Suggestions to implement the proposed Labour Codes

RRRECOMMENDSECOMMENDSECOMMENDS
Quick
Implementation
of
Labour Codes
Benefits & Recommendations to
Central Govt.
The Code on Wages
The Code on
Industrial Relations
The Code on OSHW
The Code on
Social Security

BACKGROUND
Covid-19, which is said to have started in Wuhan, China. Sometime during the last week of
Dec 2019 still seems to have not weakened. It continues to wreak havoc to humanity.
Simultaneously, it poses a big challenge to the economies, across the globe, even for
survival. It has largely disrupted business / industrial operations. India was already
experiencing a pre-pandemic slow-down that its growth in the fourth quarter of the fiscal,
2020 went down to 3.1%. India had four phases of lockdown from 25th March 2020 till 31st
May 2020 to tackle the spread of the virus. The Government of India adopted the policy of
‘Life First; Livelihood Next’ during the first phase and later moved to ‘Life and Livelihood’.
The industrial houses in the country were largely out-of-operations with some minimum
exceptions during the lockdown phases. The sharp rise in unemployment, stress on the
supply chain, decrease in Government income, the collapse of tourism/hospitality
industries, reduced consumer activity, plunge in fuel consumption, rise in LPG sales were
reported during these phases. The Government of India too announced several relief
measures during this period in order to support the industries. Yet only negative growth is
predicted for the fiscal, 2021. The unlocking phase started on 1st June 2020. Industries are
trying its best to get back to the normalcy while at the same time the number of covid cases
is also on the increase. In fact, in some select places, the State Governments have gone for
another clampdown during the 3rd and 4th week of June 2020.
MEASURES BY STATES
It is in this scenario, during May 2020, some of the states have made moves to amend or to
entirely suspend the operation of labour laws for a specific period in their enthusiasm to
(a) quickly revive the industries / economy and (b) attract the investments in the post-covid
period. In the past few weeks, several states have moved to amend their labour laws,
ahead of restarting economic activities. States such as Uttar Pradesh, Maharashtra,
Rajasthan, Gujarat, Goa, MP, Uttarakhand, Assam, Punjab, Haryana and Himachal Pradesh
have increased the working hours from 8 to 12 hours. Uttar Pradesh, however, later
withdrew the order of 12-hour shift for workers following a notice from the Allahabad
High Court. Rajasthan also followed suit. While Uttar Pradesh and Madhya Pradesh
scrapped key labour laws for the next three years, Gujarat did the same for 1,200 days. In
MP, factory licenses will now be required to be renewed only once in 10 years instead of..
Disclaimer: “The article represents the opinions of the author and the author is solely
responsible for the facts, cases and legal or otherwise reproduced in the article”02
Quick Implementation of Labour Codes

annually. Also, MSMEs (micro, small and medium enterprises) will be able to hire
labourers according to their requirement to increase productivity.
In UP, only three labour laws will be applicable in the state for the next three years apart
from provisions relating to children and women in the suspended laws. The three
include the Building and Other Construction Workers Act, 1996, Workmen
Compensation Act, 1923, and the Bonded Labour Act, 1976.
The following tabulation will clearly explain the steps taken by various state
Governments :

The Central Government is already making efforts to reduce the existing
set of labour laws in the central sphere into just four codes, of which, The
Code on Wages has already been passed by both the Houses of Parliament
and only the date of commencement is awaited. The other three codes, viz,
The Occupational Safety, Health and Working Conditions Code, The Code on
Industrial Relations and The Code on Social Security are yet to be passed.

LABOUR CODES - HIGHLIGHTS
Number of legislations reduced
The Code on Wages subsumes in it the existing four legislations, viz., The Equal
Remuneration Act, The Minimum Wages Act, The Payment of Bonus Act and The
Payment of Wages Act; similarly, The Occupational Safety, Health and working Conditions
Code thirteen; Code on Industrial Relations three and The Code on Social Security nine.
Thus, at least, 29 existing central legislations will get reduced to just four codes. Therefore,
the amalgamation is sure to happen.
Attempt to reduce multiplicity of definitions
Currently, in all the 29 legislations, we find a total of ‘355’ definitions. The number of
such definitions will come down to ‘206’ in the four codes. Thus the multiplicity of
definitions is largely removed. Further, some of the key terms possess common definitions in all
the four codes.
Transactional compliance tasks getting reduced
The registration of an establishment is important and it is done separately under several
legislations, for ex., PF, ESI, Factories Act, Contract Labour Act, etc. The proposed labour
codes suggest one common registration instead of the multiple registrations. Employers are
given option of either to go for a common licensing under Factories Act, Contract
Labour Act and Beedi & Cigar establishments Act or to get it separately as is the case at
present. In addition, the volume of the transactional tasks like, maintenance of registers,
submission of returns, the statutory displays to be made, etc. are expected to come
down considerably. This clearly signals simplification and rationalization in doing
compliance which is otherwise considered to be complex.
Bringing in transparency and accountability by using technology
The codes permit maintenance of registers in electronic format. Proposals are made for
online submission of periodical returns. Online generation of challans for PF and ESI;
online payment of salary and bonus; online submission of applications are either
introduced or continued. Leveraging, thus, on technology, is expected to ease the...

