#TaxmannPPT | The New Labour Codes – Impact on Policies or Processes | Deloitte

The New Labour Codes –

Impact on policies and processes

Today’s topics

• Labour Codes - Overview and status

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Areas of change and impact on organisations

Financial

Compliance

• Policies and processes – A deep dive

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Way forward

Overview and status

Labour

Existing Legislations to be subsumed under new Codes

Code on Wages

• The Payment of Wages Act, 1936;

• The Minimum Wages Act, 1948;

• The Payment of Bonus Act, 1965; and

• The Equal RemunerationAct, 1976

Industrial Relations Code

• The Trade Unions Act, 1926,

• The Industrial Employment (Standing Orders) Act, 1946 and

• The Industrial DisputesAct, 1947

Occupational Safety Code

Existing Legislations subsumed under The Code on Social Security, 2020

Code on Social Security

• The Factories Act, 1948;

• The Mines Act, 1952;

• The Employee's CompensationAct, 1923;

• The Employee's CompensationAct, 1923;

• The Dock Workers (Safety, Health and Welfare)Act, 1986;

• The Employees' State InsuranceAct, 1948;

• The Employees' State InsuranceAct, 1948;

• The Employees' Provident Funds and Miscellaneous Provisions Act, 1952;

• The Employees' Provident Funds and Miscellaneous Provisions Act, 1952;

• The Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996;

• The Plantations LabourAct, 1951;

• The Employment Exchanges (Compulsory Notification of Vacancies)Act, 1959;

• The Employment Exchanges (Compulsory Notification of Vacancies)Act, 1959;

• The Contract Labour (Regulation and Abolition)Act, 1970;

• The Inter-state migrant workmen (Regulation of Employment and Conditions of Service) Act, 1979;

• The Maternity Benefit Act, 1961;

• The Maternity Benefit Act, 1961;

• The Payment of Gratuity Act, 1972;

• The Payment of Gratuity Act, 1972;

• The Working Journalist and other News Paper Employees (Conditions of Service and Misc. Provision) Act, 1955;

• The Cine Workers Welfare Fund Act, 1981;

• The Cine-Workers Welfare Fund Act, 1981;

• The Working Journalist (Fixation of rates of Wages)Act, 1958;

• The Building and Other Construction Workers' Welfare Cess Act, 1996;

• The Building and Other Construction Workers' Welfare Cess Act, 1996;

• The Motor Transport WorkersAct, 1961;

• Sales Promotion Employees (Condition of Service) Act, 1976;

• The Unorganised Workers' Social Security Act, 2008

• The Unorganised Workers' Social Security Act, 2008

• The Beedi and Cigar Workers (Condition of Employment)Act, 1966;

• The Cine Workers and Cinema Theatre WorkersAct 1981

State rules - Current status

State with one or more draft rule

State yet to issue to draft rules

Source Economic Survey 2021 22 / State Labour Department websites

Code on wages (31)

• Uttarakhand

• Uttar Pradesh

• Gujarat • Bihar

• Madhya Pradesh

• J&K

• Punjab • Karnataka

• Odisha

• Tripura

• Rajasthan

• Himachal Pradesh

• Chhattisgarh

• Jharkhand

• Maharashtra

• Haryana

• Telangana

• Delhi • Sikkim

• Mizoram

• Arunachal Pradesh

• Assam

• Puducherry

• Manipur

• Kerala

• Chandigarh

• Tamil Nadu

• Andhra Pradesh

• Andaman and Nicobar Islands

• Goa

• Ladakh

Industrial relations code (26)

• Uttarakhand • Uttar Pradesh • Madhya Pradesh

• Bihar

• J&K • Punjab • Karnataka

• Gujarat • Odisha • Tripura • Chhattisgarh

• Jharkhand • Haryana

• Telangana

• Himachal Pradesh

• Manipur

• Arunachal Pradesh

• Assam • Goa

• Puducherry

• Maharashtra • Chandigarh

• Tamil Nadu • Andhra Pradesh

• Ladakh • Mizoram

Code on social security (25)

• Uttarakhand

• Uttar Pradesh

• Madhya Pradesh

• Bihar

• J&K

• Punjab

• Odisha

• Chhattisgarh

• Jharkhand

• Assam

• Maharashtra

• Haryana

• Tripura

• Himachal Pradesh

• Manipur

• Gujarat

• Goa

• Chandigarh

• Kerala

• Andaman and Nicobar Islands

• Ladakh

• Karnataka

• Telangana

• Puduchery

• Arunachal Pradesh

Occupational safety, health and working conditions code (21)

