This doesn’t pay labour code must let go of rule mandating minimum 50% of salary to be basic it will help no one

This doesn’t pay labour code must let go of rule mandating minimum 50% of salary to be basic it will help no one

The two-day National Labour Conference to facilitate the rollout of the four central labour codes began yesterday. The four codes covering wages, social security, industrial relations and working conditions were cleared by Parliament between 2019 and 2020. They compressed multiple central laws on the subject into four categories that aimed to make things simpler and also decriminalise minor offences. The subordinate legislation to actualise the new codes is not yet in place as it needs coordination between GoI and states, as labour is in the Constitution’s concurrent list.

To move things forward, GoI pre-published drafts of the subordinate legislation. As many as 31 states have done the same for the Code on Wages, the first of the four to be cleared by Parliament in 2019. Despite sensible intentions that catalysed the parent legislation, the rules for the wages code gets into granular details, putting them at odds with ground realities. To illustrate, the proposed definition of wages goes a step further than the erstwhile legislation. Specifically, it says basic income must be at least 50% of total wage/salary for any employee – one of the arguments being that this will increase social security contribution.

But while this will increase the social security component of pay, it will be at the expense of the take home component. It not only limits flexibility employers currently have but it may also hurt employees’ interest as private firms fix salaries on the basis of cost-to-company. Therefore, employees, who the code intends to help, may be worse off. Private sector employs a wide variety of people with varying skill sets and in dynamic market conditions. A minimum contribution for social security is enough. Salary structures should be left to contractual negotiations between stakeholders.