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New Wage Code: 5 Things That Will Impact Salaried Employees

The new rules are in line with changing labour market trends and, at the same time, provide for the welfare requirements of employees in the unorganized sector.

Shruti Kandwal
The law will have an effect on take-home pay while raising retirement savings.
The law will have an effect on take-home pay while raising retirement savings.

The four labour rules from the Centre—on wages, social security, labour relations, and occupation safety, health, and working conditions—should go into effect soon. It was originally scheduled to go into effect in April 2021, but because labour is a concurrent subject, both the Centre and the states are required to notify rules under these four codes to make them the laws of the land.

Bhupender Yadav, the minister of labour, recently expressed confidence in the probability that the four codes will soon be put into effect because almost 90% of states had already come out with draft rules.

In 2019 and 2020, 29 central labour laws were amalgamated, rationalized, and simplified into four labour codes, viz, the Code on Wages, 2019; the Industrial Relations Code, 2020; the Code on Social Security, 2020; and the Occupational Safety, Health & Working Conditions Code, 2020, noted the Survey.

The new rules are in line with changing labour market trends and, at the same time, provide for the welfare requirements of employees in the unorganized sector, including self-employed people and migrant workers, as well as the minimum wage requirement.

Here's how the new labour code will impact employees:

1. If the four codes are put into effect, it would drastically alter how industrial companies treat their employees and have an influence on their working conditions, take-home pay, and other rights. For instance, there will be considerable changes to the calculation of employees' basic pay and provident fund once the wages code is in effect.

2. One significant change is that it would have an effect on take-home pay while raising retirement savings, which is something that some employers are against since it might raise their employee costs.

3. According to the new code, employees' basic pay must equal 50% of their gross salary. Although the employees' take-home pay will decrease, both the employer and the employees' PF contributions will increase.

4. In accordance with the new law, companies will be able to demand their workers to work 4 days per week as opposed to the present 5; nevertheless, the daily work hours will increase from 9 to 12 hours per day since they must meet the 48-hour weekly work requirement. Employees will get a week off consisting of 3 days if a 4-day work week is implemented. An employee should be given overtime pay if they work more than the required 48 hours per week.

5. According to the new wage code, a company must pay employees their entire final settlement within two days after their last day of work. Currently, the complete settlement of salary and dues is given after 45 days to 60 days from an employee's last working day. The new law states that "the wages payable to him shall be paid within two working days of his removal, dismissal, retrenchment, or, as the case may be, his resignation" when an employee has been (i) removed or dismissed from service; or (ii) retrenched or has resigned from service, or (iii) became unemployed due to closure of the establishment."

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