• Uttarakhand

• Uttar Pradesh

• Madhya Pradesh

• Punjab

• J&K

• Chhattisgarh

• Odisha

• Haryana

• Jharkhand

• Manipur

• Bihar

• Gujarat • Kerala

• Himachal Pradesh

• Chandigarh

• Goa

• Tamil Nadu

• Andhra Pradesh

• Ladakh

• Assam

• Arunachal

Pradesh

Key impact areas

Key impact areas

Financial Policies and processes Compliance

• New definition of Wages

• Gratuity – Past and ongoing liability

• Applicability of gratuity to Fixed Term employees

• Impact on provident fund – domestic as well as international workers

• Minimum Wages - New Floor wages and impact of qualifying wages

• Overtime - Wider applicability , at double the wages

• ESI, Statutory Bonus - Change in coverage of employees;

• Maternity pay and creche facilities

• Gig and Platform workers - Extension of social security benefits.

• Leave encashment mandatory for workers- payout based on new wage definition;

• Retrenchment compensation / contribution to reskilling fund

• Identify core and non-core activities - Prohibition to employ contract work force in core areas;

• Realign compliances based on workforce categorization

• Registration of gig/platform workers in e-shram portal, regular updation of details;

• Provision of creche facility irrespective of work location;

• Need to set up Works, Grievance Redressal and Safety Committees.

• Recognition of negotiating union / council;

• Payment of journey allowance to Inter-State Migrant Workers;

• Query clarification through inspector cum facilitator

• Realign filings and forms

Wage definition - Need to realign payroll systems / calculations;

Wage settlement timeline – onboarding / exit process change

Deductions from wages specified, limited to 50% of total wages – to align payroll recoveries;

Policies on equal remuneration, nondiscrimination basis gender, work timings, overtime, and women safety to be in place;

Prior consent from workers for overtime, from women employees for night shift;

Need to reissue appointment letters to all;

Revisit / realign leave encashment and maternity benefit policies Retrenchment policy

Introduce / align standing orders;

Policies

Policies

Compensation and benefits

Compensation and benefits - policies

Gratuity Benefits

• Amount of benefit

• Whether gratuity is part of CTC

• Need to cap gratuity

• Funded through trust or insurance

• Review of trust deed

Provident Fund

• Limited to statutory wage ceiling

• PF on Wages or continuing on basic salary

• Review of PF trust deeds

• Policy for International Workers

Realignment of salary structure

• Flexible Vs Fixed allowances

• Increase in limits

• Introduction of new components

Overtime

• Policy to call out applicability of overtime – category of workforce, amount of benefit, trigger for overtime

– especially given WFH

• Revisit existing allowances – on call, holiday allowance

Compensation and benefits - processes

Payroll related processes

Payroll process

Payroll processes

compliance changes

In case of death or on account of absence of information of his/ her whereabouts the amount is to be paid to his/ her nominee

Workers to be paid wages in lieu of un availed leaves upon discharge, dismissal, resignation, superannuation, or death while in service

Factor ESI contributions appropriately for new enrollments

Gratuity to be paid to the eligible employees within 30 days

Overtime calculations and payouts to be aligned to policy changes

Compliance processes

Leave and maternity benefits

Policies and processes - leave encashment

Challenges to be addressed

Worker who has worked for 180 days or more in a calendar year will be entitled for leave with wages Worker

• Restriction on employment of women immediately following delivery, termination, miscarriage;

• Prohibition on employing pregnant women in work of arduous nature / long standing – based on request

• Maximum period for maternity benefit 26 weeks (8 weeks before delivery);

• Benefit to be calculated on average daily wage of the women employee;

• Medical bonus of INR 3,,500 p.m. in the absence of pre/post natal care

• Entitlement of benefits under Chapter VI mutually exclusive to that under Chapter IV ESI;

• Coverage will continue till a women becomes eligible to claim benefit under ESI rules.

