All the four Labour Codes have now been passed in both the houses of the parliament and President's assent obtained. As industries across India are busy decoding the codes, they are also trying to understand the possible impact the could make, when the date of commencement likely shortly, is announced. They would like to make policy decisions, if need be, to stay compliant because of the introduction of the Codes.

1. Labour
Codes
-Highlights

2. ● Code on Wages, 2019 [4]
● Occupational Safety, Health and Working Conditions
Code, 2020 [13]
● Code on Industrial Relations, 2020 [3]
● Code on Social Security, 2020 [9]
● Status
● Rationale
● Changes only in Central Legislations
THE CODES

3. TABLE OF
CONTENTS
OSHWC CODE,
2020
01
0302
04
CODE ON WAGES,
2019 & DRAFT RULES
NOTIFICATION
INDUSTRIAL
RELATIONS CODE,
2020
CODE ON SOCIAL
SECURITY

4. Code on social security
01

5. HRA is excluded from ‘wages’ ( cannot have
HRA as a component particularly when
mere minimum rate of wages is paid )

6. Gratuity is excluded ( Madras HC’s ruling in
Madras Fertilizer Ltd.’s case could get
nullified )

7. The sum of ‘excluded components’ cannot
go beyond 50% of the Total Remuneration

8. Ascertaining ‘Total Remuneration’ could be
a challenge ?

9. Wages – Sec 2(88) –
Various Parts
Specifics
Substantive
All remuneration by way of salaries, allowances or otherwise
Expressed in terms of money or capable of being so
expressed
As per the terms of employment
Inclusive Basic, DA, Retaining Allowance, if any
Exclusion
(a) Any bonus payable under any law
(b) The value of house accommodation, or…..
(c)Any contribution paid by the employer to any pension or
PF
(d) Any conveyance allowance
(e) Any sum paid to defray special expenses
(f) HRA
(g) Remuneration payable under any award or settlement
(h) Any overtime allowance
(i) Any commission payable
(j) Any gratuity payable on termination
(k) Any retrenchment compensation

10. Wages – Sec 2(88) –
Various Parts
Specifics
Proviso and Explanation
Provided that, for calculating the wages under this clause, if
payments made by the employer to the employee under clauses
(a) to (i) exceeds one-half, or such other per cent, as may be
notified by the Central Government, of the all remuneration
calculated under this clause, the amount which exceeds such
one-half, or the per cent so notified, shall be deemed as
remuneration and shall be accordingly added in wages under
this clause:
Provided further that for the purpose of equal wages to all
genders and for the purpose of payment of wages, the
emoluments specified in clauses (d), (f), (g) and (h) shall be
taken for computation of wage.
Explanation.––Where an employee is given in lieu of the whole or
part of the wages payable to him, any remuneration in kind by his
employer, the value of such remuneration in kind which does not
exceed fifteen per cent. of the total wages payable to him, shall
be deemed to form part of the wages of such employee;”

11. Wages – Sec 2(88) – Various Parts Specifics
Basic 5000 If the total remuneration is 13000
DA 2000 50% works out to 6500
HRA 3000 Basic + DA = 7000 ( > 6500 )
Conveyance Allowance 3000
Commission 3000 If the total remuneration is 15240
Monthly Gross 13000 50% works out to 7620
PF Employer’s contribution ( 12% on
Basic + DA )
840 Basic + DA = 7000 ( < 7620 )
Bonus ( reckoned for a month @ 20 % ) 1400 Sum of excluded components 15240
– 7000 = 8240
Total 15240 8240 – 7620 = 620 ( will be added to
wages )

12. 50% of wages shall be considered for PF
contributions ( in as much as salary ceiling,
even if notified, will not be available for PF
purposes ) – PF wage could increase ???

