In line objectives of social justice, social security, and improving the ease of doing business, the Second National Commission on Labour (2002) recommended that the central labour laws should be integrated into the following groups: (a) industrial relations; (b) wages; (c) social security; and (d) safety, welfare and working conditions. One of the key factors behind these recommendations was acknowledgment that existing labour legislations in India were archaic, inconsistent and complex.
In 2019, the Indian Government’s ‘Ease of Doing Business’ initiative and recommendations of the Second National Commission on Labour paved way for the introduction of four labour codes: the Code on Wages, 2019 (Wages Code), the Industrial Relations Code, 2020 (IR Code), the Occupational Safety Health and Working Conditions Code, 2020 (OSH Code), and the Code on Social Security, 2020 (SS Code). The Labour Codes have been passed by both the houses of Parliament and have received presidential assent. As per news reports, it is likely that the Labour Codes will come into force at the onset of the next fiscal year, commencing April 1, 2025, to align with the business cycle.
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By codification of 29 central laws, Government of India has attempted to facilitate easier compliance, reduction of duplicate provisions, multiplicity of definitions and overlapping of authorities for businesses. The significant changes that will be brought about by the Labour Codes encompass a new and uniform definition of “wages” which is broader than the definitions under the current legislations; reduction of multiple compliances by increasing the applicability thresholds with respect to such compliances; recognition of fixed-term employment; prescribing a formal process for recognition of trade unions, extension of social security benefits to a broader spectrum of workers, including gig economy workers, platform workers and unorganised sector workers, and providing for an inspector cum facilitator. Overall, the Labour Codes aim to balance the needs of both employers and workers, fostering a conducive business environment while safeguarding the rights and welfare of employees. Some of the key changes introduced by the Labour Codes and their impacts are as follows:
The amendments proposed under the Labour Codes would need to be kept in mind by organizations in the assessment of their readiness to comply. It may be worthwhile for businesses to grasp the importance of the Labour Codes and evaluate their impact on particular sectors. This understanding will enable them to proactively address implementation and financial challenges by establishing policies and procedures in line with the Labour Codes.
Once the Labour Codes come into force, companies would need to revisit and perhaps overhaul compliance systems, compensation and benefits, HR policies and processes to align with the Labour Codes. At this point, businesses could consider investing in the new-age technologies such as AI to streamline and automate their HR processes.
The implementation of new labour code reforms signifies a departure aimed at further modernizing and rationalizing labour regulations. These reforms are poised to deeply impact both the workforce and industries throughout India.
This article was originally published in BW Legal World on 16 May 2024 Co-written by: Pooja Ramchandani, Partner; Suryansh Gupta, Principal Associate. Click here for original article
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Contributed by: Pooja Ramchandani, Partner; Suryansh Gupta, Principal Associate
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