How will new labour code affect your career? Know all details

New Delhi:

New rules have been finalised by the Ministry of Labour and Employment in accordance with the four labour codes. These rules may be implemented from July 1 this year.

Once implemented these rules are implemented, they are expected to effect far-reaching changes in terms of working hours, take-home salary and provident fund contributions.

These changes may take place:

Week off may be available 3 days a week, but working hours will increase

As per the new draft law, it is proposed to increase the maximum working hours to 12 per day. At the same time, 48 hours of work will have to be done in a week. That is, working 8 hours a day will have to work 6 days a week, but working 12 hours a day will only work for 4 days and can get 3 days off. That is, if the company wants, it can also make arrangements in such a way that the employee should work for 12-12 hours only 4 days a week and leave the remaining three days.

If you do 15 minutes more work then you will get overtime

After the implementation of the new labor code, if you work 15 to 30 minutes more than your shift, then there is a provision to count it as 30 minutes and include it in overtime. That is, if the provisions are approved in the new labor code, then you will get overtime for working extra 15 minutes. Under the current rules, work up to 30 minutes is not counted as overtime. The question is, how much overtime will it be? According to your salary, 30 minutes i.e. half an hour salary will be calculated and given to you.

Half an hour break will be available every 5 hours

According to the rules of the new labor code, no employee is allowed to work continuously for more than 5 hours. After 5 hours, half an hour break will be given to the employee. The government has tried to make the new rules in such a way that employees can get maximum benefit from it and companies can not exploit any kind of employees.

Will in-hand salary decrease?

According to the new rules, the share of basic salary i.e. basic salary in the salary of any employee will be up to 50 percent and the remaining 50 percent will be all kinds of allowances. At present, companies keep only 25-30 per cent of the basic salary. In such a situation, all types of allowances range from 70-75 percent. Due to these allowances, more salary comes in the account of the employees, as all kinds of deductions are made on the basic salary and it is very less. In such a situation, after the implementation of the new wage code, there may be a reduction of 7-10% in your inhand salary.

Will the contribution to PF increase?

If there is an increase in the basic salary, then the contribution to PF will also increase. This is because PF is calculated on the basis of basic salary. 12-12 per cent of the basic salary is contributed by the employer and the employee to the provident fund. If your company is paying only 25-30 per cent of CTC as basic salary, it means that your contribution to PF will almost double after the implementation of the new wage code.

How much money will be deducted for gratuity?

The calculation of gratuity and PF is almost the same. In gratuity, 15 days of basic salary is deducted. So if your monthly basic salary is Rs 10000 then your gratuity will be deducted by Rs 5000. If your company has kept the basic salary at 25% of your CTC, then after the implementation of the new wage code, the basic salary will be doubled and the deduction in gratuity will also be doubled.

Pension will increase

There are two types of deductions in Provident Fund. One is the Provident Fund and the other is the Employees’ Pension Scheme. Of the 12 per cent contributed by the employer to the provident fund, only 3.67 per cent goes to the provident fund, while 8.33 per cent goes to the employee pension scheme. At the same time, the entire contribution of 12 percent made by the employee goes to the Provident Fund. 

After the new wage code, due to the increase in the basic salary, the contribution made by the employee to the PF will also increase. That is, the contribution to the Employees’ Pension Scheme will also increase. Suppose now both the employer and employee put 1200-1200 rupees in PF and the company gives only 25 percent basic salary, then after the new wage code it will be 2400-2400. That is, earlier the Rs 833 which used to go to the employee pension scheme from the employer, now it will increase to Rs 1666.

Salary structure will change

Companies often try to put more money in the hands of the employee through special allowances. If the contribution to PF and gratuity will increase due to increase in basic salary, then companies will change the salary structure and reduce the special allowance. That is, your CTC will remain the same as it is now, but your basic salary will increase and special allowance will decrease. In companies where there is no special allowance system, the salary structure will be changed in such a way that there is no loss to the companies.

What is the new definition of wage?

Basic pay, DA, retaining and special allowances have been included in the new codes. HRA, conveyance, bonus, overtime allowance and commissions are excluded from this. Under the new rule, all allowances cannot exceed 50 percent of the total salary. If it exceeds 50 per cent, then the higher amount will be considered as part of the wage. For example, earlier gratuity was calculated on the basis of basic salary i.e. basic salary, but now it will be available on the basis of wages. This can increase the salary of the employee and the expenses of the employer will increase.

How much will the company’s bill increase?

Expenses on fixed-term employees will increase, as gratuity will become mandatory. There will be less burden in the high-salary and mid-salary groups, but in the lower-salary range group, the company’s expenses may increase by 25 to 30 percent. This may affect the salary of the employees. That is, the implementation of these four labor codes will benefit the employees, but the burden of the companies may increase somewhat.


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