New Wage Code: Salary, PF, gratuity, working hours & leaves of government employees likely to be affected

The new Wage Code is likely to come into force from October and this will bring in significant changes to the lives of government employees. Earlier, the new Wage Code was due to be implemented from April 1, but due to non-receipt of draft rules from the state governments, it was put on hold. Now, speculations are rife that the new Wage Code will come into effect in October. It is being reported that all states will also prepare draft rules by October. 

Working hours and weekly offs

The New Wage Code will increase employee working hours from 9 to 12. According to the Ministry of Labour and Employment, the 48-hour working rule a week will come into effect. Some unions had questioned the 12-hour work and three-day leave rule. The government said there will be only 48 hours a week of work, if someone works 8 hours a day, he will have to work 6 days a week and get a day off. If someone works 12 hours a day, he will get a three-day leave.

The new wage code will provide a number of provisions that will affect salaried classes, mills and factory workers. From employees’ salaries to their holidays and working hours, a lot will change. 

Change in salary structure 

The salary structure of employees will also be changed under the new wage code. The take-home salary could be reduced. As per the Wage Code Bill 2019, also known as the Code of Wages 2019, the definition of ‘wage’ will change. In simple terms, as per the new definition, wage has to comprise at least 50% of total salary that the employee is getting. This may result in a change in the basic pay which, in turn, will result in a change in the other components such as provident fund contribution, gratuity, whose calculation is based on the definition of basic wages.

Increase in year holidays 

Employees’ earned leave could increase from 240 to 300. Several provisions were discussed between representatives of the Labour Ministry, the Labour Union and the industry over the change in the Labour Code. The employees had demanded an increase in the Earned Leave of employees from 240 to 300.

Minimum wages for workers 

For the first time, all types of workers in the country will get minimum wages i.e. minimum salary. New schemes are being introduced for migrant labourers. In addition, provident funds will be provided for social security of all workers. All employees in the organised and unorganised sector will also get coverage of the Employees’ State Insurance (ESI). It will allow women to work in all kinds of businesses, also allow them to shift nights.

PF, gratuity to increase 

This also means that there will be a consequent rise in gratuity and PF contribution of the employee. Hence, while the take home pay of the employees may be reduced, the Gratuity and PF component may rise.

The new wage code will also be applicable to unorganized sector employees. The rules related to salary and bonus will change and the salary of employees working in every industry and sector will be equal.

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