Four labor codes related to changes in labor laws will not be effective from April 01. This is because states have not yet finalized the rules in this case. This means that the salaries coming into the employee’s account will continue to be the same as before, but there will be no change in the future fund liability on the employer. It is well known that with the implementation of labor codes, there will be a big change in the calculation of the basic wage and future fund and employee gratuity.
Four states have drafted
According to sources, some states have issued draft regulations. These states are Uttar Pradesh, Bihar, Madhya Pradesh, Haryana and Uttarakhand. Since the workers’ case is on the concurrent list of the country’s constitution, both the central and the state need to state the rules for implementation of the codes in their respective areas. Allowances are limited to 50 percent of the total wage under the New Wage Code. This means that only half of the employee’s basic salary will be allowed.
If the base salary increases, the future fund contribution increases
The future fund is determined based on base salary (base salary and dearness allowance). In this case, if the base salary increases, the contribution to the future fund increases. With this, more money will be deducted in the Employee Futures Fund on the one hand, and on the other hand, increased liability on the companies. Employers divide employees’ pay into various allowances to reduce base salary. It reduces future fund liabilities and reduces income tax payments.
Get higher gratuity during retirement
If the labor codes went into effect on April 1, the salaries of the employees’ account would have been reduced, but they would have been investing more money in the retirement fund. Also, there was a higher gratuity benefit during retirement. On the other hand, it increases future fund liability on employers. Enforcing these codes does not give employers some time to revise their employees’ pay under the new law.
The Ministry of Labor had planned to implement four codes.
The Ministry of Labor plans to implement four codes on industrial relations, wages, social security, occupational health care and working conditions from April 1, 2021. The Ministry has finalized the implementation of the four codes. “The implementation of these laws has been postponed for some time as the states have not finalized rules relating to the four labor codes,” a source said.
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