procedure and this measure should ideally bring in transparency and accountability.
Powers given to states on dynamic factors
The fundamental working conditions like daily hours of work, weekly hours of work, rest
intervals, spread-over are all currently fixed under the Factories Act which will have
uniform application across the country. Whereas, the Occupational Safety Code considers
them as dynamic factors and powers have been given to the appropriate Governments to fix
for their respective areas. Exercising the powers conferred on them, each state Government
can decide on these working conditions and issue notifications, of course, subject to the
constitutional provisions, if any and the ILO conventions for which India is a subscriber,
instead of looking for separate amendments / suspension of labour laws.
Allowing Fixed Term Employment
Industries have been seeking permission to engage flexible work force as a part of labour
reforms for a long time now. Employment of contract workers is one way of doing it but
it has limitations. While ‘Fixed term employment’ is another form of flexible employment and
no doubt the idea is getting momentum, as such, employers cannot engage such a class of
employees freely in all the states. Interestingly, the term is specifically defined in labour
code on social security and industrial relations as well which adds strength to the
expectations of the Managements.
Expanded coverage
The scope of coverage of establishments / employees is getting expanded in the
labour codes. The terms gig worker, home-based worker, unorganized worker,
unorganized sector, self-employed worker, wage worker are all defined in labour
code on social security. The idea is to extend them the social security benefits as is
available for the workers in the organised sector. Similarly, the term ‘family’
would include the dependent grand-parents and widowed sisters also. It is further
suggested that separate latrines, shelters, rest rooms, bathroom facilities shall be
provided to transgender. What becomes evident from these measures is, apart from
extended coverage, the codes are also attempting for better social inclusion.

Changes in Industrial Disputes
The Code on IR provides for a sole negotiating union in an industrial establishment for
negotiating with the employer of the establishment, on such matters as may be provided
for by the rules. In case of more than one trade union, a trade union would be designated as
a sole negotiating union if it has support of 75% or more of workers in the muster roll of the
establishment. If no trade union has the support strength, a negotiating council shall be
constituted for negotiation.
The code also provides for recognition of trade unions.
It defines the expression ‘fixed term employment’ and the term ‘industry’ which is in line
with what was suggested in the Bangalore Water Supply and Sewerage Board case. Further,
the definition of the term ‘strike’ is proposed to be modified in the labour code on
industrial relations to include ‘mass casual leave’ within its ambit.
It is further suggested in the code to provide for industrial tribunal to be the adjudicating
body to decide appeals against the conciliation officer in the place of multiple adjudicating
bodies like court of inquiry, board of conciliation and labour courts.
Some of these are all long term expectations of the employers which are likely to be
fulfilled with the passing of the labour codes.
More Facilitation than Inspection
Yet another expectation of the employers was that the executive wing should extend
guidance and thus ensure compliance instead of waiting to catch hold of the employers
even for trivial matters establishing the ‘Inspector Raj’. Keeping this in mind, the labour
codes propose to change the terminology itself as ‘Inspector-cum-Facilitator’ instead of
‘Inspector’. The role is also expected to change accordingly.

Provisions to be reviewed

Under Code on Wages:

