Intrinsically, labour laws play a vital role in any business. Because it regulates and governs the company’s relations with its employees and government. Any amendments in the labour laws can affect your recruiting rules, finances and other responsibilities towards the employees.
Lately, the government has decided to amend 29 existing laws along with four codes. And one of them is an industrial code of 2020. In this blog, we will discuss the changes that will be made in existing labour laws by this amendment. We would also discuss its impact on your business compliances once you register a pvt ltd company in India. It can be done with the required documents by visiting the MCA website.
What are some of the significant benefits of the industrial relations code of 2020 to the business owners?
– The primary purpose of this act is to minimize business costs related to labour while modernizing the labour regulations.
– Easy submission – earlier, there were a multiplicity of labour compliances that one was required to follow under the various laws such as gratuity, employee state insurance scheme, compensation of workmen, PF and so forth. The code has subsumed these laws into one comprehensive legislation. It would minimize the cost and time spent on various annual and quarterly submissions.
-Lesser litigation and quick dispute resolution – concentrate on arbitration and negotiation for disputes with workers, thereby adopting non-tribunal and non-court settlements. It can potentially free up the business resources such as money, time, and personnel locked in a litigious matter.
– Smooth operations with lesser regulations – any strikes organized by the workers or employees without the notice will be considered illegal for all the businesses. Likewise, more leeway has been offered to businesses in designing their working hours and other employment-related policies.
– Incentives to expand the business – earlier, many small businesses used to face regulations as they grew in employment and size. It has been known as ‘perverse incentive’ means, small businesses often stay small to circumvent greater financial burdens of labour laws. With raising the threshold limit of employees up to 300, businesses now can recruit more without paying any extra compliance costs.
Main characteristics of the code.
Defining the worker – the code resolves the doubts related to the workers’ definition, stated in various labour laws. It mentions that a worker would include, along with all the persons employed in a skilled or unskilled, technical, manual, clerical, operational, and all supervisory staff drawing up to Rs. 18000 a month as a salary.
Lay off of employees.
– In the new code, laying off employees has become challenging, especially with the rights of employees during Covid-19. Now, the government’s prior approval is necessary for the establishment whose no. of workers exceeds 300. Lay off simple means dismissing the employees due to unfavorable business conditions like the inability to pay the due salaries to the workers and so forth.
– For the applicable businesses will have to submit an application before the 90 days of closure.
– Nonetheless, if the employees provide alternative employment not requiring any special skill or causing undue hardship to him/her.
In this new code, conflicts related to dismissal, discharge, or termination of an individual worker’s services would be an industrial dispute. Hence, the business can be dragged to the industrial tribulation for adjudication.
The proscription on strikes.
– The new code of industrial relations proscribes any lockout or strikes without prior notice in any industrial establishment. Earlier, this was limited to public utility services. A notice has to be given before the sixty days of the strike.
– Also, no strike will be entertained during the conciliation process or in a sub judice matter in an industrial tribunal. It can minimize the chances of work disruption.
Speedy resolution of the disputes.
It offers two members in the industrial tribunal; earlier, there was only one. If a matter remains unsettled at the conciliation stage, then the tribunal can be approached directly.
Fixed time of employment – resolving the issue of exploitation and flexibility.
The new code introduces the concept of fixed-term employment for short-term labour. This unique arrangement offers flexibility to businesses in recruiting employees for short assignments. Under contract labour, many times, a contractor would be involved. Nonetheless, the new law surpasses it to enable direct recruiting under fixed employment.
Gratuity and other statutory payments for contract workers and fixed-term employees.
– A business will have to ensure that all statutory incentives and service conditions (same as to regular employees) with an offer to solid term employees.
– Gratuity becomes payable by a business to both fixed-term and permanent employees. It can only be given if the worker has finished the period of one year.
– Gratuity is a fixed sum payable either on superannuation, retirement, death or suspension of an employee’s services. This is payable at the rate of fifteen days wages for every completed year of services.
– It will be only applicable when 10 or more employees get employment on any day in a year.
– Hence, it can lead to better business outflows, especially where fixed-term consultants get involved. Nonetheless, for short-term assignments involving less than 1 year of work, no gratuity will be given.
Raising the threshold for standing orders.
This threshold limit usually increases from 100 to 300 workers in the standing orders. These standing orders can be related to matters like the classification of workers, work hours, employment termination, grievance redressal and so forth. It can offer small and medium-sized businesses greater flexibility in recruiting and dismissing workers.