New labour codes for India delayed due to second wave of Covid-19

While it remains to be seen when the new labour codes will be implemented, government officials say it could get pushed to next year.

With most state governments struggling to keep the spread of the coronavirus under control, the work on readying the framework for the implementation of the four labour codes has slowed down.

According to a senior government official, the Centre is no longer pursuing state governments to speed up the process of framing rules for the labour codes, as the focus has shifted to providing healthcare to people who have become seriously ill with Covid-19.

The Ministry of Labour and Employment had earlier deferred the implementation of the four labour codes on industrial relations, wages, social security and occupational health, safety and working conditions from 1 April as many state governments had not finalised the relevant rules for their region of jurisdiction.

To ensure the full implementation of the codes, it is essential for states to issue their own rules for each as the codes work on the concept of an appropriate government.
Although the central government has jurisdiction over sectors such as coal, mining, banking, civil aviation, railways and ports, the state government s are the appropriate government for a large part of the country’s industry and the private sector.

The planned changes will result in 29 existing central labour laws being amalgamated into four codes.

The delay in implementation of the codes means minimum wages and the timely payment of wages that are designed to introduced under the laws may not become a reality soon.

One of the most significant changes under the labour reforms is the plan to cap employee salary allowances at 50 per cent of CTC (cost-to-company). This means the basic salary of an employee would have to be at least 50 per cent of CTC.

The new laws also propose to bring all workers under the social security net.

Apart from various industry-friendly proposals, the delay might hit India’s prospects of attracting fresh business investment from overseas.

According to a survey carried out by Grant Thornton Bharat and the Confederation of Indian Industry in March of this year, 50 per cent of companies in India are confident about their readiness to implement the new labour codes, 43 per cent have started internal reviews and 13 per cent are waiting for the final announcement of the implementation date. The survey also found that although 20 per cent of businesses have sought help from external consultants to prepare for the introduction of the new codes, 20 per cent have not decided their implementation strategy yet.

The Code on Wages was passed by the Indian Parliament in August 2019. The three other codes were approved by both houses of parliament in September 2020.

For information on the codes see:
labour.gov.in/labour-codes