13. 50% shall be considered for ESI contributions
subject to ceiling, if any – quantum can
come down ( hitherto, it is the monthly
gross, of course, with certain exceptions )

14. 50% shall be considered for gratuity
calculations – financial commitment could
go up ( hitherto, it is only basic and DA )

15. 50% shall be considered for Maternity
Benefits – commitment could come down

16. 50% shall be considered for working out
compensation, subject to ceiling if any –
there can be a reduction in the quantum
[for the purposes of calculation of
compensation under EC Act, the salary
ceiling is Rs 15000/- currently ]

17. PF – chapter III - shall apply to
establishments employing 20 or more
employees – industry-specific application
removed [ Sec. 1 (4)]

18. No wage ceiling could be prescribed for
provident fund employee coverage??? (
Wages ceiling is only for EPS & EDLI Schemes
) [ Sec. 2 (26) ]

19. Employees, whose wages are more than the
notified wage ceiling by the Central
Government shall also be taken into
account for determining the number of
employees [ Sec. 2 (26) 2nd Proviso ]

20. The term ‘employee’ Specifically excludes only
apprentices engaged under the Apprentices Act.
Will the apprentices engaged under the Standing
orders or otherwise would become entitled for PF (
and gratuity )??? [ Sec. 2 (26) ]
[ the present position will continue till a new scheme
is framed as per Sec 164 of CoSS ]

21. The code provides for specifying differential
rates of employees’ contribution [ Sec. 16 (1)
2nd Proviso ]

22. Condition for authorization to employers for
maintaining PF accounts – 100 or more
persons (Exempted Establishments)

23. Chapter IV – ESI - Voluntary coverage
possible [ Sec 1(7) ] [ if covered voluntarily,
withdrawal subsequently is possible ]

24. Applicability to Plantations on voluntary basis
[ Sec. 1 (4) 1st Schedule ]

25. Hazardous or life threatening establishments
– Central Government can make ESI
applicable through notification even if there
is single employee [ Sec. 1 (4) 1st Schedule ]

26. Proviso to Sec 2(26) – employee - For the
purposes of Chapter III, except in case of the
Employees’ Provident Fund Scheme and
Chapter IV, the term "employee" shall mean
such employee drawing wages less than or
equal to the wage ceiling notified by the
Central Government…..”

27. Presumption as to the accident while
commutation between residence and place
of employment [ Sec 34 ]

28. ESIC’s rights when the employer fails to
register an employee or fails to pay the
contributions [ Sec 42 ]

29. Mines also to be covered under the ESI
provided if the required number of
employees are employed therein??? [ Sec.
2 (29) ]

30. Chapter V - Gratuity for Fixed Term Workers
and other provisions on par with regular
employees [Sec. 2 (34)].
[ FTEs are to be paid proportionately, even if
the number of years of continuous service is
less than 5 ]

31. Working journalists shall be entitled to
gratuity even if they have completed 3
years of continuous service [Sec. 53 (1)
Proviso]

32. The employer shall not be liable to pay
interest for the delay in payment of gratuity if
the delay is due to the fault of the employee
and there is a written permission from the
controlling authority [Sec. 56 (4) Proviso]

33. The central govt. would be the appropriate
Govt. in relation to an establishment having
departments or branches in more than one
State (There will be an impact under
Gratuity, Maternity Benefit and Employment
Exchange chapters)

34. Chapter VI – maternity benefits - “Any law for
the time being in force apply” removed - CA
firms could go out of the purview of these
chapters
Establishments which are already notified (
by Central/State govt.) shall continue to be
covered under this chapter (ex. Educational
institutions)

35. The crèche shall be provided if 50 or more
employees are employed ( irrespective of
whether such establishment is covered
under ESI or not ) [ Sec. 67(1) ]

36. Maternity benefits or medical bonus or both
can be deprived, if a woman is dismissed or
discharged for any gross misconduct as
prescribed by the Central Govt. [ Sec. 68 (1)
Proviso ]

