum as fixed by the State Financial impact under EC Provisioning of Crèche - Creches applicable if employing more than 50 employees (men & women) irrespective of ESI coverage. Higher financial and compliance impact. Payment of Maternity Benefit - Wages shall not be less than 50% of total remuneration. Financial impact may reduce. For Telecommunication/ Insurance/ banking companies, Central government shall be the appropriate government for vacancy notification Return submission, notification of vacancies are to be done with Authority of Central Government. Extending social security to unorganized workers also Wide coverage Aadhaar mandatory for availing social security benefit Inter-linking and avoid duplicity Social Security Code, 2020 - Impact 12

13. 13 Snapshot – OSHWC Code, 2020 Exclusive definition for ‘appropriate Government’2(1)(d): Need not refer ID Act Sec 2(1)(n) defines who ‘a contractor’ is ( almost on par with the one in the existing CLRA Act ) Sec 2(m) defines ‘contract labour’ ( specifically includes inter-state migrant workmen and excludes the persons who are regularly employed ) Differentiates ‘employee’ (2(1)(s)) and ‘worker’ (2(1)( zze )) Inclusion of Contractor in the definition of ‘employer’ 2(1)(t) Wide scope of definition for ‘establishment’ 2(1)(u) Definition of ‘Industry’ 2(1) zb at par with the triple test formula laid down under Bangalore water supply sewerage board case – Supreme Court Direct employment of workers from other States would become an ‘Inter-state Migrant’ Workers 2(1)zd Independent director can’t be an occupier of the factory. 2(1)zo(ii) Appointment order made mandatory Sec. 6(1)(f) Reduction in threshold no. of workers for appointment of Safety Officer, Welfare Officer, provisions of canteen, crèche, etc., (Sec. 22 & 24)

14. 14 Snapshot – OSHWC Code, 2020 Third Party Audit and certification (Sec. 37) Overtime with consent of worker (Sec. 27) Direct liabilities of Principal Employers for the provisions of various amenities to contract workers (Sec. 53) The workers of unlicensed contractor shall be deemed as direct workers of Principal Employer (Sec 54) Experience certificate to Contract Labour to be issued by Principal Employer (Sec. 56) The role of inspector is modified as “Inspector cum facilitator” (Sec. 35) Beneficial Leave with wages provisions for workers – Reduction of eligibility from 240 days to 180 days and every year encashment of leave while in service (Sec. 32)

15. OSHWC Code -Impact 15 15 Description Impact The threshold number to constitute a “factory” is changed – 20 and 40 workers instead of 10 and 20 Could favour small employers Night shift for woman with her consent and overtime with worker’s consent Advancement at the same time with caution and favoring workers Safety Officer - Applicable if engaging more than 500 workers. 250 for HZ process industry More number of factories will come under the coverage. Canteen Facilities - Applicable if engaging more than 100 workers (direct and Contract workers) Financial and compliance liability will increase. Welfare Officer - Applicable if engaging more than 250 workers More number of factories will come under the coverage. Provisioning of Creches - Applicable if employing more than 50 workers More number of factories will come under the coverage. Irrespective of Gender, scope of creche applicability is widened now Leave eligibility - Worker should have worked 180 days in a calendar year. Encashment of leave annually on demand or in excess of 30 days carry forward Increase in leave wages as more people will become eligible and procedural work on encashment. Over time wages - Double the rate on wages Reducing the total quantum with exclusion clause Appointment Order made mandatory for all including contract workers Accountability of employers towards employee increases

16. 16 Description Impact Independent director can’t be an occupier of the factory Only MD or whole time directors can be nominated thus bringing them under the loop of ultimate responsibility Hours of work – Daily, Weekly, quarterly OT etc Bringing some clarity and enable proper shift planning. Chapter concerning the Contract labour shall apply only if 50 or more contract labour are employed Would bring an uniformity across India and bring out many small industries from the purview of registration and inspection The term core activity is defined as “ activity for which the establishment is set up and includes any activity which is essential or necessary to such activity” . Code prohibits employment of contract labour in core activities Clarity brought in. Since the core activity is defined and some of the activities are in perennial nature and these are excluded from the definition (11 activities). Employers to be careful not to engage in core activities to avoid prosecution Contractor having operations in multiple States may obtain common licence from the authority specified by the Central Government. Ease of operation by enabling a provision in the portal. Requires clarity ‘Contract Labour ’ definition - specifically includes Inter-State Migrant workmen and excludes the persons who are regularly employed There will be ambiguity in identifying and differentiating the direct employees of contractors. Basanta Kumar Mohanty Vs. State of Orissa - Orissa HC 1992 case law . OSHWC Code -Impact 16

17. Following shall not be considered as essential or necessary activity, if the establishment is not set for any such activity S anitation works, including sweeping, cleaning, dusting and collection and disposal of all kinds of waste; W atch and ward services including security services; Canteen and catering services; L oading and unloading operations; Running of hospitals, educational and training Institutions, guest houses, clubs and the like where they are in the nature of support services of an establishment; Courier services which are in nature of support services of an establishment; Civil and other constructional works, including maintenance; Gardening and maintenance of lawns and other like activities; Housekeeping and laundry services, and other like activities, where these are in nature of support services of an establishment; Transport services including, ambulance services; Any activity of intermittent nature even if that constitutes a core activity of an establishment; 17

