The Social Security Code 2020 (the SS Code), the Occupational Safety, Health and Working Conditions Code 2020 (the OSHW Code) and the Industrial Relations Code 2020 (the IR Code) were recently passed by Parliament and received presidential assent.
The three new labour codes have been enacted in the pursuit of abridging, rationalising and consolidating central and state labour laws and improving India's position in the global 'ease of doing business' index. The government is in the process of finalising delegated legislation and has proposed implementing the codes in the first half of 2021. The government has also proposed implementing the Wage Code 2019 alongside the new codes.
This article discusses each code's highlights.
The SS Code amends and consolidates nine pieces of legislation relating to social security benefits.
The new definition of 'wages' will affect salary structures and respective employer and employee contributions to social security schemes.
Unions have argued that retaining different thresholds for different social security schemes is counter-intuitive and against the spirit of rationalisation.
The SS Code recognises 'gig and platform workers' and proposes to introduce a dedicated social security scheme, electronic registration and possible board for them. The dedicated social security scheme is proposed to be funded by contributions from the government, aggregators and corporate social responsibility funds. A similar fund, board and social security scheme is also proposed for unorganised workers.
Under the SS Code, employers can use common childcare facilities belonging to the government, the municipality, non-governmental organisations and private entities to decrease their compliance burden.
Pursuant to the SS Code, the government can defer contributions to social security schemes up to three months in the event of a pandemic, an epidemic or a national disaster.
Occupational Safety, Health and Working Conditions Code
The OSHW Code amends and consolidates 13 pieces of legislation relating to:
- factory workers;
- contract workers;
- inter-state migrant workers;
- building and other construction workers;
- miners;
- dock workers;
- plantation workers;
- journalists and other newspaper employees;
- motor transport workers;
- sales promotion employees;
- beedi and cigar workers; and
- cinema staff.
The OSHW Code proposes one registration for establishments and one return along with electronic processes and issuance. Deemed registrations are also provided in case of inaction by the authorities.
Employers must:
- ensure that workplaces are hazard free;
- provide free annual health check-ups;
- dispose of hazardous and toxic waste (including e-waste); and
- issue letters of appointment to all employees.
To diversify the workplace, the OSHW Code includes provisions for the health, safety and welfare of transgender workers. Pursuant to the code, women can work during the night and as part of dangerous operations.
The OSHW Code prescribes that the maximum number of working hours in a day is eight hours.
A new definition for 'contract labour' has been included in the code and a higher compliance threshold will make it easier to use contract labour. Hiring contractors for an establishment's core activities is prohibited. Employers will now need to re-evaluate engaging workers through external agencies.
State governments can exempt new factories, subject to certain conditions, from the OSWH Code in the interest of generating economic activity and employment.
The IR Code amends and consolidates three pieces of legislation relating to trade unions, service conditions and industrial disputes.
The right to strike has been curtailed by:
- changing the definition of a 'strike';
- shortening the notice period before a strike; and
- deeming strikes during conciliation proceedings to be illegal.
The threshold for applicability of provisions requiring prior government approval relating to lay-offs and retrenchment or closures in factories, mines and plantations has been increased, thereby relaxing the hiring and firing norms.
The certification threshold for standing orders has been increased, allowing employers flexibility in setting the terms of employment.
New provisions relating to negotiating with unions have been introduced in cases where there are multiple unions but none of them represent at least 51% of employees.
Fixed-term employment is expressly recognised under the IR Code and the SS Code. Discrimination between fixed-term and permanent employees based on benefits and the terms of employment is prohibited and fixed-term employees will be entitled to pro rata gratuity.
The IR Code proposes to set up a worker reskilling fund, funded by employers, to help retrenched workers reskill and remain competitive in the jobs market.
Pursuant to the IR Code, establishments with 20 workers or more will need to establish a grievance redressal committee which has equal worker representation to address workplace grievances and disputes.
The appropriate government can also exempt establishments from the codes under certain conditions. Fines have been increased across the board but compounding of offences is also allowed. Exemptions for public emergencies (including a disaster, an epidemic or a pandemic) have been included in the codes. The codes grant extensive rule-making powers to the government and several substantial changes are tied to the rules.
The three new codes along with the Wage Code mark the ushering in of a new employment and labour law regime in India. India has improved its position in the 'ease of doing business' index in recent times and the new labour codes will help to improve it further. The codes are not flawless and have a blend of positives and negatives. The positives include:
- the digitisation of records;
- the rationalisation of compliance measures;
- the enhancement of occupational safety;
- the expansion of social security benefits; and
- increasing diversity.
The negatives include:
- the retention of different applicability thresholds;
- substantial provisions being left to delegated legislations;
- increasing employer compliance in certain provisions; and
- reproducing certain failed or unimplemented concepts again (eg, the need for government permission to retrench staff).
The codes will require a long development period before their full implementation as the legislative work at the state level is yet to begin and the requisite institutional and logistical support remains to be set up.
