BUSINESS

When will the new wage codes be implemented? Can companies deduct more PF, give low in-hand pay?

New labour codes will allow the employers to allow four-day work week. (File)

The new labour codes will have a major impact on employment rules, including working hours, leave of absence and pay packages, including the provident fund and gratuity. There were reports that they would be implemented from July 1, but experts now say there is no clarity on when they will be enforced. However, they were passed in Parliament in the year 2020. So implementation can take place any time soon. The four labour codes cover salary details, occupational health, social security and industrial relations. 

According to the government’s documents, after the labour codes are implemented, companies will have the option to give three week off in a week. No company will be allowed to make employees work more than 48 hours per week. This means those who work 12 hours per day will be required to work only four days. Those with an 8-hour day will work for six days in a week. 

Women can’t be made to work in a night shift without their express consent.

The new labour codes will also change the full-and-final rules. Those who decide to leave the country would have to be paid the final settlement amount within 2 days of exiting the company. 

The new rules also propose a change in the salary structure. This means the companies will be required to keep 50 percent of the salary as basic pay. This would mean employees would have to pay more provident fund. Hence, they will get less salary in their accounts every month. 

Preeti Chandrashekhar, India business leader for health and wealth at Mercer, told Moneycontrol that 29 states and union territories have notified the draft rules. 20 have notified the rules for all the four codes. She said for the Centre to notify rules, states would have to notify the rules. 

The codes, however, will be implemented in 2022.

As of now, the companies calculate the provident fund on 25-40 percent of the total salary. This base amount is called the basic salary. After the implementation of the labour codes, the basic salary will become at least 50 percent of the total cost to the company. 

An expert, however, told the website that the employer will not be under an obligation to contribute on higher wages if the salary is more than Rs 15,000. 

So if the person pays more, the provident fund would depend on the company’s policies. If the company restricts the PF contribution to the wage ceiling of Rs 15,000, the current PF contribution will not increase. 

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