Labour Code Rollout to Be Delayed Again - Beyond October 1, 2021
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Labour Code Rollout to Be Delayed Again – Beyond October 1, 2021

Implementation of State Rules by each of the Indian States, under the 4 Labour codes enacted, passed, and assent was given between 2019 and 2020, in all likelihood to be delayed further beyond October 1, 2021 deadline which was set earlier sometime in May/June 2021 this year as against the original plan to implement the reforms from April 1, 2021.                        

 The Centre has completed the huge task of clubbing or amalgamating 29 central labour laws into four codes which is the biggest change since the independence of India.   The broad framework of the 4 labour codes has been rolled out, however, the relative rules are relevant to implement and put into proper perspective the significance of the 4 labour codes.

Some states have accepted the challenges of writing the rules, while there are other States who have been constantly faltering on the deadlines to frame the rules.  Believably, framing the rules is a mammoth task for the States since the fallout of passing of the 4 labour codes, has given rise to conflicts between the respective representatives of employers and employees over some provisions in the draft rules which is understood to be the main reason for the latest delay.

It seems that neither the employers nor the employees want a faster implementation of the rules and none of the sides is willing to move an inch from their demands.

One of the contentious provisions in the definition of wages proposes to cap allowances at 50% of the wages.  This means if allowances exceed 50%, the employer will have to pay social security, including gratuity, on the excess amount.  This will lead to an increased social security burden and hence, the financial burden on employers will lead to an increase in the salary cost.

Employees’ representatives are insisting on keeping the definition of wages, unchanged even if the take-home salary comes down.

Currently, there is no law for defining CTC.  Each Organization has the liberty to draw up CTC  for individual employees on their own terms and conditions, depending upon the affordability to pay and its relative profitability.

Labour Code Rollout to Be Delayed Again – Companies to restructure the CTC

Cost to Company (CTC) is the yearly expenditure that a company spends on an employee. Each employee’s spending depends on their salary and variable. CTC is calculated by adding salary and additional benefits that an employee receives such as EPF, gratuity, house allowance, food coupons, medical insurance, travel expense, and so on. CTC in colloquial terms is the cost an employer bears to hire and sustain its employees.

Formula: CTC = Gross Salary + Benefits.

If an employee’s salary is ₹40,000 and the company pays an additional ₹5,000 for their health insurance, the CTC is ₹45,000. Employees may not directly receive the CTC amount as cash.

The new labour laws will prompt the companies to restructure the CTC as they cap several allowances including LTA, house rent, overtime, and conveyance at 50% of the total CTC. The definition of the term ‘wages’ has been revised under the Code on Wages 2019 and it comprises three components now – basic pay, dearness allowance, and retention payment. Some other components have been excluded from ‘wages’ such as conveyance allowance, HRA, pension, and PF contribution, over time, gratuity, and statutory bonus. If any of these exclusions, in aggregate, are over 50% of the CTC, barring a special allowance, the extra amount will be added back to the wage.

Employers have gone ahead in putting forth their arguments by insisting that a 50% threshold for basic pay plus dearness allowance should be brought down to 20 to 30% of the total package.

During consultations between the labour ministry, various stakeholders expressed concern over the possible impact of the new definition of wages on a company’s outgo. “However, there will be no change in the definition of wages,” a labour ministry official said.

Besides the various industry-friendly proposals, the new laws ensure minimum wages along with timely payment of wages to all workers and propose to bring them all under the social security net.

Thus the tussle will continue and shifting to the new regime, will be a daunting task and the date to be implemented, seems to look far-fetched at the moment.  The issues and challenges that various stakeholders are embroiled in is understandable in the light of the complexities and evolvement of labour laws in India as per the list given below :

Classification of LABOUR LAWS in India

Labour Laws may be classified under the following heads: 

  1. Laws related to Industrial Relations such as:
  2. Trade Unions Act, 1926
  3. Industrial Employment Standing Order Act, 1946.
  4. Industrial Disputes Act, 1947.


  1. Laws related to Wages such as:
  2. Payment of Wages Act, 1936
  3. Minimum Wages Act, 1948
  4. Payment of Bonus Act, 1965.
  5. Working Journalists (Fixation of Rates of Wages Act, 1958

III. Laws related to Working Hours, Conditions of Service, and Employment such as:

  1. Factories Act, 1948.
  2. Plantation Labour Act, 1951.
  3. Mines Act, 1952.
  4. Working Journalists and other Newspaper Employees (Conditions of Service and Misc. Provisions) Act, 1955.
  1. Merchant Shipping Act, 1958.
  2. Motor Transport Workers Act, 1961.
  3. Beedi & Cigar Workers (Conditions of Employment) Act, 1966.
  4. Contract Labour (Regulation & Abolition) Act, 1970.
  5. Sales Promotion Employees Act, 1976.
  6. Inter‐State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979.
  1. Dock Workers (Safety, Health & Welfare) Act, 1986.
  2. Building & Other Construction Workers (Regulation of Employment & Conditions of Service) Act, 1996.
  1. Building and Other Construction Workers Welfare Cess Act, 1996
  2. Cine‐Workers and Cinema Theatre Workers (Regulation of Employment) Act, 1981
  1. Dangerous Machines (Regulation) Act, 1983
  2. Dock Workers (Regulation of Employment) Act, 1948
  3. Dock Workers (Regulation of Employment) (Inapplicability to Major Ports) Act, 1997
  1. Employment of Manual Scavengers and Construction of Dry Latrines (Prohibition) Act, 1993
  1. Industrial Employment (Standing Orders) Act, 1946
  2. Mines and Mineral (Development and Regulation Act, 1957
  3. Plantation Labour Act, 1951
  4. Private Security Agencies (Regulation) Act, 2005
  5. Laws related to Equality and Empowerment of Women such as:
  6. Maternity Benefit Act, 1961
  7. Equal Remuneration Act, 1976.
  8. Laws related to Deprived and Disadvantaged Sections of the Society such as:
  9. Bonded Labour System (Abolition) Act, 1976
  10. Child Labour (Prohibition & Regulation) Act, 1986
  11. Children (Pledging of Labour) Act, 1933
  12. Laws related to Social Security such as:
  13. Workmen’s Compensation Act, 1923.
  14. Employees’ State Insurance Act, 1948.
  15. Employees’ Provident Fund & Miscellaneous Provisions Act, 1952.
  16. Payment of Gratuity Act, 1972.
  17. Employers’ Liability Act, 1938
  18. Beedi Workers Welfare Cess Act, 1976
  19. Beedi Workers Welfare Fund Act, 1976
  20. Cine Workers Welfare Cess Act, 1981
  21. Cine Workers Welfare Fund Act, 1981
  22. Fatal Accidents Act, 1855
  23. Iron Ore Mines, Manganese Ore Mines, and Chrome Ore Mines Labour Welfare Cess Act, 1976
  1. Iron Ore Mines, Manganese Ore Mines, and Chrome Ore Mines Labour Welfare Fund Act, 1976 
  2. Limestone and Dolomite Mines Labour Welfare Fund Act, 1972
  3. Mica Mines Labour Welfare Fund Act, 1946
  4. Personal Injuries (Compensation Insurance) Act, 1963
  5. Personal Injuries (Emergency Provisions) Act, 1962
  6. Unorganized Workers’ Social Security Act, 2008

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