• Creche facility to be provided within prescribed distance;

• Permission to use common facility;

• Two nursing breaks to be provided in addition to periods of rest;

Policies and processes - maternity benefit 01 03 05

• Benefits to be intimated in writing and electronically

• No deduction from wages due to nature of work or permitted nursing breaks allowed;

• No discharge or dismissal from service on account of absence due to maternity

Hiring and onboarding of workforce

Policies and Processes – Hiring and onboarding

Prohibition of gender discrimination by the employer in respect of same work or work of similar nature

Issuance of Letter of Appointment to its employee in specified format

Reporting of vacancies to career centres - as specified in the notification, and the employer shall thereupon comply with such requisition

Conditions to be met for employment of women/ adolescents

Hiring and onboarding

No employer or worker shall commit any unfair labour practice

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Fixed

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Policies and Processes –

working conditions

Constitution of Safety Committee

Constitute Safety Committee consisting of representatives of employers and workers.

Issue of standing orders

Prepare draft standing orders based on model order within six months on matters specified shift workings, attendance, termination of employment, process to avail leave etc.

Annual Health

Examination

Conduct free of cost, medical examination for every worker

Notice of dangerous occurrence

Ensure compliance in relation to provisions such as to give notice for any dangerous occurrence

Employment of Women

Ensure compliance for provisions relating to the safety of women, Maternity benefits

Working hours

Realign working hours policy as per labour code

Employing Contract Labour

Ensure that contract labour is employed from a licensed contractor, comply with restrictions / prohibitions

Notice of accident and diseases

Ensure compliance to give notice for any accident which causes death or causes any bodily injury

Payment of Journey Allowance

Apprise inter-state migrant workers about their rights/entitlements and ensure compliance

Policies and processes - dispute resolution

• Constitution of Grievance Redressal Committee for resolution of disputes arising out of individual grievances;

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Constitution of works committee to promote measures for securing and preserving amity and good relations between the employer and workers; work towards resolving material differences of opinion in such matters.

• Option to reach out to conciliation officer (through trade union) in case of unresolved grievance.

• Formation of Negotiating Union/ council for negotiations with the employer on prescribed matters

• Conditions to be met for retrenchment notice and compensation;

• Opportunity to be given to retrenched workers for reemployment, to be preferred over others;

• Contribute to worker re-skilling fund at fifteen ways wages last drawn by the worker.

• Recognition of trade union / negotiating council by employer;

• Validity period of three years extendable by 2 years

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• No change in conditions of service of workers to be affected without adequate notice following the process laid down;

• Ensure complianceNot to engage in any Unfair Labour Practice

Way forward

Labour codes - Challenges / Clarity Required

Wage definition

• Clarity on treatment for one time payments, variable pay, last drawn wages for gratuity;

• Instances covered by payment of wages provisions and modified wage definition;

• Illustrations to help in decoding the definition to avoid interpretation issues;

• Timing for computation of wages (monthly, quarterly, annual), option for true up

Benefits in Kind (BIK)

• Listing of items that need to be considered as BIK – would stock options, car lease be covered?

• Valuation methodology / rules should we rely on tax provisions?

• Should wages be revised when BIK is issued during / end of the year?

Extent of coverage

• Does overtime apply to employees also or is it restricted to workers?

• To bring consistency in worker definition, overtime provisions, working hours across codes and state rules;

• Need for review of very short wage settlement timeline (2 working days) challenges when employees have assets, are working remotely etc.);

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• Cap on deductions from wages statutory deductions to be excluded, mechanism for recovery in case of employee resignation / termination to be provided

Correlation with state rules

• Whether labour codes will prevail over S&E Act when there’s a conflict or beneficial of the two to be considered?

Effective date and implementation window

• Guidance on the expected date of go live;

• Treatment when current policies are more labour friendly;

• Gratuity insurance is mandated by CoSS but not included under many state rules clarity on way forward.

• Establishments to be given with a time period (say 3 months) for implementation without invoking penal provisions;

• Query redressal mechanisms / help desk to be made available right from the notification of go live date.

What actions are required?

Analysing the impact

Analyse the salary structure, map components of salary with the definition of Wages under the Codes, identify areas of realignment, and quantify financial impact

Understanding the Codes

Get an overview of the Codes, the salient features, compliances required, and identify the areas of change from the existing regulations

Reviewing policies and process

Review of the impacted policies, processes, procedures, and compliances to ascertain and make changes wherever required

Focus on workforce categorization and identify related compliances

Communicating to employees

Communicate the changes to employees and create awareness of the new regulations

Q and A