The term ‘wages’ is defined in Sec 2(y) of the Code on Wages as follows:
“ ‘wages’ means all remuneration whether by way of salary, 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, and includes,—
(i) basic pay; (ii) dearness allowance; and (iii) retaining allowance, if any, but does not
include––
a) any bonus payable under any law for the time being in force, which does not form part of
the remuneration payable under the terms of employment;
b) the value of any house-accommodation, or of the supply of light, water, medical
attendance or other amenity or of any service excluded from the computation of wages by a
general or special order of the appropriate Government;
c) any contribution paid by the employer to any pension or provident fund, and the interest
which may have accrued thereon;
d) any conveyance allowance or the value of any travelling concession;
e) any sum paid to the employed person to defray special expenses entailed on him by the
nature of his employment;
f) house rent allowance;
g) remuneration payable under any award or settlement between the parties or order of a
court or Tribunal;
h) any overtime allowance
i) any commission payable to the employee;
j) any gratuity payable on the termination of employment;
k) any retrenchment compensation or other
retirement benefit payable to the employee or any ex gratia payment made to him
on the termination of employment:
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;”
As per the first proviso, the payments made under clauses (a) to (i) exceeds one-half, the
amount which exceeds such one-half shall be reckoned as ‘wages’. Whereas, clause (a)
refers to the bonus payable as per law and clause (c) refers to the contributions made by
the employer towards pension or provident funds and the interest accrued thereon.
These two payments shall be added to arrive at the total remuneration. Like the clauses
(j) and (k), these two clauses, viz., (a) and (c) shall not be added to arrive at the total
remuneration. Otherwise, this could create a confusion when the actual working is done.
Under The Occupational Safety, Health and Working Conditions Code :
In Part I of Chapter XI of The Occupational Safety, Health and Working Conditions
Code, Sec 45(1) reads as follows : “This part shall apply to –
i. every establishment in which twenty or more contract labour are employed or were employed
on any day of the preceding twelve months through contract;
ii. every manpower supply contractor who has employed on any day of the preceding twelve
months twenty or more contract labour:
Provided ….
Provided further….
Provided also….”
As per this section, Part I of Chapter XI is applicable to only the manpower supply
contractor. The job contractor is not included. Whereas definition of the term
‘contractor’ as defined in Sec 2(1)(n) of the Code and Sec 47 which talks about licensing of
contractors include both the types of contractors, viz., job contractor and the manpower
supply contractor. Therefore, sub-clause (ii) of Sec 45(1) shall be modified as follows:
:

Every contractor who has employed on any day of the preceding twelve months twenty or more
contract labour:
Under the Code on Industrial Relations
The appropriate Government shall set up a fund to be called the worker re-
skilling fund. The contribution for the fund will be by the employer of an
amount equivalent to 15 days’ wages last drawn by the retrenched worker. This is
to be paid by the employer in respect of every retrenched worker. It is also
mentioned that the contributions will be from such other sources as may be
prescribed by the appropriate Government. While the idea of re-skilling of
workers is fine, this also adds to the financial burden of the employers. Instead of
compelling the employers, the funding can be by the Government and other
sources.
Under Code on Social Security
Even though the intention of the ESI Act is good, the medical services provided in many
places are far from satisfactory. This has been the situation for quite a long time. Even
the workers are looking for alternatives. In the Small Factories Act which was proposed
and in the other earlier drafts for amending the ESI Act, there was a suggestion to
provide option to the employees to choose between ESI Act and equivalent insurance
scheme introduced by IRDA. But, unfortunately, this is missing in the latest draft of the
code on social security. Suitable changes may be made in the code giving opportunity
for the employees to choose between ESI and IRDA controlled insurance scheme.
Recommendations
No doubt the industries have to step up and recover from the effects caused by covid-19.
It is also largely accepted that major reforms are required in the laws relating to ‘labour
and employment’ for the benefit of the industries in the long run. The Central
Government is seeking to consolidate the existing set of laws, estimated to be 44, into just
four codes without compromising on the spirit of it. There is a feeling among the section
of employers that the labour codes are a mere consolidation of existing central
legislations and there are no major

reforms. It is also debatable whether the proposed codes would be capable of ushering in
industrial relations, but, it is surely a step forward, at least from the compliance
perspective, in the right direction that could help the industries both in the short-term
(to address the damage caused by the pandemic) and in the long-term (could fulfill the
expectations of labour reforms to a certain extent). Suspending the entire set of labour
laws with a view to attract investments and reduce compliance burden may not be the
right idea and the constitutional validity could also be challenged. Therefore, steps may
be taken to pass all the four codes as quickly as possible and make it enforceable. Before
doing that, the entire draft may be properly reviewed particularly the points mentioned
in the section “Provisions to be reviewed”.
The State Governments can issue notifications, once the codes become operative, exercising
the powers conferred on them, taking decisions for their areas on the ‘dynamic factors’,
including the fundamental working conditions like working hours, rest intervals,
overtime, etc., of course, duly considering the ILO conventions and the constitutional
provisions on the matter. State Governments making amendments in the central laws
and going for suspension of entire set of labour laws can thus be avoided.
Apart from the central laws, each state has its own set of laws ranging from 2 to 7 in the
field of labour and employment. Each state can make an attempt to club all its
laws and bring the number down to just ‘one’, of course, without compromising on the spirit
of the existing laws.
K VARADAN,
CHIEF CONSULTATION OFFICER,
APARAJITHA CORPORATE SERVICES (P) LTD.,
MADURAI. .
marketing@aparajitha.com
+91 99524 06408+91 99949 39987

Suggestions to implement the proposed Labour Codes

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Suggestions to implement the proposed Labour Codes