Salary structure, hours of work, holidays to be modified under new labor laws; Know the details

The government has released four new labor codes after working on them for several months, in a bid to revamp the rules dictating the age-old relationship between employees and their employers. The newly prescribed labor codes provide for a multitude of schemes, under which there will be significant changes in terms of an employee’s salary, FP contributions and working hours. Labor codes also include changes in working conditions, worker welfare, health and safety. These laws, when implemented, will cause organizations across the country to undergo paradigm shifts.

Here are the changes we can expect under the four new labor codes

Working hours and days off

Under the new labor law, one major thing likely to be implemented is the change in working days. Once the new rule takes effect, companies will be able to have employees work for four days instead of five, and there will be three weeks off. However, there is a catch. Employees will have to work 12 hours a day instead of eight, since working hours will not be reduced. This will apply to all industries, but may change from state to state depending on the rules set by a particular state.

PF contributions and net salary

Another major change this will bring is the relationship between take-home pay and employee and employer contribution to the provident fund. In accordance with the provisions of the new codes, the employee’s base salary shall be 50% of the gross salary. While this means both employee and employer PF contributions will increase, net pay will decrease for some employees, especially those working in private companies. The money received after retirement as well as the amount of gratuity will also increase under the provisions of the new draft rules.

Annual leaves

The central government, as part of the new labor law, also wants to streamline the leave an employee can take during their tenure in a company. The policy for deferring leave to the following year and for cashing in leave has also been streamlined. The government also recognizes working from home, which has become widespread during Covid-19, in its draft model for the service sector. On the other hand, the new labor codes have increased the eligibility criteria for leave from 240 working days to 180 working days in one year. This means that to qualify for leave, an employee must work for 240 days after joining a new job.

Uttarakhand, Uttar Pradesh, Madhya Pradesh, Chhattisgarh, Odisha, Arunachal Pradesh, Haryana, Jharkhand, Punjab, Manipur, Bihar, Himachal Pradesh and UT of Jammu and Kashmir are among the states that have already drafted labor law rules.

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William M. Mayer