Labour codes: There can be a big change in the employee’s salary structure.
The new wage code was to be implemented from April 1, but the Ministry of Labour postponed it. Media reports said that if the same is implemented from 1st July, then there can be a big change in the salary structure.
Once the wages code comes into force, there will be significant changes in the way basic pay and provident fund of employees are calculated. The labour ministry had envisaged implementing the four codes on industrial relations, wages, social security and occupational health safety & working conditions from April 1, 2021. These four labour codes will rationalise 29 central labour laws.
The ministry had even finalised the rules under the four codes. But these could not be implemented because many states were not in a position to notify rules under these codes in their jurisdiction.
”Many major states have not finalised the rules under four codes. Some states are in the process of finalising rules for the implementation of these laws. Central government cannot wait forever for states to firm up rules under these codes. Therefore, it is planning to implement these codes in a couple of months as some time would have to be given to establishments or firms to align with new laws.
This is the right time for companies to standardise the CTC structure, this will help to reduce the number of heads under which salary and reimbursements, thereby reducing the administration cost of payroll management. Companies can standardise payroll records, appointment letters, policies and roll out controlled templates in alignment to new labour codes.
The new definition of wage as introduced in The Wage code, 2019 indicates that if the ‘wages’ bucket falls below 50% of the remuneration, then some portion of components excluded from the ‘wages’ bucket will be added to it so that this bucket becomes at least 50% of the remuneration for the purpose of calculating different payments such as social security contributions, gratuity, leave encashment, etc.
The need of this hour is a thorough analysis by each organisation of their employees’ compensation structures and to prepare well to accept the changes with a welcoming approach.