37. Chapter VII – employees’ compensation -
Appropriate Government definition now
available for EC purpose

38. If death or injury is caused to any worker or a
member of his family as a result of the collapse of a
house provided by the employer in a plantation, and
the collapse is not solely and directly attributable to
a fault on the part of any occupant of the house or to
a natural calamity, the employer shall be liable to
pay compensation under section 76 and the Sixth
Schedule, so far as may be [ Sec. 75 ]

39. Funeral Expenditure – Rs 15000/- or such
sum as fixed by the State Government [ Sec
76(7) ]

40. Chapter VIII - The building and construction
work shall not include the construction work
carried out in the factory or mine in which
less than 10 workers are employed [ Sec. 2
(6) ]

41. ‘Building and Other Construction Work’ does
not include the residential construction, if the
cost of such construction is less than Rs 50
lakh [ Currently, its Rs 10 lakh ]

42. Chapter XIII – employment information -
Applies to establishment employing 20 or
more employees [ First Schedule read with
S.140(f) ]

43. The Central Govt. would be the appropriate
Govt. for Telecommunication, Insurance and
Banking companies (obligation could arise
to send notification of vacancies and
submission of returns)

44. ● Central Board of Trustees of Employees Provident Fund constituted
under section 4;
● Employees' State Insurance Corporation constituted under section 5;
● National Social Security Board for Unorganised Workers constituted
under section 6;
● State Unorganised Workers' Social Security Board constituted under
section 6;
● State Building and other Construction Workers' Welfare Boards
constituted under section 7; and
● Any other organisation or special purpose vehicle declared to be the
social security organisation by the Central Government;
● Transitional Provisions under Section 153 (Existing Board/committees
will continue to operate its functions)
Social Security Organisation [ Sec 2(79) ]

45. ● Central Govt to frame schemes for providing social security to gig
workers and platform workers (Sec. 114(1))
● Central Govt to constitute a social security fund/s for unorganized / gig
/ platform workers or such class of persons (Sec. 109 (1)
○ Gig workers (Sec. 2 (35))
○ Home-based workers (Sec. 2 (36))
○ Platform workers (Sec. 2 (61)
○ Self-employed workers (Sec. 2 (75))
○ Wage workers (Sec. 2 (90))
Chapter IX – Social Security for
Unorganized Workers

46. ● Limitation of 5 years for institution of ESI and PF proceedings [ Sec. 125 (1)
Proviso ]
● The role of Inspector is changed to inspector cum facilitator
● To provide penalty for different types of violations commensurate with
gravity
● There is an increase in Penalty in case of violation
● Provision for compounding of offence introduced
● Prior to prosecution, opportunity to be provided to employer for corrective
action
● Application of Aadhaar Number: Establishment of identity of employees and
his/her family members to avail benefits under the Code through Aadhaar
Number [ Sec. 142 ]
Chapter XI – Assessment

47. ● Registration – Sec 3 – either electronically or
otherwise
● Plantation – Sec 2 ( 59 ) - 10 or more workers; 5 or
more hectares of land
Common points

48. ● The central govt. would be the appropriate Govt. for telecommunication,
insurance and banking companies ( obligation could arise to send
notification of vacancies and submission of returns )
● The permanent workers of a contractor shall not be considered as
‘contract labour’ if they are extended social security and welfare
benefits as prescribed under law
● Engagement of Fixed Term Employees – Sec 2(34) - is getting
recognised; They are to be treated on par with the permanent
employees and are entitled for all the benefits on a proportionate basis
● Any person taking up employment, directly or thru a contractor, in the
destination state and drawing a monthly wage of less than Rs 18000/-
would be ISMW
Some common points – Clarification given

49. ● Calculation of ‘total remuneration’ ?
● Whether the branches are to be clubbed together
for the purposes of ESI and Gratuity as the
explanation to Sec 2(29) is available only for
chapter III ( PF ) ?
● Whether the Principal Employer would be liable for
payment of gratuity to contract workers ?
Some common points –
clarification required