18. 18 Description Impact Welfare facilities - Principal Employer is primarily liable for canteen, rest room, first aid, drinking water and other welfare facilities to workers This will increase the cost on providing such welfare facilities. However, no prohibition to get the canteen amount from the individuals including contract labours Applicability of ISMW - Applicable when 10 or more ISMW are engaged (drawing wages not exceeding Rs . 18000/- per month) Number of establishments for ISMW coverage may reduce Definition of ISMW - Direct employees included if such workers are drawing wages not exceeding Rs . 18000/- per month More number of establishment may come under the ISMW coverage In case of accident to ISMW, authorities in both the States and next of kin are to be informed Increasing the procedural compliance and finding the correct authy in the domicile state Journey allowance, toll free helpline and availing public distribution system for ISMW Additional care for ISMW. Displacement allowance removed Third Party Audit and certification by Experts Panel Facilitating small and start-up establishments to comply Medical examination for workers above 45 years Free of cost test would motivate them to keep fit. OSHWC Code -Impact 18

19. 19 Snapshot – IR, 2020 Appropriate Government’ definition is at par with other codes [Sec. 2 (b)] No definition of ‘employee’ in either of these three subsumed Acts [Sec. 2 ( i )] New definition of ‘fixed term employment’: at par benefits as like of permanent workers [Sec. 2 (l)] New definition of ‘Negotiating Union’ or ‘Negotiating Council’ [Sec. 2 (v)] – for recognition as referred in Section 14. Termination due to continued ill-health is not treated as Retrenchment [Sec. 2 ( zc )] The Central Government shall make model standing orders relating to conditions of service and other matters incidental thereto or connected therewith (Currently, appropriate Govt.) [Sec. 29] Board of Conciliation, Court of Inquiry and Labour Courts are removed in the code [Chapter VII] and Industrial or National Tribunals replaced Notice of Strike or lock-out from 6 weeks to 60 days Public Utility Service is changed as Industrial Establishment [Sec. 62] If employer receives any notice of strike/lock-out, he shall report the same to App. Govt. or authority and to conciliation officer within 2 days on receipt (currently it is 5 days) [Sec. 62 (6)] Appropriate Government shall set-up the workers re-skilling fund through notification (Sec. 83) To obtain permission from the appropriate govt. for retrenchment or lay-off if 300 or more workers are employed

20. IR code - Impact 20 20 Description Impact "Appropriate Government“ is CG for metro railways, telecommunication, insurance and banking companies, estb . of contractors serving to PSU More clarity given. Industry definition in line with the Apex court verdict in Bangalore Water Supply and Sewerage Board Case, 1978. Triple test Gives more clarity (Inclusion & Exclusions) To obtain permission from the appropriate govt. for retrenchment or lay-off if 300 or more workers are employed Would benefit the employer Allowing flexible employment – Fixed Term Employment Giving leverage to employer based on the business requirement 15 days last drawn wages for reskilling fund before retrenchment Additional liability to employer SO applicability is 300 and deemed approval of certification of standing orders beyond 60 days from submission. MSO is only from Central Govt Need to wait for local Authy response though it is beneficial to the employer The trade union having 51% or more workers support shall be recognised as sole negotiating union else negotiating council to be formed Ease in recognition. Prohibits strikes and lockouts in any industrial establishment without giving notice of 14 days and validity of notice is extended from 6 weeks to 60 days Balancing has been done. Time period for filing a grievance application is reduced from three years to one year and for raising industrial dispute before the conciliation officer is reduced to 2 years from 3 years. Reduction period of raising ID is in place with contemporary requirements

21. ‘Wages’ – Common Definition 21 Code Section Code on Wages Sec 2(y) Code on Social Security Sec 2 (88) OSHWC Code Sec 2 (1) ( zzj ) Industrial Relations Code Sec 2 ( zq ) 21

22. Definition - Wages Wages – Various Parts Specifics Substantive All remuneration whether by way of salaries, allowances or otherwise, expressed in terms of money or capable of being so expressed which would, if the terms of employment, express or implied, were fulfilled, be payable to a person employed in respect of his employment or of work done in such employment, Inclusive Basic, DA, Retaining Allowance, if any Exclusion (a) Any bonus payable under any law (b) The value of house accommodation, or….. (c) Any contribution paid by the employer to any pension or PF (d) Any conveyance allowance (e) Any sum paid to defray special expenses (f) House Rent Allowance (g) Remuneration payable under any award or settlement (h) Any overtime allowance ( i ) Any commission payable (j) Any gratuity payable on termination (k) Any retrenchment compensation 22

23. Wages – Various Parts Specifics Proviso and Explanation Provided that, for calculating the wages under this clause, if payments made by the employer to the employee under clauses (a) to ( i ) exceeds one-half, or such other per cent , as may be notified by the Central Government, of the all remuneration calculated under this clause, the amount which exceeds such one-half, or the per cent so notified, shall be deemed as remuneration and shall be accordingly added in wages under this clause:   Provided further that for the purpose of equal wages to all genders and for the purpose of payment of wages, the emoluments specified in clauses (d), (f), (g) and (h) shall be taken for computation of wage.   Explanation.––Where an employee is given in lieu of the whole or part of the wages payable to him, any remuneration in kind by his employer, the value of such remuneration in kind which does not exceed fifteen per cent. of the total wages payable to him, shall be deemed to form part of the wages of such employee;” 23 23

24. Easy understanding REMUNERATION = SUBSTANTIVE PART + INCLUSION PART + EXCLUSION PART WAGES = REMUNERATION – EXCLUSION PART (sum of clauses (a) to ( i ) alone subject to 50% as maximum) 24

25. Changes that need to be implemented having financial impact Salary structuring and knowing MW applicable Knowing PF, ESI, Gratuity, Bonus & Leave encashment liability Engaging workers for overtime Gratuity and bonus commitment to FTEs and CLs respectively Amenities to CLs Providing crèche even if ESI chapter is applicable Reduction in threshold limit for SO, WO, canteen etc Leave eligibility ( from 240 to 180 ) Leave encashment on demand or in excess of 30 days carry forward Contribution to reskilling fund on retrenchment Amenities for trans-genders 25 25