Most workers in the unorganized sector were unbeknownst to social security. For the first time, the welfare of both—the organized and unorganized sectors is a priority, and that too, through a uniform set of codes and not through a complex web of legislations.
29 different labour law legislations have been compiled and revamped to form 4 new labour codes— Code on Wages, 2019, Industrial Relations Code, 2020, The Code on Social Security, 2020, and the Occupational, Safety, Health and Work Conditions Code, 2020.
The reforms tackle wages, social security (pension, gratuity), labour welfare, health, safety, and working conditions (including women's).
The most recognizable tweak is the change in working hours. Under the new codes, daily and weekly working hours have been capped at 12, and 48 hours, i.e., companies can introduce 4-day work weeks. In addition, overtime work has been increased from 50 hours to 125 hours in a quarter across industries.
Salary structure is also getting overhauled. A worker's basic salary must be 50% of the gross salary. That means gratuity deductions will increase, and the employees will contribute more to their EPF accounts. This will lead to a decrease in take-home salary but increase their long-term retirement benefits.
The quantum of leaves remains the same, but earlier, employees earned leave for every 45 days of work; now, it’s 20 days. New employees will also be able to avail themselves leaves after 180 days of employment instead of 240 days.
Under the new rules, employers need to treat both the permanent and fixed-term employees (contractual workers) the same regarding employment benefits.
In the light of the increasing participation of women in the economy, paid maternity leave will remain 26 weeks along with crèche (baby daycare center) facilities paid by the employer.
All companies will now need to practice a faster full and final settlement system, i.e., to settle employee dues, salaries, leave encashments, and reimbursements within two days of the employee's last working day as compared to the current 45-60 days after exiting of the employee.
Red tape and ‘inspector Raj’ has been checked by introducing a national labour license instead of a different license in every district. This will particularly benefit staffing firms to enhance the formalization of employment and encourage faster hiring across industries.
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