According to the new wage code, a company must pay the full and final settlement of wages and dues within two days of an employee’s last working day following their resignation, dismissal, or removal from employment and services.
The four labour codes are India’s new reform, which has already been passed by the parliament: pay, social security, labour relations, occupational safety, health, and working conditions. The four new labour codes were formed by reviewing and combining the previous 29 Central labour laws.
What new wage code says
The new wage code under the labour law says, “Where an employee has been – (i) removed or dismissed from service; or (ii) retrenched or has resigned from service, or became unemployed due to closure of the establishment, the wages payable to him shall be paid within two working days of his removal, dismissal, retrenchment or, as the case may be, his resignation.”
While the government hopes to implement these new laws by July 1, many states have yet to ratify them, which is required by the constitution before they can become effective, as labour is on the concurrent list. For now, a few states have yet to establish the laws required by all four labour statutes.
23 states and UTs have released the draft guidelines
According to Minister of State for Labour and Employment Rameshwar Teli’s written response to the Lok Sabha, only 23 states and union territories (UTs) have released the draft guidelines under the Code on Wages.
If the wage code is implemented, then businesses would need to realign their payroll processes and work around the timeliness and procedures for deriving the complete settlement of wages within two working days. But the code also allows individual states to set the full and final settlement timeline based on what the state governments think is reasonable.
Other rules included in newly prescribed wage codes
The newly prescribed wage codes include a number of other changes that will result in increased work hours, PF (Provident Fund) contributions, and lower in-hand salary for employees. Companies can increase their working hours from 8 to 12 hours per day under the new laws. They must, however, provide the employees with three weekly days off. As a result, the number of working days in a week will be reduced to four, but the total number of working hours in a week will not be affected. The new wage code requires a total of 48 working hours per week.
The employees’ take-home salary will also change significantly as the basic salary will be at least 50 per cent of the gross monthly salary under the new wage code. This will also increase the PF contributions made by employees and employers, and the take-home salary will be affected more by the employees in the private sector. Under the new labour laws, the retirement corpus and gratuity amount will increase.
