Center may soon implement four new labor codes under revised Labor Law, aimed at improving an employee’s well-being at work. Once applied, new labor code The rules stipulating the old relationship between employees and their employers are expected to be reformed. The central government is working on designing four new labor codes, under which there will be significant changes in the context of an employee. salaryLeave encashment, annual leave and final settlement if an employee decides to leave a company.
Change in the salary of employees under the new labor law
One of the most important aspects of the Labor Code is that they prescribe a new definition of wages, under which take home salary and PF contribution will be affected. “For the purpose of uniformity, a new definition of wages has been introduced. This is a significant change as it will impact several statutory payments like bonus, gratuity and contribution towards provident fund and state insurance of employees,” said Vaibhav Bhardwaj, partner, Induslaw.
According to the provision of the new code, the basic salary of the employee should be 50 percent of the gross salary. While this will mean that the PF contribution of the employee and the employer will increase, the take home salary will come down for some employees, especially those working in private firms. Under the provisions of the new draft rules, along with the amount received after retirement, the amount of gratuity will also increase.
Leave encashment under new labor laws
Apart from the pay structure and salary, the Center has also aimed to rationalize the employees’ leave policy, which has a provision where employees can redeem their unused leaves annually. At present, encashment of leave can be done only after separation from the company.
“Employees have the flexibility to encash unused annual holidays at the end of the calendar year,” Bhardwaj said. “While the existing law allows employees to encash unused leaves on separation, the codes provide for annual encashment. This is a welcome change from the employee’s perspective as the leave earned by them will be encashed and will not need to be forfeited if they exceed the carry-forward entitlement,” he said.
Final settlement of wages under new labor law
The new labor code mandates that salary to an employee who has left the company for various reasons, including resignation, layoff or dismissal, must be paid within two working days of his exit. At the moment, many states do not mandate ‘resignation’ to set this deadline of two working days. It currently takes about a month for full and final settlement by employers to calculate the gross amount paid to employees. However, the new labor law looks largely to reduce this time period to two working days.
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