New Labour Laws to Come into Effect from July 1: Key Changes in Salary, PF, Working Hours & Leaves

From July 1, 2022, the Central government intends to put into effect a number of new labour laws. Once the new regulations are in place, they will significantly change all Indian industries and sectors. New labour laws will lead to major changes to the regulations surrounding employee working hours, provident funds, and pay scales.

Despite indications that the Centre is prepared to implement these guidelines starting next month, no formal notice has yet been made. The changes will affect areas such as wages, social security (pension, gratuity), labour welfare, health, safety, and working conditions (including that of women).

According to reports, 23 states have created state labour codes and regulations based on the newly passed Occupational Safety, Health and Working Conditions Code, 2020, Industrial Relations Code, 2020, and Code on Social Security, all of which were approved by the Parliament.

Significantly, the states that have established regulations under the new labour laws include Uttarakhand, Uttar Pradesh, Madhya Pradesh, Chhattisgarh, Odisha, Arunachal Pradesh, Haryana, Jharkhand, Punjab, Manipur, Bihar, Himachal Pradesh, and UT of Jammu and Kashmir.

List of key changes to come into effect under new labour laws:

Working Hours: Working hours for employees throughout all sectors will vary considerably as a result of the new rules. The Factories Act of 1948 presently regulates working hours for employees in factories and other similar businesses on a national basis, while state-specific Shops and Establishment Acts govern office workers and other employees. The daily and weekly maximum working hours, however, have been set at 12 and 48 hours, respectively, as part of the new rules. Due to the rise of overtime from 50 to 125 hours each week across all industries, businesses will be able to establish 4-day workweeks.

Salary Structure: As part of the new labour laws, the basic salary of an employee will have to be at least 50 percent of the gross salary. As a result, employees will contribute more to their EPF accounts and gratuity deductions will increase, which would lower most employees' take-home pay.

Leaves: In accordance with the new labour rules, the central government intends to rationalize leave schemes. Employees will now get a leave after 20 days of work instead of 45, while the number of leaves in a year will stay the same. Furthermore, rather than requiring 240 days of employment to qualify for leaves, new employees will just need 180.

Provident Fund Contributions: The ratio of take-home salary to employee and employer's contribution to the provident fund will vary substantially under the new labour law. According to the provisions of the new laws, the employee's basic wage must equal 50% of their gross salary. Employee and employer PF contributions will increase, while some employees' take-home income will decrease, especially those who work for private firms.