This document provides a high-level overview of key compliance requirements for employers under the new Labour Codes. It outlines the primary obligations introduced by the Code on Wages, 2019; the Code on Social Security, 2020; the Occupational Safety, Health and Working Conditions Code, 2020; and the Industrial Relations Code, 2020.
1. THE CODE ON WAGES, 2019
The Code on Wages, 2019 consolidates and replaces four central labour legislations, namely the Payment of Wages Act, 1936, the Minimum Wages Act, 1948, the Payment of Bonus Act, 1965, and the Equal Remuneration Act, 1976. It establishes a uniform definition of wages, introduces the concept of a national floor wage, and creates a single framework governing minimum wages, payment of wages, bonus, and equal remuneration across all sectors.
| Provision | Compliance Requirement |
|---|---|
| Definition of ‘Wages’ | |
| Section 2(y) | Restructure salary components to ensure that exclusions (clauses (a) to (i)) do not exceed 50% of total remuneration. |
| Equal Remuneration | |
| Section 3 | Ensure no discrimination on the ground of gender in wages for the same or similar nature of work. Ensure no reduction of wages to comply with this provision. For the purpose of equal remuneration, the Code specifically requires that certain emoluments such as house rent allowance, conveyance allowance, remuneration under awards or settlements and overtime allowance must also be taken into account while computing wage equality. |
| Minimum Wages | |
| Section 5 & 9 | Pay wages no less than the minimum rate of wages notified by the appropriate government, which cannot be less than the ‘floor wage’ fixed by the Central Government. |
| Section 14 | Pay overtime for work beyond normal working hours at a rate not less than twice the normal rate of wages. |
| Payment of Wages | |
| Section 17 | Adhere to strict timelines for payment of wages based on the wage period (e.g., within 7 days of the succeeding month for monthly wages) and within two working days for employees whose service has ended (including by way of resignation). Unlike the erstwhile Payment of Wages Act, 1936, which applied only to employees earning up to ₹24,000 per month, these timelines now apply to all employees under the Wage Code. |
| Deductions | |
| Section 18 | Ensure deductions from wages are only for purposes specified in the Code and do not exceed 50% of the total wages for any wage period. |
| Bonus | |
| Section 26 | Pay an annual minimum bonus of 8.33% of wages or ₹100 (whichever is higher), and a maximum of 20% of wages. |
| Section 39 | Pay bonus within eight months from the close of the accounting year. |
| Record Keeping | |
| Section 50 | Maintain registers, display notices with abstracts of the Code, and issue wage slips to employees. |
2. CODE ON SOCIAL SECURITY, 2020
The Social Security Code, 2020 consolidates and replaces nine central labour legislations, including the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, the Employees’ State Insurance Act, 1948, the Maternity Benefit Act, 1961, the Payment of Gratuity Act, 1972, the Employees’ Compensation Act, 1923, the Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959, the Building and Other Construction Workers’ Welfare Cess Act, 1996, the Unorganised Workers’ Social Security Act, 2008, and the Cine Workers Welfare Fund Act, 1981. It brings these diverse social security frameworks into a single statutory structure covering provident fund, pension, insurance, maternity, gratuity, compensation and welfare schemes.
| Provision | Compliance Requirement |
|---|---|
| Definition of ‘Wages’ | |
| Section 2(88) | Align salary components with the new definition, ensuring that specified exclusions do not exceed 50% of total remuneration. The new definition has a direct financial impact on the calculation of overtime, leave encashment, and contributions to PF and ESI, and it also affects wage-linked benefits and statutory payouts such as maternity benefit, gratuity and retrenchment compensation. |
| Registration | |
| Section 3 | Register the establishment electronically under the Code. |
| Employees’ Provident Fund | |
| Section 16 | Contribute to the Provident Fund, Pension Fund, and Insurance Fund. |
| Sections 125 and 127 | There is now a five-year limitation period for determining amounts due and for initiating any inquiry, along with a two-year time limit for completing such inquiries. |
| Gratuity | |
| Section 50 | Obtain insurance for gratuity liability (from any IRDAI regulated insurance provider) or establish an approved gratuity fund. |
| Section 53 | Gratuity is payable at the rate of fifteen days’ wages for each completed year of service, subject to the completion of five years of continuous service, or earlier in cases of death or disablement. In the case of fixed-term employees, the five-year eligibility requirement does not apply upon expiry of the contract, and gratuity is payable on a pro-rata basis where the fixed term is at least one year. |
| Maternity Benefit | |
| Section 60 | Calculate maternity benefits (including maternity leave wages and medical bonus, where applicable) using the new definition of “wages”. |
| Section 67 | Provide a crèche facility for establishments with 50 or more employees. |
| Employee’s Compensation | |
| Section 74 | Pay compensation for personal injury or occupational disease arising out of and in the course of employment. |
| Section 75 | Calculate compensation strictly in accordance with the formulas provided in the Code and the factors set out in the Sixth Schedule. The employer’s liability also extends to accidents or occupational diseases arising not only at the primary workplace but at any place where the employee is required or permitted to work, in line with the extended definition of workplace under Section 74(3). |
| Aadhaar Requirement | |
| Section 142 | Ensure employees/beneficiaries establish their identity through Aadhaar for registration and for receiving benefits under the Code, including provident fund, gratuity, and maternity benefit. |
3. OCCUPATIONAL SAFETY, HEALTH AND WORKING CONDITIONS CODE, 2020
The Occupational Safety, Health and Working Conditions Code, 2020 consolidates and replaces thirteen central labour legislations, including the Factories Act, 1948, the Contract Labour (Regulation and Abolition) Act, 1970, the Mines Act, 1952, the Inter-State Migrant Workmen Act, 1979, the Plantations Labour Act, 1951, the Building and Other Construction Workers Act, 1996, the Motor Transport Workers Act, 1961, and several other establishment-specific laws dealing with worker safety, health, welfare and working conditions.
