India’s consolidated labour codes (Wages, Social Security, Industrial Relations, and OH Regulations) reframe legal definitions—especially of "wages," “worker,” and “strike”—and promise to broaden social security access, including to gig workers. For HR teams, this means reevaluating salary structures: what constitutes retrenchment-eligible pay, PF/ESIC structures, and how uniform definitions affect pay scales. The codes will also require litigation notices before layoffs and extended parental leave mandates. Compliance calendars and payroll systems must be revamped ahead of rollouts.
@The Economic Times
How will payroll systems need to adapt to the new definitions of wages and worker entitlements?
What employee communications and training are necessary to ensure clarity and acceptance of these changes?
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4@The Economic Times
How will payroll systems need to adapt to the new definitions of wages and worker entitlements?
What employee communications and training are necessary to ensure clarity and acceptance of these changes?
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Payroll systems will need to adapt to the new definitions of wages and worker entitlements by incorporating the changes brought about by the new labour codes. This could involve adjusting the calculation of wages to include the new definitions and entitlements. For instance, the definition of 'wages' now includes more components, which may affect the calculation of various statutory benefits.
Employee communications and training will play a crucial role in ensuring clarity and acceptance of these changes. Here are some steps that can be taken:
1. Conduct information sessions to explain the changes in the labour codes and how they affect the employees.
2. Provide written communication detailing the changes and their implications on the employees' wages and benefits.
3. Organize training sessions for HR and payroll teams to ensure they understand the new codes and can implement them correctly.
4. Update employee handbooks, policy documents, and other relevant materials to reflect the new labour codes.
5. Set up a dedicated helpline or point of contact where employees can direct their queries regarding the changes.
Remember, clear communication and transparency are key to ensuring a smooth transition to the new labour codes.
From India, Gurugram
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Employee communications and training will play a crucial role in ensuring clarity and acceptance of these changes. Here are some steps that can be taken:
1. Conduct information sessions to explain the changes in the labour codes and how they affect the employees.
2. Provide written communication detailing the changes and their implications on the employees' wages and benefits.
3. Organize training sessions for HR and payroll teams to ensure they understand the new codes and can implement them correctly.
4. Update employee handbooks, policy documents, and other relevant materials to reflect the new labour codes.
5. Set up a dedicated helpline or point of contact where employees can direct their queries regarding the changes.
Remember, clear communication and transparency are key to ensuring a smooth transition to the new labour codes.
From India, Gurugram
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The so called labour Codes are just copy and paste of the existing labour laws. There are some changes but that could have been brought in by means of amendment to the existing Acts itself. For example, the provision relating to taking permission to lay off, retrench and close down applies to establishments employing 100 or more workers. Under the IR Code it is 300. Under the present system only employees getting wages not above Rs 24000 are covered under Payment of Wages Act but under the proposed Code on Wages all are covered. It could have been possible by making an amendment also. Again there are almost same definition of wages under all the existing Acts and all of them say that wages means total amount that an employee gets as reward for service. When it came to Codes, we have a uniform definition and the same is total mess and confusing. In order to find out what is the wages which will qualify to PF or Bonus, we have to consider all allowances and find what percentage it will exceed the basic pay. While doing so, your overtime pay will also get considered for payment towards PF or gratuity. Under the present law allowances are payments which are outside the scope of wages. Without any efforts to decide what is remuneration the Code has given so many confusing interpretations. That should have been avoided.
The most important thing is that when we introduce a new Code replacing the existing one, we should consider the grey areas. Everyone knows that there is lot of confusions regarding eligibility for gratuity to an employee who has completed 4 years and 240 days. There are a few High Court verdicts also. The Code should have covered this confusion but has just pasted the Payment of Gratuity Act. The schedule attached to Employees Compensation Act regarding who all are covered and age based factors for deciding compensation are not touched but are just pasted copied from the parent Act.
About GIG workers, the Codes does not recognise them as workers but only extends social security. Why don't they be included under the definition of workmen itself. As we know, any person who works for the employer is a workman. As such there is no need to have a separate category of workers called gig or platform workers.
Regarding payroll, a formatting is required in order to ensure that PF or ESI is calculated correctly. Under the present system, you can take the gross salary as PF qualifying salary. Of course, in respect of employees who are given HRA that amount may be deducted from the PF qualifying salary. But for an organisation which restricts its PF contributions to 12% of Rs 15000 what is going to change? When there seems to be no industry in India where the statutory minimum wages is less than Rs 15000 and no industry can operate by paying wages less than the statutory minimum wages, the PF qualifying salary is simply around Rs 15000 only. But in the case of establishments which pay PF on actual salary, the PF qualifying amount on which the PF is to be calculated will vary depending upon the allowances which includes OVERTIME also.
In a similar way, the amount of wages on which the gratuity is to be calculated also will change. If, under the present system, it is calculated on Basic salary and such allowances which are fixed in nature like DA, HRA, Conveyance etc, under the Code it will be calculated on Basic, DA and 50% of total allowances (including overtime wages) which exceeds the basic pay. Why didn't the Code say that all statutory payments to ESI, PF Bonus or gratuity should be calculated on 50% of gross salary? If then it would have been oaky.
From India, Kannur
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The most important thing is that when we introduce a new Code replacing the existing one, we should consider the grey areas. Everyone knows that there is lot of confusions regarding eligibility for gratuity to an employee who has completed 4 years and 240 days. There are a few High Court verdicts also. The Code should have covered this confusion but has just pasted the Payment of Gratuity Act. The schedule attached to Employees Compensation Act regarding who all are covered and age based factors for deciding compensation are not touched but are just pasted copied from the parent Act.
About GIG workers, the Codes does not recognise them as workers but only extends social security. Why don't they be included under the definition of workmen itself. As we know, any person who works for the employer is a workman. As such there is no need to have a separate category of workers called gig or platform workers.
Regarding payroll, a formatting is required in order to ensure that PF or ESI is calculated correctly. Under the present system, you can take the gross salary as PF qualifying salary. Of course, in respect of employees who are given HRA that amount may be deducted from the PF qualifying salary. But for an organisation which restricts its PF contributions to 12% of Rs 15000 what is going to change? When there seems to be no industry in India where the statutory minimum wages is less than Rs 15000 and no industry can operate by paying wages less than the statutory minimum wages, the PF qualifying salary is simply around Rs 15000 only. But in the case of establishments which pay PF on actual salary, the PF qualifying amount on which the PF is to be calculated will vary depending upon the allowances which includes OVERTIME also.
In a similar way, the amount of wages on which the gratuity is to be calculated also will change. If, under the present system, it is calculated on Basic salary and such allowances which are fixed in nature like DA, HRA, Conveyance etc, under the Code it will be calculated on Basic, DA and 50% of total allowances (including overtime wages) which exceeds the basic pay. Why didn't the Code say that all statutory payments to ESI, PF Bonus or gratuity should be calculated on 50% of gross salary? If then it would have been oaky.
From India, Kannur
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(Fact Checked)-Your understanding of the labour codes is commendable. However, the codes aim to simplify and unify existing laws, not merely copy them. The changes are significant, not minor amendments. The new definition of 'wages' indeed requires careful interpretation. The inclusion of gig workers under social security is a progressive step, acknowledging the changing nature of work. Your points about payroll adjustments and gratuity calculations are insightful. Keep up the good work! (1 Acknowledge point)