50. OSHWC Code, 2020
02

51. ● Chapter concerning the Contract labour shall apply only if 50 or more
contract labour are employed
● The term core activity is defined. Code prohibits the employment of
contract labour in core activities
● The term “controlled industry” is defined and which refers to the
industries which are declared so by central govt. under any Central
Act (Scope is widened).
● Contractor having operations in multiple States may obtain common
licence from the authority specified by the Central Government
● Sec 2(1)(m) defines ‘contract labour’ ( specifically includes Inter-State
Migrant workmen and excludes the persons who are regularly
employed )
Contract Labour

52. ● Inclusion of Contractor in the definition of ‘employer’ [2(1)(t)]
● Direct liability for Principal Employers for the provisions of various
amenities to contract workers (Sec. 53)
● Workers from other States, even directly employed, would become
‘Inter-state Migrant’ Workers [ Sec 2(1)(zd) ]
● Provision with reference to the payment of Displacement allowance
is removed now
● Experience certificate to Contract Labour to be issued by the
Contractor (Sec. 56)
● Contractor Labour chapter applies to manpower supply contractor
only ??? [45 (1)(ii) & 47(1)(b)]
● Sec 2(1)(n) defines who ‘a contractor’ is ( almost on par with the one
in the existing CLRA Act )
Contract Labour

53. ● The threshold number to constitute a “factory” is replaced by 20 in the
place of 10 and 40 in the place of 20
● Three Dimensional or four Dimensional printing, prototyping and
flexography processes are also included as manufacturing process.
● Code empowers the Central Govt. to add to the list in the
manufacturing process
● Night shift for woman with her consent (Sec 43)
● Overtime with consent of worker (Sec. 27)
● Independent director can’t be an occupier of the factory [2(1)zo(ii)]
● Reduction in threshold no. of workers for appointment of Safety
Officer, Welfare Officer, provisions of canteen, etc. (Sec 22 & 24)
Factories

54. ● Definition of ‘Industry’ [Sec 2(1)(zb)] - the triple test formula laid down
under Bangalore water supply sewerage board case – Supreme
Court
● Appointment order made mandatory [Sec 6(1)(f)]
● Third Party Audit and certification (Sec 37)
● Single registration instead of 6 (Sec 3)
● Daily hours, weekly hours and other working conditions shall be fixed
by appropriate Government (Sec 25) [ Daily hours not to exceed 8 –
fixed by CG ]
● Common license for factory, CLRA and Beedi & Cigar establishment
and valid for 5 years (Sec 111)
Common Points

55. ● Registers, Returns, Abstract & Notices - Consolidated (Sec 33)
● Wide scope of definition for ‘establishment’ [Sec 2(1)(u)]; (One
common definition instead of 5)
● Appropriate Government defined [ Sec 2(1)(d) ]; (One common
definition instead of 4)
● Differentiates ‘employee’ [2(1)(s)] and ‘worker’ [(2(1)(zze)]
● The role of inspector is modified as “Inspector cum facilitator” (Sec.
35)
● Exclusive facilities for Transgender [Sec. 23(2)(viii)]
Common Points

56. ● Building and other construction work defined [ Sec 2(1)(g) ] - 10 or
more workers removed
● ‘Family’ defined [ Sec 2(1)(w) ]
● Enhanced Penalties (From Section 87 to 107); Obstructing inspector:
from Rs. 10000 to 1 Lakh; Accident: Death - from 25000 to 5 Lakh &
Serious bodily injury – upto 4 Lakh; Falsification & contravention:
Similar penalty upto 1 Lakh
Common Points

57. Code on wages, 2019
&
Draft Rules
Notification
03

58. ● Sec 2(g) defines ‘contract labour’ ( specifically includes inter-state
migrant workmen and excludes the persons who are regularly
employed )
● Contractor’s payment shall be ensured by Company before the
contractor makes the payment of wages to his employees - Rule 54
● In case of non-payment of minimum bonus to the contract worker,
company should pay the same. But no specification about recovery
from contractor - Rule 57
● Sec 2(f) defines who ‘a contractor’ is ( almost on par with the one in
the existing CLRA Act )
Contract Labour