| Provision | Compliance Requirement |
|---|---|
| Registration | |
| Section 3 | Complete the electronic registration of the establishment, providing all required particulars and paying the prescribed fees. |
| Health, Safety & Working Conditions | |
| Sections 18, 23 & 24 | Implement specific standards for workplace health, safety, and welfare facilities, such as ventilation, lighting, canteens, crèches, first-aid, etc. |
| Annual Health Examinations | |
| Section 6(1)(c) | Arrange and provide free annual health examinations or tests for specified employees. |
| Leave Encashment | |
| Section 32(1)(vi) (Leave Encashment on exit) | On discharge, dismissal, resignation, superannuation or death, the worker or nominee/heir is entitled to encash all earned leave due immediately before separation, even if minimum eligibility days are not met. Payment must be made: Within two working days from the date of discharge, dismissal, or quitting.Within two months from the date of superannuation or death. |
| Section 32(1)(viii) & (ix) | • Implement a process to allow workers to demand encashment of their accrued annual leave at the end of a calendar year. • Workers are entitled to encash any leave balance that exceeds the 30-day carry-forward limit. |
| Employment of Women | |
| Section 43 | Implement specific safety measures to facilitate night work for women employees (between 7 p.m. and 6 a.m.). |
| Contract Labour | |
| Sections 2(p) and 57 | Core activities of the establishment must not be outsourced to contract labour. Contract labour may only be engaged for core activities in limited circumstances, such as when the activity is ordinarily done through contractors, when the work is of an intermittent or seasonal nature, when specialised or skilled work is required, or when sufficient regular workers are not available. |
| Inter-State Migrant Workers | |
| Section 2(zf) | Identify and classify workers as inter-state migrant workers if they are recruited from or have moved from another State for employment and earn wages within the prescribed threshold. Maintain records of such workers, including their state of origin. |
| Section 61 | Pay a lump sum amount to every inter-state migrant worker for an annual to-and-fro journey to their native place. |
| Maintenance of Records & Filing of Returns | |
| Section 33 | Maintain registers with prescribed particulars, display notices in the prescribed form, and file returns electronically. |
4. THE INDUSTRIAL RELATIONS CODE, 2020
The Industrial Relations Code, 2020, consolidates and replaces three central labour legislations, namely the Industrial Disputes Act, 1947, the Trade Unions Act, 1926, and the Industrial Employment (Standing Orders) Act, 1946.
| Provision | Compliance Requirement |
|---|---|
| Definition | |
| Section 2(zr) | Identify employees who fall within the statutory definition of “worker,” which includes those performing manual, unskilled, skilled, technical, operational, clerical, or supervisory work. The definition excludes managerial or administrative employees and supervisory employees earning above INR 18,000 per month. |
| Bi-partite Forums | |
| Section 4 | Constitute one or more Grievance Redressal Committees (GRCs) in establishments with 20 or more workers. The committee size is now up to 10 members with adequate representation of women. |
| Standing Orders | |
| Section 28 | The requirement to have certified standing orders applies to industrial establishments with 300 or more workers. |
| Section 70 Retrenchment – General requirement | Pay retrenchment compensation equivalent to fifteen days’ average pay for every completed year of continuous service, calculated using the new definition of “wages”. These requirements apply irrespective of establishment size, subject to applicable exemptions. |
| Sections 77 and 79 (Retrenchment – Prior government permission) | The requirement to seek prior permission of the appropriate Government before effecting retrenchment applies only to industrial establishments employing 300 or more workers (or such higher threshold as may be notified). No prior permission or intimation is required where the employee count is below this threshold. |
| Worker Re-skilling Fund | |
| Section 83 | Contribute an amount equal to 15 days’ wages (last drawn) for every retrenched worker to a “worker re-skilling fund”. |
