New Labour Code Could Lower Your Take Home Salary

Mumbai: The government on Friday implemented four new labour codes, marking the biggest overhaul of workers’ laws in decades. The four Labour Codes — Code on Wages, Industrial Relations Code, Code on Social Security, and Occupational Safety, Health and Working Conditions Code replacing 29 fragmented labour laws promises minimum wages, timely payments, expand social security and equal opportunities for 40 crore workers.

Here are Key Reforms Under the New Labour Codes and how it impacts you:

1. Uniform Definition of Wages to Impact Take Home Salary---The new “Wages” definition will now include basic pay, dearness allowance, and retaining allowance. Wages have been introduced for calculating benefits related to Gratuity, Employees’ State Insurance, Leave Encashment, Overtime, Statutory Bonus, etc. The rule says that at least 50 per cent of your cost to company (CTC) must now be classified as wages (basic pay+ dearness allowance) which will increase yourmandatory contributions. This change may lead to lower take-home salaries but higher PF and gratuity benefits.

2. Gratuity for fixed-term employees after one year---The labour codes explicitly prohibit the use of contract labour for the 'core activities' of an organisation, except in certain exceptional circumstances. Core activity means any activity for which the establishment is set up. Furthermore, fixed-term employment has been officially recognised as a valid employment model, subject to specific conditions and compliance requirements. For instance, such a worker would be entitled to gratuity after one year of service on termination and all other statutory benefits available to a permanent workman, proportionately according to the period of service rendered by him/ her. However, permanent staff continue to follow the five-year rule.

3. Universal Minimum Wages & New Statutory Floor Wage---The government will now set a statutory floor wage based on minimum living standards. States must ensure their minimum wages remain above the statutory floor wage, creating nationwide uniformity. For the first time, all employees, including unorganised-sector workers, are covered.

4. Gender Equality & Universal Wage Protection---The code mandates gender equality ensuring equal pay for equal work. Timely wage payment rules now apply to all employees earning up to Rs 24,000 per month, widening protection.

5. Work Hours, Overtime & Women Working at Night---The weekly cap remains 48 hours. Daily limits may be increased, but overtime must be paid at twice the normal rate. Appointment letters are now mandatory for all workers, ensuring clear employment terms, job security, and transparency.

6. Universal Social Security---For the first time, gig and platform workers, drivers, delivery partners, and freelancers, will receive social security benefits. Aggregators will contribute one to two per cent of their turnover into a dedicated social-security fund.

7. Work-from-Home Recognised in Law---For the first time, work-from-home provisions are officially recognised, especially for services and IT sectors, giving companies and employees more

flexibility.