Protection of workers’ rights
Under the labour codes, all organizations will need to classify their employee population as ‘employees’ or ‘workers’. While all individuals employed in an organization will be employees, individuals who do not have managerial or supervisory roles may potentially be workers. With this, even individuals in so-called white collared jobs working in an office may qualify as workers if they are not managers or supervisors.
While a similar definition of ‘workman’ exists under the current Industrial Disputes Act, it is applicable for limited purposes such as retrenchment or in cases of disputes with an employer.
If an individual is a worker, under the labour codes, he will be eligible for additional benefits from employers such as overtime for working beyond 8 hours on any day or 48 hours in any week and leave encashment for un-availed leave at the end of the year. Employers will also need to set up a grievance redressal committee where workers can file complaints on any matter.
From an employer’s perspective, it may be quite challenging to identify workers given that the definition lacks clarity and has been a matter of extensive litigation in the past. Terminologies such as managerial or supervisory role have not been defined and may have very different meaning in today’s digital world than that interpreted by the courts in the past. For instance, if someone is supervising work done by robots or other artificial intelligence tools, will it mean they are supervisors and therefore not workers?
Tracking of overtime specially in alternative work arrangements may be challenging for employees. Annual leave encashment will be counter-productive, as workers may not avail leave to receive a higher payout at the year end. Further, in service organizations where there is no categorization of blue-collared and white-collared jobs, companies may face a huge dilemma on how to communicate different leave encashment policies for employees and workers.
Balancing of employer duties and employee rights
Labour codes have not lost sight of challenges faced by employers because of multiple trade unions. The labour codes have given recognition to a negotiating union or negotiation council in establishments that have multiple trade unions. Such a negotiating union or negotiation council will have representatives from all trade unions in the establishment and will negotiate benefits and service conditions with the employer.
Addressing the issue faced by employers where unplanned strikes affect business continuity, the new labour codes provide that no employee will be allowed to go on strike without a mandatory 14 day notice to the employer.
Labour codes have enhanced the threshold number of employees from 100 to 300 for an employer to seek approval from the central government for retrenchment of workers.
Fixed term contract hiring
Hiring through third parties has been a common approach to flexi hiring in India. The labour codes open doors for a different approach to flexi hiring called fixed term employees. There are no restrictions under the labour codes on the number of or period for which fixed term employees can be employed.
While hiring of contract labour through third parties is not permitted in core functions in an organization, there is no such restriction on hiring fixed term employees for core functions. However, fixed term employees should be offered the same benefits as permanent employees for similar roles. Also, fixed term employees are eligible for gratuity after one year of service.
For employers looking at agility in hiring, fixed term employees may be a good option.
Digitization of compliance and enforcement
Employers are permitted to maintain all registers and records digitally under the labour codes albeit prescriptive formats for these registers and records have been provided in the proposed rules supporting the labour codes. The Government also plans to do random web-based inspections under the online inspection scheme.
There is a specific requirement for employers to do full and final settlement of wages within two working days of employees leaving. This will require employers to automate compliance and strengthen internal processes to reduce the full and final settlement time.
Multiple aspects in human resource and payroll policy framework and processes will undergo changes to ensure compliance with labour codes.
Focus on enforcement
One of the drivers for new labour codes is to ensure effective enforcement. Attempt has been made to achieve this in many ways. By rebranding labour inspectors as ‘inspectors-cum-facilitators’, the government has tried to give a friendly face to the labour code inspection regime. These inspectors-cum-facilitators have been made responsible for not just inspecting but also advising employers and employees on matters relating to compliance.
Employees have been given more voice – they can directly approach courts on any matter under the Code on Wages. This may lead to labour law litigation.
For enforcement of compliance, monetary penalties have been prescribed for first non-compliance under the labour codes but imprisonment proceedings kick-in for any second non-compliance by the employer.
Social security for self employed
Work arrangements outside the traditional employer-employee relationship have been given recognition under the new labour codes. The central government has been authorized to notify specific social security schemes for gig workers and platform workers. Such social security schemes may provide life and disability cover, accident insurance, health and maternity benefits, old age protection, creche and other benefits to such individuals.
An onus has been put on aggregators who are digital intermediaries and run online marketplaces, who make use of services of these gig and platform workers, to contribute a certain percentage of their annual turnover (between 1% to 2%) towards social security schemes for such workers.
Conclusion
Implementation of labour codes is a laudable step forward. However, the impact of new labour codes is immense, like it requires huge change management for employers. Employers will need to start preparing for these codes by first analyzing the impact and then creating internal policies, processes and governance structures which are aligned with the various requirements under the labour codes. All functional groups in an organization will need to come together for successful implementation of a framework that is future-ready.
From the government’s perspective, a clear roadmap on the implementation of labour codes, timely notification of central and state rules, taking away the retrospective cost impact and providing clarity on certain aspects will go a long way to ensure adoption by the industry.
Implementation of labour codes may be seen as a journey for the next two to three years. As the law evolves, further clarity on some provisions of the labour codes may come in and industry best practices may emerge.
(Puneet Gupta, Director, People Advisory Services – Tax, EY India also contributed to this article).