Labour Codes: Government Will Stick To New Definition Of Wages - Exclusive

On Wednesday, a top government official said: "the Indian government will not change the definition of wages despite concerns from industry over the impact of the new labour law regime on wage bills."

Answering to a question on whether the government will bring any changes to the new definition of wages following concerns raised by the industry or not,  Labour and Employment Secretary Apurva Chandra told "The definition of wages is a part of the Codes and that cannot be addressed through the rules," during an interview with BloombergQuint on Wednesday evening.

The secretary said that during the recent consultations on the new labour codes, which will probably be conducted from or before the next financial year, "the more important issue" discussed by the industry was on the definition of wages and "how it will impact the take-home salary of workers and lead to a higher outgo on PF and gratuity." As soon as the new labour codes is applied, the way companies structure employee salaries will undergo a notable change. based on the new law, the salaries will have to be structured in a manner so that all the monetary allowances- house rent, leave travel, overtime, conveyance, among others- are covered by 50% of the wage of an employee, which will include the basic pay, dearness allowance and retention pay.

Higher basic pay would mean increased costs towards provident fund and gratuity which are calculated on the former. Earlier this month, a top government official had said that "the government was planning to issue a clarification to 'grandfather' the gratuity payments. This is because gratuity is calculated on the last drawn salary of a worker and is equivalent to 15 days of their salary for every year worked in an organisation. Employees are entitled to receive gratuity from their employers on completion of five years of continuous service in an organisation.

"I cannot comment on it. What’s there in the code is there in the code;" said Chandra, while asking if the ministry is planning for a 'grandfathering' clause to limit the gratuity outgo for industry. The secretary added: "It (gratuity payments) won't go up immediately. In a year, not more than 3-4% of employees avail of it. So, there will be no immediate impact (for the industry). We are examining with the industry bodies but what’s there in the code is there in the code."

Last year, Parliament accepted four labour codes, one each on wages, industrial relations, occupational safety health and working conditions and social security to usher in main changes to India's labour laws, some of which were framed during the British rule.

Chandra added that the provident fund costs of companies would not be affected as contribution towards the Employees' Provident Fund schemes is mandatory for only those earning below Rs. 15,000 in a month. "Once a worker's wage limit crosses Rs. 15,000, companies are not required to pay EPF towards them," he said.