New Labour Codes Might Get Deferred Due to COVID-19 Second Wave

Companies might not reorganise their employees’ salaries, citing the delay in implementing the new labour codes. New labour reforms were supposed to come into effect from April 1; however, the Centre deferred the implementation. Due to the COVID-19 second wave, new labour codes might not get implemented this year as well.

The deadly second wave has kept all the states completely occupied; states have been slow in getting the framework ready for the four new labour codes implementation. Earlier, the Centre pressurised states to complete the drafting of rules quickly; however, with the current situation, the Centre is no longer pushing the states to complete the framing of rules.

Several companies were worried about bringing about the complex changes needed for staying compliant with the new labour codes. With the delay in implementation, companies might get more time in realigning their employees’ salary structure as per the new labour rules.

Under the new labour codes, the most important rule is capping employee salary allowances at 50% of CTC. Hence, with this capping, the basic salary of an employee should be a minimum of 50% of CTC. With the new labour codes coming into effect, companies will need to change their employee compensation structure to meet the new requirements. This would be a complicated process since currently, most employers do not pay 50% salary as basic pay to their employees.

There are still many doubts when it comes to the new salary structure. The new wage codes will provide better social security benefits to employees; however, monthly take-home salaries could dip marginally under the new codes. Employees might get higher post-retirement benefits since there is an increase in the provident fund contribution.

For any clarifications/feedback on the topic, please contact the writer at bhavana.pn@cleartax.in