The four new Labour Codes are a big improvement over erstwhile labour laws. They are much slimmer now and have been updated. Now the new Labour Codes provide for a unified legal framework with uniform definitions, lower compliance costs, digital filing system and fixed term employment options. These will boost employment, better industrial relations and encourage investment as well as consumption leading to overall economic growth.
Labour Codes shall have wide spread impact –personal, social, industrial and economic. It will help organize labour and social welfare enhancing life of crores of labour force in India. It will also impact many sectors in terms of increased cost but it shall be beneficial in larger national interest. It will also reorganize employment and jobs restructuring in industrial sector.
According to a SBI study, the new Labour Codes shall aid formalization of labour force and also increase social sector coverage to about 85%. The new Codes may help generating 7.7 million jobs and reduce rate of unemployment by 1.3% in medium term. Millions of workers may transit to organized sector and compliance burden may reduce in future as rules and sections have been pruned to one-third and there will be just one return replacing 31 returns. Compliances will substantially reduced and become easier as there will be single registration / licence, large number of offences have been decriminalized and compounding of offences introduced. Also filing will not be manual but digital.
There will be complete prohibition on engagement of contract workers in core activities of an establishment. Also, principal employer is required to provide to contract workers, health and social security benefits including gratuity after one year of continuous service. Free annual health check-ups have also been provided for. In real estate sector, where contract workers are used more, the labour force will benefit the most though, this may result on higher cost to ultimate buyers as such costs would also be loaded to the overall cost of the project. In construction and real estate sector, contract labour will now be used only in non-core activities leading to higher costs of property or developers may carry the burden of compliance risk.
Manpower service providers will also be hit hard financially in terms of social security contributions, gratuity and severance related compensation as such amounts will now be computed on a minimum of fifty percent remuneration paid to workers, again leading to higher costs. The silver lining which can be read is that enhanced welfare and security measures would ensure work force stability, lesser attrition, more productivity and efficiency long term continuity.
In fact, new codes have provided much sought relief to employers by reducing the imprisonment provisions to just 22 from earlier 87 provisions. Out of these 22, 16 offences are compoundable and only 6 offences provide for imprisonment alongwith higher fine in defaults relating to safety and social security violations. Compoundable offences allow a defaulter or an accused to reach settlement with the designated authority on payment of prescribed fee. In order to reduce litigation, there will be a provision for ‘improvement notice’ before launching prosecution. It is hoped that such provision will facilitate smooth and easy implementation and compliances on the part of employers and enhance ease of doing business.
E-commerce or gig workers are likely to benefit significantly from new Labour Codes which may have financial impact an e-commerce aggregators including food delivery and quick commence such as amazon, filpkart, blinkitt, swiggi, zomato etc. The new Code mandates E-com operators to contribute towards social security for gig / platform workers. Government is likely to fix up some percentage of turnover towards this end. Gig workers shall be provided social security benefits through scheme of direct benefit transfers for which aaddhar based registration on e-shran portal will be used.
With new Codes, gig workers, i.e. workers with online aggregators and platforms would get benefit of organized and structured welfare measurers. There are now specific meanings assigned to aggregator, platform workers and gig workers. The new Code will provide security to all workers such as provident fund, employee’s insurance and other social benefits etc. Such workers will get Aadhaar linked Universal Account Number (UAN) to have accessible welfare benefits. A social security funds will be set up to finance schemes in which amount collected from compounding of offences by companies will also be credited. The new Codes mandate aggregators to contribute a part of their annual turnover, capped @ 5% of the amount paid or payable to gig and platform workers.
Start-ups will be impacted from mandatory social security obligations with reduced regulatory uncertainties for workers leading to additional costs. New wage and salary definitions and wage rules would simplify payrolls and disputes, particularly where manpower has a significant role. It will also help startups to have standard formats of contracts, HR policies and practices and easier compliances and solutions. Start-ups can also modernize workplace safety standards and face lesser adhoc inspections. Though costs will be there, start-ups can build strong, sustainable and socially responsible enterprises.
Despite all good legislative intentions, there are divergent views from the stakeholders. While the industry is unhappy with the likely costs getting increased ending up in higher cost of output and final prices, labour bodies have opined that it would lead to exploitation of workers through its hire and fire approach and more temporary jobs terming the Codes to be regressive, anti-worker and pro-employer. Workers grievances shall be addressed through grievance redressing committees with tripartite representation, besides having trade Unions which are recognized in the codes. Tribunals will also be there having judicious and administrative members.
The new Codes are aimed at simplification of compliances but at the same time may result in increased cost of compliance, at least for smaller companies in terms of insurance coverage, health check-ups, enhanced safety norms, paid leaves etc.
Author Bio
