Your salary structure is unlikely to change from April 1 as the government postpones the implementation of labor codes

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New Delhi: In great relief for India Inc, the government has postponed the implementation of labor codes beyond April 1. Economic period citing a senior Department of Labor official mentioned in a report that implementation of labor codes has been delayed for some time because states have yet to finalize the rules.

“Implementation of labor codes looks unlikely from April 1. The government wants at least some industrial states to notify the rules of four labor codes as well as the Center to avoid any legal loopholes,” the government said. official quoted by the publication.

The delay is a great relief for India Inc as it will give companies more time to rework employee salary structure and other Human Resource (HR) related policies. Certain provisions of the code would have resulted in an increase in the cost to the company (CTC) of the employees.

The report further mentions that the Department of Labor is ready with the rules on four codes and will let them know once certain states are ready with rules in their area. So far, only Jammu and Kashmir has notified rules for the codes while states like Uttar Pradesh, Bihar, Uttarakhand and Madhya Pradesh have put in place draft rules for two codes while Karnataka set it up for a code.

It should be mentioned here that in 2019 Parliament approved the Wages Code and in September 2020 it approved the Social Security Code, the Industrial Relations Code and the Safety, Health and Working Conditions Code. job. 29 labor codes have been merged into four codes to significantly reduce the compliance burden and improve the ease of doing business. The new codes also aim to make it easier to hire and fire workers and give employers more flexibility in terms of working hours.

Under the new codes, salaries would be at least 50% of an employee’s total salary. Given that today most companies have their base salary around 35% to 45%, this would amount to a change for them. Your CTC may also increase with your base salary when the new rules are implemented.

The most important factor of change in the labor code is the standard of the definition of “salary” for the wage code and the social security code. In the existing laws, the definition of wages varied from one legislation to another. For example, in the definition of salary under the Maternity Benefit Act, Minimum Wage Act, Wage Payment Act and Bonus Payment Act, housing allowance as a component is included, but is excluded under the Bonuses Payment Act and Employees Act. Provident Fund and Miscellaneous Provisions Act. So, for an employer, keeping tabs on the different requirements under each law has been cumbersome.

The definition of “salary” in the new Code is an inclusive definition and includes all remuneration, but excludes certain allowances and benefits such as housing allowance, overtime allowance, statutory bonus, employer to provident/retirement fund, etc. If the value of exclusions exceeds 50% of the total salary, then the excess amount would be included in the salary. The additional value of remuneration in kind must also be included up to 15% of the total salary.

William M. Mayer