Labour reforms proposed in Budget 2019 Decoded: Here is what Modi govt 2.0 is looking to do

- By Aarti Raote, Partner and Tarun Garg, Manager with Deloitte Haskins and Sells LLP

In line with the government’s focus on ‘Ease of Doing business’, ‘Make in India’, ‘Rationalisation of various regulations’, it has taken up the streamlining of Labour Laws. Considering the objective of achieving simplicity, about 44 currently prevalent labour laws will be subsumed into four labour codes.

Finance Minister Nirmala Sitharaman emphasized in the Budget Speech 2019 that this exercise would result in streamlining of multiple labour laws, ensuring that the process of registration and filing of returns will get standardized. This would also result in a positive situation of definitions being uniform across the various legislations and help in reducing litigation. It is widely believed that the impact of this streamlining would be far beyond. Let us look at what the four labour codes look to cover:

Code of Wages

The Code of Wages proposes to subsume four current legislations namely: the Payment of Wages Act, 1936, the Minimum Wages Act, 1948, the Payment of Bonus Act, 1965 and the Equal Remuneration Act, 1976.

While the Central government provides a limit for wages, the State Government has a right to fix the Minimum wage for the establishments within their State. Having a unified code would help in aligning these.

The draft of ‘the Code of Wages’ has been recently approved by the Union Cabinet. Since the Government has set the ball rolling, one can expect that this would be implemented soon.

Code on Social Security - 2018

The Code on Social Security seeks to subsume labour laws like the Provident Fund Act, ESI Act, Payment of Gratuity Act, Maternity Benefits Act etc . There have been recent changes to some of these including the enhancement of the limit for payment of gratuity to INR 20 lakhs increase in the maternity leave for women from 12 weeks to 26 weeks and the requirement to have a crèche facility for employers having more than 50 employees. The recent Supreme Court ruling on PF wages has impacted the industry significantly.

The proposed code will not only minimise the numer of legislations but also bring about alignment across various provisions

Code on Industrial Relations

Code on Industrial Relations would replace Trade Union Act, 1926, The Industrial Employment (Standing Order) Act, 1946 and The Industrial Disputes Act, 1947. However, as per information received from press releases, this code will be taken up later.

Code on Occupational Safety, Health and Working Conditions

Code on Occupational Safety, Health and Working Conditions amalgamates 13 labour laws like Factories Act, Mines Act, Plantation labour Act, Building and other construction workers Act etc.

The overall objective of having the four labour codes is to:

· Reduce the compliance and administrative burden emanating from multiple legislations;

· Integration of labour regulations;

· Minimise anomalies and contradictions thereby reducing litigation in interpretation of statutes; and

· Widen the social security benefits and ensure last mile reach. Simpler compliance through integration of returns.

While this is a laudable initiative, the government needs to ensure seamless transition and effective implementation.