Context: India is likely to implement four new labour codes on wages, social security, industrial relations, and occupational safety by the next fiscal year beginning 2022.
About New Labour Codes
The four codes likely to be implemented in FY23 are

• Code on Wages
• Industrial Relations Code
• Social Security Code, and
• Occupational Safety, Health and Working Conditions Code

Objectives of the Labour Code

• The new labor codes are aimed at facilitating ease of doing business in the country and seek to replace 29 cumbersome laws.
• The objective is to encompass over 500 million organized and unorganized sector workers—90% of the workforce which has been outside labour laws.
• The idea is to ensure that they receive wage security, social security and health security, gender equality in terms of remuneration, a minimum floor wage, make the lives of inter-state migrant workers easier.

What is the current status of the codes?

• The central government has completed the process of finalizing the draft rules, state governments are in the process of drafting the same.
• With labor being a concurrent subject, states are in the process of pre-publishing draft rules for these reforms.

How many labour laws do Indian states have?

• The simplification of 29 labour laws into the four labour codes is expected be a watershed moment for labour reforms.
• India currently has a web of multiple labour legislations, over 40 central laws and 100 state laws involving labour.
• The Second National Commission on Labour (2002) recommended simplification to bring about transparency and uniformity.

What are the major goals in these codes?

• Social security benefits: With organized sector workers being approximately 10% of the total workforce, the new codes may ensure that social security benefits are for all.
• Take-home salary: As per the proposed labour codes, total allowances such as house rent, leave, travel etc. are to be capped at 50% of the salary, while basic pay should account for the remaining 50%.
• Four days work: There could also be a permissible four-day work week of 12 hours per day.

How will it affect ease of doing business?

• Labour productivity: It is likely to improve with both employees and employers developing a sense of being partners in wealth creation.
• Labour reform: A transparent environment in terms of workers’ compensation, clear definition of employee rights and employer duties.
• Compliance un-burdening: Simplified labour codes making compliance easier are likely to attract investments.
• Formalization of the economy: With more workers in the organized sector, leakage in terms of direct as well as indirect taxes may be plugged.

By: Shubham Tiwari