59. ● Common definition for ‘wages’ for all the four existing laws [Sec
2(y)]
● Certain allowances, excluded for Minimum Wages and Bonus
but included for Payment of Wages and Equal Remuneration
(Convey, HRA, Remuneration under Settlement & Award and
OT)
● A cap – 50 % - fixed for ‘excluded components’
● HRA – No more part of minimum wages
Wages

60. ● Payment of Wages Act – Ceiling of Rs 24000/- removed now – the Act
applies to all
● In case of separation, including resignation, the settlement is to be made
within the next two working days
● Employer shall fix the wage period and it shall not be more than one month
( Sec 16 ):
○ Daily wage shall be paid by the end of the day
○ Weekly wage shall be paid on the last working day of the week
○ Fortnightly wage shall be paid within 2 days after the end of the period
○ Monthly wages shall be paid within 7 days after the month
● Wages shall be paid in current coin or currency notes or by cheque or by
crediting wages in the bank a/c ( Sec 15 )
Payment of Wages

61. ● Total amount of deduction in any wage period from the wages of employed
person shall not exceed 50% (Currently in case of co-operative Society – 75%)
● Recovery of advance can be done without any stipulated time but with one
condition ie. Recovery can't go more than 50% on any wage period (Rule
19). (Currently in TN – 12 months)
● Deduction for damage or loss shall be done only with specified procedure.
Explain personally and intimate in writing within 15 days from the date of such
deduction (Rule 18)
● Undisbursed due ( unpaid accumulation) period is 6 months - Rule 47
● Amount to be settled within 15 days from the date of last day of due period. (Rule
47(1))
● Amount to be deposited through bank transfer or DD - Rule 47 (2)
● If the undisbursed amount remains unclaimed for a period of seven years, the
same shall be dealt in the manner as directed by the Central Government - Rule
48(4)
Payment of Wages

62.  Payment of Bonus chapter shall apply to the establishments in
which 20 or more persons are or were employed on any day during
an accounting year ( Sec 41(2) )
 The Code is silent about the applicability if the threshold limit falls
below subsequently
 Wages ceiling for eligibility for Bonus : To be fixed by the
Appropriate Governments
 Wages ceiling for calculation of Bonus : To be fixed by the
Appropriate Governments
 Mode of payment of bonus - Only by giving bank credit
 Disqualification for bonus : ‘conviction for sexual harassment’
added
Bonus

63. ● Definitions of Unskilled, Semiskilled, Skilled and Highly Skilled Occupations are
introduced in the Rules [Rule 2 (j), (t) (u) & (v)]
● Geographical Areas classified as metropolitan, non-metropolitan and rural areas
(Rule 4)
○ ‘Metropolitan’ means 40 lakhs and above population area - Rule 2(m)
○ ‘Non-metropolitan’ means above 10 lakhs but below 40 lakhs - Rule 2(n)
○ ‘Rural area’ means other than metro and non-metro - Rule 2(q).
● Differentiates ‘employee’ (Sec 2(k)) and ‘worker’ ( Sec 2(z))
● Period of limitation is 3 years for claim. Claim to be determined and in addition, 10
times of such amount (MW, Bonus & Equal Wages)
● Introduction of Web based inspection Scheme; The role of inspector is modified as
Inspector-cum-facilitator
● In case of complaint, Court can take cognizance directly from employee and the
Registered Trade Union
● Burden of Proof - lies with the employer
Common Points

