New labor codes likely in India from FY2022-2023
India is projected to implement four new labor codes on social security, wages, industrial relations, and occupational safety starting the financial year 2022-23, a senior government official reportedly said. The proposed labor codes are set to impact the take-home pay and working hours for employees. Notably, several states have pre-published draft regulations on these laws.
What did the official say?
"The four labor codes are likely to be implemented in the next financial year of 2022-23 as a large number of states have finalized draft rules on these," a senior government official told PTI. The code rules had been drafted in February 2021. "But since labor is a concurrent subject, the Centre wants the states to implement these as well," he said.
How do the new codes impact pay?
The new codes cap the allowances component of an employee's salary at 50%. This effectively increases the basic pay component. Notably, provident fund contributions by the employer are determined on the basis of basic pay and dearness allowance. With an increase in basic pay, more PF will be deducted, thus lowering the take-home salary and increasing the retirement savings.
4-day workweeks likely, but there's a catch
With the new codes, employees in India may finally enjoy four-day workweeks. However, the labor ministry has clarified that the 48-hour weekly work requirement would remain. Hence, employees may end up working for 12 hours on those four days.
Several states pre-published draft regulations
At least 13 states have already pre-published draft regulations on these laws, the official said. Twenty-four states/UTs have pre-published the most drafts notices on The Code on Wages. It is followed by The Industrial Relations Code (20 states) and The Code on Social Security (18 states). The draft rules for Occupational Safety, Health, and Working Conditions Code have been pre-published in 13 states.