64. Industrial Relations
Code, 2020
04

65. ● The definition of the term “industry” is modified in line with the Apex
court verdict in Bangalore Water Supply and Sewage Board Case [
Sec 2(p) ]
● Domestic services and the Institutions engaged in charitable, social
or philanthropic services are excluded from the term “industry” [
Sec 2(p) Exclusion part ]
● Termination of the service of a worker on the ground of continued
ill-health is considered as retrenchment [ Sec 2(zh)(v) ]
● Concerted mass casual leave also be construed as strike [ Sec 2
(zk) ]
● The total number of members of the Grievance Redressal
Committee increased from six to ten [ Sec 4 (4) ]
Industrial Disputes

66. ● Notice shall not be required for effecting change in case of
emergent situation requiring change of shift or shift working
otherwise than (except) in accordance with standing orders, in
consultation with Grievance Redressal Committee [ Sec 40(ii)( c) ]
● Prohibits strikes and lockouts in any industrial establishment
without giving notice of 14 days [ Sec 62 (1) (b) ]
● Notice of strike or lockout validity is amended from 6 weeks to 60
days [ Sec 62 (1) (a) ]
● Wilful go-slow shall be construed as unfair labour practice on the
part of worker - The Second Schedule [See sections 2 (zo), 84, 86
(5) and 101(1)]
● Time period for filing a grievance application is reduced from three
years to one year – Sec 4 (5)
Industrial Disputes

67. ● Time period for raising industrial dispute before the conciliation
officer is reduced to 2 years from 3 years [ Sec 53(1) Proviso ]
● Factories, mines or plantations shall obtain permission from the
appropriate govt. for retrenchment or lay-off if 300 or more workers
[ Sec 77 (1) Chapter X ]
● Only tribunal has the power to entertain any suit in relation to
dispute concerning trade unions and the members – Sec 44
● The employer shall contribute an amount equivalent to 15 days
wages for every retrenched worker towards the workers reskilling
fund; [ Sec 83 (2) Chapter XI ]
Industrial Disputes

68. ● Chapter IV concerning the Standing orders shall apply to the industrial establishment
in which 300 or more workers are employed (currently it is 100 or more) [ Sec 28(1) ]
● Central government shall draft model standing orders (currently both central and
state govt. has this power) [ Sec 29 ]
● The central govt. would be the appropriate govt. for telecommunication, insurance
and banking companies [ Sec 2(b) ]
● Employers shall consult the trade unions or negotiating union/council before
submitting the draft standing orders to the certifying officer. [ Sec 30 (2) ]
● Certifying officer to look in to the fairness or reasonableness of the provisions of any
standing orders [ Sec 30 (7) ]
● Certifying officer shall certify the standing orders within 60 days and in case of failure
to certify within the time limit, then it will be deemed to have been approved. [ Sec 30
(5) ]
● Standing orders already certified shall continue to be inforce [ Sec 30 (11) ]
Standing Orders

69. ● Empowers the app. Govt. to appoint officers for holding enquiry and
impose penalty in certain contraventions punishable with fine up to
Rs. 50000/- [ Sec 86 ]
● Central govt. would be the appropriate govt. for metro railways [
Sec 2(b) ]
● The Central Government will be the appropriate govt. for the
establishment of contractors serving to the establishment,
undertakings etc. of Central Govt. [ Sec 2(b) ]
● To provide penalty for different types of violations commensurate
with gravity [ Sec 85 and 86 ]
● There is an increase in Penalty in case of violation of the provisions
of this code [ Sec 85 and 86 ]
● Provision for compounding of offence is introduced [ Sec 89 ]
Common Points

70. ● Special provision introduced for recognition of trade union [ Sec 14 ]
● If more than one trade unions are functioning, the trade union
having 51% or more workers support, shall be recognised as sole
negotiating union [ Sec 14(3) ]
● If more than one trade unions are functioning and if no trade union
is having 51% or more workers support, negotiating council to be
formed (i.e @1 representative for each 20% members). [ Sec 14(4) ]
● Only one-third of the total number of office bearers of the union or
five office bearers, whichever is lower, can be from outside the
industry with which the union is connected [ Sec 23(2) ]
Trade Union

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